Review: Built to Last

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Each Sunday, The Simple Dollar reviews a personal productivity or personal development book.

BuiltAbout a year ago, I began to really look at The Simple Dollar as the beginnings of a small business – likely one that would only ever have one employee (me), but a business nonetheless. I proceeded to dive into a big handful of recommended business books, but most of them made no impact at all on me – they either didn’t apply to me or were filled with platitudes so generic that they didn’t matter.

Then a reader of The Simple Dollar sent me his copy of Built to Last with a little inscription inside: “This book will change the way you think about The Simple Dollar and any goals you have with it. Good luck.”

I was really intrigued by this, and even more intrigued when I opened the book to the introduction and read the following:

We’ve come to understand since publication that, ultimately, this is not a business book, but a book about building enduring, great human institutions of any type. People in a wide range of noncorporate situations report that they’ve found the concepts valuable – from for-cause organizations like the American Cancer Society to school districts, colleges, universities, churches, teams, governments, and even families and individuals.

What’s so compelling here? Built to Last, in a nutshell, tries to extract the reason for success behind some of the greatest corporate success stories in American history. What do companies like 3M, Boeing, Sony, and Hewlett-Packard have in common, and what made them rise above the pack and keep enduring?

The idea that this subject could extract principles that apply to any organization, from Exxon-Mobil down to an individual person running a small, self-employed business, and that this book is so highly respected in the business community says that there might be something compelling for all of us between the covers. For instance, I read it for ideas on how to make The Simple Dollar a long-term thing. Let’s dig in together and see what there is to learn.

A Deeper Look At Built to Last

The Best of the Best
The book opens by seeking to identify visionary companies – best of breed companies within their respective areas that have endured over time. Some companies peak and then fall off (like, uh, Enron) and others stay around for a long time but never stay on top of any area (like Colgate, for instance). The book winds up identifying a list of eighteen companies – Citicorp, Procter and Gamble, Philip Morris, American Express, Johnson and Johnson, Merck, General Electric, Nordstrom, 3M Ford, IBM, Boeing, Walt Disney, Marriott, Motorola, Hewlett-Packard, Sony, and Wal-Mart – that have persisted at or near the top of their respective areas for a long time, surviving leadership changes and drastic changes in the marketplace. While I can think of a few companies that could be added to this list (Microsoft immediately comes to mind), I do have to say that all of the companies here did reinvent themselves and manage to stay relevant for a very long time (even if a few are having troubles right at the moment).

Clock Building, Not Time Telling
When you look at that list of companies, what do they make? You’ll probably come up with a long list of answers, but they all made one thing in common: an organization that could survive any personnel change, product change, or market change. Great ideas and great leaders might have helped in some cases, but neither one of those is absolutely necessary. What mattered was defining a process that worked regardless of the product, the idea, or the personnel.

Let’s translate this to blogging, something I’m interested in. You could compare The Simple Dollar to a completely different blog – say, amalah (an excellent parenting blog). We write about completely different topics and have almost no audience overlap, yet we’ve both found success in our respective areas – personal finance blogs and parenting blogs. What do we have in common that has value? We both write in a conversational tone. We both write very regularly, so that our readers can expect posts on a consistent basis. We both write on material that matters to our audience – we don’t write sidebar posts about our cat getting sick that are completely disconnected from the topic at hand. We’re both working on ways to make our message more permanent, through downloadables and book deals. It’s reasonable to think that these are elements of success that build a continually successful blog – and I’d bet that a lot of people would agree with that.

More Than Profits
Another interesting piece of the pie is that these companies all have goals in mind that don’t mention profits. Their mission doesn’t directly involve making money – money just comes in as a result of successfully completing the mission. They use a compelling example with Merck, who gave away millions of doses of Mectizan in the third world, a drug that cures “river blindness.” It brought them no profits at all – in fact, it was by itself a giant net loss. They did the same exact thing in Japan after World War II – they sold streptomycin there at cost because the Japanese couldn’t afford expensive medicine. What happened after that in Japan? Merck became the dominant American pharmaceutical company there because they didn’t just talk the talk about healing the world, they walked it, too.

I’ve taken this lesson to heart recently. What is the mission of The Simple Dollar? It’s to talk frankly about financial issues and help people to get back on track financially, regardless of where they came from. If I make money in the process of doing that, that’s great – it’s wonderful to receive some compensation for my time. But the mission of the site is to help people financially. That’s why I made some difficult choices recently, particularly in getting rid of most of the ads. I am violating my own mission by having payday loan ads or other ads that encourage poor financial decision making on the site, and while I’ve come to the viewpoint that such a stand is a bit extreme, it’s where my heart lies. In the long run, I firmly believe that following my mission above all else will pay off – I’ll reach more people than ever before. And that, my friends, is how I define success.

Preserve the Core/Stimulate Progress
A successful company usually has three or four core principles – outside of those principles, the company should be willing to change anything. Companies get into trouble when they start holding onto ideas and “rules” that are less important and refusing to change when the market changes. Built to Last uses IBM as an example here, showing their three core principles (give full consideration to the individual employee, spend a lot of time making customers happy, and go the last mile to do things right), the success IBM had when they followed them (up until the mid-1980s or so), and the failures after they started adhering to secondary principles, like corporate culture and such.

What are The Simple Dollar’s core principles? I sat down and thought about this for a while, and I came up with three. Simplify and humanize personal finance and growth is pretty much the core principle of the site, and these relate to my other two principles: never recommend a principle that I wouldn’t follow myself and be open and honest, even in failure. Everything I write or do related to The Simple Dollar comes from these three principles.

Big Hairy Audacious Goals
Here, Built to Last uses Boeing as the primary example, talking about how time and time again the company bet its entire future on what they saw as the next evolutionary step in the airplane. The challenge, though, is to make sure that these big goals are in line with your core principles – it wouldn’t make sense, for example, for Ford in 1909 to revolutionize the railroad industry.

What’s a big goal for The Simple Dollar? A book deal? 100,000 subscribers? My biggest goal, actually, would be to be able to have enough passive income to focus on spreading this message full time – the other items are just pieces of the puzzle to get there.

Cult-Like Cultures
Another element of long-term success is that people in the organization believe in the principles in the organization. This is how often companies with great success bring in new management that doesn’t believe in the company’s principles – and then proceed to derail everything. Think of Bob Nardelli at Home Depot, for example – he came into a company with some core principles, basically chucked them out the door, and installed a version of what worked at GE. A lot of the Home Depot folks didn’t like that much at all, and it created a long period of internal strife there.

In other words, everybody involved needs to believe in the same principles. When that fails to happen, then the organization begins to waste a lot of effort working against itself instead of working towards those goals. From my perspective, this is even greater encouragement to throw out the things that don’t work.

Try a Lot of Stuff and Keep What Works
Continuing this same thread, Built to Last also encourages trying a lot of different things, seeing which ones work, and sticking with the ones that do work. Thus, most successful organizations (like 3M) encourage people to spend a percentage of their time simply trying out new things instead of doing the same old same old. A lot of innovative companies do the same – Google comes immediately to mind.

I do the same thing with The Simple Dollar. I constantly try out new topic areas to see how they fit, try new writing styles, and take contrarian views. Some of these things work – some of them don’t. But each time, I learn something new about myself and about people reading this site, and that makes the site better and more useful for everyone.

Home-Grown Management
The book also encourages companies to look for management from within, something I strongly agree with. Almost every large company that brings in a new management team from the outside – particularly from another industry – winds up with some significant problems. For example, Jack Welch came from within GE and Lee Iacocca (at Chrysler) came from Ford and both saw great success, but Bob Nardelli came from GE to Home Depot and it was a big mistake.

I truly hope to find a mentor for The Simple Dollar someday. I would like to transition the entire site to the right person when the time comes (though that’s a long way off). But, if I don’t find the right person, I’ll just stop the whole thing – I want someone who is intimately involved with the site to take it over and I want that person to believe in the same things.

Good Enough Never Is
Built to Last believes the biggest enemy of all is complacency. Complacency is the point where you let competitors overtake you because you believe you’ve earned your spot. That never happens – someone’s always waiting to take your place in a competitive market.

How do I keep trying to work harder? I read the negative comments and rarely look at the positive ones. This even includes the ones that are obviously people trying to grind an axe that is unrelated to me. The negative comments usually point me to where I need to improve – the positive ones, while reaffirming, usually carry the message that I don’t need to improve. And that’s dangerous.

The End of the Beginning
The last principle is that success isn’t the end of the road. It’s merely the start of it, because now you have to live up to that success. Where can you go from here? It’s an eternal question that some companies can answer and some cannot. If you have all of the tools in place, you can usually find the answer to that question. It’s a powerful question to always think about, even if you believe that you really are the best – how can you get better?

Building a Vision
This chapter largely concludes the book by stating that all of these pieces do in fact intersect and come together, showing you a true vision for your organization. This isn’t buzzwords or “mission statements,” but the actual realization of the path you have left to travel and the tools you have to get there.

Buy or Don’t Buy?

Every person who does any sort of side business or is involved in running anything should read this book. It made me think about The Simple Dollar and my other side businesses in a very deep and careful way and it made me realize that the core values I’ve adopted really are the most important thing of all.

I really just scratched the surface of this book in this writeup, trying to point out a few of the principles that relate to what I do. This book is far deeper than that and not only relates to things done within an organization, but with how you choose to live your life as well. It brought me to some serious realizations about my principles and what I’m doing – you’ve already seen some of this in the last few months, and I think you’ll start to see more of them.

Read this book – it’s really worth it. It’s a bit of an older book, so you should be able to get it from your library or from PaperBackSwap quite easily.

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17 thoughts on “Review: Built to Last

  1. Trent, straighten up there. (Had to go a little negative so you’d read this comment :)

    Yes, it is a fantastic book and I wholeheartedly agree with your recommendation. Jim Collins said that he should have written this one after Good to Great instead of the other way around because this book ironically seems to carry on the themes from Good to Great.

    When I read it a while back, I found myself realizing a lot of mistakes at my own company and resolved to try to get others to “build clocks” not just “tell time.” Time telling is so ingrained in our psyche that it’s difficult to even get upper management to understand what I’m talking about.

    When we look to hire additional sales staff, I always emphasize that the principles of selling are the same, regardless of the product or service. For management, the same truths apply as well. But Noooo. We only hire from within the industry . . .

    Great blog post.

  2. Corporations by definition are “built to last” long after their founders are gone, yet in our culture (21st c. USA) we have given them the same status as real persons. And for some purposes, they have more rights than real persons. From my point of view, the corporatocracy is part of the problem, not part of the solution. Corporations have to constantly keep moving, feeding, and growing–much like sharks. They have to sell more things to more people, or die. In the process, we have changed from “citizens” to “consumers,” and that’s why most of us are in debt. Corporations need to be tamed, not emulated.

  3. @sharon
    Corporations have given us life prolonging drugs and pharmaceuticals.
    Corporations have given millions of books to public libraries.
    Corporations have employed hundreds of millions, and by doing so, indirectly put food on the table.
    Corporations have built hospitals.
    Corporations enable their founders to start a business without the risk of being sued by worthless , bloodsucking shark attorneys.
    Corporations create the very products that make our lives richer such as iPhones, laptop computers, cars, homes, designer clothes, furniture, and virtually everything else you use.

    But wait a minute, corporations don’t do all those things. People do. So, if you want to blame a faceless corporation, that’s your prerogative. But in reality, the problem isn’t the supplier of consumer goods, it’s the demander. If one supplier doesn’t fill a void, another one will. So who is really to blame? The demander who has zero self control.

  4. thanks for your book reviews.

    Here two thinks I particularly dislike about the book:

    1- there is nothing actionable, it’s only commonplaces.

    2- far much worse, the book is flawed by selection bias: having identified a pattern among successful companies, there is no check among failed companies to see whether the pattern does actually make a difference.

    The last flaw makes the book’s contribution useless: seeing a pattern doesn’t mean there is something to see.

  5. @Ron, I don’t deny that corporations were created by governments to fill a need. My point is that the creation has become much too powerful and has turned on its master. We the People must regain the power that we have yielded to the corporations, or forever consign ourselves to be “consumers,” and no longer “citizens.”

  6. @sharon
    And your suggestion to solve this “problem?” Should we abandon capitalism to help those who are unable to say no to anything consumer oriented?

    It’s one thing to rant. It’s another to have an actual solution. The problem with coming up with a solution is that it quickly becomes a socialistic endeavor and we all know how socialism fails everywhere it’s tried.

  7. @Sharon — Remember our government, if you are American, is a corporation. It also has outlasted its founders, has more rights than real persons, and is constantly feeding and growing. Now you want to feed it businesses. How does that solve the corporation problem?

  8. The thoughts in the reviewed book aren’t complete because it is short-sighted. Its subjects have not even lasted two hundred years.

  9. Trent, I’ve got to disagree with you on how you read comments.

    Don’t ignore just the positive comments (or the negatives, for that matter)–simply ignore all comments without content. Someone who says “this post sucks” is just as useless as someone who says “this post is great!”

    Negative comments can help show you where your weaknesses are, and help you figure out what you need to improve on. But positive comments can show you or remind you of your strengths, and help you figure out HOW to improve on your weak points.

    Read positive comments not as affirmations, or as people telling you there’s no room for improvement, but as people reminding you which of your tools work the best.

  10. This is not a negative comment. Read it anyway. Thank you for this thoughtful review. Your blog was among the first financial blogs I began reading and has been the one which has inspired me the most – not just as far as shaping up my financial situation, but to start a blog of my own. I’ve been reading and letting it all incubate, as well as trying to figure out the mechanics. I’m now ready to figure out where to obtain a domain and get started. I just want to thank you for your inspiration and your ethics regarding the ads on site. I’m open for any suggestions as to where to start obtaining a domain, etc. Thanks again for inspiring me to step out of my comfort zone and share who I am and where I’m headed in this big world of blogs.

  11. @sharon
    I’m sorry. I don’t mean to read anything into your comments.

    I think the corporations in Built to Last should be emulated.
    –Build something great that will outlive the founders.
    –Put people ahead of profits like Merck did, and the profits will come later.
    –Build clocks, don’t just tell time.
    –Never stop improving.
    –Try new and different things and keep what works.
    –Set huge goals (Boeing’s 747 was an example in the book)

    Corporations don’t have the same status as people. They can’t vote. They can’t die (they just “dissolve”). They can’t run for office. They have limited liability. They can be bought and sold.

    There is really no such thing as the “they” I’ve been using. The “they” is really just a group of people. They have names and families. I’ve owned three corporations, all sub chapter S. They were small entities that were run by me, though two of them became quite large and I cashed out. To say that “we the people” need to take back the country from the corporations doesn’t make any sense if you’ve owned and run one. The people ARE the corporations.

  12. @Pat – many people read/write pf blogs not for strict advice, but for a sense of community in being smart with money in our consumerist society. Of course, most pf bloggers do not try to make this a full time job type thing.

    @Jonathan – I think that trend isn’t just the bloggers fault, but once you have the basics down… you are right, you don’t need to read 50 pf articles a day. I read less blogs that offer “advice” and more that offer stories. If I want knowledge, I usually google it, or serach archives of reputable blots with more meaty information.

    And Trent… I do agree with the comment about the blog being Trent-centric lately. I also applaud your decision, but don’t blow off those comments. I remember in one post you were talking about one reason your blog and another blog were popluar and you said something along the lines of “we don’t write about how our cat got sick” because people don’t care. While you haven’t taken it that far, it has trended slightly in that direction, so just be careful.

    [Sorry if it is creepy that i remember that sentence. I have a really good memory for random things I read/hear]

  13. Corporations of any type that gain more and more power and influence is a sad reality for mankind. A Wise Man Once Said, “Power tends to corrupt and absolute power corrupts absolutely”. That same man also once made a statement that I believe would suit well for the author of this blog, “I’m not a driven businessman, but a driven artist. I never think about money. Beautiful things make money.”

  14. I just read this book. My favorite part is that it involved actual research. They didn’t just look at “visionary” companies, they also compared these to a control group. And they didn’t just confirm what they already knew, but actually learned things (surprisingly rare in social research).

    The book makes certain things about my own employer a little more interesting to me as well. We just articulated our core values, and this books shows me they can be handy. Plus, someone was recently venting about how one of the higher ups had done something so shockingly bad that it was impossible to know how to respond. At the time, I thought that the best way to have responded would have been a reminder of our core values, and this book confirms that.

    Now I’m looking for evidence that we are stimulating growth in some way. This book has made me decide to bring a copy of our vision statement and core values to some committee meetings where I’m going to be helping to decide what to do next.

    Reading this book also reminded me of _The Art of War_ which is about waging war but is also read by businessmen for ideas on running businesses. Similarly, some of this book’s ideas for creating and maintaining visionary businesses could also be used to create and maintain a visionary life.

    I especially like the idea of nailing down my own core values (although unlike the book’s advice, I wouldn’t actually mind if some of these evolved over time) along with the idea of trying multiple things and keeping the good ones. I think a lot of grown-ups do stagnate, and the idea of stimulating progress is a great one.

    Probably you could also use it in family decision making. You probably have some core family values like mutual love and respect, good works, and good health. And then when something scary comes along (like a teenager’s new hobby or love interest), you can have a more reasonable response by remembering your family’s core values and goals.

    This book is also giving me ideas for how to evaluate companies to see if I want to invest in them or even buy from them. (It could also be a way to decide which companies to apply for, but I like my current employer.)

    I wonder how the companies selected almost 20 years ago are doing now and whether any changes are correlated with straying from the traits described in the book.

    Thanks for the recommendation.

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