The Best Businesses are the Worst

the worst!

“I can’t believe this place is still in business,” my friend is telling me. “It’s a complete shit-show. Layers of bureaucracy, incompetent people, nothing gets done as planned and most things aren’t planned anyways. It’s just a matter of time. A matter of time!” My friend’s complaining to me about this backwards-ass company he works at called Google. I hear this type of ominous bellyaching all the time. I’ve heard it at every place I’ve ever worked. I’ve thought it at every place I’ve ever worked. I always imagined that somewhere over the rainbow there was a company doing everything right, a living symphony of Harvard Business School case studies. A company where every meeting is a Ted Talk and every employee is overpaid and customers write-in the CEO’s name on presidential ballots. At this moment, it finally hits me. Great companies are a myth. Even Google is a shit-show! Funny enough, I learned this lesson when I was 14. I just didn’t learn that I learned it until this moment.

Early 2000s gig work

As a wormy high-school freshman I landed my first job at a local pizza joint scrubbing dishes. If you’ve been to a local pizza spot anywhere in America then you’ve been to this one. It smelled like a ham sandwich dipped in a swimming pool.. The owner was the unforgettable Dino. Dino looked the generic cartoon chef on the top of every pizza box, except with leather bags under his eyes, the type of bags that come from an overdose on sleep, not a lack of it. Dino would show up for about an hour each day with a newspaper tucked under his arm and a pencil in his ear. He’d walk directly to the cash register and take out all the big bills. Then he’d pull out the newspaper, flip to the horse races and circle his favorites. Then, unless there was an emergency that desperately demanded his attention, he’d head to the racetrack. I only spoke to Dino two times. The first time was when sought me out while I was in the middle of spraying off a giant, crusted pans. I didn’t even realize he was talking to me until he yanked my shirt. I turned off the sink and looked at him. “Hey kid, erm, tell yer friend we don’ need him around here no more.” I stared at him, perplexed, but he just walked past me, out the back door. One of the kitchen guys clarified that I was to inform that other dishwasher, a kid my age who I had never even met, that his role had been eliminated. I awkwardly passed the message to this other kid, and that remains the first and only time I’ve ever fired a person.

The second time I spoke to Dino was on a particularly busy Friday night, when we were short staffed and he begrudgingly manned the register. I went to take a bathroom break during peak hours and found the toilet aggressively overflowing, geyser-like. I left the bathroom and closed the door, but the tainted water followed. By the time I made it back to the front the two tables closest to the bathroom were sitting in the shallow end of a kiddy-pool. “Uh, Dino” I beckoned without making eye contact, “I think someone flooded the toilet.” Dino was slackjawed and hunched over the register, scratching his perpetually unshaven beard, probably trying to remember what any button besides “open” did. When he heard me, though, he sprung to life like an electrocuted sloth. He quickly smoothed things over with the seated customers, then had me follow him to the bathroom, where I held a mop bucket as he got on his hands and knees and unclogged the toilet by using his hand as a plunger (only time I’ve ever seen that), and then wiped the floors clean. He then looked at me, and said the last words he’d ever say to me: “I fuckin’ hate people.”

Ok, so what is the relevance of this story? Dino was, by any measure, a bad boss running a bad company, right? The amazing thing is that now, decades later, that pizza joint has turned into a regional chain. That company is undeniably really successful. Dino is still running it and he’s probably made quite a fortune, or lost quite a fortune on horse racing. How is that possible? Dino did what all great business leaders do: the bare minimum.

Better than good is good enough

Here are the facts: resources are scarce, budgets are limited, and everything is constrained. Nobody can do everything. We all have to optimize as best as we can. For a company, that means perfection isn’t just unrealistic, it’s wasteful and inefficient. I’ll borrow from Tony Ulwick, a business strategist who coined the term “job-to-be-done.” Tony realized that successful companies identify exactly what customers are hiring them for and then optimize their resource allocation and decision-making to get that job done. What’s important to understand is that the job doesn’t have to be perfect, it just has to be done. Example time. You hire a painter to lay a fresh coat of Sherman-William’s finest on your shutters. He spends three months recreating the roof of the Sistine Chapel. You’re probably not happy, but that doesn’t even matter. The bigger picture is this painter is out of business. Nobody can afford to deliver Michaelangelo-level work for handyman prices. The painter took this job and completely knocked it out of the park and is subsequently out on his ass. He did good, but better than good would have been good enough. Just get the job done you idiot painter (it’s okay that I say that, you don’t have to feel bad. He’s just a narrative device I invented, he has no feelings). 

This is why Dino, despite everything I have told you about him, was actually a pretty good businessperson. Dino figured out that the job-to-be-done was to get mediocre pizza into the mouths of locals. If he could do that, his shop would be successful. The shop was a dump in every sense of the word but Dino always made sure his job got done. He stepped up when he needed to and only when he needed to. He did the bare minimum and it made his company successful. Bad companies exert time and effort overdoing their job or doing jobs that nobody asked them to do. Have you ever walked into a local restaurant that has tens of thousands of dollars in autographed sports memorabilia painstakingly placed on the wall? How about one of those kitschy trinket shops that feel more like the Smithsonian than a store to get a gift for your hipster friends? Those places never last. They never last because they are doing a great job at something nobody is hiring for.

In business, being bad ends you. If you fail to serve a customer you lose them forever. The opposite isn’t true though. There are diminishing returns and increasing costs to perfection. A company shooting for perfection falls down a slippery slope of wasting scarce resources. That’s why being good enough is best. Deliver something that is good enough - that satisfies expectations and requirements by the littlest amount, and you’ve done perfectly. Better than good is good enough. 

The evidence

You may be asking “MoneyLemma, don’t you think you’re over-extrapolating a high school experience into an universal economic truth? I dated a magician in 10th grade but you don’t see me arguing that all men will fake saw you in half and then leave you for the woman pretending to be your legs.” Nope, I don’t think I am. I believe every successful company is run by some variation of Dino. Hopefully a bit more enlightened, but the same mindset: get the job done.

Shopify

Shopify’s valuation comes in slightly above your local pizza joint at about $150 billion. Here’s a letter that CEO Tobi Lütke wrote to his direct reports (it was leaked to business insider). Note this part where Tobi calls out Shopify’s job:

“We are trying to create a world class product that gives superpowers to the merchants that we are obsessed over...Everything Shopify does is to accomplish this, and everyone at Shopify should be able to describe how their job, through a series of direct or indirect steps, furthers this mission.”

The letter goes on to highlight behavior and ambitions that may seem nice, but are actually a threat to the company because they distract Shopify from doing it’s job. Towards the end of the letter is Lütke’s key point:

“We cannot solve every societal problem here.”

Those are the words of someone who knows that he can’t do everything, but he can do one job.

Amazon

Every year Amazon republishes it’s 1997 investor shareholder letter, in which Jeff Bezos proclaimed it was still “day 1 of the internet.” This three-page letter has been the blueprint for Amazon’s empire, an empire which, like the Hallmark Channel, is certainly up to no good even if I can’t prove it and even if its approval rating is suspiciously high. The letter identifies “obsessing over customers” as the job-to-be-done. More specifically, that means three things: lowest prices, best experience, broadest product offering. If you think about Amazon’s success (at least on the retail side of its business, if not the AWS business as well), those three factors can explain pretty much everything. More importantly, those factors explain everything they’ve not done. Amazon’s been mired in scandal after scandal for everything from using mother nature as a personal urinal to firing whistleblowers to never paying taxes. These scandals rise up and then disappear mysteriously, much like Amazon employees who try to unionize. What Amazon has figured out is that as long as it executes on obsessing over customers, it can neglect basically anything else. 

By the way, when the National Enquirer tried to blackmail Jeff Bezos with his nudes, Bezos just leaned in and published them himself. I’m certain Dino would have done the same thing, even without provocation. Every great leader is a Dino!

New England Patriots Dynasty

This one is kind of cheating because the Patriots had Tom Brady, but the team did release a documentary about the 2014 Super Bowl winning season called Do Your Job. Bill Belicheck would make a great pizza shop owner, let’s just say that. Also, he dresses a lot like Dino. Every great leader is a Dino!

Warren Buffet

Of course I’m going to bring in the greatest investor of all time. In 1991 an investment bank committed some serious white collar crime (gasp, I know) and the scandal was so inflammatory that regulators questioned whether the bank, Saloman brothers, should even continue to exist (don’t fret, they settled on a fine, another gasp, I know). Warren Buffett took over the company and famously testified to Congress that he would make Saloman Brothers a leader in financial services.  In that testimony Buffett lays out his entire vision for Salomon Brothers in just a few minutes. He doesn’t mention profit, or strategy, or even banking. His message is directed to employees: 

Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.

Buffett realized that if Salomon’s could earn back the trust of investors, regulators, and customers, then everything else would take care of itself. During his time at Salomon’s he concentrated his efforts on getting rid of unethical employees and completely rebuilding company culture and compliance efforts. A few years later Salomon was acquired by what is now Citigroup for over triple its previous low.

The best companies are the worst

The companies and people I just listed are widely viewed as some of the best. At the same time, they are the worst. In that Shopify letter, the CEO acknowledges that some Shopify employees might be miserable and he invites those employees to leave. Salomon brothers had a massive “brain drain,” when Buffet took over, where talented employees rushed to the exit when faced with the prospect of integrity. And pretty much everybody hates Amazon and the Patriots at least a little. These companies are the best because they excel at certain things (cheap prices for Amazon, deflating footballs for the Patriots), but that inherently means they underperform in other areas. That’s the law of scarce resources. That’s what the Shopify letter is all about. That’s what Amazon’s Day 1 letter is all about. These are leaders telling employees that we are going to be really good at a few things, even if it means we are really bad at everything else. That’s the trade-off: In order to be the best, these companies have to be the worst. This brings me back to my friend complaining about Google. Everything he said was probably true. It probably is a shitshow, every office is. Google probably underperforms competitors in many ways. If it didn’t, it wouldn’t be one of the most valuable companies in the world.