“As for The General Theory, he wrote, “I should like temporarily to say
nothing about it, since I am hopelessly stuck in chapter 6.” […] Haberler had
by this time read The General Theory and sent Hayek a piece intended for
Economica pointing out perceived flaws in Richard Kahn’s multiplier theory.
Hayek returned the article, quoting unexplained “difficulties” at the journal.
In his covering note Hayek wrote, “In the May number appears Pigou’s article
on Keynes, which in the meantime has also come in first and is immensely
sharp, or will be (I have not yet seen it myself). You will understand that in
these circumstances we want to avoid anything which could create the
impression that we are conducting a planned campaign “against Keynes. I myself
have for that reason determined to submit a note ... to the Economic Journal,
where Keynes cannot well refuse. ... I believe you should try first of all the
same. In the event he refuses, one can then talk about other possibilities.””
(Wapshott, 2011, p. 192)


“an elaboration of the still inadequately developed theory of capital was a
prerequisite for a thorough disposal of Keynes’s argument.” So it was that
after nearly fifty years of obfuscation, Hayek volunteered a plausible
explanation for his echoing silence. What Hayek did not explain in his belated
mea culpa was that when The General Theory burst upon the world, he thought he
was on the verge of publishing his own mammoth work that would provide a new
twist on the Austrian theory of capital and, he hoped, would offer a
comprehensive contradiction to Keynesianism. By 1936, he was well advanced in
writing such a thesis. Three years earlier, he had applied to the LSE’s
Rockefeller Research Fund Committee for money to hire an assistant. “During
the next eighteen months (or two years at the outside) I hope to finish what,
I am afraid, is going to be a rather voluminous volume on the theory of
capital,” he wrote. “In the further course of preparation of this volume,
about one-fourth of which is already completed, I shall badly need the
continuous assistance of a really good mathematician, who would not only be
able to work out with greater exactness the rather elaborate diagrammatical
apparatus which I have developed, but also to help me in the analytical
exposition which, although I hope to confine it to appendices, is
unfortunately indispensable.” A suitable mathematician who spoke English,
German, and French was found and assigned to help Hayek through 1934 and
1935.” (Wapshott, 2011, p. 191)


“Hayek […] suggested that it was too difficult to adequately express
objections to Keynes’s top-down approach to economics when his
counterarguments assumed that the key to understanding economics was bottom-
up.” (Wapshott, 2011, p. 189)


“after Pigou’s rejoinder, which made barely a ripple among economists, Robbins
inexplicably brought the debate to an end, not even assigning a supplementary
salvo from the pen of Hayek.” (Wapshott, 2011, p. 188)


“Why did Friedrich Hayek not instantly confront what he believed to be the
missteps of logic in Keynes’s General Theory? Had he volunteered his
counterarguments at the time of publication, he might have nipped the
Keynesian Revolution in the bud. For the remainder of his life, Hayek was coy
about the missed opportunity. As he confessed nearly forty years later, “I
have to the present day not quite got over a feeling that I had then shirked
what should have been a plain duty.” Keynes went out of his way to invite
Hayek’s criticism. He sent Hayek advance copies so that his nemesis could
compile his critique in time for publication day. Among his talents, Keynes
was a master publicist and knew the value of courting controversy. A heated
debate with Hayek would have boosted sales.” (Wapshott, 2011, p. 186)


“He used to open his lectures with, “I am Seymour Harris, Professor of
Economics at Harvard University and author of 33 books,” all of which were
about Keynes. […] Paul Samuelson’s best-selling Keynesian primer, Economics:
An Introductory Analysis, published in 1948, which was instantly to become the
most influential economic textbook since Principles of Economics, Alfred
Marshall’s definitive exposition of the classical economic case.” (Wapshott,
2011, p. 183)


““Often the students overflowed into the hall,” Galbraith remembered. “One
felt that it was the most important thing currently happening in the country.
... The officials took Hansen’s ideas, and perhaps even more, his sense of
conviction, back to Washington.” Joining with John Hicks, who in 1930 was one
of the first to be influenced by Hayek at the LSE, Hansen described in
graphical form the complex interrelationship Keynes suggested between interest
rates, liquidity-money supply, investment-savings, and the national income
that became famous among economists as the IS-LM (Investment Saving /
Liquidity preference Money supply) model. […] Hansen’s 1953 tome, A Guide to
Keynes, became the first Keynesian Revolution textbook and inspired
generations of young economists.” (Wapshott, 2011, p. 183)


“One young Harvard economics graduate student, Robert Bryce, a Canadian,
enjoyed the added allure of having just arrived from Cambridge, England, where
he had been taught by Keynes himself and had attended Hayek’s seminar at the
LSE […]. Joseph Schumpeter was prompted to remark, “Keynes is Allah and Bryce
is his prophet.” […] Alvin H. Hansen, who before long came to be known as the
“American Keynes,” was a fifty-year-old classical economist when recruited by
Harvard from the University of Minnesota in 1937. Hansen had heavily
criticized Keynes’s Treatise on its publication, and at first he was skeptical
of the ideas expressed in The General Theory. Then he changed his mind.”
(Wapshott, 2011, p. 182)


““The General Theory caught most economists under the age of thirty-five with
the unexpected virulence of a disease first attacking and decimating an
isolated tribe of South Sea islanders,” he recalled. “Economists beyond fifty
turned out to be quite immune to the ailment.” Galbraith also recalled the
generational divide that Keynes’s work revealed.” (Wapshott, 2011, p. 182)


“Such was the sense of excitement and expectation in the winter of 1935 when
The General Theory was about to be published in Britain that Harvard
undergraduates arranged for special consignments to be dispatched across the
Atlantic the minute it was available. As soon as the boxes of books arrived,
they pounced on them to be among the first to read the revolutionary ideas
revealed in the text. As Tobin recalled, “Harvard was becoming the beachhead
for the Keynesian invasion of the New World.” Paul Samuelson, described by
Galbraith as “almost from the outset … the acknowledged leader of the younger
Keynesian community,”” (Wapshott, 2011, p. 181)


“Eccles advocated public works financed by federal government borrowing.
“There are times to borrow and times to pay,” he declared. “You have got to
take care of the unemployed or you are going to have revolution in this
country.” […] In 1935, Roosevelt appointed Eccles the first chairman of the
board of the Federal Reserve, a position he was to hold for the next fourteen
years. The man Eccles chose as his assistant at the Fed was Lauchlin Currie,
an LSE- and Harvard-educated economist who also believed that the only way out
of the Great Depression was to stimulate demand, if necessary through public
works financed by borrowing.” (Wapshott, 2011, p. 180)


“Marriner Eccles, a multimillionaire Mormon banker from Utah, was a soft touch
or a naïve idealist. He was a hard-nosed former Republican who owned the First
Security Corporation, which ran twenty-six banks, as well as one of the
largest beet sugar producers in America, a vast dairy chain, and lumber
companies, among other businesses. He came to the conclusion from his own
understanding of businesses that a boost in demand was what the country
needed.” (Wapshott, 2011, p. 179)


““Though young and unimportant, by following the master we could feel superior
to the great men of Morgan’s Chase, National City and the New York Federal
Reserve Bank,” he declared. Galbraith was so enamored of Keynes that on his
honeymoon in 1937 he took his young bride Kitty from Cambridge, Massachusetts,
to Cambridge, England, to seek out an audience with the great man. There was a
quasi-religious aspect to Galbraith’s journey that reflected the deification
of Keynes among the young. “I had resolved to go to the temple,” Galbraith
recalled.” (Wapshott, 2011, p. 179)


“As Keynes told Frankfurter, “Here, not in Moscow, is the economic laboratory
of the world. The young men who are running it are splendid. I am astonished
by their competence, intelligence and wisdom. One meets a classical economist
here and there who ought to be thrown out of [the] window—but they mostly have
been.”” (Wapshott, 2011, p. 178)


“Even Roosevelt took fright at the extent of the deficit, and in April 1934 he
instructed Hopkins to abruptly end the Civilian Works Administration’s most
ambitious endeavors, building bridges and public buildings. Keynes was
skeptical of much of what was being done in the New Deal […]. government-
funded aid to alleviate unemployment was appropriate only at the bottom of a
cycle, or during a recession, and that it was not appropriate to continue
pumping money into the system when an economy had recovered. “Only in the
event of a transition into Socialism would anyone expect government
expenditure to play a predominant part year in year out,” he told Victor von
Szeliski, a top statistician in the National Recovery Administration, the
vanguard of New Deal activism.” (Wapshott, 2011, p. 178)


““I do not know whether you realize how great an effect that letter [in The
New York Times] had,” the columnist Walter Lippmann wrote to Keynes, “but I am
told that it was chiefly responsible for the policy which the Treasury is now
quietly but effectively pursuing of purchasing long-term government bonds with
a view to making a strong bond market and to reducing the long-term rate of
interest.” Lippmann, a recent convert to Keynesian thinking, told an audience
of Harvard academics in 1934 that “laissez-faire is dead and the modern state
has become responsible for the modern economy as a whole.”” (Wapshott, 2011,
p. 177)


““I saw your friend Keynes,” he said. “He left a whole rigamarole of figures.
He must be a mathematician rather than a political economist.” Still, Keynes
confessed he found his encounter with the president “fascinating and
illuminating,” while Roosevelt reported back to Frankfurter, “I had a grand
talk with Keynes and liked him immensely.”” (Wapshott, 2011, p. 176)


“Roosevelt had announced on his election that he was in favor of “sound
money,” but when pressed to explain what he meant, he responded, “I don’t
intend to write a book about it.” […] Frances Perkins, FDR’s labor secretary.
“Keynes repeated his admiration for the actions Roosevelt had taken,” she
recalled, “but said cautiously that he had ‘supposed the President was more
literate, economically speaking.’”” (Wapshott, 2011, p. 175)


“Roosevelt did not directly respond to Keynes’s contribution to the economic
debate, but he wrote to Frankfurter, “You can tell the professor [Keynes] that
in regard to public works we shall spend in the fiscal [financial] year nearly
twice the amount we are spending in this fiscal year, but there is a practical
limit to what the Government can borrow especially because the banks are
offering passive resistance in most of the large centers.” The following year,
at Frankfurter’s suggestion, the president agreed to meet Keynes. “He is
really devoted to your efforts and perhaps the single most powerful supporter
of the New Deal in England,” Frankfurter wrote to the president. “Not only
does he wield a trenchant economic pen. As the head of an important insurance
company, he exercises considerable influence in the City [the financial
district of London]. … Therefore I believe it to be doubly important that he
hear about the Administration’s efforts and purposes at first hand, because
during his stay in New York every effort will be made to fill him with
poison.”” (Wapshott, 2011, p. 174)


“Keynes proffered his advice to the new president, first by sending Roosevelt
in early 1933 a copy of The Means to Prosperity […], then by addressing him in
an open letter, published in The New York Times on December 31, 1933. Keynes
wrote at the suggestion of Felix Frankfurter, professor of administrative law
at Harvard University and, as leader of the president’s “brain trust,” one of
Roosevelt’s closest political friends. Keynes first met Frankfurter at the
Paris peace talks, where the American was promoting the Zionist movement.”
(Wapshott, 2011, p. 171)


“The welcome Keynes received from political leaders and academics during his
short American visit in 1931 showed that news of his radical economic remedies
had reached way beyond Britain. By syndicating in America articles written for
London papers he had become a celebrity economist, writing in such unlikely
organs as Vanity Fair […]. The collapse of investment, down 90 percent since
the crash, left 13 million Americans unemployed, or one in four of the adult
population. The situation was even more dire than the figures suggested, as
poor measuring methods severely underestimated the extent of the catastrophe.
If farm workers were excluded, unemployment was thought to be more than 37
percent. In Toledo, Ohio, four out of five were out of work.” (Wapshott, 2011,
p. 171)


“Far from being a white knight, Keynes judged that Wilson, by failing to halt
the crippling reparations imposed on the vanquished nations, threatened the
noble bid to bring a just end to “the war to end all wars” and made more
likely another catastrophic war before long. […] To many Americans, Keynes was
a clearheaded seer whose sharpened pen had sketched a nightmare vision of how
the world really span.” (Wapshott, 2011, p. 170)


““just as wars have been the only form of large-scale loan expenditure which
statesmen have thought justifiable, so gold-mining is the only pretext for
digging holes in the ground which has recommended itself to bankers as sound
finance.”” (Wapshott, 2011, p. 163)


“Paul Samuelson, the Massachusetts Institute of Technology economist who was
to become Keynes’s greatest evangelizer, summed up the accomplishment of The
General Theory: “It is a badly written book, poorly organized,” he wrote. “It
is arrogant, bad-tempered, polemical, and not overly generous in its
acknowledgements. It abounds with mares’ nests and confusions. ... Flashes of
insight and intuition intersperse tedious algebra. An awkward definition
suddenly gives way to an unforgettable cadenza. When it is finally mastered,
we find its analysis to be obvious and at the same time new. In short, it is a
work of genius.” John Kenneth Galbraith, who was to appoint himself Keynes’s
high priest, agreed.“Unlike nearly all of Keynes’s other writing, this volume
is deeply obscure,” he wrote. “Perhaps had it been otherwise and had
economists not been called upon to debate his meaning and intentions, it would
not have been so influential. Economists respond well to obscurity and
associated puzzlement.”” (Wapshott, 2011, p. 160)


“he decided to speak English at all times and quietly abandoned any thoughts
of returning to live in Austria. “I became in a sense British, because that
was a natural attitude for me,” he recalled.” (Wapshott, 2011, p. 158)


“In 1933, Hayek moved away from economic theory when he discovered that
“people were seriously believing that National Socialism was a capitalist
reaction against socialism. ... The main exponent whom I came across was Lord
Beveridge.” (Wapshott, 2011, p. 157)


“The republication in English of his University of Vienna dissertation on
monetary theory and the trade cycle in 1932 gave him the chance to offer his
explanation of the 1929 stock market crash and the Depression. […] While
Keynes was spurred by a desire to confront real-life dilemmas, Hayek’s works
were usually pure theory. But in his preface to the English edition of
Monetary Theory and the Trade Cycle, Hayek addressed recent catastrophic
events.” (Wapshott, 2011, p. 154)


““All of us were excited to hear that Hayek had arrived,” recalled Theodore
Draimin, an LSE undegraduate in 1932. “When we arrived for the first lecture
he commenced to talk in English. After a few minutes, it became apparent that
none of us could understand a word he said. Some suggested he speak in German.
This he did, and those of us unable to understand had to leave the course.” It
was a common experience. “Read a new book yesterday,” student Ralph Arakie
wrote to a friend. “It is by old Hayek or von Hayek as he is called here. This
year he is giving twenty lectures in bad English (God help us) and has
recommended us to read [a] book in Dutch!; besides thirty other weighty
volumes. But he is a very clever chap.”” (Wapshott, 2011, p. 153)


“Hayek began writing for Routledge his own thoughts on the subject, in The
Pure Theory of Capital, which he hoped would become the counterpart to
Keynes’s General Theory. Hayek meanwhile settled himself, his wife Helen,
daughter Christine Maria Felicitas, born in 1929, three years after their
marriage, and son Laurence Joseph Heinrich, born in 1934, in a comfortable
red-brick home in Hampstead Garden Suburb, a planned ideal “garden city” of
Edwardian housing and communal amenities that had become a redoubt for North
London’s left-leaning intelligentsia. Among his academic neighbors was
Robbins, who had become a close friend. Hayek followed Karl Marx’s example by
frequenting the circular reading room of the British Library. He joined the
Reform Club in Pall Mall, founded to mark the 1832 Reform Act that extended
the voting franchise to the populations of the newly expanded cities of the
Industrial Revolution. As London’s principal gentlemen’s club not populated by
Conservatives, the Reform’s dazzling clubhouse, based on the Farnese Palace in
Rome by the architect of the Palace of Westminster, Charles Barry, was adorned
with portraits of British history’s most radical figures. Hayek felt at home
among the memorials not only to those, such as Lord Grey, who had passed the
Reform Act in the face of Conservative opposition, but also to the regicide
Oliver Cromwell.” (Wapshott, 2011, p. 153)


“Keynes admitted in A Treatise on Money that “in German, I can only clearly
understand what I already know—so that new ideas are apt to beveiled from me
by the difficulties of the language.” Hayek therefore commissioned Nicholas
Kaldor and H. M. Croome to translate his 1929 work Monetary Theory and the
Trade Cycle, to be published by Harcourt, Brace in 1933. The London School of
Economics lectures that had secured him a professorship were revised and
published by Routledge as Prices and Production in 1931, and he took pains to
revise his ideas in a second edition in 1935.” (Wapshott, 2011, p. 152)


““I doubt if I shall return to the charge in Economica,” Keynes wrote to him
in March 1932. “I am trying to re-shape and improve my central position, and
that is probably a better way to spend one’s time than in controversy.””
(Wapshott, 2011, p. 151)


“World Bank. He proposed $5 billion in “gold-notes” distributed to each
country according to “some such formula as the amount of gold which it held in
reserve at some recent normal date, e.g., at the end of 1928.”” (Wapshott,
2011, p. 149)


“What he now proposed was that the world’s finance ministers should print
money in concert, as if it were backed by gold. For Keynes, “notional gold”
was every bit as useful as real gold ingots.” (Wapshott, 2011, p. 148)


“Keynes estimated it would cost £100 million a year to put 1 million people to
work, of which £50 million might come from a reduction in taxation. This was
Keynes’s first suggestion that tax breaks could be used to stimulate the
economy, a policy that became a hallmark first of Keynesians and Keynesian
finance ministers but then a talisman of their conservative opponents. He
cautioned that for such a reduction in taxes to have the desired effect on the
job market, it “does not apply to a relief of taxation balanced by an equal
reduction of Government expenditure (by reducing school teachers’ salaries,
for example) […].” (Wapshott, 2011, p. 147)


““Half of what [the chancellor of the exchequer] remits will in fact return to
him from the saving on the dole and the higher yield of a given level of
taxation.”” (Wapshott, 2011, p. 147)


““There are still people who believe that the way out can only be found by
hard work, endurance, frugality, improved business methods,more cautious
banking, and, above all, the avoidance of devices,” he wrote. Armed with
Kahn’s paper, Keynes for the first time publicly integrated the multiplier
into his proposal that governments should spend to raise overall demand in the
economy. And he confronted head-on the assertion by Hayekians that government
spending would only spur inflation. “If the new expenditure is additional and
not merely in substitution for other expenditure, the increase of employment
does not stop there,” he wrote. “The additional wages and other incomes paid
out are spent on additional purchases, which in turn lead to further
employment. If the resources of the country were already fully employed, these
additional purchases would be mainly reflected in higher prices and increased
imports. But in present circumstances this would be true of only a small
proportion of the additional consumption, since the greater part of it could
be provided without much change of price by home resources which are at
present unemployed.” […] He suggested that the multiplier figure in Britain
was 2, but he did not want to overpromise lest his arguments appear fantastic,
so he suggested that every pound the government spent on creating new jobs was
worth one and a half pounds to the total economy.” (Wapshott, 2011, p. 146)


“He challenged them to either agree with his prescription for creating
millions of new jobs at a minimum of cost to the taxpayer or point out where
he was mistaken. It was the most cogent, disciplined, persuasive account of
his imaginative ideas yet expressed, and contained all the elements that would
come to be known as “Keynesianism.” Far more than The General Theory, which
was intended to influence academic economists, The Means to Prosperity was
made deliberately accessible for those, like many of the world’s finance
ministers, who had little knowledge of economics.” (Wapshott, 2011, p. 145)


“When it was announced that an international summit, the World Economic
Conference, was to be held in London in June 1933, Keynes could not resist a
chance to contribute. […] He proposed to the editor of The Times, Geoffrey
Dawson, a series of articles […]. the articles were collected as a pamphlet,
The Means to Prosperity, a document that proved to be the base camp to The
General Theory’s peak.” (Wapshott, 2011, p. 145)


“Michael Straight, an American undergraduate, recalled, “It was as if we were
listening to Charles Darwin or Isaac Newton. The audience was hushed as Keynes
spoke.”” (Wapshott, 2011, p. 144)


“in the summer of 1932, all started to come clear. Keynes began expounding on
his post-Treatise thoughts in a series of Monday-morning lectures to his
Cambridge students, titled “The Pure Theory of Money” […].” (Wapshott, 2011,
p. 144)


“Kahn[:] “I began work on my so-called ‘multiplier’ article in the Austrian
Tyrol in August 1930”.” (Wapshott, 2011, p. 141)


“During the writing of The General Theory, Kahn proved to be far more than
Keynes’s favorite and most devoted pupil; he acquired something of the status
of a missing son. He alone was invited to take part in the intense long hours
of conversation Keynes needed to define and refine his thoughts.” (Wapshott,
2011, p. 140)


“Having failed to instigate change via a more direct route, he now embarked on
a long march to finesse his theories so that economists would take up the
campaign on his behalf. […] He scrawled over a copy of Hayek’s essay “Capital
Consumption,” published in English in 1932, “The wildest farrago of nonsense
yet.” […] Keynes wrote to Lydia from King’s College in early 1933. “I sat by
him in hall last night and lunched with him at Piero’s [Sraffa] today. We get
on very well in private life. But what rubbish his theory is—I felt today that
even he was beginning to disbelieve it himself.”” (Wapshott, 2011, p. 136)


“In the aftermath of A Treatise on Money, Keynes was suffering from a distinct
lack of influence in high places. Ramsay MacDonald’s “National” administration
was a Conservative government by any other name. The Conservatives thought
Keynes antibusiness, and he was declared persona non grata in Whitehall. The
Labour Party, in defeat, had swung leftward, and members had little time for
Keynes’s prescriptions for what they were sure was a doomed capitalist system.
For their part the Liberals, the party Keynes felt was his spiritual home,
were beaten, down and out. […] He retained a position on the Committee on
Economic Information, a subset of the prime minister’s Economic Advisory
Council, but when yet another new committee of top economists was set up in
February 1932 to advise on policy, Keynes was left out, while his orthodox
rival Lionel Robbins was awarded a place.” (Wapshott, 2011, p. 135)


““This way of escape was not open to Dr. Hayek,” crowed Sraffa, “for he had
emphatically repudiated the use of averages.” And on that sour note the to-
and-fro between Hayek and Sraffa came to an abrupt end.” (Wapshott, 2011, p.
133)


“Hayek had conceded, on Sraffa’s prompting, that there was no single overall
natural rate but a succession of different natural rates that were appropriate
for different commodities.” (Wapshott, 2011, p. 132)


“what Hayek claimed to be his novel contribution to economics, that “capital
accumulated by ‘forced saving’ [would] be, at least partly, dissipated as soon
as the cause of ‘forced saving’ disappears.” Hayek agreed with Sraffa, that
“it is upon the truth of this point that my theory stands or falls.””
(Wapshott, 2011, p. 130)


“Sraffa accuses Hayek of a rudimentary error by reminding him that his notion
of neutral money is confounded by “the beginning of every textbook on money.
That is to say, that money is not only the medium of exchange, but also a
store of value.” Sraffa describes Hayek’s theories as “a maze of
contradictions [that] makes the reader so completely dizzy that when he
reaches the discussion of money he may out of despair be prepared to believe
anything.”” (Wapshott, 2011, p. 129)


“Even Chicago-School economist Frank Knight, steeped in Austrian School
thinking, found the whole matter too obtuse. As he wrote to Oskar Morgenstern,
“I wish [Hayek] or someone would try to tell me in a plain grammatical
sentence what the controversy between Sraffa and Hayek is about. I haven’t
been able to find anyone on this side who has the least idea.”” (Wapshott,
2011, p. 127)


“Sraffa’s close friend the philosopher Ludwig Wittgenstein was so in awe of
the Italian’s argumentative skill […]. He was a friend of the Italian
communist leader Antonio Gramsci and his socialist counterpart Filippo Turati,
which was enough to make Sraffa an enemy of the state according to Mussolini
[…].” (Wapshott, 2011, p. 126)


“Keynes’s decision not to respond was a significant setback for Hayek. By
splitting Hayek’s review into two parts, Robbins and Hayek had failed to gain
Keynes’s full attention. Having exploded at the tone of the first part, and
having accused Hayek of deliberately misunderstanding his argument, Keynes had
no intention of returning to the debate. Thus the first and perhaps best
chance to nip Keynesianism in the bud was lost. Had Hayek first published the
second part of his “Reflections,” which addressed the nub of Keynes’s
interventionist thoughts, or published the whole of his critique in a single
pass, he may have held Keynes’s wandering attention long enough to stop him in
his tracks. Instead, perhaps because neither Hayek nor Robbins had expected
Keynes to respond so quickly to the first part, the more substantial and
persuasive line of Hayek’s argument was left unanswered by Keynes. Instead,
Keynes set a hound onto Hayek in the shape of the young Circus member Piero
Sraffa. The decision to assign Sraffa to the task was an act of outright
hostility.” (Wapshott, 2011, p. 125)


“The Cambridge group’s more aggressive stance gave them the upper hand. Ludwig
Lachmann, who studied under Hayek at the LSE, confessed to feeling like a
junior officer in a war that was fast being lost. Sometimes Hayek, Keynes,
Robbins, and Dennis Robertson attended, much to the excitement and
consternation of the younger members. Paul Rosenstein-Rodan, who in 1931 was
an economics lecturer at University College, recalled one meeting in which
Robertson gave a talk on the role of money and accused both Hayek and Keynes,
who were present, of failing to take into account the passage of time. Faced
for once with a common enemy, Hayek responded with a “lengthy diatribe,”
followed by Keynes, “who rose to say he entirely agreed [with Hayek].” […]
Sraffa, who, outside of Joan Robinson, was the most aggressive and articulate
of his disciples.” (Wapshott, 2011, p. 121)


“At the first meeting, in August 1933, in the Cambridge corner were Kahn, Joan
and Austin Robinson, and James Meade; on the LSE team were Lerner, Sol Adler,
Ralph Arakie, and Aaron Emanuel. Typical of the tone of the discussion was
Kahn’s remark, “If Hayek believes that the spending of newly printed currency
on employment and consumption will worsen our current terrible depression,
then Hayek is a nut.”” (Wapshott, 2011, p. 121)


“Abba Lerner, a Hayekian graduate student at the LSE spending a term at
Cambridge, approached Richard Kahn and other Circus members “to suggest that
the young generation on each side should get together and settle the debate
amongst themselves.” The Cambridge contingent agreed, and both sides decided
that an account of the debates should be logged in a new journal, Review of
Economic Studies. There were also face-to-face meetings between the two sides
at a public house in Newport, Essex.” (Wapshott, 2011, p. 120)


“[Hayek] explaining that by “velocity” he meant “total effective circulation,”
though “I do not normally work with this concept at all.” He directed Keynes
toward Pigou’s Economics of Welfare, “which on the whole agrees with my
views.”” (Wapshott, 2011, p. 116)


“Arthur Pigou lamented the decline in standards of civility that Keynes’s
riposte represented.” (Wapshott, 2011, p. 113)


““Any denial of his own doctrine has seemed to him so unthinkable, that even
thousands of words of mine directed to its refutation have been water off a
duck’s back, and whilst he notices that I hold conclusions inconsistent with
it, he seems still unaware that I have disputed it from the outset.” […] The
solution, he suggested, was for more work to be done on the theories of
capital and interest, building on the works of Böhm-Bawerk and Wicksell, whom
he agreed had been ignored for too long by English economists.” (Wapshott,
2011, p. 112)


“He accused Hayek not only of misrepresenting his views but of putting words
into his mouth. […] He admitted that during the years it had taken to write A
Treatise, he had changed his mind on a number of key elements and that perhaps
he had not totally purged the finished work of his earlier reasoning. […]
“Those who are sufficiently steeped in the old point of view simply cannot
bring themselves to believe that I am asking them to step into a new pair of
trousers, and will insist on regarding it as nothing but an embroidered
version of the old pair which they have been wearing for years.”” (Wapshott,
2011, p. 111)


“Cooler heads than Hayek and Keynes may have spotted the many similarities
between their arguments and concentrated on the interesting differences.
Instead, in their sharp exchanges in Economica and in their subsequent private
correspondence, Keynes and Hayek became deeply entangled in efforts to
determine the meaning of the terms they used in an attempt to decipher what
the other was saying. Even for a trained economist with the benefit of decades
of hindsight, the differences between the two men are often erudite to the
point of impenetrability. At one point, Keynes even appeals to Robbins to
mediate.” (Wapshott, 2011, p. 110)


“In the preface to A Treatise, Keynes admitted that he was dissatisfied with
his efforts. “There is a good deal in this book which represents the process
of getting rid of the ideas which I used to have and of finding my way to
those which I now have,” he wrote. “There are many skins which I have sloughed
still littering these pages. ... I feel like someone who has been forcing his
way through a confused jungle.”” (Wapshott, 2011, p. 108)


“Bertrand Russell could be intimidated by Keynes’s dazzling intelligence.
“Keynes’s intellect was the sharpest and clearest that I have ever known,” he
wrote. […] Roy Harrod agreed: “No one in our age was cleverer than Keynes nor
made less attempt to conceal it.”” (Wapshott, 2011, p. 107)


“When Hayek’s four lectures to the LSE were published in book form as Prices
and Production, Hayek acknowledged the contribution Robbins made to cleaning
up his English […].” (Wapshott, 2011, p. 105)


“Hayek’s tetchy remarks are littered with ad hominem snipes, such as “he seems
to think …” and “in spite of some clearly contradictory statements of Mr.
Keynes,” whom he accuses of “very mischievous peculiarities.”” (Wapshott,
2011, p. 102)


“Keynes’s exposition was so “difficult, unsystematic, and obscure” and
“extremely difficult,” with “a degree of obscurity which ... is almost
unbelievable,” that “one can never be sure whether one has understood
Mr.Keynes aright.” […] Hayek sets off on a long, complex, and often barely
comprehensible explanation for why Keynes’s ignorance of Austrian capital
theory, including Hayek’s own contribution, which had not yet been published
in English and therefore Keynes could not have read, ensured that A Treatise
was of little use in explaining the fluctuations of the business cycle.
Throughout, Hayek adopted an ill-tempered tone of indignation, as if Keynes
had deliberately set out to offend him personally. […] Hayek’s stance was
based on absolute certainty that he was right in every particular.” (Wapshott,
2011, p. 101)


“The work was “so highly technical and complicated that it must forever remain
entirely unintelligible to those who are not experts.”” (Wapshott, 2011, p.
100)


“Hayek often told colleagues that he liked in particular those thinkers, like
Schumpeter and Keynes, who tweaked the noses of the great and the good and
liked to shock respectable opinion. Now he was about to offer Keynes a dose of
his own medicine. In the opening sentence of the review, Hayek was impeccably
polite about Keynes and his many achievements, as befitted an Austrian
gentleman who was very much Keynes’s junior and a newcomer on the English
academic scene. “The appearance of any work by Mr. J. M. Keynes must always be
a matter of importance: and the publication of the Treatise on Money has long
been awaited with intense interest by all economists,” he wrote. Then he
slipped a stiletto between Keynes’s ribs. “Nonetheless, in the event, the
Treatise proves to be so obviously—and, I think, admittedly —the expression of
a transitory phase in a process of rapid intellectual development that its
appearance cannot be said to have that definitive significance which at one
time was expected of it.” Hayek adopted the lofty air that would inform the
rest of his appraisal, suggesting that Keynes was an ignorant, insular figure
trapped in the provincial Anglo-Saxon thinking of his teacher and mentor
Alfred Marshall, and that his belated attempt to catch up with Austrian
thinking was too large a task for him.” (Wapshott, 2011, p. 98)


“Keynes became alarmed that the young undergraduates around him at Cambridge
were turning to communism. In the early 1930s, the Apostles, the largely
homosexual Cambridge society Keynes belonged to, recruited Guy Burgess and
Anthony Blunt, who became Soviet agents. […] No sooner had Hayek joined the
LSE faculty than Robbins, in his role as editor of Economica, put him to work
subjecting the work of Keynes to close scrutiny.” (Wapshott, 2011, p. 98)


“MacDonald took the helm of a new overwhelmingly Conservative administration
devoted to a policy of deeply cutting public expenditures. On September 15,
1931, MacDonald abandoned the gold standard.” (Wapshott, 2011, p. 97)


“Meyer immediately suggested to Hoover that the reparations be cut in half;
three days later Hoover went a step further, declaring a moratorium on all
debt payments for a year. Keynes declared the decision“a first step of the
greatest possible value.”” (Wapshott, 2011, p. 95)


“Though he hed no official British government position, nor was he sent to
America as an informal ambassador, Keynes’s renown offered him celebrity
status that opened access to the most influential Americans. No sooner had the
SS Adriatic arrived in New York than he and Lydia were whisked off to the Long
Island country retreat of the chairman of the Federal Reserve, Eugene Meyer
[…].” (Wapshott, 2011, p. 94)


““For example, why not pull down the whole of South London from Westminster to
Greenwich. ... Would that employ men? Why, of course it would! Is it better
that the men should stand idle and miserable, drawing the dole? Of course it
is not.” […] “Never such publicity in my life,” […] “If you put two economists
in a room, you get two opinions, unless one of them is Lord Keynes, in which
case you get three,” a remark often attributed to Winston Churchill. Keynes’s
apocryphal response was, “When the facts change, I change my mind. What do you
do, sir?”” (Wapshott, 2011, p. 93)


“The month Hayek arrived in London, Keynes was urging the housewives of London
in a radio broadcast to spend, spend, spend. […] “Whenever you save five
shillings, you put a man out of work for a day.”” (Wapshott, 2011, p. 92)


““In the event the lectures were a sensation,” recalled Robbins, “partly for
their revelations of an aspect of classical monetary theory which for many
years had been forgotten.” […] Robbins was particularly pleased, for they had
achieved exactly his intended purpose, to introduce British economists to
“this great tradition [the Austrian School], [that] will do something to
persuade English readers that here is a school of thought which can only be
neglected at the cost of losing contact with what may prove to be one of the
most fruitful scientific developments of our age.” The talks served as an
extended job interview for Hayek, who dearly wished to join the LSE faculty.
It was with delight, then, that on the strength of the lectures Beveridge
offered Hayek a visiting professorship, and the following year awarded him the
Tooke Chair in Economic Science and Statistics. According to Robbins, “There
was a unanimous vote in favor.”” (Wapshott, 2011, p. 91)


““The characteristic peculiarity of these forms of credit is that they spring
up without being subject to any central control, but once they have come into
existence their convertibility into other forms of money must be possible if a
collapse of credit is to be avoided,” he said. To avoid the most extravagant
swings of a business cycle, he argued, banks should keep their lending in
close check. “Bankers need not be afraid to harm production by overcaution”
[…]. “It is probably an illusion to suppose that we shall ever be able
entirely to eliminate industrial fluctuations by means of monetary policy,”
[Hayek said].” (Wapshott, 2011, p. 90)


“In sharp contrast to the reception in Cambridge, Hayek’s first lecture in
London was met with warm applause. Importantly, the ever-competitive Robbins
was delighted by what he heard and was convinced he had found the right man to
challenge the potent new theories Keynes was propagating.” (Wapshott, 2011, p.
86)


“Hayek said he had reservations about Cantillon’s theory as “the effects may
be quite opposite depending upon when the additional money comes first into
the hands of traders and manufacturers.”” (Wapshott, 2011, p. 84)


“Joan Robinson: “[Hayek] expounded his theory and covered the blackboard with
his triangles. The whole argument, as we could see later, consisted in
confusing the current rate of investment with the total stock of capital
goods, but we could not make it out at the time. The general tendency seemed
to be to show that the Slump was caused by inflation.” She cruelly summed up
Hayek’s unfortunate debut on the British stage as a “pitiful state of
confusion.”” (Wapshott, 2011, p. 83)


““The members of the audience—to a man—were completely bewildered,” wrote
Kahn. “Usually a Marshall Society talk is followed by a lively and protracted
barrage of discussions and questions. On this occasion there was complete
silence. I felt that I had to break the ice. So I got up and asked, ‘Is it
your view that if I went out tomorrow and bought a new overcoat, that would
increase unemployment?’ ‘Yes,’ said Hayek. ‘But,’ pointing to his triangles on
the board, ‘it would take a very long mathematical argument to explain why.’”
” (Wapshott, 2011, p. 82)


“Hayek’s written English was in dire need of a good translator and editor and
was even less comprehensible than his spoken English. As Hayek later admitted,
the notions he referred to were taken for granted among Austrian School
economists but were unfamiliar to the British economists, who treated
continental economics with the deepest suspicion. Indeed, many of the
arguments Hayek assumed his British audience would understand were not
available in English.” (Wapshott, 2011, p. 81)


“An orthodox Jew, Keynes affectionately dubbed him the “Little Rabbi.” […]
Kahn published little […] Schumpeter […] crediting Kahn with a large portion
of The General Theory, writing that Kahn’s “share in the historic achievement
cannot have fallen very far short of co-authorship.”” (Wapshott, 2011, p. 79)


“James Meade, a fellow of Hertford College, Oxford, who was spending a year in
Cambridge, recalled that “from the point of view of a humble mortal like
myself, Keynes seemed to play the role of God in a morality play; he dominated
the play but rarely appeared himself on the stage. Kahn was the Messenger
Angel who brought messages and problems from Keynes to the ‘Circus’ and who
went back to Heaven with the result of our deliberations.” Kahn was an
indifferent physicist turned inspired economist thanks to his mastery of
mathematics, winning a first-class degree before being elected as a fellow of
King’s in 1930. Kahn’s switch of subject led the Austrian-School economist
Joseph Schumpeter, with a typical lack of sensitivity, to inform him that
“many a failed race-horse makes quite a good hack.”” (Wapshott, 2011, p. 78)


“Austin Robinson, may have been the person to first dub the weekly informal
seminar the “Cambridge Circus.” “We were busily reading [A Treatise on Money]
and digesting it,”he wrote. “Inevitably some of us—Richard Kahn, Joan Robinson
[Austin’s wife], Piero Sraffa, James Meade, and myself—found ourselves arguing
together about it. What came to be called the ‘Circus’ first emerged
byaccident rather than design.” In addition to these five were C. H.
P.Gifford, A. E. W. Plumptre, L. Tarshis, and a small number of
undergraduates. Each new member was subjected to a searching interview by
Kahn, Austin Robinson, and Sraffa. The group met regularly between January and
May 1931 and enjoyed heated debate, though, in true Cambridge fashion, no
offense was taken however sharp the disagreement or pointed the words. As
Austin Robinson recalled, “It is only by argument,by conflict if you like,
that economics makes progress.” The Circus, which first met in Kahn’s rooms in
the Gibbs Building in King’s and later in the Old Combination Room at Trinity
College […].” (Wapshott, 2011, p. 78)


“It was Keynes’s ability to combine awe with accessibility that invested his
closest admirers with a devotion that bordered on the spiritual. He was far
more than a sublime teacher; he was worshipped as a guru and sage.” (Wapshott,
2011, p. 77)


“Friedrich Hayek arrived in London in January 1931 to take up Robbins’s
invitation to deliver four lectures […]. Cambridge, fifty miles north, where
he was invited to deliver a lecture to the Marshall Society, an intense group
of economists made up mostly of associates of John Maynard Keynes.” (Wapshott,
2011, p. 76)


“Keynes reluctantly allowed a dissenting opinion, titled “Report by Professor
L. Robbins,” […]. What Robbins did not grasp was that the arrival of Hayek
would play directly into the hands of William Beveridge, who held a low
opinion of Keynes. Beatrice Webb, who co-founded the LSE with her husband,
Sidney, had lunch with Beveridge and discovered that he “heartily dislikes
Keynes and regards him as a quack in economics.”” (Wapshott, 2011, p. 74)


“Robbins “saw in [Keynes’s tariff] proposals a turning away from the ancient
traditions which made Britain great, and a devastating blow at the all-too-
tender plant of internationalism. ... He felt he must devote the whole of his
strength to resisting it.” […] Robbins wanted to call his friend Hayek as an
expert witness to the committee […]. Keynes rejected the idea. […] Citing the
opinion of the cabinet secretary, Keynes denied Robbins the right to distance
himself from the rest of the committee. Precedents were summoned whereby it
was deemed unconstitutional for a single individual to publish a minority
report.” (Wapshott, 2011, p. 73)


“In his Macmillan Committee evidence, Keynes rejected import duties as
tantamount to taking drugs—once imposed they were hard to do without—yet, in
his report to the prime minister’s Economic Advisory Council, he advocated
import levies—and export credits—as the only policy palatable to the general
population. Keynes was adamant, however, that Britain and the world were in
such dire straits that dire measures, such as imposing trade tariffs, had to
be taken. “Free traders may, consistently with their faith, regard a revenue
tariff as our iron ration, which can be used once only in an emergency,” he
wrote in March 1931. “The emergency has arrived.” Keynes’s change of heart
over “revenue tariffs” was the main reason for his profound disagreement with
the free-trader Robbins, whom he had personally appointed to the Economic
Advisory Council’s Committee on Economic Outlook. […] the two men clashed in
the Macmillan Committee in the most abrasive fashion.” (Wapshott, 2011, p. 72)


“To increase employment he urged public spending on roads and the telephone
system.” (Wapshott, 2011, p. 71)


“One problem in Britain in the 1920s, however, was that because of collective
bargaining by trade unions, wages were “sticky” and could not be easily cut.
In fact, because of a reduction in the length of the working week and the
maintenance of wages due to trade union demands, wages had actually increased.
Keynes warned the committee that “there has never been in modern or ancient
history a community that has been prepared to accept without immense struggle
a reduction in the general level of money income.”” (Wapshott, 2011, p. 70)


“The program he was proposing would cost £100 million a year. The
Conservatives claimed this would produce only two thousand new jobs a year,
but, Keynes argued, they were ignoring not only the savings in unemployment
pay and foreign borrowing but also what he would come to term the “multiplier
effect”: every job created by the government would add a further job to supply
that new worker with goods.” (Wapshott, 2011, p. 68)


“Keynes costed his employment program in the face of Conservative jeers that
the money would be wasted. […] In the previous eight years the unemployed had
been paid a total of £500 million to do nothing. […] could have built a
million new homes, or renewed a third of Britain’s roads, or provided every
third family with a free car […].” (Wapshott, 2011, p. 68)


“Keynes suggested that the cause of the alternate booms and busts of the
business cycle was the action of the banks, which also held the cure. “It is
the machinery of banking which makes this [imbalance] possible,” Keynes wrote,
for banks created credit irrespective of a community’s desire or ability to
save. Banks did not base lending decisions on the level of savings they had in
their coffers; “their main criterion of how much to lend is a totally
different one,—namely the proportion of their cash reserves to their money
liabilities.” The level of savings and investment could be brought into line
if a central bank were to carefully control the amount of credit it offered.
The result would be stable prices. Like Wicksell, Keynes differentiated
between a “natural rate of interest,” in which savings and investment were the
same and prices remained stable, and a “market rate of interest,” what the
banks charged for their own ends. Throughout A Treatise, Keynes assumed that a
state of equilibrium would be reached where savings and investment were equal
and prices were stable, whatever the interest rate set by the central bank,
and at that time there would be full employment.” (Wapshott, 2011, p. 65)


“Keynes suggested that because one group of people saved and quite another
invested, an imbalance tended to occur. When the amount invested was larger
than the amount saved, the result was a boom accompanied by price inflation.
Conversely, when savings ran ahead of investment, a state of depression
occurred, accompanied by deflation and unemployment. He reasoned that total
income in an economy stemmed from the sale of both consumer goods and capital
goods. If there were no savings and total income was instead spent on consumer
goods, the price of those goods would sharply rise and there would be a boom.
Conversely, if all income were saved, the price of consumer goods would fall
and industries would fail.” (Wapshott, 2011, p. 65)


“On the eve of publication, Keynes wrote to his parents, “Artistically it is a
failure—I have changed my mind too much during the course of writing it for it
to be a proper unity.” In the preface, Keynes acknowledged that “it represents
a collection of material rather than a finished work.” Notwithstanding his
reservations, A Treatise was published, in two large volumes, in December
1930.” (Wapshott, 2011, p. 64)


“after living half of his life as a homosexual, he married Lydia Lopokova, a
boyish ballerina in Sergei Diaghilev’s Ballets Russes, who was nine years his
junior. Keynes’s marriage to Lydia upset the Bloomsburys, particularly the
Woolfs, who thought her skittish mind and hilarious malaproprisms made her an
unsuitable partner for their cerebral and homosexual friend. But Lydia was no
beard; Keynes had fallen head over heels in love.” […] He wrote long letters
to her most days, leaving a rich cache of intimate,unabashed, and sexually
explicit correspondence that was matched by the couple’s passionate,
adventurous, and uninhibited love life. The couple dearly hoped to have
children, though after a while it became clear that Lydia was infertile.”
(Wapshott, 2011, p. 63)


“[Keynes] Most mornings he remained in bed until noon, giving directions to
his broker on the telephone. His financial acuity ensured that his Bloomsbury
friends’ meager trust funds earned enough for them to pursue their artistic
endeavors without worrying about having to earn a living. Though Keynes owned
no American shares, he was caught by the speed of the market collapse. The
fortune he had amassed by market speculation was wiped out by the crash. (By
playing the market he soon made a second fortune, as large as the first.)”
(Wapshott, 2011, p. 63)


“Robbins invited Hayek to give four lectures at the LSE in February 1931.
Hayek was aware of why he had been invited. “[Robbins] pounced on my subject:
This is the thing we need at the moment, to fight Keynes,” he recalled Robbins
saying. “The ‘Paradox’” was translated into English and published in the May
1931 edition of Economica, the LSE journal that Robbins edited. By introducing
Hayek into Britain, Robbins instigated the great debate between Hayek and
Keynes. The question arises why Robbins did not invite Mises to counter
Keynes. Mises was more distinguished than Hayek and had already established a
formidable body of work that challenged many of Keynes’s contentions. Two
factors appeared to have played their part. To be effective in countering
Keynes, Robbins needed someone who could be readily understood. Mises’s
English was fractured and his Austrian accent was so heavy he found it hard to
make himself understood. […] In contrast, Hayek’s short sojourn in New York
had equipped him with rudimentary spoken English, albeit of a fractured
nature. Hayek’s comparative youth was also a contributing factor. Robbins was
young and perhaps felt more comfortable working with someone of a similar age.
Mises was not only older but also set in his ways. He had a well-deserved
reputation for being taciturn and ill-tempered. Even his wife, Margit, could
not disguise her husband’s recurring dark moods. “The one thing about [Mises]
that was as astonishing as it was frightening was his temper,” she recalled.
“Occasionally he showed terrible outbursts of tantrums. ... These terrible
attacks were really a sign of depression.” Mises was also deeply impractical.
According to Margit, “He did not even know how to boil an egg.” So Hayek, an
even-tempered and rational individual as far as Robbins could judge, seemed
the ideal choice.” (Wapshott, 2011, p. 61)


“Hayek told his wife “half jokingly” of his ambition to climb to the summit of
Austrian society. He would first teach economics in London for a time before
returning to teach in Vienna. Then, as his reputation grew, he hoped to be
appointed president of the Nationalbank, the Austrian central bank. In his
dotage he would return to London as Austria’s ambassador. As he recalled, with
the lack of modesty and self-awareness that was key to his personality, it was
“by no means an unreasonable aspiration and would have given me that sort of
life on the borderline of purely academic and public work which probably, in
the later part of my life, I should have found most satisfactory.” […]
Robbins, a former socialist labor organizer, was attracted to Hayek through
his essay “The ‘Paradox’ of Saving” […].” (Wapshott, 2011, p. 58)


“Robbins, who, rare among British economists of the time, read German and had
explored the works of European economists, including Mises, the Swede Knut
Wicksell, and the Austrian Eugen von Böhm-Bawerk. Vigorous and ambitious,
Robbins was elevated by the director of the LSE, William Beveridge, to the
chair of political economy in 1929 at the age of thirty-one, becoming “the
youngest Professor in the country.” On his appointment, Robbins determined
that the LSE should counter Cambridge, the home of Marshall and Keynes, as the
fount of wisdom in British economic theory by presenting the full repertoire
of European thinking.” (Wapshott, 2011, p. 58)


Nicholas Wapshott, Keynes - Hayek: The Clash That Defined Modern Economics , 1st ed (New York: W.W. Norton & Co, 2011).


Österreichische Schule


Seminar 30


co-located teams outperform dispersed teams


MVP = Minimal Viable PROTOTYPE


Product Discovery and Delivery


Business Cases - fatal flaw


Racing towards product/market fit


Marty Cagan - Exzerpt


Also "agile" companies mostly do waterfall-processes


a race until money runs out: but isn't it a race where you can slow down the pace by burning less cash. i.e 2 teams instead of 4? of course there's also competition that races you, but sometimes it takes time to figure something out...


One product manager and two engineers - isn't that a lot of non-coding work?


[Product @ Scale]


[Marty Cagan, “Inspired - How to Create Tech Products Customers Love (for..)”, 2017]{}


About the Author


Before founding the Silicon Valley Product Group to pursue his interests
in helping others create successful products through his writing,
speaking, advising, and coaching, Marty Cagan served as an executive
responsible for defining and building products for some of the most
successful companies in the world, including Hewlett-Packard, Netscape
Communications, and eBay.
Marty began his career with a decade as a software engineer at
Hewlett-Packard Laboratories, conducting research on software technology
and building several software products for other software developers.
After HP, Marty joined a then-young Netscape Communications Corporation,
where he had the opportunity to participate in the birth of the Internet
industry. Marty worked directly for co-founder Marc Andreessen, where he
was vice president for Netscape's platform and tools, and later
e-commerce applications, and worked to help Internet startups and
Fortune 500 companies alike understand and use the newly emerging
technology.
Marty was most recently senior vice president of product and design for
eBay, where he was responsible for defining products and services for
the company's global e-commerce trading site.
During his career, Marty has personally performed and managed most of
the roles of a modern software product organization, including
engineering, product management, product marketing, user experience
design, software testing, engineering management, and general
management.
As part of his work
with SVPG, Marty is an invited speaker at major conferences and top
companies across the globe.
Marty is a graduate of the University of California at Santa Cruz with
bachelor of arts degrees in computer science and applied economics
(1981) and of the Stanford University Executive Institute (1994).


The very nature of putting together this book on sharing best practices
from the industry's best product companies means that I have learned
from a great many exceptional people. I have been especially fortunate
to have had the chance to work with and for some of our industry's best
product minds and companies. I have learned from each one of these
people, but some of them have made such a deep impression on me that I
must thank them here.
First and foremost, my partners at the Silicon Valley Product Group.
They are my colleagues now precisely because I have been so impressed
with their talents and have learned so much from each of them over the
years: Lea Hickman, Martina Lauchengco, and Chris Jones.
I must also thank Peter Economy, Jeff Patton, and Richard Narramore for
their help reviewing and improving this book.
The genesis of this book was material developed at Netscape
Communications. Netscape provided an unparalleled learning opportunity,
and I gained much insight about product and leadership by working for
and with truly brilliant minds, including Marc Andreessen, Barry
Appelman, Jennifer Bailey, Jim Barksdale, Peter Currie, Eric Hahn, Basil
Hashem, Mike Homer, Ben Horowitz, Omid Kordestani, Keng Lim, Bob
Lisbonne, Debby Meredith, Mike McCue, Danny Shader, Sharmila Shahani,
Ram Shriram, Bill Turpin, and David Weiden.
At eBay, I have to especially credit Marty Abbott, Mike Fisher, Chuck
Geiger, Jeff Jordan, Josh Kopelman, Shri Mahesh, Pierre Omidyar, Lynn
Reedy, Stephanie Tilenius, and Maynard Webb.
Each one of these people has directly influenced me and informed
specific topics in this book, either by their explicit help and coaching
or simply by way of their leadership and actions that I was fortunate
enough to witness first hand.
While my time working for these exceptional companies was an invaluable
learning experience, I found that as I began working with tech teams in
my advisory and coaching work as part of SVPG, I benefited greatly by
getting a chance to meet and work with the product leaders at many of
the very best companies in our industry. There are simply too many
people to list, but they know who they are, and I am grateful to every
one of them.
This book is based on material produced for a blog and newsletter that I
have published for many years, and each and every topic was improved
thanks to feedback and comments from literally thousands of product
managers and product leaders from every corner of the globe. I thank
everyone who has read, shared, and commented on these articles.
Finally, those people who know the culture of the companies I've worked
at understand that  many
very long hours were involved, and I could not have contributed to these
companies without the support of my wife and children.


Acknowledgments


I can tell you that there do exist companies that are very strong at
both consistent innovation and execution. Amazon is one of the best
examples. However, it's also well known that the Amazon work
environment is not for the faint of heart. I've found that most
companies that are exceptionally strong at execution are pretty tough
places to work.
In my experience working with companies, only a few companies are strong
at both innovation and execution. Many are good at execution but weak at
innovation; some are strong at innovation and just okay at execution;
and a depressing number of companies are poor at both innovation and
execution (usually older companies that lost their product mojo a long
time ago, but still have a strong brand and customer base to lean on).
In any case, what I hope
you and your team will consider doing is assess yourself along these
dimensions of innovation and execution, and then ask yourselves where
you would like to be, or think you need to be, as a team or company.


[Is an innovation culture in any way inherently at odds with an
execution culture?]
[Does a strong execution culture lead to a stressful (or worse) work
environment?]
[What types of people, including leaders, are attracted to, and
needed, for each type of culture?]


So, if these characteristics help define each culture, this begs some pretty tough
questions:


[Culture of urgency---people feel like they are in wartime, and that
if they don't find a way to move fast, then bad things could
happen.]
[Culture of high-integrity commitments---teams understand the need
for (and power of) commitments, but they also insist on
high-integrity commitments.]
[Culture of empowerment---teams feel as though they have the tools,
resources, and permission to do whatever is necessary to meet their
commitments.]
[Culture of accountability---people and teams feel a deep
responsibility to meet their commitments. Accountability also
implies consequences---not necessarily being terminated, except in
extreme and repeated situations, but more likely consequences to
their reputations among their peers.]
[Culture of collaboration---while team autonomy and empowerment is
important, teams understand their even higher need to work together
to accomplish many of the biggest and most meaningful
objectives.]
[Culture of results---is the focus on output or is the focus on
results?]
[Culture of recognition---teams often take their cues from what is
rewarded and what is accepted. Is it just the team that comes up
with the great new idea that gets rewarded, or the team that
delivered on a brutally tough commitment? And what is the message if
missing a commitment is seen as easily
excusable?]


What does it really mean to have a strong execution culture?


[Culture of experimentation---teams know they can run tests; some
will succeed and many will fail, and this is acceptable and
understood.]
[Culture of open minds---teams know that good ideas can come from
anywhere and aren't always obvious at the
outset.]
[Culture of empowerment---individuals and teams feel empowered to be
able to try out an idea.]
[Culture of technology---teams realize that true innovation can be
inspired by new technology and analysis of data, as well as by
customers.]
[Culture of business- and customer-savvy teams---teams, including
developers, have a deep understanding of the business needs and
constraints, and understanding of (and access to) the users and
customers.]
[Culture of skill-set and staff diversity---teams appreciate that
different skills and backgrounds contribute to innovative
solutions---especially engineering, design, and
product.]
[Culture of discovery techniques---the mechanisms are in place for
ideas to be tested out quickly and safely (protecting brand,
revenue, customers, and colleagues).]


What does it really mean to have a strong innovation culture?


What we're really talking about in this book is product culture.
I've described to you how great product companies think, organize, and
operate.


While we've talked about product teams and techniques for discovering
successful products, I hope you've noticed that what we're really
talking about in this book is product culture. I've described to you
how great product companies think, organize, and operate.
I think of product culture along two dimensions. The first dimension is
whether the company can consistently innovate to come up with valuable
solutions for their customers. This is what product discovery is all
about.
The second dimension is execution. It doesn't matter how great the
ideas are if you can't get a productized, shippable version delivered
to your customers. This is what product delivery is all about.
My goal in this final chapter is to describe the characteristics of a
strong innovation culture versus those of a strong execution
culture.


[CHAPTER 67][Establishing a Strong Product Culture]


There are, of course, any
number of other causes of slow product, but in my experience, these
are  among the most common
culprits.


[A consensus culture. Many organizations strive for consensus.
While this typically comes from good intentions, what this means in
practice is decisions are very hard to make and everything slows to
a crawl.]


[Changing priorities. Realize that rapidly shifting priorities
cause significant churn and substantially reduces the total
throughput and morale.]


[Not utilizing product design in discovery and instead having them
try to do their work at the same time the engineers are trying to
build. Not doing this will both slow things down and lead to poor
designs.]


[Not including engineers early enough during product discovery.
The engineers need to participate in product discovery from the
start of ideation. They will often contribute alternative approaches
that can be significantly faster to implement if you include them
early enough in the process for the product manager and designer to
adjust. If not, their critical input will come too late in the
process.]


[Lack of co-located, durable product teams. If teams are split
across locations---or worse, if engineers are outsourced---besides
the dramatic decrease in innovation, the velocity of the
organization will suffer significantly. Even simple communication
becomes difficult. It gets so bad that many outsourcing firms will
add another layer of people to coordinate and communicate, which
usually makes things worse.]


[Lack of product vision and strategy. It's essential that the
team have a clear vision of the big picture and how their immediate
work contributes to the whole.]


[Infrequent release cycles. Most teams with slow velocity have
release vehicles that are too infrequent. Your team should release no less
frequently than every two weeks (very good teams release multiple
times per day). Correcting this typically means getting serious
about test automation and release automation so the team can move
quickly and release with confidence.]


[Lack of delivery management. The most important function of the
delivery manager is to remove impediments, and the list of
impediments grows non-linearly as the technology organization grows.
Most impediments won't go away quickly without someone actively
chasing them down.]


The lack of a strong and capable product manager is typically a
major reason for slow product.


[Lack of strong product managers. The lack of a strong and
capable product manager is typically a major reason for slow
product. The impact of a weak product manager shows up in many ways,
but it shows up very visibly as a team of mercenaries rather than
missionaries. The product manager has not inspired or evangelized to
the team, or the team has lost confidence in their product
manager.]


[Technical debt. Often, the architecture does not facilitate or
enable the rapid evolution of the product. This is not something
that can be fixed overnight, but it needs to be attacked in an
ongoing and concerted effort.]


As organizations grow, it's not unusual for things to slow down. They
don't need to, and in the best organizations, they can accelerate. But
if you are seeing a slowdown, these are the first things to look for.


[CHAPTER 66][Top Reasons for Loss of Velocity]


I hope you notice that the
above list essentially describes a culture of consistent innovation.
It's much more about culture than it is about process---or anything
else.


[Time to innovate. At scale, it's very possible that your
product teams are entirely consumed just doing what we call keep
the lights on activities. Fixing bugs, implementing capabilities
for different parts of the business, addressing technical debt, and
more. If this is your situation, you shouldn't be surprised at the
lack of innovation. Some of this is normal and healthy, but be sure
that your teams have the room to also pursue harder and more
impactful problems.]


[Product mindset. In an IT-mindset organization, the product teams exist to
serve the needs of the business. In contrast, in a product-mind set
organization, the product teams exist to serve the company's
customers in ways that meet the needs of the business. The resulting
differences between these mind sets are many and
profound.]


[Empowered product teams. Even though your organization might
have begun by using best practices, many organizations regress as
they scale, and if you've reverted to just handing your teams
roadmaps of features, then you no longer can expect the benefits of
empowered product teams. Remember that empowerment means the teams
are able to tackle and solve the business problems they've been
assigned in the best way they see fit.]


[Corporate courage. It's no secret that many companies become
extremely risk averse as they grow larger. There is, of course, much
more to lose. But the best technology-product companies know that
the riskiest strategy of all is to stop taking risks. We do have to
be smart about how we work, but the willingness to risk disruption
to our current business is essential to consistent
innovation.]


[Engineers in discovery. So often the key to innovation is the
engineers on the team, but this means (a) including them from the
very beginning, and not just at the end and (b) exposing them
directly to the customer pain.]


[Stable product teams. One of the prerequisites for consistent
innovation is a team that has had a chance to learn the space,
technologies, and customer pain. This doesn't happen if the members
of the team are constantly shifting.]


[Strong product managers. The lack of a strong and capable
product manager is typically a major reason for lack of product
innovation. When a company is small, the CEO or one of the
co-founders usually plays this role, but at scale, each product team
depends on a strong and capable product
manager.]


[Focused product strategy. One of the surest paths to product failure is to try to
please everyone at once. Yet large companies often forget this
reality. The product strategy needs to spell out a logical and
intentional sequence of target markets for the product teams to
focus on.]


"Customers are always beautifully, wonderfully dissatisfied, even
when they report being happy and business is great. Even when they
don't yet know it, customers want something better, and your desire
to delight customers will drive you to invent on their behalf."


[Compelling product vision. By the time many companies reach
scale, their original product vision is now largely realized, and
the team is struggling to understand what's next. This is often
compounded because the original founders may have moved on, and they
were likely the keepers of the vision. In this case, someone
else---usually either the CEO or the VP product---needs to step up
and fill this void.]


[Customer-centric culture. As Jeff Bezos, the CEO of Amazon
says, "Customers are always beautifully, wonderfully dissatisfied,
even when they report being happy and business is great. Even when
they don't yet know it, customers want something better, and your
desire to delight customers will drive you to invent on their
behalf." Companies that don't have this focus on customers---and
direct and frequent contact with them---lose this passion and
critical source of inspiration.]


I define consistent innovation as the ability of a team to repeatedly
add value to the business. Many organizations lose their ability to
innovate at scale, and this is incredibly frustrating to both leaders
and the members of the product teams. It's one of the main reasons
people often leave large companies for startups.
But losing the ability to innovate is absolutely and demonstrably not
inevitable. Some of the most consistently innovative companies in our
industry are very large---consider Amazon, Google, Facebook, and Netflix
as examples.
Organizations that lose the ability to innovate at scale are inevitably
missing one or more of the following attributes:


[CHAPTER 65][Top Reasons for Loss of Innovation]


If a significant number of these items strike too close to home, I hope
you'll consider raising the bar for your team. See if you can't use
the techniques in this book to experience the difference.


[Good teams have a compelling product vision that they pursue with a missionary-like
passion. Bad teams are mercenaries.]
[Good teams get their inspiration and product ideas from their
vision and objectives, from observing customers' struggle, from
analyzing the data customers generate from using their product, and
from constantly seeking to apply new technology to solve real
problems. Bad teams gather requirements from sales and
customers.]
[Good teams understand who each of their key stakeholders are, they
understand the constraints that these stakeholders operate in, and
they are committed to inventing solutions that work not just for
users and customers, but also work within the constraints of the
business. Bad teams gather requirements from
stakeholders.]
[Good teams are skilled in the many techniques to rapidly try out
product ideas to determine which ones are truly worth building. Bad
teams hold meetings to generate prioritized
roadmaps.]
[Good teams love to have brainstorming discussions with smart
thought leaders from across the company. Bad teams get offended when
someone outside their team dares to suggest they do
something.]
[Good teams have product, design, and engineering sit side by side,
and they embrace the give and take between the functionality, the
user experience, and the enabling technology. Bad teams sit in their
respective silos, and ask that others make requests for their
services in the form of documents and scheduling
meetings.]
[Good teams are constantly trying out new ideas to innovate, but
doing so in ways that protect the revenue and protect the brand. Bad
teams are still waiting for permission to run a
test.]
[Good teams insist they have the skill sets on their team, such as
strong product design, necessary to create winning products. Bad
teams don't even know what product designers
are.]
[Good teams ensure that their engineers have time to try out the prototypes in
discovery every day so that they can contribute their thoughts on
how to make the product better. Bad teams show the prototypes to the
engineers during sprint planning so they can
estimate.]
[Good teams engage directly with end users and customers every week,
to better understand their customers, and to see the customer's
response to their latest ideas. Bad teams think they are the
customer.]
[Good teams know that many of their favorite ideas won't end up
working for customers, and even the ones that could will need
several iterations to get to the point where they provide the
desired outcome. Bad teams just build what's on the roadmap, and
are satisfied with meeting dates and ensuring
quality.]
[Good teams understand the need for speed and how rapid iteration is
the key to innovation, and they understand this speed comes from the
right techniques and not forced labor. Bad teams complain they are
slow because their colleagues are not working hard
enough.]
[Good teams make high-integrity commitments after they've evaluated
the request and ensured they have a viable solution that will work
for the customer and the business. Bad teams complain about being a
sales-driven company.]
[Good teams instrument their work so they can immediately understand
how their product is being used and make adjustments based on the
data. Bad teams consider analytics and reporting a nice to
have.]
[Good teams integrate and release continuously, knowing that a
constant stream of smaller releases provides a much more stable
solution for their customers. Bad teams test manually at the end of
a painful integration phase and then release everything at
once.]
[Good teams obsess over their reference customers. Bad teams obsess over their
competitors.]
[Good teams celebrate when they achieve a significant impact to the
business results. Bad teams celebrate when they finally release
something.]


With a grateful nod to Ben Horowitz's classic post "Good Product
Manager/Bad Product Manager," for those that have not yet had the
opportunity to participate in or observe a strong product team up close,
in this chapter I provide you with a glimpse into some of the important
differences between strong product teams and weak teams:


Good teams have a compelling product vision that they pursue with a
missionary-like passion. Bad teams are mercenaries.


I've had the extremely good fortune to be able to work with many of the
best technology product teams in the world---the people creating the
products you use and love every day, teams that are literally changing
the world.
I've also been brought in to try to help with companies that are not
doing so well. Startups racing to get some traction before the money
runs out. Larger companies struggling to replicate their early
innovation. Teams failing to continuously add value to their business.
Leaders frustrated with how long it takes to go from idea to reality.
Engineers exasperated with their product managers.
What I've learned is that there is a profound difference between how
the very best product companies create technology products and all the
rest. And I don't mean minor differences. Everything from how the
leaders behave to the level of empowerment of teams to how the
organization thinks about funding, staffing, and producing products,
down to how product, design, and engineering collaborate to discover
effective solutions for their customers.


[CHAPTER 64][Good Product Team/Bad Product Team]


[PART V] [The Right Culture]
We've worked through quite a lot of information, and I believe it would
useful at this point to step back and consider the range and scope of
how the product manager role is defined, how these people work
collaboratively with their product team, and the techniques they use to
quickly come up with products worth building and delivering to
customers.
It's easy to get hung up on the minutiae of all this, but what's
really important here is creating the right product culture for
success.
In these final chapters,
I'll push your focus to what's most important to your success. In
particular, how does a great product team behave, and how do strong
product companies provide these teams with an environment where they can
flourish?


During 2008, American Idol was a cultural icon---watched by more than
25 million people twice a week, with a level of repeat engagement that
was largely unrivaled.
Apple saw in this an opportunity to expose an ideal target market to the
power of iTunes and digital music. Not just by selling the music from
the contestants featured on the show but by making iTunes an integral
part of consumers' lives.
However, while the potential was substantial, the challenges were
significant as well.
The VP of iTunes, Eddy Cue, and others made the business deal, but
Camille worked as product manager on many of the integrations to help
figure this out.
As just one example, the American Idol program is all about voting,
and Apple quickly realized that sales of contestants' music would very
likely be strongly indicative of voting results. So, while normally
iTunes was designed to show trending music and highlight popular titles,
in this case, it was important to use extreme care not to influence
the voting.
This was obviously critically important to the Idol producers---it would reduce or even
eliminate the suspense to learn which contestants would continue to the
next week.
The integration also allowed the team to target a very specific persona
and work to drive up engagement with this group. One of the keys was to
make it easy to get to iTunes for those that didn't yet have the app
installed.
By tackling these and countless other challenges head-on, Camille and
her team came up with technology solutions that complemented the
American Idol experience, yet also injected iTunes as a key component
of fans' lives. This contributed to what was in 2014, before the move
to streaming, a roughly $20 billion business.
To me, this is a great example of how great product managers work to
find creative solutions to very difficult problems.
Camille went on to join the YouTube team and then lead product at
London-based Hailo. Now I'm very happy to say that she's CEO of a
NYC-based startup.


This is a great example of how great product managers work to find
creative solutions to very difficult problems.


I'd love to introduce you to another very strong product manager,
Camille Hearst.
Camille was a product manager on the iTunes team at Apple, and as you
might imagine with such a disruptive and groundbreaking product, she
experienced and learned a great deal during her formative product years
at Apple. This was especially the case because she was there during the
years moving from iTunes's original DRM-based music to DRM-free, which
was critical in helping iTunes become truly mass market.
Moving beyond early adopters into mass market involved many different
efforts, some product, some marketing, and some a blend of the two. A
good example of this blend was the relationship the iTunes team engaged
with the American Idol television program.
This turned out to be one of the most dramatic and visible---yet
challenging---product efforts for the iTunes team.


[CHAPTER 63][Profile: Camille Hearst of Apple]


[The big learnings are important to share broadly, especially when
things don't go as hoped. As a side benefit, sometimes someone in the audience
has an insight about what might explain the
results.]
[This is a useful and easy way for the various product teams to keep
apprised of what other teams are learning, as well as ensuring that
useful learnings make it to the leaders.]
[This technique encourages the product teams to keep their focus on
big learnings and not on minor experimentation that doesn't have a
real customer or business impact one way or the
other.]
[Culturally, it's critical that the organization understand that
discovery and innovation is about continuously running these rapid
experiments and learning from the results.]
[It is also important culturally that the product organization be
transparent and generous in what they learn and how they work. It
helps the broader organization to understand that the product
organization is not there "to serve the business" but, rather, to
solve problems for our customers in ways that work for our
business.]


Sharing what we learn in a startup happens naturally because the product
team and the company are pretty much the same thing. However, as
companies scale, this becomes substantially more difficult; yet, it also
becomes increasingly important to do.
A technique I love for helping with this is for the head of product, at
a company all-hands or similar meeting every week or two, to take 15 to
30 minutes to highlight what has been learned in product discovery
across the various product teams.
Note that this is meant to cover the bigger learnings and not the minor
things---what worked, what didn't work, and what the teams are planning
to try the following week.
This update needs to move fast and kept at the big learnings level,
which is why I prefer the VP product to do this. This is not where
every product manager parades in front of everyone for a detailed
update, taking one to two hours of time and at more detail than most
people want to see. It's not meant to be a repeat of sprint reviews
either.
Instead, the update is meant to address several purposes, some tactical
and some cultural:


[CHAPTER 62][Communicating Product Learnings]


But, let's say you are at a young, growth-stage company, and you decide
to hire a senior leader---maybe the head of product, or the head of
engineering, or the head of marketing---from a brand name like Oracle.
Your board will probably like that. The issue is that, unless you make
this clear at the outset, that new leader may assume you're hiring them
for their knowledge of process and how to define and deliver products.
And, so they bring with them their views on how things should work. Even
worse, they often then proceed to hire people that want to work in those
ways.
Note that I'm picking  on
Oracle here as an example, but they are certainly not the only one.
There are a great many very strong people to hire from Oracle as they
love to acquire companies, often very good companies, but those strong
product, design, and technology people they also acquired rarely like
Oracle's culture or ways of creating product.
I have seen this anti-pattern play out at every level of a
company---from individual engineers all the way to CEO. It doesn't
happen overnight; it happens over years. But I've seen it enough to be
convinced it's an anti-pattern. Many people intuitively sense this
problem but they usually just attribute it to a "big company person,"
but this is less about being from a big company and more about being
from a company that's not strong at product.
I know of two ways to prevent this problem from infecting your company:
The first is to have a very strong and very intentional product culture,
and to have that culture very well established so that new hires know
they're joining a different type of company that takes pride in how
they work and in using best practices. When you join Netflix, or Airbnb,
or Facebook, it's something you figure out in your first days, and
that's their intention.
The second way of preventing this is to make this explicit in the
interview and onboarding process. As part of my advisory work, I'm
often on the interview team for senior positions, and when the person is
coming from one of these types of companies, I'm up front with the
prospective hire. We'll talk about the reasons why their former company
has not produced successful new products in many years, and I'll
emphasize to them that the new company is interested in them because of
their mind and their talents, and of course they wouldn't want to bring
with them the bad practices of their former company.
In my experience, people
are really good about this when you talk openly and honestly about it.
In fact, people often tell me it's a major reason why they want to
leave their former company. It's more about getting this to be
something you and they are very aware of.


There is little question that most organizations become worse in their
ability to rapidly deliver consistent innovation as they grow, yet most
people attribute this to staff quality, process, and communication
issues of scale.


Devolving from Good to Bad
Lots of people have written about the challenges of managing growth, and
especially about the importance of working hard to maintain staff
quality as you scale the organization.
There is little question that most organizations become worse in their
ability to rapidly deliver consistent innovation as they grow, yet most
people attribute this to staff quality, process, and communication
issues of scale. Some believe that this is unavoidable.
There's an anti-pattern I see in many companies that are doing very
well, growing aggressively, yet they will sometimes---over time and
unintentionally---replace their good behaviors with bad ones.
I have never seen this anti-pattern written about before, and I suspect
it's going to make more than a few people uncomfortable. But it's a
serious issue that I think needs to be out in the open, as it's not
hard to prevent if you're aware.
The scenario is that you
are probably a later-stage startup or growth-stage company. You've
probably achieved product/market fit, at least for an initial product,
and to have accomplished that, you've probably done some important
things right. But then you get some substantial funding, or a board
member strongly suggests that you need to bring on some "adult
supervision" or some experienced people from brand-name companies.
Here's the thing. The new people you hire are often from those large,
brand-name companies that have stopped growing, have long since lost
their ability to innovate, and have been living off their brand for many
years. Because of this, they're not on the trajectory they once were,
and people leave.
Would you rather hire all your staff and leaders from Google, Facebook,
Amazon, and Netflix? Sure you would, but these people are in very short
supply and there is lots of strong talent at other companies.


However, beyond understanding the constraints and concerns of each
stakeholder, if you want the latitude to come up with the most-effective
solutions, then it's critically important that the product manager
convince each of these stakeholders that she not only understands the
issues, but that she is committed to coming up with solutions that not
only work for the customer, but also work for the stakeholder as well.
And this must be sincere. I emphasize this because, if the stakeholder
does not have this trust that you are going to
solve  for their concerns
as well, then they will either escalate, or they will try to control.
Strategies for Success
Success in terms of stakeholder management means that your stakeholders
respect you and your contribution. They trust that you understand their
concerns and will ensure solutions work well for them too. They trust
that you will keep them informed of important decisions or changes. And,
most of all, they give you the room to come up with the best solutions
possible, even when those solutions end up being quite different from
what they might have originally envisioned.
It's not that difficult to have this kind of relationship with
stakeholders, but it does require first and foremost that you are a
competent product manager. This especially means having a deep
understanding of your customers, the analytics, the technology, your
industry, and in particular, your business.
Without this, they won't trust you (and in fairness they shouldn't).
The main way we demonstrate this knowledge to the organization is by
sharing very openly what we learn.
With this as a foundation, the key technique is to spend one-on-one time
with the key stakeholders. Sit down with them and listen. Explain that
the better you understand their constraints, the better your solutions
will be. Ask lots of questions. Be open and transparent.
One of the most common mistakes product managers make with stakeholders
is that they show them their solution after they have already built it.
And, sometimes, there are issues because the product manager did not
have a clear enough understanding of the constraints. Not only will the
stakeholder be frustrated, but your engineering team will be frustrated
as well with all the rework. So, commit to previewing your solutions
during discovery with the key stakeholders before you put this work on
the product backlog.
This is one of the keys of product discovery. In discovery, you are not only making sure that
your solutions are valuable and usable (with customers), and feasible
(with engineers), but you are also making sure your stakeholders will
support the proposed solution.
The other big mistake I often see being made is when situations boil
down to the product manager's opinion versus the stakeholder's
opinion. In this case, the stakeholder usually wins because he or she is
usually more senior. However, as we've already discussed many times
before, the key is to change the game by quickly running a test and
collecting some evidence. Move the discussion from opinions to data.
Share what you're learning very openly. It may be that neither of your
opinions were right. Again, the discovery work is designed specifically
as a place for these tests.
Mostly this is about creating a collaborative, mutually respectful
personal relationship. For most companies, it takes about two to three
hours a week---meeting for half an hour or so with each key
stakeholder---to keep them apprised, and to get their feedback on new
ideas. My favorite way to do this is a weekly lunch or coffee with your
most-involved stakeholders.
Many product managers tell me that the way they deal with testing
business viability with all their different stakeholders is by
scheduling a large, group meeting and inviting all the stakeholders. The
product manager then presents to them what they want to build, usually
with a PowerPoint presentation.
There are two very serious (potentially career limiting) problems with
this.
First, presentations are notoriously terrible for testing business
viability. The reason is that they are far too ambiguous. A lawyer needs
to see the actual proposed screens, pages, and wording. A marketing
leader wants to see the actual product design. A security leader needs
to see exactly what the product is trying to do. Presentations are
terrible for this.
In contrast, high-fidelity user prototypes are ideal for this. I plead
with product managers in larger companies to not trust a sign-off on
anything other than a high-fidelity prototype. I have seen far too many
times where the execs agree to something based on a presentation, but
when they see the actual product, they are completely shocked,
frustrated, and often visibly angry.
The second problem is that
a group setting is not the forum for designing strong products. It
results in design by committee, which yields mediocre results at best.
Instead, meet privately with each stakeholder, show them the
high-fidelity prototype, and give them the chance to raise any concerns.
This may sound like more work to you, but please believe me that, in the
long run, it will turn out to be far less work, time, and grief.
One final note: in many companies, some of the stakeholders may not even
understand what product does, and some may even feel threatened by the
role. Be sensitive to this. You may need to spend some time explaining
the role and how technology-enabled product companies operate and why.


The product manager has the responsibility to understand the
considerations and constraints of the various stakeholders, and to bring
this knowledge into the product team.


There can be others, but you get the idea.
In a startup, there are few stakeholders because the company is very
small, and frankly, there's not a lot to lose. But in large companies,
quite a few people are there to protect the substantial assets of the
company.
Product Manager Responsibilities
In terms of the stakeholders, the product manager has the responsibility
to understand the considerations and constraints of the various
stakeholders, and to bring this knowledge into the product team. It
doesn't do anyone any good to build things that may work for the
customer, but then at some review meeting find out that you're not
allowed to deploy what was created. This happens much more than you
might realize, and every time it does happen, the company loses a little
more confidence in the product team.


[The executive team (CEO and leaders of marketing, sales, and
technology)]
[Business partners (to make sure the product and the business are
aligned)]
[Finance (to make sure the product fits within the financial
parameters and model of the company)]
[Legal (to make sure that what you propose is
defensible)]
[Compliance (to make sure what you propose complies with any relevant standards or
policies)]
[Business development (to make sure what you propose does not
violate any existing contracts or
relationships)]


For many product managers, managing stakeholders is probably the least
favorite part of their job. I don't want to suggest that this will
always be easy, but it can usually be substantially improved.
First, let's consider just who is a stakeholder, then what the product
manager's responsibilities are with these stakeholders. After that,
we'll talk about techniques for success.
Stakeholder Defined
In many product companies, just about anyone and everyone feels like
they have a say in the products. They certainly care about the product,
and they often have many ideas---either derived from their own use, or
from what they hear from customers. But, regardless of what they
think, we would not consider most of them to be stakeholders. They are
just part of the community at large---another source of input on the
product, along with many others.
One practical test of whether a person is considered a stakeholder is
whether or not they have veto power, or can otherwise prevent your work
from launching.
This group of people typically includes:


[CHAPTER 61][Managing Stakeholders]


One way companies try to protect what they've achieved is to institute
process by formalizing and standardizing how things are done in the name
of reducing error or risk. This applies from how we get reimbursed for
travel expenses, to how we request a change to a report, to how we
discover and deliver product.
In many areas, such as expense reporting, it's an irritant but not
likely to make the difference between success and failure of the
company.
On the other hand, it is all too easy to institute processes that govern
how you produce products that can bring innovation to a grinding halt.
Nobody does this intentionally, but it happens so frequently, in so many
companies, that I find it quite remarkable.
As just one example in the process area, Agile methods are generally
very conducive to consistent innovation. Yet there are several process
consultancies that specialize in "Agile at Scale," which introduce
methods and structures intended to scale to large numbers of engineers,
yet which absolutely destroy any hope of innovation.
It does not have to be this way. Many of the best product companies in
the world are very large companies that have successfully scaled their
product and technology
organizations. The techniques and methods described here are all about
maintaining your ability to consistently innovate as you continue to
grow and scale.


It is all too easy to institute processes that govern how you produce
products that can bring innovation to a grinding halt.