The New Economics of Matchmaking and Market Design


A patient with kidney disease goes to his doctor with good news: He found a donor who would be willing to give up one of her kidneys. A series of tests, however, shows that the donor-recipient match is incompatible. This scenario occurred at Rhode Island hospital with two pairs of donors and recipients. Then the Rhode Island surgeons realized that the donor of one pair was compatible with the recipient of the other pair, and vice-versa. With the permission of both donors and both patients, the surgeons did a kidney “exchange.”

Those operations planted the seed of what would become the New England Program for Kidney Exchange (NEPKE), a “matching market” for kidneys based on algorithms developed by Nobel Prize-winning economist Alvin E. Roth. (As opposed to commodity markets, matching markets allow buyers and/or sellers a choice in what they buy or whom they sell to.)

In his new book, Who Gets What — and Why, an engaging exploration of the different types and different roles of matching markets that underpin how our world operates, Roth devotes a full chapter to the creation and expansion of NEPKE — a market that does not involve money since the sale of kidneys is illegal and has been expanding thanks to the continued evolution of its rules.

Rules Are Necessary for Markets

Rules are at the heart of market design, the discipline for which Roth is perhaps the world’s most pre-eminent expert. Politicians talk of free markets as if no rules are necessary, as if self-interest and self-control will ensure the efficiency of markets. But as Roth shows through his many examples, rules are necessary because markets only work under the right conditions. For example, markets need to be thick — there must be a sufficient number of buyers and sellers all active at the same time for the market to work. The kidney exchange works because a sufficiently large database of donors and patients was created.

At the same time, markets cannot be too congested. Buyers need to be able to find what they want in the market in a timely manner. Travelers using Airbnb, which created a market of rooms in personal homes acting as hotel rooms, were hampered by the response time from hosts using personal computers. Smartphones (hosts no longer had to wait to check their computers at home at night) relieved the congestion. Markets also need to be safe: Both buyers and sellers must be assured that they will not be cheated. One of the challenges of Uber was convincing travelers that the car would show up and convincing Uber drivers that passengers would wait. Markets that are not thick, uncongested or safe will unravel and no longer fulfill their functions.

In Who Gets What — and Why, Roth’s clear jargon-free writing helps readers navigate the nuances and implications of market design. Roth’s wit and the variety of case studies he describes in detail also help. For example, Roth describes how the market for gastroenterology fellowships (the educational step after internal-medicine residency) “unraveled.” The section is titled, “Finding the Guts to Wait.”

Packed with fascinating stories, from the history behind the nickname Oklahoma Sooners to the role that repugnance plays in market design, Who Gets What –– and Why is at once supremely insightful and entertaining — a rare combination for an economics text.

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A Manager’s Guide to Keeping the Best and Brightest


When a valued employee suddenly and unexpectedly gives his or her notice, managers and supervisors will want to know why. Often, they will seek the answer in the “exit interview,” the standard meeting between outgoing employees and their bosses. The concept of exit interviews raises an obvious question: Would it not be better to find out why valued employees may want to leave before they turn in their resignation letters?

Consultant Richard Finnegan agrees and offers a solution: the “stay” interview. In his book The Stay Interview: A Manager’s Guide to Keeping the Best and Brightest, Finnegan lays out the process for regular face-to-face meetings during which managers can pre-emptively uncover problems and concerns and resolve them.

Questions and Probes

The goal of the stay interview, and one that differentiates it from performance reviews or personal-development meetings, is for the employee to set the agenda, not the manager. This does not mean that the manager should not prepare for the meeting. On the contrary, managers should prepare as much as possible, Finnegan writes. For example, he suggests that before the meeting managers prepare two lists: an “important to them” list and a “my beliefs” list. The “important to them” list is an effort to anticipate (and thus be prepared to respond to) all the issues and concerns that the employee might have. “Avoid falling into the trap of thinking that if something is important to you, then it must be important to everybody,” warns Finnegan. “Conducting effective stay interviews requires putting your needs on the sidelines and focusing entirely on those of your employees.” The “my beliefs” list must follow this rule. It is a list of solutions or suggestions that managers believe should be offered (if the employee does not ask for them first) because they believe the employee will benefit from them.

The next step is to prepare the questions for the interview that will, in essence, help the employee set the agenda — that is, keep the meeting focused on his or her needs and not the needs of the manager. Finnegan offers five key questions to use in the interviews:

When you come to work each day, what things do you look forward to?

What are you learning here?

Why do you stay here?

When was the last time you thought about leaving our team? What prompted it?

What can I do to make your experience at work better for you?

These questions are the opening to the conversations. Each question, Finnegan emphasizes, must be followed up with what he calls “probes”: questions designed to dig deep into the reasoning of the employee’s responses. Effective probing will reveal the core emotions, concerns or challenges at the heart of the first responses to the questions.

Four Essential Skills

Probing, according to Finnegan, is one of the four essential skills required to make stay interviews work. Listening and taking notes are also essential skills, but it may be the fourth skill that Finnegan highlights that may be the most challenging to managers: supporting the employee without throwing the company under the bus. It’s easy in such situations to commiserate with the employee about the unfairness of the situation. In the long run, however, an employee is not going to stay engaged in a company in which even middle managers agree that the executives don’t know what they’re doing. Managers, Finnegan writes, should respond by expressing to employees their trust in top management — a trust that must be sincere. If managers have their own doubts about the company, they are not in a good position to work with employees on engagement.

Finnegan’s comprehensive guide, which covers all the facets of stay interviews, including developing stay plans and avoiding interview traps, does not gloss over the challenge of keeping the best and brightest in the company. In The Stay Interview, he introduces a valuable employee engagement tool that is realistic and practical but requires a conscientious effort from both parties.

Balancing the Inverse Equation of Increasing Demands + Shrinking Resources


What consultant Jesse Sostrin calls “the manager’s dilemma” is easily explained and all too familiar to any manager: too much demand, not enough resources. Specifically, as Sostrin writes in his new book, The Manager’s Dilemma: Balancing the Inverse Equation of Increasing Demands and Shrinking Resources, “There is not — and never will be — enough time, energy, resources or focus to meet the demand.” As a result, managers and businesses are often toggling between a “performance zone,” where resources meet demands, and a “danger zone,” when resources and demands are out of balance, and one, Sostrin writes, becomes “defensive, disorganized, disrupted, disoriented and disengaged.” (Sostrin uses the evocative acronym TERF for time, energy, resources and focus.)

Before addressing the dilemma, you have to know that it exists, Sostrin writes. Many managers are unaware that they are in the dilemma. They say things such as, “With so many deadlines and demands, some priorities will have to be sacrificed,” or “It’s too crazy now; I’ll focus better once things settle down.”

Contradictory statements such as these — not addressing priorities only means that the deadlines and demands will continue, for example — are red flags that indicate the manager is entangled in the manager’s dilemma and doesn’t know it, writes Sostrin. “The first and best response to the manager’s dilemma,” he explains, “is to accept the situation for what it is and to focus all of your available TERF in a concentrated effort to balance the equation.”

Principles to Guide Managers

Balancing the equation is the first of the two big phases that managers must achieve to effectively emerge from the manager’s dilemma. Sostrin offers four principles, explored in detail in the book, that will guide managers in balancing the equation.

The first principle is to follow the contradiction. Contradictions, explains Sostrin, are subtle clues that tell the alert manager something is wrong. Rushing your work because you have no time to slow down, only to spend more time fixing the mistakes in the rushed work is a typical contradiction reflecting the manager’s dilemma.

Once alerted, the other three principles help you move out of the danger zone: Determine your line of sight; in other words, focus on the right priorities. Distinguish your contributions; that is, know your strongest value-added capabilities, and use those capabilities over others. And plug the leaks, i.e., the ongoing experiences that reduce performance by draining your TERF.

These four principles, writes Sostrin, “rebalance the inverse equation of shrinking resources and increasing demands” — but he believes managers can do better. In a section called “Flip the Scales,” Sostrin introduces an additional four principles that, he writes, will “render the dilemma’s effects irrelevant.”

The first principle is to create the conditions you need to achieve more value. A sample of such conditions, according to Sostrin, includes flexibility, openness to diverse ideas or a willingness to innovate even if it requires letting go of the past.

The second principle is to find the pocket of influence. The issue is timing — learning the optimal time to take the bold action required. Sostrin’s third principle is to convert your challenges to fuel — in other words, turn setbacks into opportunities for learning and performance. A tool called the navigation map makes this possible. Finally, Sostrin urges you to make your goals their priorities. This last principle entails building a mutual agenda with your team.

Scenarios, examples and tools in The Manager’s Dilemma support this solid eight-principle methodology for addressing one of the core barriers to management performance: too little resources for too many demands.

How to Thrive in a World of Too Much


How did they do it before? It’s a question many of us ask, as we stay glued to our laptops or our phone, always present, always working, always trying to be “productive” at all hours of the day. And yet, we can’t keep up. Which leads to that question: How did they (which, for those of us of a certain age, means “we”) do it before?

In his book Busy, business psychologist Tony Crabbe offers a succinct answer: because we are trying to resolve information-age problems with industrial-age solutions. We try to be more productive, we try to “manage time” — when the problem, according to Crabbe, is not that we have too little time to do what we have to do. The problem of the information age is that we give ourselves too much to do.

Busy is not just a burden. It has become a badge of honor. One brags about how busy one is.

Stopping this cycle of being overbusy and never actually catching up — which, despite our bravado, just makes us exhausted and frustrated — begins with understanding what Crabbe calls “the three faces of busy.”

The Three Faces of Busy

Each of the “three faces of busy,” writes Crabbe “refers to a different way in which we relate to busyness.”

The first face sees “busy as an experience.” This is the busyness, he writes, that keeps us harried and overwhelmed, the busyness that makes us feel that we don’t know how to manage our time.

The second face of busy is, according to Crabbe, “busy as a success strategy.” In this case, we believe that success comes by busy more productively, by always striving to do more and more. Unfortunately, this type of busyness leaves us little time to do the “big stuff,” such as taking the time to think creatively.

Finally, the third face of busyness is “busy as an approach to happiness.” This busyness face, writes Crabbe, refers to the goal of having more and more — more stuff, more popularity, more status. Values, relationships and our health are put on hold during a relentless acquisition frenzy.

Three Strategies to Battle Busyness

In his book, Crabbe offers three distinct strategies to battle each of the faces of busyness. The first strategy, aimed at getting beyond busyness as an experience, is a strategy of mastery. The goal is to become masters of our lives, Crabbe writes. It means to stop trying to get everything done through more efficient organization and start, instead, to make tough choices about what to eliminate. Mastery also involves, Crabbe writes, “shifting our focus from managing time to managing attention.”

The second strategy is to differentiate. This strategy is aimed at getting beyond busyness as a success strategy. As noted above, if we only focus on being more productive, we don’t take time to reflect or be creative — the keys to standing out in our overcrowded world. In this section of the book, Crabbe urges his readers to focus on innovation, not productivity of more of the same. He also argues that too many people see busyness as an effective brand, when all it really does is convey your lack of mastery. A truly effective brand is a simple summary of what makes you unique (for example, one of his clients had “no problem!” as his brand, which is the nickname he had been given in his business for his can-do attitude.)

Crabbe’s third strategy, engagement, is designed to overcome busyness as an approach to happiness (the “having more makes me happy!” attitude). The three steps in this strategy are let your values define your meaning of success; develop deeper relationships with fewer people instead of piling up the number of connections; and replace the addiction to shallow buzz (“I’m flying from meeting to meeting.” “I’ve taken up this new hobby.” “I’m a player!”) with the joy of flow — Mihaly Csikszentmihaltyi’s famous term for losing oneself in a task and not realizing the time flying by.

Busy is very clearly organized into the three sections focused on the three strategies. Each of the chapters in each section ends with a summary of the “big messages” of the chapter as well as one- to three-paragraph “go-do” and “experiment” sections. Perhaps some readers addicted to buzz and productivity might be tempted to focus on these end-of-chapter summaries. If so, they will have missed the point of this innovative and important book.

How to Build Your Customer-Driven Growth Engine


Jeanne Bliss, a long-time advocate of the Chief Customer Officer (CCO) position and author of two previous books on the subject, returns with her third book, Chief Customer Officer 2.0. At the heart of the book is a framework built around five customer leadership competencies that will help CCOs build what Bliss calls a “customer-driven growth engine.” The five competencies show Chief Customer Officers how they can enable “one-company” customer growth behaviors and actions. “Without this united engine, activities go back to being ruled by squeaky wheel issues, executive-driven one-off action items, and silo-by-silo priorities,” she writes.

The Five Competencies

The first of the five competencies is to honor and manage customers as assets. A company’s efforts to understand its customers are often based on surveys in which customers describe what they might do, Bliss explains. The customer-as-asset approach is not about conjecture but about what customers are actually doing. This competency involves aligning leaders to create a performance metric that rigorously measures customer results, including quarterly results, in terms of volume and value, on: how many new customers were brought in; how many customers were lost; how many customers increased their purchases; and how many customers are disengaging from the company. Of course, this competency is not about the numbers but about awareness and focusing the company’s leaders on the why of the numbers: why customers stay or go, or become more or less active.

The second of the five competencies is to align around experience. This is the competency required for COOs to guide the leaders of the company into building “a one-company version of their customer journey,” Bliss writes. This is achieved by working with leaders to create a customer journey map that follows the customer through his or her entire interaction with the company. The challenge is that the customer experience is often seen from the company’s perspective, such as prospecting, the sales pitch, the close, or after-sale service. The purpose of competency two is to shift the perspective from the company to the customer. Thus, the first step, for example, is not “prospecting,” but “customers who have an unfulfilled need.” Likewise, the second step is not the “sales pitch” but customers who are trying to figure out their options.

The third CCO competency is to build a customer listening path. CCOs must work with leaders to build a one-company listening system, which, Bliss writes, uses multiple sources of customer feedback to focus the company on important areas of improvement. With this competency, the challenge for Chief Customer Officers is to break the dependence on survey scores, which fail to fully describe the customer experience. Bliss emphasizes that leaders must understand, appreciate and respond to the customer’s story, not quantitative results.

The fourth of Bliss’s competencies is entitled proactive experience reliability and innovation. The goal of the CCO in this competency, according to Bliss, is to ensure that leaders of the company are aware of customer experience problems before customers have to contact the company. Bliss offers guidelines on how to build a “Revenue Erosion Early-Warning Process” to achieve this important proactive step. This process includes a reliability reality-check — investigating the reliability of the company’s interactions with customers at every stage of the customer journey — and building a defector pipeline, which identifies the make-or-break moments when companies are at risk of losing customers.

The fifth and final competency is leadership, accountability and culture. For Bliss, this is the “prove it to me” stage of building the customer-driven growth engine, when CCOs work with their company’s leaders to ensure “consistent behaviors, decision-making, and company engagement that will prove to the organization that leaders are united in their commitment to earn the right to customer-driven growth.”

“Earning the right to growth” is a phrase that appears consistently in this comprehensive guide to customer-driven growth. Filled with stories from a variety of companies as well as practical implementation tools for CCOs, Chief Customer Officer 2.0 is a manual that translates customer-focused language into on-the-ground action.

The Purpose of Mentoring Has Changed

Modern Mentoring

Unfortunately, according to Randy Emelo, most mentoring relationships today are obsolete. Traditional mentoring, he writes in his book Modern Mentoring, does not truly meet the needs of the modern organization.

The reason, as he explains, is that “the purpose of mentoring has moved away from getting a handful of people ready for leadership roles.” Instead, mentoring according to Emelo, is an organizational practice that should increase an organization’s intelligence, including emotional, leadership and technical intelligence; enhance the organization’s competitiveness; and “accelerate” employee development.

In other words, the traditional approach to mentoring, focusing on a few select individuals, should be replaced by an approach that is much broader and inclusive, he writes. Instead of mentors only consisting of top leaders, and mentees consisting of high-potential employees, mentors and mentees can be anyone in the organization, at any level.

The connections of modern mentoring are no longer one-to-one, Emelo writes, but many-to-many.

Building Blocks

In the opening chapter of his book, Emelo lays down the building blocks of modern mentoring:

Open and Egalitarian. The goal of mentoring is to enable “uninhibited and meaningful learning,” Emelo writes. For such learning to take place requires, he writes, “an open environment where people have equal access to one another.”

Diversity. The diversity in question involves different perspectives coming from different functional, geographical, hierarchical or generational backgrounds and experiences. These different perspectives are valuable in helping mentors develop innovative solutions for the people they are mentoring.

Broad and Flexible. One person does not have all the answers. Such a mindset, Emelo writes, “is outdated and inefficient.” The ideal mentoring relationships are those that involve multiple people who are simultaneously advisors and learners. The relationship is flexible, depending on the situation at hand. A person can be an advisor in one situation, and a learner in another. As Emelo writes, “modern mentoring breaks the cycle of the sage on the stage and pushes the idea of the guides on the side.”

Self-directed and Personal. In today’s world, people must take the responsibility to direct their own personal development. They have to choose what they want to learn and from whom they want to learn it. “By allowing participants to control the process,” Emelo explains, “they can tailor their learning so that they reap the benefits.”

Virtual and Asynchronous. In traditional face-to-face, one-on-one mentoring, advisors and learners made arrangements to meet. Such arrangements are no longer necessary, given today’s technology, nor even logistically effective given the broad “many-to-many” reach of modern mentoring. Thus mentoring sessions, writes Emelo, are more likely to be virtual as well as asynchronous — that is, the teaching and learning do not have to occur in the same window of time. Mentors can share their knowledge and experience through virtual communication, which is then captured at the learner’s convenience.

Modern mentoring as described by Emelo is a significant change from traditional mentoring, and therefore often requires a significant and perhaps difficult culture change in an organization. Leaders used to the traditional methods will need to be “reeducated,” Emelo writes.

Another challenge is the vital role of trust. Today’s virtual capabilities allow long-distance mentoring but hinder trust-building. Emelo includes guidelines for trust building and many other facets of modern mentoring in this eloquent and compelling addition to the personal development literature.

The Four Global Forces Breaking All the Trends


Once upon a time, a company such as Toyota used to have strict retirement requirements tied to age. Employees knew that once they reached the cut-off age, they would be asked to retire. No exceptions.

The situation is a little more fluid today. Toyota has a “reemployment” program for retiring workers. As they leave their current positions, retiring employees have the opportunity to apply for other positions at Toyota or its affiliates. The reason for Toyota’s efforts is their desire to keep the experience and knowledge of older employees in the company. “Employers have long focused on youth,” explain McKinsey Global Institute directors Richard Dobbs, James Manyika and Jonathan Woetzel, the authors of a new book, No Ordinary Disruption. “But in a graying world, employers have to reset their intuition. Rather than seeing older employees as legacy costs, they must view them as assets and resources.”

The Four Disruptive Forces

A graying world is just one of four disruptive forces that the authors believe will dramatically alter the landscape of the world more than any previous disruption in history. The other three forces are:

  • The shifting locus to emerging markets and specifically the cities within those markets. Half of the global GDP between 2010 and 2025 will come from 440 cities in emerging markets. Some of them will be well known, such as Shanghai, but most will be small- and medium-sized cities most have never heard of.
  • The acceleration of the scope, scale and economic impact of technology. It’s hard to believe that technology could accelerate even more than what we’ve seen in the past 25 years (a paltry 3 percent of people in the world had a mobile phone 20 years ago). However, companies such as Alibaba and Uber show how quickly technology can redefine industries.
  • The global interconnectivity through movements (or “flows”) of capital, people and information. The original lines of connectivity between Europe and America have evolved into a “complex, intricate, sprawling web,” the authors write.

These four global forces are breaking all the trends, according to the authors. As a result, people and companies are going to need what they call “intuition resets.” The old assumptions, habits and priorities have to be replaced with new ones. Thus, Toyota starts a reemployment initiative for older workers, as described above.

Companies are discovering the power and reach of the exploding technology to “create difficult-to-replicate capabilities,” the authors write. One example is Medtronic’s remote heart monitoring network connecting implanted heart monitoring devices to physicians at remote locations.

Given the shift to cities, companies that used to avoid the costs of downtowns are now recognizing that locating in urban areas is vital to attract the best and the brightest. The success of Uber, Zipcar and Lyft reveal the potential for companies that focus on urban consumers. Finally, in a super-interconnected world, establishing a presence in a major hub, depending on industry and domain, is key.

This is just a tiny sample of the intuition resets that the authors offer in a book that is as sprawling, complex and fascinating as the world it describes.

Executing the Right Company Strategy

How to Choose and Execute the Right Approach

Which strategy is the right strategy for your company? How to make the choice is brilliantly addressed in a new book from three Boston Consulting Group senior partners: Martin Reeves in BCG’s New York office, Knut Haanaes in Geneva and Janmejaya Sinha in Mumbai. In their book, Your Strategy Needs a Strategy: How to Choose and Execute the Right Approach, Reeves, Haanaes and Sinha identify just five different types of competitive environments, and the corresponding strategy that works for each. The story of Novo Nordisk in China illuminates how a company can take advantage by pursuing a strategy that perfectly fits the environment.

Danish pharmaceutical giant Novo Nordisk controls 60 percent of the insulin market in China, which means that nearly 60 million diabetes patients are taking Novo products. Novo’s market share is twice that of its nearest competitor.

How did Novo establish such a strong and lucrative stronghold in China? According to the authors, Novo was the key player in shaping the market. When Novo came to China in the early 1990s, diabetes awareness was very low. Novo worked with the medical community, the Chinese Ministry of Health and the World Diabetes Foundation to educate the country about diabetes. It reached out to patients as well, established its first production site in China in 1995 and an R&D center in China in 2002.

Novo recognized the untapped potential of the insulin market in China and working with the major stakeholders in the country was able to shape the market to its advantage.

The Five Strategies

Novo Nordisk was successful because its orchestration strategy, in the authors’ terms, matched the shaping environment of China’s insulin market. According to the authors, companies can differentiate between competitive environments by focusing on three variables: predictability (can you forecast it?); malleability (can you, working with others, shape it?); and harshness (can you survive it?). These three variables lead to five types of strategy environments, they write, which in turn defines which strategy work best for those environments:

Classical: I can predict it, but I can’t change it. The best strategy for the classical environment, the authors write, can be summarized as be big. The competitive environment is stable and predictable. Competitive advantage is built by the company’s positioning in the environment. This is achieved, write the authors, by “superior size, differentiation, or capabilities.” This strategy calls for companies to analyze the environment, plan the best positioning strategy, and execute it.

Adaptive: I can’t predict it and I can’t change it. In this environment, the most effective strategy, according to the authors, is to be fast. The rules change quickly, and the most successful companies are those who can vary their approach to create several strategic options, select the best option at the right tie and scale it up.

Visionary: I can predict it, and I can change it. The strategic imperative for the visionary environment, write the authors, is to be first. Successful companies envisage the possibility of the market, are the first to build that possibility, and persist in executing and scaling the vision.

Shaping: I can’t predict but I can change it. The key to success in the shaping environment is to be the orchestrator. Novo succeeded in the shaping environment, the authors explain, by engaging stakeholders to create a vision of the future, building a platform through which it could orchestrate the collaboration of all stakeholders, then evolving that platform by scaling and maintaining the flexibility of the platform’s stakeholder ecosystem.

Renewal: My resources are severely constrained. Finally, the only strategy that will work in a renewal environment is to be viable. The key, write the authors, is for the company to react to a deteriorating environment, economize as much as possible, and then choose among the other four strategies to grow.

Insightful, well written and filled with examples, Your Strategy Needs a Strategy is a crystal clear roadmap — actually five roadmaps in one — that can guide companies through the most challenging of competitive environments.

Taming the Markets to Achieve Your Life’s Goals


To succeed as an investor, you need to beat the market. That, at least, is how most investors view their financial goals. Discussions with financial advisors are focused on whether investments did better than the market; if they didn’t, the advisors better have a good explanation for their clients.

According to Ashvin Chhabra, Chief Investment Officer of Merrill Lynch Wealth Management and the author of The Aspirational Investor, investors have their priorities mixed up. The goal should not be to beat the market; the goal is to build an investment strategy that helps you achieve your personal objectives and aspirations. As Chhabra shows, refocusing on personal objectives and aspirations rather than just beating the market requires a different kind of investment strategy.

Traditional investing is designed to manage risk through what is known as modern portfolio theory. Modern portfolio theory is not so modern (Chhabra calls the name “ironic”); it was developed by a University of Chicago graduate student in the 1950s named Harry Markowitz, who argued that the only way to manage risk in volatile markets was to invest in a portfolio of stocks and bonds with a variety of risk. For example, if stocks take a hit, bonds go up. Therefore, a combination of stocks and bonds is less risky than a portfolio of only stocks.

For Chhabra, modern portfolio theory is based on investments as a supplemental source of income for an era in which retirement income was based on social safety nets and stable pension plans. Those days are gone, he writes, and now it’s mostly through investments that individuals must not only create wealth but also build a foundation of financial security. In other words, investors today must use their investments to achieve three objectives, Chhabra writes: “financial security in the face of known and unknowable risks,” “maintain your living standard in the face of inflation and longevity” and “pursue aspirational goals, be it for personal wealth creation, to create positive impact or to leave a legacy.”

Unlike the general, all-encompassing goal of beating the markets and making money, an investment strategy based on personal objectives implies three different risk strategies. This “allocation” of risk is at the heart of Chhabra’s theory, which he calls the Wealth Allocation Framework. Risk allocation, Chhabra explains, “is achieved by creating three distinct risk buckets to support each of the corresponding three key objectives of your wealth management strategy.” The three risk buckets are

  1. Personal Risk. Investors must “immunize” themselves against personal risk — not being able to pay their bills. No matter what the markets do, personal risk is non-negotiable: Failure is not an option.
  2. Market Risk. The cost of living will inevitably increase over time. Maintaining your lifestyle thus requires, according to Chhabra, “earning a rate of return in the financial markets that is comparable to the increase in the cost of living.” To earn such a rate requires adopting the diversification principles of Markowitz’s portfolio theory.
  3. Aspirational Risk. To fulfill your aspirational goals, you will need to create significant wealth; the only way to build substantial wealth is to invest in high risk/high gain portfolios. You can’t win big without taking the risk of losing big.

As expected from a chief investment officer, The Aspirational Investor is not a theoretical treatise on financial markets but a practical guide for investors. Chhabra digs deep into the investment-decision implications of the three risk buckets, including, for example, a seven-step implementation plan for what he calls “objective-driven investing.”

Most investors should probably read this book before making any further decisions on their investments: Very few of us can afford to ignore any of Chhabra’s three risk buckets.

Essential Tools for Failure-Proofing Your Project

Projects Are Inherently Risky Business

One of the most important responsibilities of a project manager, according to veteran senior project manager Tom Kendrick, is to identify and manage the variety of risks associated with the project. Kendrick is the author of Identifying and Managing Project Risk: Essential Tools for Failure-Proofing Your Project, which is now in its third edition. Detailed, well-organized and comprehensive, Identifying and Managing Project Risk takes you through the planning, assessment and responses required for any kind of project of any size.

For the past 20 years, Kendrick has been collecting anonymous data on project problems from hundreds of project leaders. From this database, Kendrick has identified the three types of project risks encountered by project managers, based on their root causes: scope, schedule and resources.

Scope risk occurs either in the form of changes to the scope or what the author calls defects — in other words, not being able to deliver what is expected. Schedule risk can either be 1) delays, 2) faulty estimates of the time required to accomplish the activities of the project or 3) slippage due to factors outside the project. Problems with people, external staff and/or money are the causes of resource risks.

In the first half of the book, Kendrick focuses on identifying these three types of project risks. For scope risks, for example, he suggests

  • Clearly defining project deliverables, noting the challenges.
  • Setting limits on the project based on the value of the deliverables.
  • Breaking down the project into small pieces.
  • Assigning ownership for all project work.
  • Noting any risk that might arise from the expected project duration or complexity.

In the second half of the book, he focuses on risk assessment (including qualitative and quantitative analyses) and responses to risks at both the different activity levels and at the overall project level.

For example, he sets down the following rules for managing activity risks:

  • Determine root causes.
  • Avoid, mitigate or transfer risks whenever feasible.
  • Develop contingency plans for the remaining risks.
  • Document risk plans, and keep the data visible.
  • Monitor all risks in your risk register.
  • “Thirty grams of prevention is worth half a kilogram of cure (approximately).”

Documenting risk plans is accomplished through a detailed listing of all risks that includes information such as a description of the risk, the owner of the risk, activities impacted by the risk, quantitative and qualitative risk-analysis results, proposed risk response actions, risk triggers, residual risk exposure and contingency plans.

Lessons from the Panama Canal

An entertaining and illuminating feature of the book is the story of the building of the Panama Canal, which Kendrick uses as the thread tying all the steps together. Thus, each chapter ends with an evocative story or stories from the Panama Canal project that illustrate the lessons of the chapter.

The building of the Panama Canal is one of the great engineering achievements, although perhaps underrated today. Kendrick shows how the leaders of the project, notably John Stevens and General George Washington Goethals, were able to complete the Panama Canal by following the same processes as described in his methodology. After Roosevelt’s first project manager resigned, declaring that building the canal was a mistake, Stevens arrived and immediately set about pinning down the scope of the project. Stevens “determined exactly how the canal should be built, to the smallest detail,” Kendrick writes. “The United States would build an 80-kilometer lock-and-dam canal … with a budget of U.S. $375 million, to open in 1915. With the scope defined, the path forward became clear.”

At 400 pages, Identifying and Managing Project Risk is not a quick read. But as Kendrick shows, anyone in a hurry should not be managing projects to begin with. Undoubtedly, they will follow in the footsteps of de Lesseps and avoid the rigorous risk planning required to successfully bring any project to fruition.