Tag Archives: local landscape

2 Small Biz Guys w Rick Murray CEO of ASBA

2 Small Biz Guys, Ray and Zen interview Rick Murray, ASBA CEO aka the Arizona Small Business Association, and travel many paths regarding small business in Arizona. Rick shares a little of his background with the State of New Mexico’s State Fair Grounds on his way to the leadership role of Arizona’s premier advocacy group.

Speaking of advocacy, we discuss the recent Crowd Funding legislation that he was instrumental in facilitating, a truly time sensitive opportunity and collaboration that met with success. It is a great win for small business owners and an example of what collaborative effort can do. You’ll have to hear the story. Look forward to further information coming from ASBA on the process and even some training on how to develop your own crowdfunding resources.

We explore various services that ASBA provides for both members and non-members, including a state-of-the-art health care coverage website that is open to anyone. You can hear more details during the interview. We talk about the ASBA Marketplace, too. We cover some critical points for the development of relationships and, of course, the follow up that is imperative for successful engagement.

As an entrepreneur or small business owner, no doubt you will benefit from this interview and, perhaps, decide to engage the Arizona Small Business Association to help develop your business. Ray and Zen are both members. Ray is also on the ASBA Mentor Board, which provides consultations for small business owners. Like any smart business owner knows, accessing those who have gone down the similar roads previously often provide insight and wisdom beyond measure.

Enjoy the show and feel free to reach out to us for help, too.

ASBA Mentor and Member (Ray and Zen) make ASBA membership work for you. We offer a special opportunity for ASBA members – EXTRA TIME (2 slots for the price of one – that’s double the time). Just fill out the appointment popup (Let’s Talk in the lower right) and tell us Rick sent you.

Thinking Fast and Slow

Thinking, Fast And SloThinking Fastw
Daniel Kahneman

reviewed by Ray Silverstein

Daniel Kahneman won the 2002 Nobel Prize in Economic Sciences for his pioneering work on how human judgment sometimes defies logic or probability—and how even supposedly scientific decisions are influenced by human bias and irrational assumptions. This was alarming news to economists.

Kahneman spend decades of research digging deeply into the human brain and the often-flowed way in which we make decisions and arrive at conclusions supported not by objective fact but by subjective assumption.

The brain thought process switches between automatic response or kneejerk reaction, System 1, and System 2, which involves concentration and deliberation. Although System 2 believes itself to be where the action is, the automatic System 1 is the hero of the book, according to Kahneman.

He argues that overreliance on System 2 can result essentially in tunnel vision. System 1, however has a bias to believe and confirm and neglects ambiguity and suppresses doubt.
He also shows that “hindsight is 20/20” is more than just a cliché’ in revisiting past beliefs and opinions. People tend to paint a much more flattering picture of themselves

Research in the areas of risk aversion and prospect theory to learn more about the ways in which humans make decisions and weight risk. Research suggested that the negative often trumped the positive; that is, if presented with data that a 50 percent positive and 50 percent negative, the general tendency is for out brains to come away with an impression of “negative.” Even though the positive/negative factors are equally divided.

Similarly, people tend to overestimate the probability of unlikely occurrences. In a business setting, that may mean failing to take a smart risk because of an unlikely hypothetical scenario. A gambler may refuse to cash out on a hot hand because he or she has a “feeling” that it will continue. The fear of regret is a factor in many of the decisions that people make.

There is also the relationship between the “experiencing self” and the “remembering self.” Taste and decisions are shaped by memories and memories can be wrong. We sometimes feel our preferences and beliefs so strongly that they can seem to be somehow rooted in fact; this however, is often not the case. This applies even to our choice of vacation. For many people, the value of a vacation is not the experience but the anticipation beforehand and the memory afterwards. Kahneman sums up, “I am my remembering self, and the experience self, who does my living, is like a stranger to me.”

Key terms and concepts:

Anchors: are related to how people try to estimate an unknown quantity. An example, the amount of money you will offer to pay for a house is in large part influenced—or anchored—by the asking price.

The Certainty effect: describes a process where your chance for success escalates from very high to certain. An example, if you are bidding on eBay and knew you had a 90%^ chance to win an auction with a $20 bid, would you still be tempted to use the “Buy It Now” option for $25, thus paying five dollars more to offset the 10% of chance of losing your bid?

In his study of decision making related to gambling Kahneman found that people tended to overvalue small risk, again showing that people make calculations and conclusions that are not aligned with probability.

The Halo effect: can be seen whenever a person makes assumptions based on a factor. An example, a beautiful stranger at a dinner party may be automatically assumed to be successful and confident. The Halo effect impacts not just social situations, but economic decisions as well.

Loss aversion: is a term that reccurs repeatedly throughout the book. Case studies show how people tend to be more driven by fear of failure than by the promise of success. This is loss aversion.

Optimistic bias: explains the decisions that we make or the beliefs that we should in the face of ample evidence to the contrary.

The major theme of Thinking, Fast and Slow is that our brains are divided into System 1 and System 2. System 1 houses our emotion and intuition, and it processes information making decisions automatically. System 2 describes the part of the brain that gets wrapped up in rationalization and concentration and value based judgments. While System 2 saves us from many of the unchecked kneejerk idiocies of System1, its decision-making capacity is more limited than we often think.

WYSIATI—“what you see is all there is.” WYSIATI basically describes our minds jumping to conclusions, drawing simply on what is in front of us without looking for missing evidence or data.

Interesting observation: studies on the impact of money on happiness, Kahneman found that there was a predictable dramatic difference between people living in poverty and people making 69K a year. Beyond that, though, the studies offered some surprise: Millionaires didn’t show any greater emotional happiness than people around the 50K zone.

The general conclusion is “We have a very narrow view of what is going on. We don’t see very far in the future, we are very focused on one idea at a time, one problem at a time, and all these are incompatible with rationality as economic theory assumes it.”

Wall Street Journal: “One major effect of the work of Messrs, Kahneman and Tversky has been to overturn the assumption that human beings are rational decision-makers who weigh all the relevant factors logically before making choices.”….”What Messrs. Kahneman and Tversky argued that, even when we have all the information that we need to arrive at a correct decision, and even when the logic is simple, we often get it drastically wrong.

How’s Your Crystal Ball?

How’s Your Crystal Ball

by Ray Silverstein

When you own a business, you need to be able to tell the future. To know where revenues are headed and what resources you’ll need. The good news is, you don’t need to be clairvoyant to see what lies ahead. 

Because you have something better than a crystal ball: your business indicators. Some indicators are nearly universal (i.e., the economy), and some are unique to every business. Either way, when you track your indicators, including those listed below, you can get a handle on the future.

Indicator #1: Present and Future Sales 

Reviewing current orders is the first step to projecting revenues. But you can estimate even more accurately if you factor in outstanding bids/proposals.

For example, review past proposals for the last 12 months. What percentage did you close?  

Apply that percentage to today’s proposals, and you’ll get a sense of where you’ll be in X number of days, depending on the length of your sales cycle. In essence, you’re diagramming your sales funnel. (Then you can also work backwards to determine how many proposals you must generate to hit your sales goals.)

Indicator #2: Service/Maintenance

If your sales have a ‘tail’—i.e., the initial sale will result in service activity down the road—that’s another indicator.

Say you sell and service equipment. By analyzing past maintenance activity, you can predict what service/parts will be needed when. Apply that information to your equipment in the field, and you cannot only proactively line up parts and staff, but anticipate maintenance-related revenues.

Indicator #3: The Domino Effect 

Certain activities in one industry  impact related industries. If you can pinpoint those relationships, you can use them to make projections.

For example, one of my PRO peer group members is in the furniture business. By talking to her customers, she found they shared one common denominator: many had purchased homes within the prior 6-12 months. By tracking the local housing market, she can project which way sales are trending.

Indicator #4: Fill-in-the-Blank!

There may also be some indicators unique to your business. Keep a look out for them.

For example, years ago when I owned a manufacturing company, I used to sell to a well-known mail order house. This was before the Internet. Every day when the mail arrived, the mail order staff would immediately weigh it. Yes, weigh it. The company’s savvy owner knew the value of his average order and had calculated the number of orders that made up a lb. of mail. So hours before the orders were processed, he knew what the day’s sales would be.

Indicator #5: The Local Landscape

Your business is part of a local community. Depending on what you sell or do, all kinds of local activity may affect you: big construction projects, hiring moves by major employers, even the school calendar. By staying abreast of your community and keeping tabs on local business news, you can get a sense of what will impact your business.

So, put away your tea leaves and cancel your appointment with Madame Marie. Learn to track and read your key business indicators, and you’ll be able to predict what the future holds.


Ray Silverstein is president of PRO, President’s Resource Organization, a network of entrepreneurial peer advisory groups in Phoenix and Chicago. He is author of “The Best Secrets of Great Small Businesses,” and “The Small Business Survival Guide.” He has partnered with the Phoenix Business Journal to bring you access to the Journal’s Digital Portal, a goldmine of potential business indicators. For more information, contact Ray at 1-800-818-0150 or ray@propres.com.

Upcoming Events:

Devon Bank sponsored Keyword Workshop in Chicago – Wednesday, October 8, 2014 

Books of Interest: