The Key to Success… in the Long Run By Victor Cheng

The Key to Success... in the Long Run  By Victor Cheng, former Consultant, McKinsey & Co. I've heard Warren Buffet speak in person. He...

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The Key to Success… in the Long Run  By Victor Cheng, former Consultant, McKinsey & Co.

I’ve heard Warren Buffet speak in person. He talks a lot about the importance of maintaining a great reputation. In his words, it takes a lifetime to develop, and only a minute to destroy.

In this respect, life is long. It serves you well to have a good reputation with the people in your world. You will have to live with reputation for the duration of your life.

Buffet also talks a lot about what kind of people he hires as CEOs to run the companies he owns.

He likes people who have integrity, are smart and work hard. (Incidentally, I heard Jack Welch speak the day after Warren Buffet, and he said nearly the same thing.)

Buffet’s logic is if the person does not have integrity, then he hopes they are stupid and lazy.

In thinking about integrity, I am reminded of something I learned in the Stanford economics department regarding game theory.

Game theory is the branch of economics regarding incentives in social situations.

One of my biggest takeaways about game theory is that the DURATION of the game matters a lot in terms of incentives.

If you meet somebody, and negotiate a deal, the incentive is to cheat them if you will only have a single interaction with them.

BUT, if you will have multiple, repeated interactions with the other party over a long period of time, the economically optimal incentive is to be honest.

In a “game” (the term economists use to describe a relationship between two parties) with a single interaction, if you cheat another person, they don’t have an opportunity to retaliate.

In a game that has a long duration, if you cheat somebody they will try to screw you over immediately and never trust you again.

In a business context, if you want to land a single order from a prospect, over promise, even if you have to under deliver. Your promise will likely be bigger than the completion.

However, if you want a LIFETIME of orders, never over promise and always over deliver.

I have never been a prolific networker. I’ve never been great at the impulse sale — making a one-time sale, say working at a clothing store.

However, the relationships I do develop personally and professionally I tend to keep for decades.

Also, I find it easier to make a 6- or 7-figure sale than I do a 2-for-the-price-of-1 $49 special at the local department store. The former is usually sold to someone you have a relationship with; the latter to a total stranger who’s never had any interaction with you.

In the former, integrity is a competitive advantage. In the latter, it is not.

If you want to win in the long run, one key secret is to have integrity in everything you do.

What exactly does this mean in practical terms?

It’s quite simple.

Be concerned with how well others do in their interactions with you.

If you win, but they will lose (even if they don’t realize it), don’t do the deal… ever. This is true even if they want to.

If you will lose, but they will win — don’t do that either. This is not about sacrificing yourself to serve others.

The ideal is to only do deals where at a minimum you win AND they win.

BUT, there is a 4th option. It’s a principle by which I’ve built my entire career.

Here it is:

I win and you win more.

In business, I firmly believe in being “more than fair.”

When you operate in this way, two things happen:

1) People will gladly come back to do business with you over and over again;

2) People will tell their friends to do the same.

In purely economic terms, the outcome is that your repeat business rate is extremely high. Since revenues from repeat customers have no cost of customer acquisition, profit margins on sales from repeat customers are quite high.

Secondly, because people tell their friends, your advertising and marketing costs drop to close to $0. Again, your margins go up considerably when new customers find their way to you (despite a total lack of effort on your part), and repeat customers keep coming back.

To a large extent, this is the the McKinsey model — it also happens to be mine.

In the career context, if you leave a company you work for better than you found it — they will always want you back. If the people who worked there move to another company, they will always want to hire you. It is excellent career insurance.

I left McKinsey on very good terms. If I ever needed a job, I am confident I could go back — or approach the people I used to work with, and work for the companies where they now work.

There are several people I worked with 13 years ago — software engineers with very high integrity. If I needed that kind of talent, I would hire them sight unseen, with no job interview and no resume, even though I haven’t talked to them in over a decade.

In my professional network, I help the people in my network out a lot. They also help me out. I always try to help them moderately to significantly more than they help me. When I do need help, they are delighted to help. They also don’t hesitate to introduce me to other people in their network, because they are 100% certain it will never reflect poorly on them.

One key to success over the long haul is simple: INTEGRITY


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