The Voltage Effect is a guide on how to get rid of bad ideas and make good ones better.
I have a ritual on Saturdays, I clean while listening to podcasts. One of my favorite Saturday listening podcasts is Freakonomics. In a recent episode, they interviewed John List about his book, The Voltage Effect: How to Make Good Ideas Great and Great Ideas Scale.
After I heard that interview, I had to get a copy.
Why So Many Ideas Fail to Scale
Ahhhh…”Scaling” your business. Every entrepreneur’s dream. But why do so many ideas fail to scale? That’s the root question at the core of “The Voltage Effect“.
The celebrity entrepreneur world has turned scaling your business into some type of holy grail. Scaling has become a buzzword, without a whole lot of understanding about how to set yourself up for success.
And this is where “The Voltage Effect” comes in. This book offers up a framework to increase the odds that your business will actually achieve that all-too-rare thing called “scale”.
John List Turns Assumptions Upside Down
John list is a professor at the University of Chicago, which is where he teamed up with Freakonomics co-author Steven Levitt. With that type of partnership, you know that the book, and the concepts inside are going to tickle your brain and make you see things from a new perspective.
Small Business Deals
But List is more than a professor. He gained a lot of on-the-court experience about scaling when he served in the White House on the Council of Economic Advisers in the early 2000s under the Bush Administration.
This is where he designed policies that would produce the greatest positive impact on the largest number of American citizens at a fair cost. He was also the chief economist of Uber and, later, at Lyft — two startups that have scaling almost down to a science.
List’s mantra is “The only ideas worth pursuing are the ones with the potential to make a significant impact on human lives. And translating an idea into widespread impact requires replicating it at scale.”
How the Voltage Effect Works
The basic premise of the book is this: Ideas only scale if they have what List calls “voltage”. And, in order to scale successfully, you have to know IF the idea can scale and if so, what are the critical success factors involved.
In the first part of the book, List discusses whether or not your idea is scalable. He introduces what he calls the Five Vital Signs;
- False positives: Where it never really had voltage in the first place. In other words, it was an idea that worked in one situation, but didn’t work in another situation.
- Misjudging the representativeness of an initial population or situation: This is when the initial idea is implemented with “the best” people, equipment or management — which is difficult to duplicate and repeat at scale.
- Spillovers: This often happens when you try to fix one problem, but circumstances (and people’s behavior) undo what you’ve tried to scale.
- Increasing costs: Teachers salaries is a great example. Say you want to attract the best educators to schools, but to do that, you need to pay teachers $200,000. This isn’t scalable.
The second part of the book explores the ingredients of successfully scaling an idea. Here, List discusses the four “secrets” to scaling:
- Find the right incentives: Money can’t always buy behavior change. Instead, think about social incentives, or unconscious motivators such a Fear of Missing Out or Losing something.
- Don’t just use averages: Averages don’t tell you much about scaling. The real gold is found in the margins.
- Know when to quit: Consider what opportunities you are giving up if you quit. Are you being pushed or pulled to quit? Look for better opportunities and a pull for change about every six months.
- Build a scaling culture: If you want to scale, you need to have a culture that supports scaling. It needs to be diverse, inclusive and sustainable at scale
To Scale or NOT to Scale
Here’s the best part – not everything needs to scale! That’s right. There are people who are not scaleable, some products or service are purposely not designed to scale. In other words, scalability isn’t for everyone.
The Voltage Effect is a guide on how to get rid of bad ideas and make good ones better. So, whether you choose to scale or not to scale, understanding the techniques behind scalability will help you in all aspects of your business.