Under the Influence

Why do ordinarily intelligent people make dumb investment decisions? I have some theories, all involving an ex-girlfriend. But Forbes.com offers some other explanations in an article published online this morning. The story cites the compelling research of Robert Cialdini, a professor of psychology at Arizona State University and author of Influence: Science and Practice (Allyn & Bacon, 2000). "We're all susceptible to suggestions by influential people; we gravitate to something if it seems to be unavailable to everyone else, and we trust strangers who appear to be like us," the article states.

Tune in to the Business Shrink this week for Peter Morris' investment advice and insight -- and maybe some of his own dumb investment decision stories...

Driving Mr Morris

The Business Shrink touched a nerve with his listeners last week after talking to Time magazine writer Jeff Kluger about his cover story on the science of ambition. Kluger's article looks at the latest research on what drives some people to achieve, and others to be complacent. Peter Morris was flooded with calls from listeners asking for advice on how best to start a business or follow their dream.

One Business Shrink caller, Wahid from Long Island, asked Peter Morris about the source of his ambition and motivation: “My ambition came from my mother and father who scared me when I was a young kid growing up,” Peter said. “They scared me by basically saying 'hey man if you don’t get off your rear end and do something and make something out of your self you won’t be very happy, rather than sit around and wait for your inheritance to come in'.” The Business Shrink added: “perseverance is what takes you from ambition to reality.”

Rebate and Switch

It's getting so you can't buy something without having to fill out a bunch of paperwork to get back the money you overpaid for it. This holiday shopping season, rebates are as ubiquitious -- and annoying -- as premature Christmas music. Business Week's Brian Grow, writing in the Nov. 23 issue, calls rebates a "tax on the disorganized." Retailers and manufacturers love them, Grow writes, because they know that 40 percent of all rebates never get redeemed. This week, Brian Grow will join Peter Morris to talk about his revealing article "The Great Rebate Runaround. "

Business Shrink with a Twist

The Business Shrink now has an exciting new home on Sirius satellite radio. Lime - "Healthy Living with a Twist" - on channel 114. LIME's programs focus on everything to organic food to corporate responsibility to alternative healthcare. Check it out at www.limemedia.com.

a growing debate

Starting in the late 1990's, thousands of people in the US and abroad took to the streets to question the "Washington consensus" -- the idea that the tide of so called "free" trade and economic globalization would "lift all boats". Critics questioned whether those policies were set up to benefit poor people, or just multinational corporations. They also challenged the idea that "growth" as measured by indicators such as GDP, is actually always a good thing. Those economic indicators, skeptics say, don't take into account social and environmental effects of economic development. But in his new book, The Moral Consequences of Economic Growth, Benjamin Friedman -- a leading critic of Ronald Reagan's economic policies-defends growth as a key factor in promoting political freedom and social and economic growth around the world. Tomorrow he joins the Business Shrink to talk about the book.

Gut Feelings

Food-fixated people are sometimes accused of thinking with their stomachs. When Michael Gershon talks about thinking with the stomach, he means it literally. Gershon, who appeared on the Business Shrink last week, is one of the world’s leading expert on what he calls “the brain in the gut.” It is no surprise, he says, that gastrointestinal ailments have roots in anxiety and depression.

“Everybody’s known for many years that the brain can affect the gut. Anybody’s who’s examined closely foxholes, shortly after an artillery barrage, will tell you that there are nasty affects the brain can have on the gut,” Gershon told the Business Shrink.

But Gershon has uncovered the complexity of the enteric nervous system, which manages every aspect of digestion with a “sophisticated, nearly self-contained network of neural circuitry, neurotransmitters and protein,” much like the brain.

“When it comes to a brain in the gut I must be a genius,” said the Business Shrink, apparently in reference to his girth.

London Calling

Why do good companies go bad? According to Donald Sull, who joined the Business Shrink live from UK where he teaches at London Business School, the most common explanations-- incompetent or corrupt executive leadership -- don’t usually hold water. Sull blames something he calls “active inertia” - an organization's tendency to persist in established patterns of behavior.

“What really explains why many good companies go bad is they get trapped by the very commitments that allowed them to succeed in the first place,” Sull told Peter Morris. “Once you’re aware of this dynamic of active inertia, the possibility that you make strong commitments and they allow you to succeed but when the environment shifts those commitments, those frames and processes and resources and relationships and values, those very hardened commitments, can be the source of your inability to respond effectively.”

Peter Morris agreed. “One of the most important things is to be able to continually reinvent yourself,” he said.

Your Tribal Mind

A while back on the Business Shrink we did a segment on the growing trend of Christian entrepreunership with Time magazine reporter Lisa Takeuchi Cullen. Targeting a specific group can make marketing easier, Cullen said, but such an approach has potential pitfalls; an openly Christian business runs the risk of alienating non-Christians.

On today’s show Peter looked at the bigger picture: why do humans sort themselves into groups in the first place? His guest was David Berreby, author of the fascinating new book Us and Them: Understanding Your Tribal Mind.

Here are some highlights from their discussion:

On the conditions that breed radicalism:

Peter Morris If you look at the situations where these do or die followers are manipulated by evil-minded or power-hungry leaders, it wasn’t just that it took a lot of effort. It was that the underlying conditions were more prevalent. What does that mean?…Poverty, emotional depravity, alienation, physical separation, geographic limitations. And we’re living in a word where a lot of those things don’t exist anymore. I mean, a lot of the ability for people to create crusades related to lack of opportunity, lack of resources.

David Berreby: You have a lot of identities when you have a flourishing life…when you have kids because you can afford to have kids and they didn’t die at age two because there’s immunization, and you have a job, and so you have job identity, and you have a community, so you have community identity. And if you have been stripped of a lot of that by circumstances because the health and economic situations around you, you’re impoverished in this sense as well, and it’s easier to persuade you that the only thing that matters is internationalism, or the only thing that matters is being an Aryan.”

On the virtues of moderation:

Peter Morris: Celebrating the different pieces of our affiliation, attributions, characteristics, experiences, and identifying with them is a wonderful thing, and it’s the opposite of being alienated or feeling alienated, it’s belonging. And yet, if you get into too many overarching simplistic, apocalyptic identifications that etch everything else out, that’s where you get into trouble – it’s in the excesses. Or another way of putting it is, in human nature and psychology, people that are too strident about something in their belief are really covering up the fact that they’re quite ambivalent about it.”

Start Me Up

I am often flummoxed when trying to fathom why businesses succeed or fail. Recently a new café, Ritual Coffee Roasters opened up near my house in San Francisco. It offers a sleek clean decor, good strong coffee from Portland’s Stumptown Coffee, free and reliable wireless access. And it instantly had a line out the door. It seems so simple and effortless. So why have so many cafes and restaurants in my neighborhood failed to catch on?

Although he focused more on venture capital then coffee, The Business Shrink Peter Morris shined some light on that question during his discussion on today’s show, His guest was Joel Kurtzman, author of Startups that Work: The 10 Critical Factors that will Make or Break a New Company. Kurtzman and a research team from PricewaterhouseCoopers spent four years studying 350 companies during the “darkest days of the internet bust” and interviewed hundreds of business people to understand startups from the inside out.

The Business Shrink asked Kurtzman to talk about some of the main obstacles to success.

KURTZMAN: “Well, first of all…too much money often is a real obstacle to companies succeeding. Companies should be hungry at the outset when they’re in the start up phase, and they should conserve their cash, and hoard it if they can. And I have seen, and we’ve observed in our studies, companies that were given lots of capital to begin with often have squandered that capital and failed as a result.

MORRIS: And of course that would seem all too logical, but I’m sure like many things, people don’t always do what’s best and always see clearly

KURTZMAN: Yes, and another really critical negative factor is when the team at the top disagrees as to the strategy going forward. Nothing is worse than when you have the top people who are in a shouting match or war about what the company should do, and who it’s customer’s should be, and how it should reach those customers. That’s lethal. It’s been lethal in the histories of business that I’ve studied; it’s lethal in the 350 companies that we studied. So, strategy really has to be aligned, and everyone in the company has to know it. They have to know what the company is doing, and they have to know where it’s going. That’s very critical, and without it, companies fail.”