Episode 11 – The Laws of Physics

In today’s episode, Caleb Dean and I ponder if big business is breaking the laws of physics, what sustainable business really means, and so much more. Caleb is Founder and Managing Director of Owl, Fox & Dean. He and his team work at the intersection of organizational design, change management, and leadership development to help bold companies and individuals increase their capacity to evolve and generate value for people and place. Join me in the conversation and read the full transcript at uprightandbetter.com!

 

Kristen G.: Hi, welcome back to Up Right & Better, the podcast where we talk about growing businesses up and to the right, and up and better. On this show, it’s not just about scaling for scaling’s sake. It’s about making organizations that deliver value to everyone involved. I’m your host, Kristen Gallagher. Caleb is founder and managing director of Owl, Fox & Dean.

He and his team work at the intersection of organizational design, change management, and leadership development to help bold companies and individuals increase their capacity to evolve and generate value for people and place. His work blends the disciplines of systems thinking, design, business strategy, organizational development, sustainability, and storytelling.

Caleb is also the chief of staff and co-owner with his wife for their family’s 43-year-old business, Cambridge Naturals, a community health and wellness store in Cambridge, Massachusetts. He has a degree in environmental design from the University of Massachusetts, Amherst and an MBA in sustainable systems from Presidio Graduate School. Welcome, Caleb.

Caleb, you’ve got a pretty varied background, but the thread to me seems to be sustainable systems. I’m curious, can you talk a little bit about what sustainability as implies to business systems in particular means to you?

Caleb D.: That’s a really good question because sustainability has been this thread throughout my education and career that I’ve had a really hard time defining, but almost everything I’ve done has been with the theme of or filter of sustainability. When I was in high school, I went to a community college for the last couple of years of school and I first heard the term in a human ecology course. That’s where I became, I would call an angsty advocate.

I was at that point which was like 2001, and I had, let’s see … I was a senior in high school. I was taking this course and I knew that something was off with the world. I grew up in a rural place and I just… but a very liberal and environmentally focused place. There was something … I was looking for a term for why I was frustrated with capitalism and business, and I think I latched onto this trying to figure out why humans do what they do, and how we relate to nature, and how we relate to big environmental systems.

I think I first heard the term of course in the environmental systems, and then sustainability became this thread. I studied environmental design with a focus on sustainable cities and communities in college. Then that translated into this early on career in community development and real estate development in my hometown in Western, Massachusetts. I think so many of the conferences I went to back then after graduating college in 2006, we would spend most of the time trying to define what sustainability meant and what it was.

I’ve grown to hate the term because I think so many people don’t … No one can come to a mutual understanding of what it means, yet I still use it. It’s this funny thing where I think a lot of terms are like that. I think we’re constantly looking for more and more terms like that and how to define what it is we feel really passionate about. The term itself is boring, but I think when put in context, that’s where meaning happens, that’s where we’re able to apply it.

I think sustainable systems when I went back to grad school at Bainbridge Graduate Institute which is now Presidio, they merged a couple of years ago, when I was able to apply the concepts of sustainability to systems thinking and then in turn to business, that’s when it became meaningful for me. To me, it’s really hard to define, but what it means to me is an ability for a business and it’s all of the systems that it is and exist within to continue to thrive in some way. I’ve heard the terms thrive ability. There’s all these abilities.

Kristen G.: Thrive ability. I haven’t heard that one.

Caleb D.: Thrive ability. Let’s see. Another one is like regenerative. There’s just all these things that people are trying to push, and especially in the business community. It’s something that I think … To me, it’s more of an awareness of the systems that you exist within. I think so many businesses, operate in isolation or their view of things is isolated. I think the practice of thinking about systems and their sustainability is what we’re looking for, and I think it allows us as businesses and organizations to see ourselves more holistically, and understand the ramifications of our actions.

I know this is really theoretical at this point, but that’s how I think of it. We need to understand the context in which we operate, and we can do that through the practice of systems thinking. When we put sustainability in there and all of the systems whether that’s environmental systems or economic systems, we can then create businesses that really allow for a realization of potential, and healthy communities, and healthy people and healthy systems. That’s how I would define it.

Kristen G.: That’s fascinating. I have so many follow ups to that. I’m not sure where to start, but I want to maybe start with this idea that you mentioned the holistic view and that if you were seeking as an organization sustainability or sustainable behavior, whatever that means to your organization, it almost is incumbent upon you to look at yourself in context. You said what are the systems that we exist within? I was just thinking about organizations that I know that they understand their market like the back of their hand, but they don’t necessarily see how that market intersects with other markets or how their business intersects with other businesses that are not necessarily in their profit line.

That could lead you to make near sighted  or narrow-minded vision decisions. That’s intersecting with the idea of thrive ability that so much of my work is asking the question how do we get employees to feel happy and to be healthy and to come back to work and to contribute and be fulfilled while contributing at that role. That’s one of the crux of the question, what is thrive ability?

Caleb D.: The term that I would use for that is health and wellness. If we can have healthy systems and a sense of wellness over time, that’s really what we’re looking for. I think what we often forget about is the variable of time. Everything is going to have a reaction at some point. There are externalities to everything. For everything that we do or make, at some point, it’s going to impact something else, right?

Kristen G.: Right.

Caleb D.: I think what we’re seeing now is this industrial economic system just playing out over time and having negative implications on the environment and on communities and on people’s health that I think it’s outside of most people’s day to day comprehension.

Kristen G.: Some of it is too vast.

Caleb D.: Exactly. That’s where I wonder like can we plan for these things and do we have to see it go … Not to go dark but get really bad before it gets better. These are the questions that I think about all the time, but I think to define … I think we’re just looking for health and wellness. If we can be happy and healthy and well in our day to day lives, and then we spend so much time at work, I do believe that it’s up to organizations and it’s in an organization’s best interest to provide the conditions or create the conditions that allow for people to be healthy and well.

I have the incredible fortune to be involved with my wife’s family’s business which is this 43-year-old natural products retail store in Cambridge, Mass called Cambridge Naturals. They have been around for 43 years, I would say doing it as best they can with these concepts in mind. The whole premise is community health and wellness. It started as a natural grocer back in 1973 and it’s morphed into this really complex operation where we have 24 staff, we have 16,000 skews, we have 500 people coming in a day.

This is very health and wellness lifestyle product selection. The joke I make is that no one would start this business. No one would be crazy enough to start this business as it operates. No, because we have a starting wage of $15 an hour. We pay everyone’s health 100% of their health insurance who work full-time. It seems crazy it a capitalistic model, but what it is as an organization, it’s been this thing that’s evolved over 43 years in a community with strong values.

I think some things need to evolve overtime and what happens is you set these intentions at the beginning. You can always course correct but it’s harder too. When you have these strong intentions from the beginning, you can … I don’t know. I think about in terms of what Amazon is doing having bought Whole Foods and that’s very much our industry. I think so much of where they’re headed is data to understand people.

I think there’s a scale issue there because they have to use technology and data to understand their customers because the people who are making decisions aren’t necessarily the people who are on the ground talking to customers whereas us at a smaller scale have known our customers for the last 43 years and we can have conversations with them on a day to day basis. I think health and wellness has to do with a certain type of scale and I think that’s been something that I’ve been trying to focus and work on throughout my career is like what is that right scale?

I was just at a round table with the Design Museum Boston for physically workplace wellness. It was a collection of designers and people and architects who are designing workplaces and people in HR roles and cultural roles.  The question that kept coming to my mind was there’s this small scale where people can know one another and respond really quickly. Then there’s this large scale where you have a lot more financial resources where you can do things like build meditation rooms and have these big initiatives and spaces.

I think of Google taking care of every single thing their employees need. I wonder what the right scale is for actual health and wellness. My background is in environmental design. I think about this thing I learned a long time ago which was Greek and Roman city states. They grew until they’re about 30,000 people and then whether intentionally or organically, people would move away and then started new city states. There’s something magical about this 30,000 people. I wonder what that is for business because right now, it seems like there are so many massive businesses.

Everyone wants to grow to become really big and I wonder if in the long-term our systems can support that. That’s really the question at the core of my career so far is like what is that scale, and how do we actually design things to be sustainable for people and healthy? How do we ensure that communities are healthy and in turn the environment around us is healthy?

Kristen G.: Those are such good questions. I, again, have so many things to ask about that. That question what is the healthy scale or at what scale, at what size can you sustain health and wellness and for whom? That’s a question for me is maybe your employees are healthy and well but are the people who make the products healthy and well? Are the people somewhere down the logistics supply chain well? Are the people who end up consuming it well?

Those are questions that I think you might not be able to answer if you answer to other … I’m trying to think. Answer to other pillars. If your pillar is profit and that’s your first purpose in business then you probably can’t hold in your mind the concept of health and wellness for everyone involved because something will break and you don’t necessarily want it to be your business, right?

Caleb D.: Right.

Kristen G.: That being said, this question of how big can you get is so interesting because for so many businesses that it’s incredibly hard to get to five employees and then 10 and then 30 and if you cross reference this with the rate of investing and what kind of investments are being made in businesses today and you watched what the scale is supposed to be that hockey stick scale equation, you do get these businesses that are almost too big to stand on their own feet. That may not be attainable but it also may not be … I’m hesitant to use this word, but natural.

You might actually be breaking the laws of physics in a way. those are some questions that I had at Amazon is are we breaking the laws of physics here and is something going to give at some point. What I found was that actually things give all the time, you just might not care. We see there a collision of values. It really is going to depend who you answer to and what your values are. This is so fascinating.

I wanted to come back to your note about whole foods and the data. I was listening to another podcast the other day about the rise of quants in investing, and quants as I learned are there are people that write algorithms for investments. There is this arms race in that particular sub market of people trying to leverage new forms of data and one of the examples they gave was trying to understand how long a customer stands in front of a particular product, at which part of the aisle, and at which height in the aisle.

That is what they’re trading on that they’re 3/4 of the way through the aisle at the major grocery store at the top of the aisle or top of the shelf, what does that mean is that commodity is suddenly more hot and everything else low. If we’re rigging our market that way, what are the implications there too from a sustainable system? What other producers are affected by that kind of guess work is my question? I guess it’s rhetorical although you might have ideas about it.

Caleb D.: I love it. Don’t get me wrong. I think data is really important and I think … I don’t know. I equate it to our financial systems and the different financial mechanisms and quote-unquote “products” that got us into the 2008 financial crisis. Are things moving at such a rate within very tight circles or a small part of the economy that just producers can’t keep up? Supply chains can’t keep up with that. I see it in the store all the time where we’ll bring in a really unique new product and then as they grow, we no longer have access to it because someone has bought up most of their supply and we can’t get it for a couple of months.

Then maybe they don’t exist after a year of that because they haven’t grown their internal organizations capacity to be able to withstand. You said something about laws of physics. That’s how I think about it. I wrote a blog post about this a couple of years ago, but I was listening to Neil deGrasse Tyson, and I love his show, StarTalk. It was a sci-fi episode and he had a comedian on. Someone called in or wrote in and asked a question of like, “If I wanted to blow up a planet, would the Death Star be a good way to do that?”

I loved it. The way he described it is like yeah. Planets are basically mass and energy holding that mass together. If you infuse more energy into that mass, it will blow up, or you take that energy out and it will implode. I see that happen to businesses all the time. If you get too much either business or you get too much investment and your organization can’t increase its capacity to withstand that energy… It explodes.

Likewise when you’re just running out of money and you’re running out of business and nothing is happening, you tend to just wither away and implode. That visual, I think it is physics. We live in the physical world. I think it is. The energy that it takes or the mass, it’s that balance between mass which would be, I guess in this case the organizational capacity and energy which is money and time and people’s abilities and that type of thing. I think we run into that all the time and it’s something that businesses just are constantly trying to figure out. That hockey stick growth to me, it seems kind of sick. I have a bias and that bias is small business-

Kristen G.: Same.

Caleb D.: … at local communities. I see so many startups creating these apps that I just don’t know if the world needs them. I just don’t know. I struggle with that because I love creativity and I think innovation is really important. I think we should try things out and see what’s valuable. I think there’s a human scale of things and I think we need to actually communicate with more humans to understand what those needs are and then solve those challenges.

It may not look like 10X growth over three to five years. It may look like a really great business that you run for a long time and that you should be doing because so many small business, you talked about profit which is a very important thing, many small businesses compete on profit margin, not product margin. When we look at retail, big retailers are competing on product margin. They’re doing everything they possibly can to lower or to increase product margins or sell more products to increase volume so that they compete with lower product margins so that it can increase their profit margin whereas a lot of small businesses don’t have that luxury. With bookstores, they can’t actually increase prices. I don’t know the way the industry works but I’m pretty sure you can’t increase the price of a book.

Kristen G.: If a publisher set the book, I think. It’s printed on the book.

Caleb D.: It’s printed on the book exactly. You can lower the price.

Kristen G.: That’s the only way, down.

Caleb D.: Local independent bookstores needs to compete on profit margin. When you have shareholders who aren’t intimately involved in the business, I get the sense that they don’t care and they’re not ready to make those decisions to decrease their profit for a while to be a better business. That’s part of that scale. I see lots of these small locally-owned businesses, family-owned businesses that have been competing on profit margin for a long time and that’s how they stay in business. I think that right now, it’s a really interesting time with these behemoths out there because small independent bookstores and small independent retailers like my family’s business, actually it’s almost an advantage right now because these big companies are beholding to shareholders.

They can’t compete on profit margin where smaller businesses can actually be scrappy and agile and take a lower profit for a couple of years. I mean bigger businesses can do it, it just looks differently, it looks different, and it behaves differently. It’s something that I think is important for small business owners to understand and manage overtime and actually use to their advantage.

Kristen G.: Certainly. Your point about the choices that you make, are you going to compete on … Which margin are you going to compete on and which choices are you going to make? I’ve always thought there are certain problems in organizational design and development and if we could just stop the presses for a minute maybe we could fix them.

This is a small one in the grand scheme but there’s a problem of knowledge management. Many businesses invest in systems to hold the knowledge that they create documentation, etc. The funny thing about that is that humans are fascinatingly unable to agree on a Lexicon and an information architecture.

The way that you organize your files is going to be different than the way I organize my files. If we don’t talk about it ahead of time and say, “Okay, Caleb. I’m going to put these things over here, in this theme, in this format.” Then what happens is that you have this parallel but different style of managing your information and so you get these companies, you have large software instances of their documentation management system and it’s complete crap. Everybody hates it, and nobody understands where to find something yet they’re paying 50 or 60,000 a year to maintain that system.

Everybody is frustrated, and it actually causes some in inefficiencies in the business but nobody is willing to stop and say let’s fix it. I can imagine where else we see problems like that but maybe are actually higher up the food chain in more pressing challenges or let’s say what if we wanted to make the choice that we were going to pay everybody a fair wage or that we were going to pay all healthcare for all full-time or if we wanted to make these choices, what are the trade-offs we have to make. I think those are things that we should be pressing executives and CEOs and shareholders to be curious about and questioning or at least I would want to do that.

Caleb D.: Absolutely. I think there’s … You’re touching on the … If it’s not sustainable systems so … I guess my … I tend to be someone who’s at 60,000 feet or way down in the DNA of things.

Kristen G.: One inch or 60,000. I teach this workshop around designing an authentic organization and that whole brand organization model. I think one of the things that I always start with is the Eames Power of Ten video. Do you know that video?

Caleb D.: I don’t. Tell me about it. I forget what year it came out. It was in the ‘60s I believe, ‘60s or ‘70s. It was Charles and Ray Eames, the designers. They created this video that basically … I bet you’ve seen this in elementary school. It starts with a couple having a picnic in the park on Chicago and it zooms out by the power of 10 out into, eventually to the point where you can see all of the known universe at that time.

Kristen G.: Oh, wow.

Caleb D.: Then in zooms all the way back in into the guy’s arm, into the atomic level where you’re inside a cell. That to me are all the levels that we need to think about organizations. Where I find, I tend to go… I’m someone who goes back and forth between super high level how is your business interacting with massive global systems and then what is that specific word that you can use at the right time to increase someone’s chance of understanding what you’re talking about.

I really like to bounce back and forth between systems thinking at a high level and then communication at a very, very small level because I think what you were saying before is exactly right where we don’t have a shared language or most organizations don’t have a shared language. I mean you see it every day. When there’s conflict, I think of the world as basically a series of understandings and misunderstandings.

If we can understand more than we misunderstand, the world will be a better place. I mean that’s my hypothesis. I think so much of what we see, so many challenges that we see, so many things in organizations are humans understanding other humans or misunderstanding other humans, I should say. So much of that is how we talk about things and what we call things. I mean even the word sustainability, someone probably has a much different name for it, “organization”.

Every word we use someone is going to have a different perspective on what that means to them. I see this happen so often and I saw it early on in my career where I was the youngest person in the room involved in these larger scale real estate development projects at the community level, and I’m looking at people. From what I could see were saying almost the same thing  but they were completely misunderstanding each other and then after a while lawyers were talking to lawyers and then the whole thing is falling apart.

I’m like, “What is going on here?” That’s been another thread for me which is like what can we do to communicate more effectively with one another to develop these systems of language that allow us to really have strong understanding and thus have strong systems and strong organizations that create health and wellness. Someone in a silo to create something. There’s not dialogue around this and the language is shared only with a small group of people and it doesn’t make sense to anyone else and everyone else is resentful about that.

Then it’s not used and it’s not effective. I see this all the time. It drives me mad but it also fuels me to keep doing the work that I do in the world because I’ve seen some businesses that do it really well. I recently had the chance to go out and visit Zingerman’s in Ann Arbor, Michigan.

Kristen G.: Very cool.

Caleb D.: I took one of their courses, an open book management course and they’re the real deal. It’s really, really fascinating to see because the level of engagement across the organization … I didn’t talk to all 720 employees but all of the interactions I had with people, they were really engaged. The customer service was a real thing. They do very good customer service, also really good pastrami. They are knowledgeable and engaged in the process of doing the work. I think we often forget about the work to do the work because from a purely revenue driven model, I mean a lot of companies don’t even go for profit, they just go for revenue which can be…

Kristen G.: [crosstalk 00:33:15] a number of customers or market depth or all these things.

Caleb D.: Exactly. Whatever number is going to get them the highest selling price. These guys know their … This way of managing which is open book management which they’re not the only ones who do it, but a lot of restaurants do it. Having employees understand the financial context of the business, people are a lot more engaged and there’s a shared language. What it takes is a lot of conversation. I see all these articles and blogs about kill your meetings and stuff like that.

First of all, I don’t want… flippant use of the word kill, but I also … I just think if you hate meeting, you’re doing it wrong. You’re also missing out because unless you’re building an app by yourself, launching it, letting it go to the world, you’re going to be working with other human beings.

Kristen G.: In which case, I will say about that development in a vacuum, it’s in a vacuum and then you haven’t talked to other people, so maybe it’s a piece of crap.

Caleb D.: Yeah, exactly

Kristen G.: You don’t need it or the world doesn’t need it.

Caleb D.: Exactly. I think most things of substance, you do with other human beings. A good friend, Tom Walters always said that most things of substance, we do with other human beings. What that means is like we need to engage with one another. The Zingerman’s model is really incredible because every team has this weekly huddles where they go over lots of numbers and measurements. There’s data there but it’s at a human scale. I think that’s what’s really fascinating or was fascinating to me but they’re constantly talking and they’re constantly figuring out what they need to do.

That’s something I advocate for a lot of my clients. My work has evolved from individual coaching into much more facilitation of groups and helping them design systems but really engaging them in a way that allows them to hear one another and understand one another and then take that understanding to develop systems that support the organization and support the brand and support the things they want to increase and do, and create.

I think it takes a lot of conversation. It really, really does. I just don’t know another way around it because we’re constantly misunderstanding one another. I mean I don’t know. I’m sure you and many of your listeners have been in a relationship before. We’ve all probably had these misunderstandings. We’re like how did that just happen?

That happens billions of times on a global basis every day in business. I’m like, “How do we solve that?” That’s what I think we can … Think about big systems where we can also talk about the right word at the right time and the right question. That’s something that’s really powerful.

Kristen G.: It is. It’s incredible. That concept that can actually get back to scale that what if we mindful of the scale of our communication and the rate of our communication that we sought to understand first rather than to be understood. Gosh that’s such a meditation on how can we … If you were just going to work today and thinking about how do I understand other people rather than how do I make them understand me? I wonder how your day would change.

Caleb D.: I love that. Do you know Ellen Langer?

Kristen G.: No.

Caleb D.: She teaches at Harvard and she’s written on mindfulness. I really like her approach to mindfulness. It’s not necessarily in a spiritual sense. I guess you’d probably say, “It’s not in a spiritual sense but she advocates for things like to practice mindfulness, go home after work and notice three new things about your partner. The way I try to bring that into work and the workplace, whether it’s at the store with my family’s business and with our employees or whether it’s with my clients, through Owl, Fox and Dean, it’s what’s one good question that you can ask in a meeting?

Just one good question. If you can think about that, what are you seeking to understand… because it forces … When you think about it in terms of a question, ideally that’s not leading somewhere. You start to think about the things you want to learn and that learning, I think is then contagious. I think people like to be asked questions and I think people like to share what they know and I think often I see it being reciprocated.

When someone asks a question, someone will also ask a question back. What I see often in a lot of organizations is that people are just talking at each other. They’re stating what they know and they’re posturing. There’s this scarcity mentality of I better get my thoughts out before someone gets their thoughts out. It’s this really interesting … I mean, it’s such a human thing and it’s not just in business that we experience this. It’s politics, it’s everything. I think… it’s family. It’s something that we spend so much time in business and business is such an important system globally for us that I think it’s worth really bringing these things into that system and into business and into organizations.

If everyone in the world asks a really good question one day like… how would the world change? I think about that all the time. What could we do? It just seems incredible, and it’s such a small thing. It’s such a small thing. It’s not a new app, it’s not this massive disruptive company. It’s like, “What if we all went in and tried to understand one another more?”

Kristen G.: Oh, gosh. Caleb, thank you so much. I want to just thank you again for this conversation. There’s so much that we could have dived more into, dug deeper into, but I truly appreciate both your wisdom, and your experience, and your ability to say I don’t know about things, sometimes.

Caleb D.: Thank you. This has been an absolute pleasure.

Kristen G.: That’s it for today. Thank you so much for joining us for another episode. If you like to ask a question or suggest a guest, email me at hello@uprightandbetter.com. Until next time, grow better.