Chapter 3: Control
How to tell the difference between a domain you govern completely, territory where you project moderate influence, and the vast sea of uncontrollables forcing you to simply ride the wave.
“Wealth consists not in having great possessions, but in having few wants.”
– Epictetus
What will I learn in this chapter?
We’ll reveal how intelligence and control connect, and how to approach control factor theory as a method for managing risk — in your life and in your business. You’ll uncover why misunderstanding dominion control factors can kill you, yet you must still find actionable coping strategies for contingency factors and influencing other stakeholders. You’ll discover how your focus on control can release anxiety, improve creativity, and build a bridge to disruption as a first step in Optimality.
Here are your key takeaways:
You’ll see a trichotomy in action. If strategic intelligence is the survival of uncontrollable contingency factors and market intelligence is the optimization of our own dominion factors, then competitive intelligence can be thought of as the discipline of influencing others.
Almost everything happening in your macro-environment is uncontrollable by any one actor, no matter how powerful they are. We’ll teach you how to prioritize control factors so you don’t get distracted worrying about uncontrollables.
The list of dominion control factors you have exclusive governance over is exceedingly short, starting with the most fundamental question of who you aspire to be. The greater your aspirations, the more you’ll need others to align with you to work for what you want to achieve.
We’ll explore examples ranging from innovations in automobile financing to streaming entertainment, pop music, precious metals, No. 2 pencils, and the President of the United States.
Earlier, you learned the Supercycle can be understood by imagining how to solve a jigsaw puzzle. We’ll transition from Discovery to Optimality with the example of filling a jar with rocks, pebbles, and sand. The rocks are your dominion factors, pebbles are the smaller but more numerous influence factors of others, and sand represents the seemingly infinite number of contingency factors swirling around in your macro-environment.
Discovery reveals whether you’re solving a jigsaw puzzle, filling up a jar, or trying something new. These endeavors require such intentional analysis and different actions that failure is practically assured if you get it wrong.
Doctrine and Tradecraft
Remember your last trip to the grocery store. The most important thing you need is milk. You make a beeline to the back of the store, resolved to ignore — for the moment — any merchandising distractions on your way to the cooler section. If you’re in a hurry and forget the milk, the trip to the store will be a waste of time. All other priorities are irrelevant.
This everyday scenario demonstrates how contingency, dominion, and influence factors all work in the context of control. There are tens of thousands of items in your path through the store. You don’t have control over where the store places the products you’re shopping for — that’s a contingency factor you must merely cope with to achieve your mission. The store influences your choices about what to buy by placing perishable, refrigerated items in the back so that you’ll be much more likely to notice other merchandise you didn’t explicitly come shopping for. Your task is to survive passage past all those succulent distractions.
An inventory of this macro-environment reveals that all of those colorful endcaps and brand merchandising — irrelevant to your milk acquisition goal — must be intentionally ignored, or you’ll risk failure in your objective. That objective becomes your singular priority — what amount and brand of milk should you buy, with the latest expiration date, and at the right asking price per unit? Understanding the grocer’s merchandising tactics can help you focus, avoid buying anything unintentionally, and save time by eliminating the distraction of which flavor of Doritos your kids won’t devour before you can.
For most of us, however, a trip to the grocery store looks quite a bit different. Unsure what to bring home to the family, you might wander in looking for meal ideas and bumble aimlessly from aisle to aisle. After checkout, you struggle to load the groceries into your vehicle, a couple hundred bucks poorer. While returning home, you might even realize you forgot the item you intended to buy in the first place. As you wrestle a dozen shopping bags into your kitchen, your child exclaims, “Yay, you bought Doritos! But…where’s the milk?”
Which version above describes your usual grocery shopping strategy? Are you laser-focused on acquiring only the thing you need and getting out of the store as quickly as possible? Or, are you there to enjoy an outing with an open-ended definition of success as you build a list of healthy meals for your family?
People tend to pursue poorly-defined objectives, often at the expense of the original goal, when they are distracted or in a hurry. When we try to control everything, we tend to control nothing. The number of variables we have sovereign governance over — our dominion factors — is shockingly small. Dominion factors are limited to your definition of success, your plan to achieve it, and whatever preparations or equipment you’ll need along the way. Narrowing your focus, surrendering power over factors outside your control, and limiting distractions will yield quicker, more reliable results.
But most of us aren’t nearly as intentional as we could be about navigating control factors for success. The macro-environment is indifferent to our plans. Human nature attempts to control too many of the wrong things. We stubbornly persist in noticing only the evidence that supports our priorities in the first place. We explain away conflicting evidence as coincidental. And we fail to account for plans being thwarted by others who might not want to see us succeed.
Using a strict scientific method, we should start with a hypothesis and seek out evidence we might be wrong.
But, as we learned in the last chapter, most of us aren’t willing to look for evidence of our own mistakes or biases. We require confirmation to be confident before we act. Any doubts will slow our actions and hinder our commitment. This tendency is what makes us human, reluctant to reconsider alternative explanations even when the evidence proves us wrong. This mistake usually leads to struggle and failure, especially in business.
Leaders tend to start with their own plan and only seek evidence that supports that plan. This is obviously a big problem if better alternatives exist that are unknown to leadership. The solution is to start with a central question and impose clear boundaries to frame it using competing hypotheses to explain why something is happening or about to happen. This method allows you to expand the options available and reveal any emerging patterns that go unnoticed when you have a plan instead of a question. These patterns will define your strategy for success.
Big plans require a more elaborate inventory of dominion factors. Larger problem domains diffuse your autonomy and likely require consent from other stakeholders to succeed. By contrast, the smaller the territory you seek to seize control over, the more autonomous you can be. You have fewer priorities to consider when nobody else has to get on board or out of the way.
The President of the United States requires thousands of people to be engaged in specialized bureaucratic roles to support American leadership of the free world. Compare the President with a city mayor. The mayor might have only a handful of municipal personnel who administer rules and regulations and provide services to taxpayers. Those personnel might not be known outside their city limits. The President is the biggest fish in the biggest pond; the mayor is a big fish in a teeny, tiny pond. The mayor has almost nothing to worry about compared to the President.
Our own free will determines dominion factors. As individuals, each of us defines for ourselves what success looks like and how to achieve it. Choosing a specific path requires our sacrifice of other avenues to success. That sacrifice limits the circumstances we must concern ourselves with. It confines, to you alone, who will enjoy or suffer from the results you produce.
The problem of sovereignty grows much more complex in a team or group setting. Everyone else with a stake in your plan has controllables and uncontrollables, too. What if they don’t like the plans you have in mind? What do they stand to lose from your success? Do you need to influence the control factors of those other stakeholders to your advantage?
This is the essence of competitive intelligence: the disciplined application of influence over other stakeholders who stand to win or lose, and who might or might not appreciate your success as much as you will.
At the heart of this application is deciding who might be friend or foe. If another actor is likely to win when you succeed, they have an interest in helping you as an ally. However, if your success will hurt them, they can quickly become hostile, and you’ll need to exert a different kind of influence over them. You might need to hide your intentions until it’s too late for them to influence your success (see Chapter 7: Guile). Your duplicity (or two-facedness) isn’t necessarily malicious. It’s more aptly considered a defense mechanism for self-preservation by finding ways to neutralize anyone who might interrupt your path to success.
The more innovative your plans to alter the status quo of the landscape, the more defensive incumbents will be to prevent those alterations. The worst-case scenario for incumbents is when their buyers redefine performance using the reference point of your new offer. If they can’t stop your plans coming to fruition, they’ll surrender all of their customers to you eventually.
The process of undermining incumbent markets with a novel, new definition of performance is known as disruptive innovation. Whether we are the innovative disruptor or the incumbent being disrupted, surrendering our assumptions about what our market will reward with share demands a rebalancing of our Missionary and Mercenary mindsets. We must learn to predict what criteria our market segments will be drawn to next. Then we must act accordingly to deliver that value, even if it undermines our existing market leadership.
What does disruptive innovation have to do with Stoic philosophy?
People ask philosophical questions about control, such as “How shall I live my life?” The Stoics of antiquity focused specifically on seeking tranquility in pursuit of the joy that comes from inner peace. To understand this concept more easily, the main theme Stoics pondered was known as the Dichotomy of Control (DOC). The DOC focuses on distinguishing between the elements of our lives within our control — especially our own thoughts and actions — rather than frustrating ourselves worrying about external events or the thoughts and actions of others.
But that’s not quite the full story.
We control one important element of our myriad uncontrollables — how we cope with uncontrollables will determine whether we survive them. Likewise, control over others is always a matter of degree — we can influence others to act or think in ways that would be advantageous to us or them. Every parent knows the trick to get a child to put their socks on when they don’t want to: “Would you like green or blue socks today, sweetie?” When it comes to influencing others, we can’t create a desirable result from factors others control. It’s far easier to influence the choice of variables associated with our desired result and leave the undesirable result out of the consideration set entirely.
Gaining an appreciation for the analytic yield potential of each control factor type shows us more clearly that our dichotomy (controllable vs. uncontrollable) is really a trichotomy (adding in the controllables and uncontrollables of other stakeholders):
Uncontrollable contingency, where no single actor governs the thousands and thousands of diverse variables in the macro-environment; yields a strategic inventory of signals indicating industry or landscape change;
Exclusive dominion, where nobody but you controls your individual and team choice-making; yields the cascading sequence of strategic choices the market will reward with share and influence your success; and
Inclusive influence, where other stakeholders have greater or lesser degrees of power over the dominion and contingency control factors their peers have power over; yields a forecast of who will win or lose in competitive confrontations.
Figure 6: The Trichotomy of Control Factor Theory uses insight filters to produce an analytic yield that fulfills discrete missions across the phases of the Supercycle
As an individual, a very short list of exclusive dominion controllables can be summarized into the choice priorities of your life — what do I wish to achieve, where should I focus my efforts toward realizing these achievements, and how will I manage and measure the yield of my ambitions? But it’s an oversimplification when we ignore the choice priorities of those who will help or hinder our own. We must expand the Stoic Dichotomy of Control to the Trichotomy of Control Factors to account for this oversight.
The Missionary accepts the impermanence of life but believes there’s an eternity ahead. They don’t seek control over others because they surrender dominion to a higher power. Unsolved mysteries don’t bother them because their whole universe consists of mysteries.
The Mercenary, however, isn’t so sure there’s anything beyond today. Consequently, a much greater sense of control is necessary for them. Mysteries are problematic because they interrupt their focus on getting things done. Unsolved mysteries stand in the way of controlling outcomes and are to be avoided at all costs.
Applied Case Examples
Organizations have difficulty with change, since innovation puts previously successful strategies at risk. Resistance to anything new and a desire for stability inhibits innovation. This is particularly problematic when a new innovation disrupts or cannibalizes fiercely-protected product or service portfolios.
Have you ever wondered how automobile financing started? People used to have to pay cash for automobiles. Wealthy motorists were drawn to the idea of owning a “horseless carriage” as a status symbol. Around the same time, Henry Ford sought to make a car his own workers could afford with the cash they had on hand or could save up.
The innovation that was needed was financial: a financier willing to amortize periodic repayments of a loan over time, at a fair interest rate, that would unlock the nascent demand of those buyers without ready access to cash or savings. As you might imagine, that number of potential buyers — those who would borrow to finance their car — dwarfed the size of the incumbent, cash-rich market by many times.
Incumbent competitors did not share in the vision of appealing to so many more buyers. Makers of higher-priced cars were threatened by any innovation that made automobiles more accessible to the middle and working classes. Perhaps they didn’t believe buyers would accept this lending innovation as eagerly as they did. Perhaps they didn’t believe borrowers taking possession of an automobile would keep up with their payment schedule. They didn’t foresee that resisting the loan model would cost market share because of the greater number of buyers down market, which would be opened up as new consumers were given a path to car ownership.
There are always more buyers down market with thinner resources to enjoy the benefits of an incumbent offer. Alphas will even attempt to repel down market buyers as low margin, weak loyalty, or simply beneath them.
We see other examples of early resistance to novel solutions in the home entertainment space against online streaming services. For Blockbuster, the definition of their business (DVDs) was the linchpin of their identity. When you can have movies streamed instantly without leaving home, what good are rental stores full of DVDs anymore?1 What was once a vast empire of real estate assets became the cost structure that couldn’t break even. Although streaming seems like a Gamma, Netflix started out as a Beta to the Blockbuster Alpha, sending DVDs through the mail. The first step in disruption was transforming the Alpha’s real estate asset into a liability.
Disruptors create new markets by making old markets irrelevant. Industrial efficiency and economic progress are byproducts of creative destruction.
How we selectively surrender the things under our dominion will determine what disruption looks like. For example, the choice to switch from selling cars for cash to credit financing, or choosing to no longer rent DVDs as users migrate to online streaming, requires incumbents to surrender their assumptions about buyer behavior. As business actors, we choose to surrender control only when we’re convinced surrender will deliver an increase in financial results, improve customer satisfaction and loyalty, or allow us to bend the rules in competitively advantageous ways.
How do businesses seek out stability, and even a sense of tranquility, similar to the way individual humans might?
As William B. Irvine says in his 2018 book, A Guide to the Good Life: The Ancient Art of Stoic Joy, “Stoic tranquility was a psychological state marked by the absence of negative emotions, such as grief, anger, and anxiety, and the presence of positive emotions, such as joy.”2
In Stoicism, the key emotional response is thankfulness for our rich lives and a resistance to adaptation that leads us to take those gifts for granted. Our human nature is to grow bored with our blessings and eventually consider our gifts nothing special. Life itself becomes drudgery when we overlook the miracle every human life really is and grow distracted by our busy lives. Resisting the fundamental frailty of adapting to take our gifts for granted is the key to maintaining the Stoic joy that only comes from the soul’s tranquility.
Of course, the number one thing outside our control is the most troubling thing of all for most of us — death. But death is the key process by which biological progress is made. This process of naturally selecting attributes that prosper simultaneously sacrifices those that do not. This mechanism of inherited advantages is nature’s perfect process of ensuring the fittest will survive.
Are you suggesting that Stoic philosophy has something to do with natural selection?
Darwin argued that death is nature’s principle method for self-improvement without acknowledging a consciousness or mind behind it. Those creatures fit for their macro-environment will survive. Those unfit will perish, usually before they can procreate, which kills off whatever characteristics were insufficient for survival. Survival of the fittest naturally selects successful characteristics for the next generation of change. Death is the mechanism organisms use to adapt their species for survival.
This same Darwinism, true in biology, is also true in business. The difference is that organisms procreate offspring that occasionally present novel mutations, while businesses generate profits through innovative new offers that might create value no one knew they needed. Those businesses unable to innovate and generate profit will experience the same extinction as a species which fails to adapt in the face of competition. Extinction of an industry clears the way for new business models selected by the invisible hand of the market to compete for share. Those innovators who create superior value for customers are more likely to be rewarded with abundant profit incentives to continue their innovations.
Creation, by contrast, assumes a higher power, lending life to all living things. But what if this same higher power allowed death to solve nature’s problem of building in progress? You needn’t be religious to ask the question: Would it matter if a higher power determined death to be systemically beneficial, even if it is individually terminal?
As Joseph Schumpeter described it, creative destruction must be a deliberate act of choosing which production processes to intentionally dismantle to increase the value to customers and profitability of providers.3 Over longer anthropological periods, as macro-environmental conditions evolve, those enterprises able to innovate characteristics to survive will sustain a generational progeny of new offers into new market segments with new value propositions. Those that fail die out, and their characteristics die with them.
Legendary singer-songwriter Prince Rogers Nelson offers an intriguing story of one of the most successful artists in history harnessing his control factors. Prince expressed creative vision, pioneered innovative musical styles, and challenged existing industry standards. Prince was a wildly prolific musician, but his contract with Warner Bros. restricted the amount of music he could release each year. His feelings about the restriction were so strong that he began to appear in public with the word “slave” on his face, referring to the fact that he was at Warner Bros’ mercy.
To restore exclusive dominion over his musical freedom, Prince stopped using his name entirely and began using a combination of male and female gender symbols as his stage name. This led to many fans and critics referring to him as “The Artist Formerly Known As Prince” because it was easier to pronounce and nostalgic to his origins while avoiding brand-dependent legal entanglements. Prince continued to assert as much control as possible over his music and initiated a number of controversial lawsuits. Even after his death, his heirs and legal representatives for the estate continue to safeguard his music, including a wealth of unreleased content.4,5
How can we see the same forces shaping artistic reactions in pop music as might be seen with investors in precious metals?
Brothers Herbert and Nelson Hunt inherited billions of dollars from their oil tycoon father, H.L. Hunt. However, they were convinced that the value of dollar-denominated paper currency would falter due to the 1970s inflationary environment. As a result, they anticipated that the value of silver would increase by at least tenfold. The brothers bought up physical silver, as well as futures contracts. Using the reputational weight of their family name to secure capital and bring investors on board, the Hunt brothers were able to drive silver prices up and secure more than two-thirds of the silver market.
The federal government, however, saw what the brothers were doing. It introduced new rules to prevent additional long-position contracts from being written or sold for silver futures, which caused the price of silver to slide. When the government also encouraged banks not to make loans for speculative activity, concerns that the Hunts wouldn’t be able to cover margin requirements with new loans tanked silver prices even more. Finally, on March 27, 1980, “Silver Thursday,” the brothers missed a margin call. The price of silver plummeted from its high of $48.70 to $11. Although the Hunts didn’t lose all of their wealth, they spent almost a decade untangling the mess they’d created from having misjudged an influence factor as a dominion factor.6
The power of exclusive governance over their own capital was insignificant compared to the government’s regulatory influence over every stakeholder the Hunts did business with.
In the Hunt brothers' story, the government did not directly set the price of silver; the market did. Much of the Hunts’ strategy, however, was dependent on lender attitudes. By recommending against speculative new loans, the government influenced how lenders interpreted the risk of the Hunts’ plan. Subsequently, this indirectly shifted investor behavior around silver as a commodity. This defensive move by the government to shore up confidence in its inflating currency turned into an existentially catastrophic attack on the Hunts’ strategy and the fortune their father left them. The Hunts’ misinterpretation of their dominion over the price of silver enabled other stakeholders to restore the status quo while making an example of them for others with similarly subversive plans.
What do mistaken control factors have to do with individual and team-based incentives?
Let’s say a few people on your team need to improve their productivity. You set them up with a trainer who can teach them the skills they need and offer bonus money to team members who achieve new productivity milestones. You can’t directly control whether team members will succeed, but you can influence their motivation in the right direction.
What if you offer the trainer an additional incentive if the team reaches its goal?
Now, the trainer is also motivated to innovate and work harder so the team learns lessons that will produce the desired improvements. You have influenced what the trainer has control over (the way they teach), which might improve team members' results if lessons are innovative enough. The combination of influence factors makes the system more predictably reliable.
All of this highlights an important economic principle about value and its relationship to price. Price is misconstrued as a dominion control factor, when in reality, it’s the byproduct of influence factors determining value. The value of something — an hour of someone’s time, the red bell pepper for sale at the farmer’s market, this book you’re reading, or the house you live in — is worth whatever somebody else is willing to pay for it.
Prices are connected to a range of dynamic factors, such as customer superiority criteria, supply and demand relationships, and the intensity of competition between players offering similar value in the landscape.
The purpose of a commodity market is price discovery. The market provides a place for buyers and sellers to interact and come to an agreement based on the dynamic factors determining the value of the commodity.7 Anything that gets in between a buyer and seller engaging in those interactions will manipulate the pricing of the commodity. In the Hunt brothers’ example, the brothers believed they could manipulate the price of silver with enough leverage, and they did for a while. However, the dynamic influence factors actually determining the silver price forcefully resisted their manipulation. The power of hostile stakeholders (the government seeking to protect its fiat currency from worthlessness) was directed at influencing the helpful stakeholders the Hunts had relied upon for their strategy to succeed (the banks lending them money).
Market prices are seldom static, but it can happen when markets themselves are manipulated. For example, when a legal regime is put in place to control the price of a key commodity (such as silver), the supply of a price-controlled commodity will tend to drop. This will intensify when the cost to provide that commodity approaches the market price cap and profit margins turn negative.
Exceptions to this rule occur when black marketeers make secret supply available to the highest bidder beyond the oversight of the legal regime. Deregulation of commodities is necessary to allow price discovery to occur once again. Supply will return to normal only when buyers and sellers can agree openly with transparent data to determine supply and demand price equilibrium. Without price discovery, the value of everything in an economy will be prone to manipulation and volatility as influence control factors are distorted.
Have you ever set a price and had a customer scoff at it? How would you react differently if you were reminded that perception of value was outside your exclusive dominion? Might you have priced your offer more creatively to reflect the inclusive influence of perceived value?
Because market economics are human in nature, they are subject to human frailties, which must be overcome for progress to occur. Superiority can be achieved in the market when innovators accurately identify the dominion and influence factors related to their commodity and ethically manipulate those factors such that the price the buyer pays allows for higher profit margins.
Take the common #2 pencil. If a seller tells customers that the pencil is primarily for filling in the answers on a multiple-choice test, the customer would not value that pencil as much as if the seller improved the versatility of its value proposition. Suppose the customer perceives the pencil is also good for sketching diagrams, recording erasable notes, or even pinning up long hair into a bun. Then, they will undoubtedly value it more than when they perceived taking a standardized test to be the only use. Buyer perception of values drives the price of the pencil. That perception is an amalgam of influence factors beyond the control of the seller’s set price.
If the price of the pencil was a dominion factor, you’d charge a million dollars for it, wouldn’t you?
Which mindset is strongest in you?
“If a person gave away your body to some passer-by, you’d be furious. Yet you hand over your mind to anyone who comes along, so they may abuse you, leaving it disturbed and troubled — have you no shame in that?” — Epictetus
As discussed in Chapter 2: Stochasm, the Mercenary is focused on producing a specific result, largely because they do not have the long-term, infinite worldview that the Missionary does. So, for them, intentional manipulation of control factors is a positive thing. It ensures that a Mercenary does not have to guess the result they might get and that they will win whatever game they choose to play.
To the Missionary, however, the Mercenary’s approach of using control to their own ends seems selfish. Missionaries do not recognize that they always influence others, often accidentally and with unpredictable results. The Mercenary is at an advantage in the arena of control because they can help the Missionary understand that, if control is not deliberate or intentional, the results produced are inconsistent, random, and unreliable.
Consistency and reliability are important for leaders and their stakeholders because predictability is necessary for risk management to succeed — as with any other type of strategic planning. Predictability ensures that a business does not waste resources or put in unnecessary effort. It is deeply connected to an organization’s ability to elicit trust from workers and clients.8 However, modern psychology also supports the idea that the ability to achieve consistency and reliability through sound controls — or even having the perception of control — can help manage systemic stress.9
Frustration with forces beyond our control is just another part of business, as it is with life in general. But we can approach those frustrations systematically to liberate ourselves from the burden of worrying about them.
To this end, make a list of all the things that frustrate you, not just in your chosen career or business, but in your life more broadly. Reconsider which of the things on your list are within your dominion and which are not. If they are within your dominion, figure out your options for controlling them and select the option you feel is best. If the things on your list are beyond your exclusive dominion, you have only three choices — influence, cope with, or ignore them.
When you perform this exercise with teammates, the greatest risk is that you miss an obvious control factor you should have seen. These accidental omissions can lead stakeholders to question your judgment or expertise and damage the trust they have in you. It can also indirectly cause your stakeholders to lose credibility with their circle of peers.
Make your list as exhaustive as possible without allowing your ego to obstruct what you’re willing to see. There will always be invisible dominion factors that surprise you. Your job is to be as rigorous as possible in avoiding those surprises, knowing the list is exceedingly short.
Memoirs
In general, individual feelings of isolation dominate the modern world. Driven in part by technology, each of us retreats into our own inner world. But when we were kids, our parents prioritized family dinners, followed by playing card games to end our day together.
One variable at the start of a card game was how we paired up, which determined which games we’d play. We would start with a game of Whist if we had all four of us. If we were down one because someone had other things to do or didn’t feel like playing, it was Cribbage instead.
Most of the time, Derek and Mom were always up for a game, and Arik and Dad were the wild cards, so to speak. But we’d happily mix up partners, and even though Whist was simple, we took advantage of knowing each other as teammates to outwit the other team. We’d play as many hands as we felt like, usually until Mom or Dad saw 6:30 roll around and wanted to shift gears into getting to bed.
Card games drove a healthy competitiveness in our family. We paid attention to winning, but winning wasn’t the only thing. There was also intentionality and mindfulness about coming together to have fun.
Although our parents might not have foreseen that we would cherish and lean on the memories of those family dinners and card games afterwards, they taught us how to influence where we could and relax about what we couldn’t. Because we learned to be flexible and see how we could influence our opponents, as well as our partners, we’re better-equipped today to assess what we can and can’t control to help stakeholders discover which hands of their own to play.
When does quitting make sense?
In the spring of 2000, I sat for the Certified Financial Analyst (CFA) Level II exam. If you’re unfamiliar with the CFA certification process, it consists of three fiercely-challenging, six-hour exams. This was the second one. By the time I got near the end of the afternoon testing session, my brain was fried. But there in front of me was an open-ended story problem about derivatives. More specifically, I had to discuss the Black-Scholes pricing model.
Even if I would have had the time and a fresh mind, that problem would have taken me 45 minutes to answer. I had maybe five minutes left. I realized there was just no way to tackle the story problem in the time I had. So, I did the only thing that made sense.
I quit.
The Black-Scholes question was a void of possibilities to explore. I couldn’t control the fact that the question was on the test or that I had only five minutes left to answer it. I had to transform uncertainty into under-certainty and defeat the lesser-known of how to act. Rather than being anxious about falling short of a higher potential score, I saw that leaving the question blank was a legitimate way to move forward. That option seemed the most rational given what the clock was telling me. So, I took control by handing in the test and leaving.
After the exam, I enjoyed a few beers with friends to celebrate that we were done with the process. I can toast to the fact that, in Mercenary fashion, I successfully explored my options and narrowed my scope while making a confident choice. I passed that Level II exam on the first try — and Level III a year later.
— Derek
One rower, multiple perspectives
When our mom died in 2001, stresses that were already in motion compounded our loss. For Derek, there was the pressure of working full-time and attending graduate business school at the same time. That contributed to weight issues, with Derek topping out at around 300 pounds and having little motivation to do much about it.
Arik previously had been on the men’s rowing team at UW-Madison. In fact, the sport had provided a spiritual breakthrough for him, which culminated in winning a 2,000-meter relay race as anchor of his team. Better yet, Arik’s final 500 meters was rowed against his freshman crew coach in a come-from-behind victory. At that moment, Arik understood that his potential belonged to him alone and that he could decide whether the outcome he achieved was the one he wanted.
Leaning on that experience, Arik made rowing a lifelong fitness discipline. He suggested to Derek that he buy a Concept2 rowing machine as a small step toward gaining control over his weight. There was a lot of work to do for that goal. But the feeling was, if Derek started out at just 5 to 10 minutes a day, it would be possible to eat the elephant, one bite at a time.
So, Derek bought a rower.
He started out slow, following the plan. Little by little, the time on the machine got longer. His pace got faster. Over the course of a year and a half, 85 pounds melted away. Derek also hit an average daily workout of 70 minutes and achieved a sub-1:52/500m pace.
But the results were more than just physical or even seen in his splits. It also showed up in mood and attitude. The rower became emotional support equipment that Derek used to cope with everything uncontrollable in his life. It enabled him to connect physical exertion with greater mindfulness and stress relief. The sense of calm rowing provided was significant enough that, now, whenever he travels by car, Derek hauls the Concept2 with him.
Rowing became a mutual love we pursued together, and we started getting involved in indoor races. Within a few years, it was clear we’d made some amazing progress and that the rower had benefited us both. We competed in Madison’s Midwinter Meltdown in 2004.
But by accident, we rowed the wrong race. That mistake meant we had to follow up, already tired, with another race, this time against much younger competitors. But we did well — Derek finished first both times, while Arik finished second and third, respectively.
We’re not always perfect or consistent with our exercise. But we still look to each other for inspiration and accountability. During the COVID-19 pandemic, Arik eased off the rowing to spend more time on the treadmill. Arik finally took advantage of the opportunity to renew his drive to row when Derek brought his Concept2 with him to the Spring 2022 SCIP conference in Minneapolis. He grabbed Derek’s room key to get in the workout he had been missing for the past couple of years, even if it was just a short 5 or 10 minutes every day.
We also recognize that, even though both of us use the rower to relax, stay fit, and access a mental state that’s more conducive to creativity, we each use the rower with our own chisel-tip perspective of control top of mind. For Derek, the most important dominion to express control over is time on the machine. For Arik, it’s pace. We’re able to respect the different goals we have about it, bring that respect into our business, and concentrate our limited amount of power on those areas that influence our business, our market, and our partnership the most.
Every person in the world finds a way to cope and express control where they can. For us, the rower achieves both. The discipline and mindfulness rowing provides makes us nicer people — or rather noticeably less nice to be around when we don’t get it. And that has a value that makes all the effort and exertion worthwhile.
You can’t control the weather, but you can prepare for it
In 2003, I attended my very first SCIP conference. The keynote speaker was none other than legendary Hall of Fame NFL coach, Bill Walsh.
I was new to the competitive intelligence industry, but there Walsh was, talking about contingency planning in the sport of football. He not only understood the concepts around control, but had been using that understanding for years to ensure his players and team were as prepared as possible for every contingency.
Walsh was famous for building the West Coast offense and serving as head coach for the San Francisco 49ers. He pointed out to the SCIP audience that he and his team had no control over the weather they encountered in places like Chicago’s Soldier Field. But could they be prepared for it? Absolutely.
Preparation could include a lot of things. Maybe they could bring two or three different sets of cleats. Maybe they could choose specific ways to monitor what was happening with the late November weather to make game adjustments, such as deciding to run the ball more than passing. But the focus was always on how to cope well with the contingencies around them.
Walsh’s real-life examples demonstrated how deliberate decisions about contingencies, especially when things around you are outside your dominion, position an individual or team in a stronger posture to win.
— Derek
Questions to Activate Control
Survival depends on paying attention to changes in the world and taking intentional action to mitigate the risks of macro-environmental variability. But instead of carefully calibrated actions to mitigate risk, much of what humans do all day are little more than random accidents. We typically don’t realize what small interventions we could have taken to produce a different result.
You must pay attention to make small interventions and produce a different outcome. But if you pay attention to the wrong things, you can miss what’s most important. And if you try to pay attention to everything, you will get overwhelmed and burn out long before you reach the finish line.
People in organizations can have dramatically different appetites for risk. Without consensus between actors who have shared dominion over factors they are responsible for, risk-tolerance conflicts can foil company plans. Consensus is elusive, as well, and sometimes, the best we can hope for is consent from other teammates not to stand in the way.
Here are a few questions for you and your teammates to consider about how you will handle control factors, individually and together:
How are the applied case examples shared above similar to the circumstances you face now or have faced in the past?
Where did you assume dominion over an influence factor, such as refusing to yield a fixed price to market expectations, leading to frustration and discord among teammates and your customers?
When was the last time your team struggled needlessly with a contingency factor entirely beyond your control?
How is the price of your offer actually determined by the inclusive influence factors of the market, rather than your exclusive dominion over it?
Transition from Section 1 Discovery
Disciplined exercise of control over actions — the heart of all intelligence — is critical. Think of under-certainty, stochasm, and control in a three-dimensional landscape (see Figure 2: The three variable dimensions of the “action graph” from Chapter 1: Under-Certainty). Under-certainty provides depth. Stochasm provides width or length. Control illustrates force and describes the correct action at the right place, time, and degree.
Hope is a natural byproduct of addressing our human under-certainties, but it’s not a control strategy. Real strategy asks how you will handle contingencies when — not if — you encounter them. The possible actions inside of those strategies must be tested with rigor and mindfulness.
Whatever you do must be done on purpose — rather than by accident. Unfortunately, so many of our actions unfold as hasty reactions to the actions of others, leading to errors that might end our endeavors entirely.
Mastery of Control Factor Theory is deeply connected to humility, guile, and empathy, as you’ll discover mostly in part three of the book. Practicing being humble (see Chapter 6: Humility) will allow you to relinquish control when it’s appropriate, especially in matters where you must consider the needs and realities of your stakeholders ahead of your own. Beguiling the other stakeholders who will win or lose if your plans succeed (see Chapter 7: Guile) must be designed as simultaneously allusive to friends and elusive to foes. Empathy (see Chapter 8: Empathy) then equips you to see the world from your stakeholders’ points of view to know how to influence them by delivering whatever it is they really want or need, as you’ll know them better than they know themselves.
Remember our analogy to clarify how to look at control of the jar of sand, pebbles, and rocks.10 Initially, the rocks are the things you must prioritize, such as health, faith, and family. The pebbles are elements that are less important but still matter, such as your day-to-day work or longer-term career. The small things are elements that ultimately don’t matter much in the long run, such as the possessions you own or whether an event is canceled or missed.
Rocks go in the jar first, followed by the pebbles. The sand goes in last and fits between the rocks and pebbles. If you get the order wrong, you’ll discover there will never be enough room to fit everything in the jar. To survive, you’ll need to first put boundaries around your operating landscape to contain whatever grains of sand must be considered as uncontrollables that might confront you.
In the intelligence world, the rocks are your dominion control factors, such as what your business defines as success. The pebbles are influence factors, everyone else’s exclusive dominion, and uncontrollable contingency factors. The sand represents your own contingency factors, which must be survived and coped with, rather than controlled. As a logical strategist, when deploying your plans, the dominion control factors go in first, followed by influence factors, and finally contingencies. But for an intelligence analyst, we begin with the strategic intelligence variables outside of our control first, which are the boundaries in which our strategy must be contained to succeed.
The analyst looks first at the landscape to ask what strategies might arise to be successful, while the leader or executive is focused single-mindedly on the strategy they’ve chosen, regardless of the macro-environmental factors that will deny them success.
Through this analogy, control factors become the programming language for happiness — or in the words of the Stoics, tranquility. It becomes possible to ignore the contingency factors that don't matter (sand), acknowledge how the choices and circumstances of others might influence your outcomes (pebbles), and concentrate most on the action around your dominion control factors (rocks). Analysts who use this sequence help leaders deploy strategy that will actually work, rather than the strategy their leadership wishes would work.
A second useful analogy that’s helpful for understanding how control connects to the larger action flow of Discovery, Optimality, and Simulation is a jigsaw puzzle. When you pour out your puzzle on the coffee table, Discovery begins with flipping all of the pieces right-side-up so everything is visible. Next, you close the stochasm by looking under the table to see if you’ve dropped any pieces. Discovery concludes by defining a clear boundary with a finite number of flat-edge pieces. Optimality is the process of fitting all the remaining interior pieces inside the border. It comes from seeing patterns of the image you’re solving for in the interior of the puzzle once the boundary is defined. Simulation can then consider who might flip your coffee table over and wreck your puzzle before you’re finished with it.
Whatever it is you’re struggling with today, remember how Alcoholics Anonymous made memorable their version of control factors through the well-known “Serenity Prayer”:11
“God grant me the serenity
To accept the things I cannot change;
Courage to change the things I can;
And wisdom to know the difference.”
References:
Guillermo Vega, “Netflix resistance: The video stores fighting the rise of streaming in Spain,” El Pais, https://english.elpais.com/science-tech/2021-09-16/netflix-resistance-the-video-stores-fighting-the-rise-of-streaming-in-spain.html.
William Irvine, A Guide to the Good Life: The Ancient Art of Stoic Joy (New York, New York, Oxford University Press, 2009).
Carol Kopp, “Creative Destruction: Out With the Old, in With the New,” Investopedia, February 20, 2023, https://www.investopedia.com/terms/c/creativedestruction.asp.
Eriq Gardner, Ashley Cullins, “Prince’s Legal Legacy: Contract Fights, Copyright Battles and Changing His Name,” The Hollywood Reporter, April 21, 2016, https://www.hollywoodreporter.com/business/business-news/princes-legal-legacy-contract-fights-886521/.
Reg Chapman, “Following 6 year legal dispute, family aims to bring Prince’s original music back to Paisley Park,” CBS Minnesota, July 29, 2022, https://www.cbsnews.com/minnesota/news/following-six-year-legal-dispute-family-aims-to-bring-princes-original-music-back-to-paisley-park/.
Andrew Beattie, “Silver Thursday: How 2 Wealthy Traders Cornered the Market,” Investopedia, June 7, 2022, https://www.investopedia.com/articles/optioninvestor/09/silver-thursday-hunt-brothers.asp.
James Chen, “What Is Price Discovery?”, Investopedia, May 4, 2022, https://www.investopedia.com/terms/p/pricediscovery.asp.
Howard H. Stevenson and Mihnea Moldoveanu, “The Power of Predictability,” Harvard Business Review, July-August, 1995, https://hbr.org/1995/07/the-power-of-predictability.
Marissa Moore, “Stress and the Perception of Control,” PyschCentral, September 20, 2022, https://psychcentral.com/stress/stress-and-the-concept-of-control.
Mindful Practices. “Rocks, Pebbles, and Sand: Prioritizing Your Life.” June 15, 2020. YouTube video, https:www.youtube.com/watch?v=cPgMeKfQFq8.
“The Serenity Prayer,” LordsPrayerWords.com, accessed January 4, 2022, https://www.lords-prayer-words.com/famous_prayers/god_grant_me_the_serenity.html.