Wikipedia (the source of all sources) suggests that altruism is the selfless concern for the welfare of others. Altruism focuses on a motivation to help others or a want to do good without reward.  I disagree, and not just because I’m trying to rationalize my greed capitalist pig behavior, but because the whole idea is incomplete, and subsequently delusory.

 When was the last time you helped an old lady carry her cans of cat food to her car for no reason at all? Maybe there was a cute member of the opposite sex watching, maybe the old lady was the heir to some great fortune and now her insolent grandchildren have just pissed her of the point of writing them out of her will. Now she needs someone nice to give her expansive mansion. The chances are small, but so is the cost of helping her. At any rate you can feel good about it when she smiles gratefully. Hey that’s a reward (even if she doesn’t give you a big shiny nickel for it). I like thinking of myself as a good person – it’s useful – it helps out with the old karma accounting. And, last week, when you bought your friend that double espresso, mocha, with sprinkles, and whip cream and suffered both the financial and emasculating setbacks, why did you do that? Could it be that a) it made you feel good b) your friend would probably buy you a beer later that night c) hey, you might need a good job reference sometime in the future. Regardless, it wasn’t for not.

 Even Mother Thereasa wasn’t altruistic in the Wikipedia sense of the word. She was doing it because of the sweet kickbacks she was getting from God. But, hey - that’s what relationships are all about, give a little, take a little so that you help each other progress. In my mind, altruism is along the lines of comparative advantage – we all benefit by partaking.

 By establishing that there is some value to our “good” deeds, we can begin to account for it when we evaluate our decisions. It is not hard to conclude that there are also negative consequences to “bad” deeds. So, I submit, that it is with this matrix that we can begin to delve into the ethical complex of businesses or further into the individuals that make the day-to-day decisions. The opportunity cost of doing someone a fovor is that, given the chance, they may not return the favor. Favors tend to accumulate and escalate, so you often ultimately get back more than you put in.

 This may seem overtly cold and calculating to some who believe that you shouldn’t need a reason to do good (besides that disembodied all knowing consciousness in the sky), and it may seem overly idealistic and Disney-bookesque to others. Yet, its really neither, it’s a reason to do good, and this reason is worth recognizing because recognizing it ultimately leads to doing more good and that’s, err… good.

One of these stories is the biggest stories to break this year and the other only appeared to be.  But they both leave the outside viewer asking themselves, “did they think we were stupid?”

 The stories? Spitzer and the Pentagon’s puppet analysts.

Of course, we, the general public, aren’t stupid, well not that thatstupid. But that didn’t stop them. Maybe they thought we (read the general public again) just didn’t have the knowledge or resources to break the story, but investigative journalists did, and we were indeed smart enough to immediate assess how we felt about both stories. And my guess is that most of us concluded that neither demonstrated the kind of behavior that public leaders should have. This guess is not a hard one to make, it’s pretty obvious that the public is not going to shake the hand of either the Pentagon or Spitzer for these moves (not that you would want to – chances are you will encounter a disease at worst, and a slimy residue at best).

That being said – why did they do what they did? The way I see it, there are three scenarios that lead up to both parties making the choices they did.

1. it did not occur to them to consider the outcome 
2. they not think they would be caught 
3. they thought people wouldn’t care 

The point is, both Spitzer and Pentagon officials (powerful (or once powerful) institutions in charge of massive decisions on a day to day basis) did not properly assess all scenarios, even the likely ones. If they had, they would have realized the consequences (loss of credibility) was far more detrimental then the benefit (short term affection).

Forgive me, this is a bit of a rant.  In the interest of savings those of you who don’t want to read as much as I want to write, we will Tarantino it.  The thought is this:

There are people that are content with precedent and status quo.  These people work at bowling ball companies.  Then there are those people that are focused on improvement, new ideas, and forward momentum.  It is these people that change the world.

It is my belief that people who are passionate about what they do are more likely to do the changing.  For these people, their passion mitigates the apparent risk associated with newness and change.  Why? Because they receive some benefit beyond the end payout – they benefit from the experience in and of itself.

For those of you whose time is less valuable and want to read the entire story, here is the James Cameron Version. It starts with a guest speaker I had in a class at my MBA program, and it ends with a story about a big idea.

The speaker began by saying he wanted to talk to us about how to achieve success in business and he started with his own career path. Inspired by John F. Kennedy, he got his law degree, intending to use it in government to implement changes.  He found government to be wasteful and bureaucratic; a place that needed changes, not one that fostered them.  Deciding that he was not the one to implement these changes, he moved into corporate law.  Finding this un-inspirational, he decided he would go to the source of the money - why get paid by businesses for legal council when you could be in business paying others?

Let’s examine.  So far his error is this: chasing money rather than pursing action behind money.  I am a firm believer that you can’t win without true passion for what you are doing.

Passion for your work will get you money, passion for money gets you work.

And that’s what he got: work, boring work, at a bowling ball manufacturer. He could sense our disappointment with his anticlimactic career path and quickly launched a defense.  As he put it, “you can’t all work for Apple and Microsoft.”  He offered this advice as we judged the un-sexiness of his career, “Stay away from the big idea,”

His logic was this: big ideas have a binary outcome, they either fail or make it. If your idea fails, you’re on the chopping block. If your idea works, everyone will want part of the credit and your boss probably won’t even recognize you for it.  What he’s done here is assume that a binary outcome means a binary payoff.  He has failed to account for any enjoyment or net self-improvement as a result of the experience.  Instead, he suggested the most efficient way to climb the ladder was to do the small things right, show up on time, get the numbers right and dress well.

He followed this with an interesting side story. While at the bowling ball company, he had the opportunity to interview for a job as CFO for a small yet growing company called Microsoft. He had read in an article that Bill Gates’s girlfriend thought he had poor hygiene. He didn’t want to work for someone with bad hygiene because he didn’t think someone who didn’t pay attention to their appearance could pay attention to bigger things.* Bigger things like establishing one of the biggest most influential companies of the century. This was meant as a light-hearted story that demonstrated his adherence to principles. It wound up being a story that showed how his risk aversion cost him millions of dollars and a job he wouldn’t have to defend to anyone.

In short, his method of achieving success was persistent mediocrity. While he was busy working for a paycheck and avoiding risk, big ideas were happening all over the place.  One of those big ideas involved ice, which is the second part of my point.

In another class the following day, a professor told us the story of one Nils Bergqvist. Nils liked to ski. He got a job in northern Sweden with a mining company so that he could ski during the winter. He didn’t like the job, it was boring, but he kept skiing, and acquired a new hobby, whitewater rafting. He began taking people down the rivers to pay for his hobby. He started taking so many people down that he bought some rafts and started a guiding company. But, he needed something to do during the winter when it was dark all day and no one wanted to be that far north.

He decided that he wanted to share the beauty of the Northern Lights with people.  He met a Japanese businessman and after talking with him, Japanese tourist began visiting, and he visited Japan. While there, he saw ice sculptures around his hotel. He asked around about artists and decided to form a workshop and festival in Sweden for ice carvers to display their work. It rained. As the sculptures melted, Nils had this to say, “We tried to preserve something that belonged to nature.  Let it be destroyed and make something new when it is destroyed.” And something new is exactly what they made.

The following winter Nils got the group of artists to construct a hotel entirely of ice in the Arctic Circle. That was his big idea, a hotel of ice. And it didn’t cost him any money since the artists were excited to do it. The hotel was huge (literally and figuratively).  People eventually had to signup years ahead of time to spend a night wrapped in animal furs in the frigid ice beds. He tried to form a marketing partnership with Absolute Vodka, after all, patrons needed vodka to keep warm during their stay. His attempts to contact Absolute were ignored again and again, so he took more risks. He started to carve Absolute bottles into the hotel’s doorways and Absolute logos into the bar. If they got a cease and desist, he reasoned, they would just melt the offending shapes away. When pictures of the hotel started circulating with the Absolute logo in them, the head of marketing at Absolute called Nils. “Are we part of this?” he asked. “You should be” was Nils’ response.

Absolute now has ice bars all over the world, made entirely of ice, kept below freezing. People pay large cover fees to dawn large parkas, drink absolute from ice glasses and lick the walls.  And who supplies the ice glasses made from the frozen rivers of northern Sweden? Nils does, and it’s good business, a multimillion-dollar business.

So, too many pages later, what’s the point?  The lesson in opportunity cost is this: if you are one of the black suits, if you are a big wimpy risk hater, the opportunity cost of your choice is that you won’t ever think of an ice hotel because you are guided by money, not passion.  You won’t be interesting, you will work harder, not smarter and no one will remember you.  When someone presents you with a new idea, you’ll run the numbers, you will conclude that it’s too much of a risk, that there isn’t enough information, that the returns don’t justify the investment. You will sacrifice large yet volatile returns for small predictable ones.  But, as any finance specialist will tell you, in the long run, more risk yields higher rates of return.

We can’t all work for Apple or Microsoft, but we can all work on something that we are passionate about.  This passion mitigates risk and can lead you to undertake endeavors that go on to change the world.  They won’t all work out, but in the end the net benefit will be greater than the slow progression to mediocrity.

*Note the payoff for the girlfriend not discarding him for poor personal hygiene.

First off, this going to be one of those narcissistic blogs. We have several checkpoints and feedback loops established to avoid any sort of digression in that direction. Anything remotely approximating, bordering, or second cousins to Ego are for humor’s sake, not that we are claiming to be funny. We are young, naive, and will not pretend to be a value-add for anyone other than ourselves. The purpose of this blog is to document things that we believe make successful businesses, mistakes that smart and/or powerful people make*, and smart lessons that other intelligent people have taught us, all in the hopes that one day we can compile this into a functioning career.

Let the games begin…

Opportunity cost (for those Art History majors out there who didn’t take an econ course or never made it to class because sleep seemed like a better alternative) is the cost of forgoing your next best alternative. An example: the time and energy we spend writing this blog could be put to use doing any number of productive things. We must narrow the options down to the “next best” forgetting about things like collecting Subway coupons, selling toothbrushes on eBay, buying toothbrushes on eBay, alphabetizing our CDs, or trolling the Craigslist personals as all of these things (except maybe Craigslist personals) clearly hold little value. We should probably also not include creating world peace or training for the World Mixed Couples Badminton Championships, because given our resources (skills and time) this is not plausible.

Obviously the debate can get complicated. But for arguments sake we will say that my opportunity cost is the education I would get from doing the mountains of post graduate work I have assigned to me on a daily basis, and my sister must forgo a few minutes every day of making sweet excel models. Given that she is paid to make sweet excel models and I pay to do homework one might call the cost of this blog a rather hefty one. But, all that it really means is that this blog is super valuable, so valuable, that we sacrifice our invaluable would-be-work time to do it.

You must promise us to memorize and thoroughly understand this entire definition with all of its nuances and rambling asides, including this important subtlety: too often people evaluate the short-term opportunity costs when they make decisions. They don’t consider the third and fourth iterations and consequences of a decision. This is probably because there is a vast amount of uncertainty about the future; however, that does not mean it is worthless.

Anyway, opportunity costs are important. They are particularly crucial in the strategic sense. Evaluation of opportunity costs, including the unknown consequences, is strategy at its most basic and effective level. This blog is going to be dedicated to evaluating businesses and situations that we encounter on a day to day basis with an eye towards strategy and mouth towards, “what we would do differently if we were running the show” or “what we think is working.” In addition, we’ll try to include smart thoughts that other people have had that might be useful and/or entertaining.

*We are still trying to establish the correlation between the smart and powerful

**Disclaimer – neither one of us can spell or edit appropriately. You can expect to see AND where there should be an AN on numerous occasions.