38 Weeks to Get Rich
What follows is my summary & key takeaways to help you digest the 127 page document.
Week 20: Take Accountability to Earn Equity
If you have high accountability, you’re less replaceable and you can get a piece of the business.
Accountability is linked to replaceability.
When you’re negotiating with other people, ultimately if someone else is making a decision about how to compensate you, that decision will be based on how replaceable you are. If you have high accountability, that makes you less replaceable.
Accountability becomes equity.
Employees earn salaries, but equity holders earn a portion of the upside (profits). People with no accountability earn the lowest wages because they’re the most replaceable. People with lots of accountability will earn a salary, but will also earn equity which gives them a much higher upside when the company/project does well.
Airline Pilots & Risk.
A great example of accountability in a work context are airline pilots. The airplane’s captain has accountability of the plane and the flight. He likely gets paid much more than the flight attendants because he’s responsible for the flight.
The risk becomes, if you’re in charge and something bad happens, your name get’s linked to it. But in the context of business it’s rarely a matter of life-and-death. Your failing as an app developer doesn’t kill a plane full of people. So don’t be worried about taking risks and being accountable for them.
Strategy Failings vs Moral Failings.
In terms of business failings there are largely two types: strategic (or execution) failings and moral (or ethical) failings. People in general seem to be pretty forgiving of tactical or strategic failings.
If your business sets out to solve problem X, and your team gives it their best shot, and it doesn’t turn out the way you or your investors thought, people are disappointed. But if you were honest and tried hard, people will likely invest in you again.
On the other hand, if you’re cheating and lying and unethical, you’ve likely ruined your name and reputation. No one will invest in you again.
James Dyson (of Dyson vacuums) had over 5,000 prototypes that all failed. And yet, his investors stayed with him.
Bernie Madoff (of Madoff investments) was unethical and no his grandchildren will never be able to work in the investment industry. The family name has been destroyed.
Accountability doesn’t just mean you have to be successful.
You can fail terribly and still maintain all accountability; you’ll just lose the cash and time you’ve invested. But that “failure” won’t haunt you or prevent you from trying again.
I look forward to sharing more next week as we look at chapter 21.