By Verne Harnish “Growth Guy”

“Jemma is a great barrier to protect the team from my overzealousness and enthusiasm,” notes Naomi Simson, founder and CEO of Sydney-based RedBalloon.  “She balances all my ‘brilliant’ ideas with a focus on making them process driven.

The single most important decision most entrepreneurs and CEOs make is who is going to be their right #2; who will play the insider role so the CEO can stay focused on market-facing activities; who will make stuff happen after the CEO tosses a new idea over the transom; and who will act as the shock absorber between the crazed entrepreneur and the rest of the team.

Sadly, it’s a decision most CEOs blow.  And once burnt by the wrong #2, CEOs are reluctant to ever try again, dooming them to long hours and frustrating activities for which someone else is better suited.  It also exacts a huge negative financial impact on the business since the CEO ends up handling day-to-day operations instead of focusing on marketing and innovation.

Someone You Know

For almost three decades I’ve watched CEOs make right and wrong decisions when it comes to hiring the right #2.  Howard Schultz, CEO of Starbucks, is yet to get it right.  Michael Dell was forced to take back control of Dell after the failure of his #2.  In turn, Bill Gates seems to have made the right decision in Steve Ballmer.  And I’ve witnessed countless small to mid-sized company CEOs live and die by choice they’ve made for the #2 position.

I became most acutely interested in the topic when it was time for me to hire my #2.  So I began to look for patterns in success and failure.  Surprisingly, only one variable emerged as critical – whether the CEO had worked with the #2 for quite some time before putting them in the position.

Steve Ballmer was a poker-playing friend of Bill Gates going back to their Harvard days — success.  In contrast, Schultz plucked his #2 out of Wal-Mart — failure.  But isn’t Google’s situation a large exception?  Eric Schmidt was first made Chairman of the Board for six months before he was given the official #2 position as CEO for the co-founders.  And given Google’s growth rate, six months is like six years for everyone else, giving the co-founders a chance to test-drive Schmidt before inviting him into the triumvirate.

Started as a Subcontractor

The #2’s that work out the best tend to be family members, employees that move up through the ranks, former customers/suppliers, or long-time friends and colleagues from a previous career.

In Richard Koury’s case, his successful #2 started as a subcontractor for his $17 million Chino, California-based geotechnical engineering firm.  With only a high school education, he excelled in his first assignment back in 1998, “rising to the top and running the job for us within the first few months,” notes Koury.

So talented was this subcontractor that he was hired away to manage a $120 million construction job for another firm and was nominated for a major construction management award.  Koury knew this guy, Dave,  was special and remained a friend and mentor over the next few years.

Four years ago, Koury felt his firm was ready for the right #2 and he knew Dave was the right guy.  So one Saturday morning he took him to breakfast and asked him point blank “Dave, are you being treated well and are you happy?”  Noting that many things that make one happy can’t be put on a spreadsheet, Koury suggested to Dave that he join his firm.  He’s been there ever since.

“He’s transformed the place,” exclaims Koury.  “I’m overly driven and he puts the appropriate reins on me.  And there isn’t one move he’s made that hasn’t helped move the business forward.”

Equally important, Dave has allowed Koury to focus on the growth of the business and the hiring of more great people.  “He’s taken over what I didn’t enjoy, wasn’t good at, and where he had better ways to do things,” concludes Koury.

Early Hire

It was a similar story for Simson at RedBalloon.  Jemma joined the company when it was only 18 months old, recruited as a product assistant managing content on the website.  Over the next six and a half years, she was promoted many times, first to product manager, then marketing manager, national marketing manager, and finally as general manager for the last 2 years.

“She has the strengths I don’t have,” explains Simson. “She is analytical, detailed, calm, and patient.”  At the same time, Jemma shares Simson’s focus on marketing, Simson herself being a former marketing manager for Apple.  Often the strength of the founder can become the weakness of the organization if the founder doesn’t find someone to support them, given all the other demands that come with growing a business.

The List

These are just a few of over fifty examples I’ve researched. And in 90% of the cases, the success rate is much greater if it’s someone you’ve worked with for quite some time.  Questions about compensation, ownership sharing, and transitioning, though critical, are moot issues (and costly!) if you don’t get the right person in the first place.

Therefore, if you think it’s time to find the right #2, start by making a list of all the quality people you’ve worked with the past several years:  customers, distributors, former employees that have gone on to bigger things, suppliers, family members, childhood friends, etc.  Somewhere on that list is a person that will likely succeed much better than a relative stranger and give you the support and freedom you need build a better company.

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By Verne Harnish

“…keeping you great”

HEADLINES:

Hiring the Right #2 — “Jemma is a great barrier to protect the team from my overzealousness and enthusiasm,” notes Naomi Simson, founder and CEO of Sydney-based RedBalloon, on her #2. “She balances all my ‘brilliant’ ideas with a focus on making them process driven.” Take five minutes and read ((http://www.gazelles.com/new_articles/Hiring_the%20Right2.pdf)) how she and other CEOs found their right #2s, one of the most important hiring decisions an entrepreneur will ever make, in my latest “Growth Guy” syndicated column.

Hiring the Right #3, #4, etc. — Gazelles is hiring; we’re excited many of our clients are hiring; and it’s still a great time to acquire critical talent. But it’s no time for amateur hour when it comes to recruiting and interviewing. The ONLY selection and hiring technique found to give a 90% success rate is the Topgrading methology. The rest of the methods: testing, behavior-based interviewing, or “passing the breath test” have between a 30% and 60% success rate — too costly! Join us for the #1 selection process if you’re going to hire at least one person in 2010:

“19 Appointments with the Right People” — and this note from Mark Dover of Canadian-based warehouse supply firm Doverco “I wanted to share the success we have enjoyed as a result of the Webinar we participated in several months ago given by Chet Holmes (http://www.gazelles.com/ggs_chet.html). Following the model of his ‘Best Buyer’ program, we conceived of a program of 10 monthly letters directed at 165 ‘Best Buyer’ prospects. Each letter contained industry intelligence (teaching is the highest form of selling as related to us by our Gazelles coach Les Rubenovitch) and our related capabilities. And every other letter had a small, low cost, attention grabbing gift related to the theme of the missive. We are at letter #6 and have already been able to secure 19 appointments with the right people! We have reached our objective and we’re only 60% through the project. Thanks to Les, Chet and Gazelles for making us smarter. BTW, the (Dr. Robert) Cialdini Webinar (http://www.gazelles.com/ggs_cialdini.html) on ‘Influence’ was awesome.”

Keeping the Right People Smart — commit to 90 minutes of first class executive education each month using our monthly online seminars — LIVE or archived; alone or with your team (perfect for the monthly management meeting). Jeff Jarvis (http://www.gazelles.com/ggs_jeff.html), author of What Would Google Do? is our February 18 online seminar; and Chip Heath (http://www.gazelles.com/ggs_chip.html), author of Made to Stick and Switch is our March 25 online seminar. These are the #1 business thought leaders of our time that would cost you $25k plus in speaker fees and travel expenses — now delivered right to your desktop for a fraction of the cost.

Vision Board Update — the children loved the experience of putting vision boards together this past weekend and I especially enjoyed sitting with my 6 year old daughter who surprised me with her desire to be a high board diver, something my wife always wanted to do but had never shared with any of us. We used Google image and lots of magazines to find the appropriate images for the boards — and appreciated the guidance given by John Assaraf’s The Complete Vision Board Kit (http://www.amazon.com/Complete-Vision-Board-Kit-Visualization/dp/1582701911/ref=sr_1_2?ie=UTF8&s=books&qid=1263315748&sr=8-2)

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By: Marshall Goldsmith

What can I do to build my confidence in my capabilities as a leader?

You won’t get to the top without self-confidence; to build it, you have to believe in yourself. Don’t worry about being perfect — put up a brave front and do the best you can. That’s it in a nutshell. Here’s a little more background for you.

Last year, as I often do, I taught a seminar for MBA students at the University of California at Berkeley’s Haas School of Business. A second-year student approached me and told me he’d read my book What Got You Here Won’t Get You There. “In the book you talk about classic challenges faced by your clients,” he said. “I noticed that you never discuss self-confidence problems. How do you deal with your client’s self-confidence problems?”

This question really made me think. I rarely encounter self-confidence problems in my work with CEOs and potential CEOs. It is almost impossible to make it to the top level in a multibillion-dollar corporation if you do not believe in yourself. On the other hand, I am frequently asked to speak at business schools, and I have noticed that students in my seminars often want to talk about it.

This is such an important topic. I thought I would share a few suggestions about how you can build your self-confidence. I also hope you, my readers, will offer your own suggestions.

1. Don’t worry about being perfect. There are never right or wrong answers to complex business decisions. The best that you can do as a leader is to gather all of the information that you can (in a timely manner), do a cost-benefit analysis of potential options, use your best judgment — and then go for it.

2. Learn to live with failure. Great salespeople are the ones who get rejected the most often. They just ask for the order more than the other salespeople. You are going to make mistakes. You are human. Learn from these mistakes and move on.

3. After you make the final decision — commit! Don’t continually second-guess yourself. Great leaders communicate with a sense of belief in what they are doing and with positive expectations toward the achievement of their vision.

4. Show courage on the outside — even if you don’t always feel it on the inside. Everyone is afraid sometimes. If you are a leader, your direct reports will read your every expression. If you show a lack of courage, you will begin to damage your direct reports’ self-confidence.

5. Find happiness and contentment in your work. Life is short. My extensive research indicates that we are all going to die anyway. Do your best. Follow your heart. When you win, celebrate. When you lose, just start over the next day.

I hope you will you share your suggestions for building self-confidence with me and with each other by sending comments. Thank you!

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By: Carmine Gallo

Software-as-a-service pioneer and salesforce.com (CRM) co-founder and CEO Marc Benioff credits storytelling as one of the primary reasons for his company’s rapid success. “Communication is probably the most essential part of my job,” Benioff told me in an recent interview about his new book, Behind the Cloud. The book describes how salesforce went from idea to $1 billion company in less than a decade. Whether you own a small business, run a large company, or have a great idea for The Next Big Thing, consider these seven tips from Benioff about how to shape and articulate your vision.

Commit to transparent communication. Customer relationships take work, and a big part of that work is dedicating yourself to constant communication with customers and prospects, says Benioff. “We invited them to come in and see what we were working on. We asked them to test it, and we made changes based on what they said. Having this kind of inclusive communication—sharing and listening— from the beginning set the tone for our entire company.” According to Benioff, salesforce used this feedback to make fast changes—”intelligent reaction.”

Make friends with reporters and bloggers. Despite a very busy schedule, Benioff responded to my interview request immediately and met my deadline. “I never treat members of the media as adversaries; they are friends of the company,” says Benioff. His relationships with reporters and bloggers have been a “pivotal part” of his marketing strategy. “Journalists immediately think of me as a resource for a quote or comment because they know that I will be available to offer fresh insight and meet their deadlines.” Benioff says that social media has also turned customers into content creators. “The future of communicating with customers rests in engaging with them through every possible channel: phone, e-mail, chat, Web, and social networks. Customers are discussing a company’s products and brand in real time. Companies need to join the conversation.”

Tell classic stories. Most reporters don’t care about a tiny startup, and that’s why Benioff never positioned himself as such. He told a classic David-vs.-Goliath story. “We gave the media something different. We gave them something new. We always positioned ourselves as revolutionaries. We went after the largest competitor in the industry or the industry itself. We made our story about change. We were about something new and different that was good for customers, and good for the community. We talked about the future.” Although the media landscape is changing, Benioff believes there will always be a need for content. The delivery model might be changing, but exchanging and sharing stories and information remains as important as ever.

Make your own metaphors. According to Benioff, simple metaphors are a terrific way to communicate your message. “I spend a lot of time creating metaphors to explain what we do. For example, early on I explained what we did with the metaphor “salesforce.com is Amazon.com (AMZN) meets Siebel Systems.” Later when we launched AppExchange we called it “the eBay (EBAY) of enterprise software.” Anyone can create their own metaphors, says Benioff. “Just remember to test them before you put them out there. Try a few and run them by customers, analysts, and people in your network to make sure they work.”

Keep everyone aligned. It’s not enough for one person to be on message. Everyone has to speak from the same playbook. At salesforce, Benioff made sure staffers could effectively convey what they did and what they stood for in one sentence. They created a laminated “cheat sheet,” with one sentence on the front and benefits of the service on the back. Salesforce employees and partners were even provided training so they could all deliver the message effectively and consistently.

Encourage presentation skill development. Want a job at Salesforce? You’d better be a good presenter. Some candidates are required to give a presentation in addition to answering tough questions. “Presentation skills are key,” says Benioff. “People who work for you represent your brand. You want them to present themselves—and represent you—in a certain way. Whether employees realize it or not, everyone in a company interfaces with customers in one way or another, and their attitude will affect the brand. That’s why we work so hard to make sure we have the right people representing our brand, and that everyone is in alignment once they get here.”

Display confidence. Benioff believes in dreaming big. “I believed that all software would eventually be delivered in the cloud. I had to believe in it passionately and be ready to constantly defend it.” Inspiring communicators are passionate about their mission—they believe it to their core and speak with conviction.

According to Benioff, you must be passionate “and a little bit crazy” to follow your own ideas and do things differently. But in the end, he says, it’s worth it.

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By: David Port

A new generation of entrepreneurs is congregating in ‘co-working’ spaces across the country.

David Brunelle was living the dream: He’d shucked his 9-to-5 office job, liberated himself from the cubicle farm and started his own business. He was working from home, being his own boss … and before long, wallowing in freedom.

“More often than not, I’d find myself on the couch, playing Xbox at 1 in the afternoon,” says Brunelle, a Seattle web developer. “It became pretty clear that to be productive, I needed structure, I needed to set boundaries between my work and my home life, and I needed to be around other people who are serious about their work.”

Fortunately, Brunelle, who launched his web design company last November, discovered Office Nomads, a 5,000-square-foot collection of work spaces designed for people just like him: sole proprietors, freelancers, artists, consultants and other independent workers who have emerged to work and connect under the same roof.

Their search for a workplace that combines the best of a home office, an internet cafe and a traditional office has given rise to a whole new movement, with an awkward but apt name: “co-working.” It’s a dramatic U-turn in the quest for the perfect work environment–a migration back to the cubicle from the often-idealized home office, but a cubicle reimagined for a time when the line between domestic and professional life has never been more blurred.

Co-working spaces–which cost anywhere from $25 a day for occasional drop-ins to $500 or more a month–only began popping up a few years ago in places like New York and San Francisco. Now they are slowly becoming a national and international phenomenon. The potential is huge: More than 10 million Americans are self-employed, up from about 8 million in 1980. Freelance job sites are booming, too: Elance.com had postings jump 40 percent in the first half of this year, while Guru.com saw its total membership grow by 15% over the year before.

The appeal of co-working seems clear: It provides people like Brunelle a professional and social package that most alternatives can’t match. For starters, there’s the real-live-human camaraderie you can’t get from Facebook or text messaging, as well as the potential for networking and uncovering new business opportunities. A co-working office can also offer a sounding board for ideas in an informal setting. And it relieves, for the most part, the energy-sapping world of office politics–not to mention blood-draining commutes.

All that, plus a basic support system that typically includes dedicated spaces for working and for socializing, high-speed internet, a kitchenette and, naturally, some type of caffeine-dispensing appliance. Printers and fax machines could also be available. Some spaces sweeten the package with lockers, showers and yoga classes. Others offer audio-video equipment, organized social outings, consulting services–and one of the newest services: child care.

Capitalizing on the fact that co-workers may have small children in need of supervision, Cubes&Crayons in Northern California has added onsite child care at its locations in San Francisco and Mountain View. What the company calls “professional, developmentally appropriate” care for children between the ages of 3 months and 5 years is provided during regular business hours. There’s flexibility in choosing a plan–full-time, part-time or drop-in. Rates for members range from $17 an hour for occasional drop-ins to a flat fee of $600 per month for 60 hours of care. Cubes&Crayons may be the first, but it is unlikely to be the last, to start grooming the next generation of co-workers.

But for most people, what makes co-working alluring isn’t the child care or the yoga but the cooperative spirit and community vibe fostered by the people who populate those spaces.

Take Tony Bacigalupo. “I was working from home for a web consulting firm and realized I needed to be around other people and out of the house,” he explains. “The local café wasn’t great as a work environment either. Then I discovered there was already a burgeoning movement for people like me.”

Similar disenchantment with working from home prompted Andrew Luter, a private equity investor in Denver, and Susan Evans, an environmental consultant in Seattle, to turn to co-working at around the same time.

“Isolation,” Evans says, “is an inconvenient byproduct of the concept of home-office convenience.” For Luter, the problem with working from home “wasn’t just the distractions, it was the sense of physical and mental separation.”

Having met enough like-minded people to believe co-working was more than a passing fancy, Bacigalupo, Evans and Luter were soon investing in the business and helping propel the movement in their respective cities. In April 2007, Luter opened the Hive in Denver. Seven months later, Office Nomads, the brainchild of Evans and business partner Jacob Sayles, began welcoming members in the Capitol Hill neighborhood of Seattle. And a year after that, Bacigalupo opened New Work City in Manhattan’s SoHo neighborhood. Meanwhile, co-working spaces also were debuting across the country–and not just in the largest cities but in smaller urban areas and university towns with thriving populations of entrepreneurs and independent workers.

Now, less than a year after opening, New Work City hosts anywhere from 40 to 50 full- and part-time members on a given day. To be there, they can pay a $25 daily drop-in fee or $500 a month for a full-time membership, which affords them 24/7 access to the space. The Hive, meanwhile, has roughly 20 members who use its 4,000-square-foot space, paying $199 per month for 24/7 access. Brunelle is one of about 25 full-time members at Office Nomads; for $475 they get “resident” status, which comes with a dedicated desk and 24/7 access. There are also part-timers and drop-ins.

Graphic artists and business consultants, architects and publicists, authors and code-writers: As diverse and colorful as the co-working crowd is, there are unifying threads. “No one in here wants to work by themselves; everyone is here because they want to be here,” Evans says.

And, Bacigalupo adds, co-workers tend to be personable types. “The jerks rarely stick around, if they come here in the first place, and they rarely do. These are offices spaces without all the sucky parts of an office.”

He explains that people spent most of the 20th century figuring out how to go from blue-collar to white-collar jobs. “Now we’re looking for a new kind of personal workplace beyond the white-collar environment,” he says. “I think what we’re seeing now is a resurgence of interest in the possibilities of the virtual office–a healthier, more sustainable version of telecommuting.”

The variety of people working in complementary fields can make co-working spaces fertile ground for new business opportunities, too. “There’s certainly work being passed to and fro among members,” Evans says. “That is definitely a consistent theme across co-working spaces. It’s a huge benefit.”

In the end, it is camaraderie, community and connectedness that fuel this trend. “It is what members make it,” Evans says, “and they have made it pretty awesome.”

So awesome, in fact, that Brunelle says he has “no complaints and no regrets” after six months as an Office Nomads full-timer–even though it’s meant sacrificing those pajamas-and-Xbox afternoons.  

David port is a freelancer based in denver who writes on small business, and financial and energy issues.

And if business takes you on the road, there are dozens of work spaces in the U.S. and abroad that have open-door policies for co-workers from out of town. as part of a loosely structured “visa” program. This means you don’t have to hole up in a hotel room to conduct business or you can rub shoulders with co-workers in other cities, Co-working spaces in at least 17 states and 13 countries have signed on to participate in the program, which invites co-workers to drop in and work at little or no cost.

“If you’re a member of a co-working space, come on in, take a seat and work here as many days as you like,” says Susan Evans, co-founder of Office Nomads in Seattle. Terms, such as whether to call or e-mail ahead to confirm space availability, vary by organization. For an updated list of visa-friendly spaces and their requirements, check http://coworking.pbworks.com/CoworkingVisa.

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By: Tim Ferris

Putting All the Chips on the Table?

Growing up as I did, with an early interest in business, it was almost impossible not to envy people like Gates, and even measure myself against them. Gates had placed all his chips on the table at one time and walked away richer than Croesus. And me? Well, I’d never even sat down at the table. The way I saw it, I couldn’t. I graduated from a state university with a stack of loans to repay. No sooner had I begun to dig my way out of personal debt than I met my wife (who failed to bring her own shovel). I remember her father joking with me soon after we got engaged. “Son,” he said, “I want to let you know about Lori’s dowry—you get her student loans and her bad teeth!” He laughed from deep in his chest. I moaned from the same spot. Add to that three children born within five years, and I felt like I was slogging through quicksand. If only I was in a different position, I used to think. If only I had the courage to take on more risk, like Bill Gates, like lots of others I used to list to myself. And then finally, years later, I realized that that’s not how it happened at all. William Henry Gates III was born October 28, 1955, in Seattle, Washington, to a family with a rich history in business, politics, and community service. His great-grandfather had been a state legislator and mayor, his grandfather was the vice president of a national bank, and his father was a prominent and very wealthy lawyer. Because young Bill excelled from his earliest school days, especially in science and math, his parents saw that he was enrolled in prestigious Lakeside Prep, known for its intense academic environment. This was in the late 1960s, when the world of computing was just beginning to peek over the horizon and carried a golden price tag. But no problem. To assure Lakeside’s students wouldn’t be left behind, the school held a fund-raiser and, with the proceeds, rented what it thought would be a year’s worth of time on a computer owned by General Electric. Bill Gates, his close friend Paul Allen, and a few others torpedoed that plan in a big hurry. They started hanging out in the computer room day and night, learning everything they could, even to the detriment of their other academic obligations. Within a matter of weeks, the expected year’s worth of allotted computer time was gone, but that was no problem either. The school simply struck a new deal, this one with Seattle-based Computer Center Corporation, to get additional computer time at good rates. That might have worked if young Gates and his friends hadn’t immediately started (a) hacking into CCC’s security system so they could reset the meter that tracked computer use and (b) crashing the system just for fun. They were caught, and the company banned Gates and his cohorts from its computers for several weeks. (The thought of Gates and Allen as the godfathers of a hacking subculture that has cost Microsoft and the world overall hundreds of billions of dollars does indeed boggle the mind.) But again, the exile was only temporary. CCC’s business was beginning to suffer from the system’s weak security and the frequency with which it crashed—many of the same flaws Gates and his friends had been exploiting—so the company offered the gang a deal: find the bugs and pinpoint the weaknesses in the system, and they could have unlimited use of the computer. In 1970, Computer Center Corporation ran into financial trouble that would eventually put it out of business, but by then, Gates and Allen had found a new computer home at the University of Washington, where Allen’s father worked. Lakeside also pitched in: during Gates’s junior year at the prep school, the administration offered him a job computerizing the scheduling system. Over the summer, Gates and Allen wrote the program, which coincidentally assured that Gates was assigned to classes with mostly girls—a sequence straight out of a nerd’s revenge movie. In the fall of 1973, Gates left Seattle to begin his freshman year at Harvard, part of his preprogrammed life plan. Allen, who almost certainly could have been admitted to Harvard along with his pal, chose a different route. He wanted hands-on experience, but the two remained in close contact, often discussing the potential of one day starting a company, and at the end of Gates’s first year at Harvard, Allen moved closer to Boston so they could continue to pursue the still-vague possibilities. Then, in December of Gates’s sophomore year, the vague future began to take on a more exact face. On a visit to Harvard, Allen stopped at a convenience store and noticed the current issue of Popular Electronics magazine. On the cover, under the title “World’s First Microcomputer Kit to Rival Commercial Models,” was a picture of the Altair 8800. Energized as he had never been, Allen showed the magazine to Gates, and within a few days Gates had called the maker of the computer, Micro Instrumentation Telemetry Systems (MITS), and told them that he had written a BASIC computer program that could be used on the Altair. This was a lie. Gates and Allen were just trying to gauge interest from the company. But MITS was deep in its own deception: the computer shown on the cover had not been developed yet, and even the prototype had been lost in shipping. Still, the magazine article had generated interest far exceeding expectations, so MITS asked Gates and Allen to come in and demonstrate what they were thinking. Only then did the two set out to write the code. Gates focused on programming while Allen worked on simulating how it would work on an Altair 8800, which they didn’t have. At the meeting eight weeks later, the program worked perfectly, and MITS arranged a deal to purchase the rights to Gates’s BASIC. Gates would later say that it was at this moment he knew the software market had been born. Yet, despite his growing certainty of the opportunity in front of him, Bill Gates waited another 12 months, until his junior year, to drop out of school and, with Allen, form Micro-Soft. And even then, the company might have amounted to little more than a footnote in the history of software without Bill Gates’s mother. Long active in community service in the Seattle area, Mary Maxwell Gates became the first female president of the United Way of King County and eventually chair of the executive committee of the national United Way, then one of the most influential nonprofit positions in the world. Serving on the exec committee with her back in the early seventies were, among others, John Akers, who would later become the CEO and chairman of International Business Machines (IBM), and John Opel, who preceded Akers in both positions. Mary Gates mentioned her son’s new business to Opel, who by many accounts then relayed this information to other top IBM executives. There’s no definitive record of what got said when to whom, but only a few weeks after Mary Gates got the ball rolling, IBM took a huge chance by contracting with Bill Gates’s fledgling company to develop an operating system for the company’s first personal computer. The success of both the IBM PC and the Microsoft Disc Operating System (or MS-DOS)—and the sweetheart deal that let Microsoft retain rights to its software—is what ultimately made Bill Gates the richest man on the planet.
Experience, Not Faith
So, did Bill Gates walk away from one of the world’s most coveted degrees toward an uncertain path? Well, he did ultimately make decisions from which there would be no turning back. That part of the myth is dead on. But was Gates a great risk taker? That’s a more complicated story. His family’s money and position provided cover for his youthful computing hijinks and helped assure that he would have the best education available. As for the famous Harvard dropout story, he didn’t really. Rather, he took a formal “leave of absence,” a kind of emotional umbilical cord that kept him tied to Harvard long after he had vacated the campus, just in case things didn’t work out. But by then, he had already turned the odds in his favor. After half a decade of dancing with the opportunity, beginning early in high school, he had already covered most of his downside risks. He knew, for example, that he loved the work, and the early Micro-Soft had projects in the pipeline. What’s more, Gates had validation that both he and Allen were highly competent with this new technology, and he could see that the topside potential was huge. The industry was just emerging, and his mother was in the particularly influential position of head of a United Way executive committee that also included two future CEOs of the world’s dominant computer company. As they say, it’s often not what you know but who your mother knows that can land you billion-dollar contracts. Far from being one of the world’s great risk takers, Bill Gates might more accurately be thought of as one of the world’s greatest risk mitigators. And in that, he is not alone. The simple fact is that everyone is afraid of risk at some level, including everyone I interviewed for this book. That’s a given of human nature. But the further fact is that Door No. 3 is a myth, whether we’re talking about the myth of Bill Gates or the myths that we privately tell ourselves. You don’t have to be fearless to make dramatic changes in your life. Transformative change isn’t propelled by raw courage. It’s “sparked” by a series of events that build exposure and experience, both of which help to create asymmetric risk. Through sparking, the upside opportunity is confirmed while downside risk is mitigated. Ultimately, the leap—when it comes—is not one of faith but of experience, even of comfort, just as it was for Gates. ### Interested in more behind-the-scenes stories?  Check out Leap <http://www.amazon.com/gp/product/1591842565?ie=UTF8&tag=offsitoftimfe-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=1591842565> .  It can be read in two quick sittings and will get you off your ass to do whatever it is that you aspire to do

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One life…. one dream and one great empire. These amazing perspectives on life should be an inspirational tool for us all. And even more so to always keep in mind when we feel we loose our way.

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By: CNNMoney.com/ Justin Martin

(Fortune Small Business) — Want to plunge into the modern American melting pot? Try the offices of Social Smoke, a hookah manufacturer in Arlington, Texas.

Here a silk Persian rug and a piece of Arabic calligraphy, The 99 Names of Allah, share wall space with a signed photo of a Willie Nelson impersonator. There’s a Chinese green tea set in the conference room, and Mom’s homemade enchiladas are chilling in the fridge. Abrahim Nadimi, director of sales and marketing, is tapping a bobblehead doll of Dwight from the TV show The Office. “Welcome to the 21st century,” he says. No kidding.

Social Smoke is growing gangbusters, and its success says a lot about the new international, cross-cultural landscape of American small business. It is run by Abrahim’s father, Sayyid Nadimi, 51, who emigrated from Iran before the 1979 revolution, and his U.S.-born sons.

The Nadimis are tapping into America’s deepening love affair with an ancient Middle Eastern tradition: hookah smoking. The company makes “authentic” Iranian and Egyptian hookahs in China, having tried and mostly failed to source them in the Middle East. Yet Sayyid is anxiously watching developments in Iran — and praying the U.S. government will soon let him sell his product back to his homeland.

Social Smoke is one of the largest and fastest-growing suppliers in the international hookah market. There is no trade group to track sales in the industry as a whole, but individual companies are reporting brisk growth. The first quarter of 2009 was Social Smoke’s best ever, with sales rising 28% from the same period a year earlier. Sayyid won’t disclose revenues but says the company is profitable. The family firm employs 11 people and sells in 15 countries.

Though Social Smoke sells hookahs and shisha (tobacco for use in water pipes) to consumers online, 90% of sales come from supplying wholesalers and hookah lounges. At a time when cigarette sales are in steep decline (20% of U.S. adults now smoke, the lowest percentage since the Centers for Disease Control started keeping statistics in 1965), hookah lounges are booming. There are now more than 400 in the U.S., up 400% since 1999, says Piergiorgio Maselli, who maintains a directory on his site HookahCrazy.com.

Several factors account for the hookah boom. The smoking bans that municipalities nationwide have imposed in the past decade affected restaurants and bars but not establishments dedicated exclusively to tobacco use. Unlike cigarette smoking, which has turned into something of a furtive activity, hookahs are inherently communal. Customers can get into a hookah lounge at age 18, three years before they are allowed in a bar in most states. (The largest number of new lounges are found in midwestern college towns such as Lawrence, Kans. and Madison, Wis.)

And most important, hookah lounges are a very attractive business model.

Just ask Yis Tigay, 28, owner of the Shouk Lounge in Philadelphia and a Social Smoke customer. Patrons stay twice as long in the hookah bar as they do in the three conventional diners his family owns, he says. Everything about his establishment — the languid music, the dim lighting, the divans — is designed to impart an unhurried vibe. A table of four puffing at a leisurely pace consumes roughly $16 worth of shisha an hour, Tigay says — plus the food and drink frequently ordered. The cost of that shisha to him: $2.

“It’s like putting a chain around people’s ankles,” he says. “They tend to stick around.”

There’s scant research on the health effects of hookah smoking. It tends to be a sporadic, ceremonial activity, and many people don’t inhale. Nevertheless, health experts warn that even such limited exposure to nicotine can spark addiction.

“I worry because hookah use is so prevalent among young people,” says Donna Vallone, senior vice president of research and evaluation at the American Legacy Foundation, an anti-tobacco group based in Washington, D.C. “What starts out as innocent experimentation could become a lifelong struggle to quit.”

Social Smoke’s response? “Everyone knows smoking is bad for you,” says Abrahim, 30. “The alcohol and food served in a hookah lounge also have the potential to be dangerous. Moderation is the key, and a hookah by its very nature is a device that promotes moderation. You can’t get all fidgety, reach into your pocket and pull out a hookah.”

Abrahim’s younger brother Ali, now 27, founded Social Smoke in 2003 while a student at the University of Texas at Arlington. As an observant Muslim, Ali does not drink alcohol, so he started taking a hookah to campus parties as a kind of social prop. “People asked a lot of questions,” says Ali, speaking in a curious blend of Tex-Mex twang and Farsi lilt. “Everyone wanted to try it. Then everyone wanted one.”

Ali says he didn’t encounter any racist misconceptions about the device. Perhaps, he mused, there was money in hookahs.

Ali built a Web site for Social Smoke, bankrolled by his credit card. He bought $3,000 worth of hookahs from a U.S. distributor, Hookah Brothers of Los Angeles. At first he sold most wares at cost, hoping to establish himself in the market. But the business took off quickly. Within two months he was renting warehouse space and selling roughly $5,000 worth of hookahs a month, but still at cost. He was also supplying hookah lounges with shisha in exotic flavors such as citrus, cappuccino and strawberry margarita. Margins on shisha are thin, but the volume is high — tobacco has to be constantly replaced. It proved to be a modest profit center.

In 2004, Hookah Brothers went out of business. So Ali decided to forge direct trade ties with the Middle East. He figured he needed to buy direct if he was ever going to turn a profit and ordered $1,000 worth of hookahs from an Egyptian supplier.

But they arrived weeks late and were poorly made. Stems didn’t fit into bases. Some units leaned; others were broken. Almost none were sellable. The supplier refused to return Ali’s money, saying the goods must have rattled around too much because Ali’s order was too small. He then had the gall to ask Ali to place a second, larger order.

The Nadimis united to save Ali’s business. At the time, Sayyid and Abrahim both worked as engineers at Bell Helicopter, one of the area’s largest employers. In 2005 father and son both quit their solid jobs for the wild ride of the international hookah trade. Sayyid now serves as CEO of Social Smoke. The matriarch of the clan — Iman Enciso (born Martha Alicia Enciso Barba in Guadalajara, Mexico) — became office manager. The youngest son, Mohammad, 18, runs the warehouse.

Sayyid decided to make some exploratory trips to Egypt and Jordan. Because of U.S. trade sanctions against Iran, he had to skip his homeland. “From time to time I return to Iran to visit family,” he says. “I’d like to go back as a businessman.”

After 30 years in the U.S. and a decade at Bell Helicopter, Sayyid had grown used to the breakneck pace of American business. He was amazed to find that Arab business dealings required three full days of social preliminaries before actual negotiations could begin. “They might take you sightseeing or invite you to their home and prepare six different kinds of food,” he says. “But it doesn’t mean anything. It’s all cosmetic. After days of this, you finally get down to business and argue over a $1-per-unit price difference.”

Misunderstandings were legion. One Egyptian prospect put Sayyid up in a hotel for a night. When Sayyid offered to pay him back, the man took offense. The language barrier made matters worse. (Sayyid is fluent in Farsi but speaks Arabic poorly.) On a drive through Cairo, Sayyid tried to patch things up with his host, who promptly pulled over to the side of the highway and berated him for 20 minutes.

Sayyid persevered and managed to sign up four hookah makers in Egypt and Jordan. Most Arab manufacturers required down payments of up to 40%. The balance was due — wired directly into the manufacturer’s bank account — when production was complete but before shipping.

“There’s always a point when the other party has all your money and also all your products,” Sayyid says.

Worse, damaged goods appeared to be the norm. After much searching, he tapped a reputable Jordanian manufacturer who presented an array of attractive, well-made hookahs. Social Smoke placed a $70,000 order. But when they arrived, glass and ceramic parts were cracked, metal was rusted, and the stems were too long. The company is still trying to recover its money, but its entreaties have slowed to a trickle. The Nadimis were forced to combine undamaged parts — a stem here, a bowl there. Overall, only 80% of the hookahs that Social Smoke ordered in the Middle East were usable.

Like many American businessmen before him, Sayyid started researching Chinese factories online and teaching himself Mandarin. (He says he is now fluent in English, Farsi and Spanish and pretty good in Mandarin.) Visiting factories in Qingdao and Shanghai, he was impressed by Chinese standards of customer service. Unlike a past Egyptian supplier, who could communicate only by Arabic snail mail, the Chinese vendors all spoke some English and communicated promptly by e-mail.

Making hookahs in 10 Chinese factories is a far cry from having them handcrafted by Middle Eastern artisans. The job of manufacturing metal pieces such as stems went to a fabricator with experience making latches and doorknobs. A flowerpot factory produces ceramic bowls for the hookahs. But Sayyid can now have his hookahs built to spec. Social Smoke has been able to add shapes like cones and cylinders to its product line. It also festoons hookahs with intricate art, such as images of cobras and Anubis, a jackal-headed god of ancient Egypt.

Despite all that Chinese manufacturing expertise, Social Smoke has persisted in importing some hookahs from Egypt. This is key for selling to hookah bars in such Arab-American centers as Dearborn, Mich., which prize Egyptian hookahs, irregularities and all. Sayyid now has a point person in Cairo who sources hookah components separately — and packs them with care.

“Communication isn’t great, and shipments still arrive late,” says Abrahim. “But this supplier is honest. That’s a big deal.”

Still, 75% of Social Smoke’s hookahs now come from China. Sayyid spends about a third of each year in the country and owns a condo in Guangzhou.

“I feel like I’ve created the modern equivalent of the Silk Road, which once connected China and Persia,” he says.

And as Silk Road traders knew, supply can be fickle. In the three years since Social Smoke started doing business in China, the cost of making hookahs has gone up about 60% — and is now on par with Egyptian prices. Sayyid says he’s thinking about manufacturing in Vietnam or Latin America.

Finally, of course, there’s the Iranian market, where Sayyid is convinced his U.S.-brand hookahs would have cachet. Earlier this year, before that country’s contentious presidential election and the protests that followed, Sayyid contacted the U.S. Commerce Department to ask about the permits necessary to export to Iran. Filling out the forms, he was told, would be a waste of time.

That may soon change. Sayyid is heartened by the protests and demands for fair elections. He’s thrilled by the softer tone that President Obama has adopted toward the country. Discussing the possibility of setting up shop in Tehran, Sayyid and sons break into big grins.

“That,” Sayyid says, “would be like coming full circle.”

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By: Douglas MacMillan

After failing to acquire Twitter last fall, Facebook went shopping for what may be the next best thing.

On Aug. 10, Facebook said it had acquired FriendFeed, the Mountain View (Calif.) social aggregation service founded by Google (GOOG) alumni Bret Taylor and Jim Norris in 2008. The deal, which The Wall Street Journal reported to be valued at nearly $50 million in cash and stock, gives Facebook top talent and advanced technology in an area many see as the next great frontier on the Web: real-time search.

The deal was seen by many as an assault on Twitter, a site that, like FriendFeed, lets users discover what people on the Web are saying about a certain topic at any given time. (Twitter turned down a $500 million offer from Facebook last November.) But experts say the pickup may be geared just as much toward a showdown with the king of Web search and the former employer of Taylor and Norris: Google. “In one fell swoop, Facebook gets to buy up Google’s best-known superstars,” says technology blogger Robert Scoble.

Pulling in Real-Time Data

FriendFeed’s founders and staff of mostly ex-Googlers earned their stripes building Google Talk, Google Maps, Gmail, and other free Web services. When they launched FriendFeed to the public in February 2008, they designed the service to help users organize their online social lives—everything from Twitter updates to pictures posted on Facebook to Netflix rentals—in one place. To help members scour through all this information, the company developed an advanced search engine that pulls in real-time data from many different sites around the Web. It lets users search keywords that only certain friends have mentioned, or only for posts that have been “liked” by a certain number of people on the site.

This search engine may be a big part of what Facebook is after. Currently the social network has a limited search engine, which only retrieves data from certain types of pages within its own site. “They could plug the [FriendFeed] search engine into Facebook and have a huge win,” Scoble says. If the site succeeds in building compelling search, more Web users may turn to Facebook for everyday searches, rather than general search engines like Google.

More effective search of current conversations and popular topics could lead to more profits for Facebook, which has taken criticism for focusing more on growth in the number of its users than in generating revenue. “Being able to get a taste of what consumers are doing on 50 different sites can be very powerful,” says David Berkowitz, director of emerging media and client strategy for digital marketing agency 360i, of FriendFeed’s search. By contrast, he says Facebook’s search tools have not been as effective for marketers.

Beefing Up Search Tools

Buying FriendFeed opens the possibility of more refined search, though Facebook has not commented on what aspects of the site will be integrated into its own. “We haven’t had the opportunity to have an in-depth, thoughtful dialogue on what to do over the long term,” says Facebook spokesman Larry Yu.

Another reminder that Facebook wants to beef up its search tools came the same day the FriendFeed deal was announced. A new tool will let users search the last 30 days of information posted by their friends. It will also let users search postings even by nonfriends, assuming those people have opted to make their material public.

In recent months, Facebook has introduced a number of features aimed at getting users to share more publicly, and the FriendFeed acquisition shows the company is committed to that goal, says Forrester Research (FORR) analyst Jeremiah Owyang. “FriendFeed is public and Facebook is not. We should expect Facebook to continue this trend to make users public,” he says. More public sharing would mean more data that’s searchable, which marketers would also appreciate.

While a battle with Google looms, Facebook’s acquisition has created a more immediate concern for the company: keeping existing users of FriendFeed from defecting to other sites. No plans to shut down the site have been announced, but many users are nervous. “If Facebook does take FriendFeed down, chances are I’ll migrate with many of the other social media and programming pundits to a similar service,” says programmer Christopher Charabaruk. “Or if there isn’t one, I’ll probably help start one.”

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Posted By Lisa Barone On June 24, 2009 @ 9:00 am In Social Entrepreneurship | 14 Comments

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