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September 3, 2012 Biz Books

Winners can harness surprise, testosterone

“Leapfrogging: Harness the Power of Surprise for Business Breakthroughs” by Soren Kaplan (Berrett-Koehler Publishers, $27.95).

Surprise challenges our assumptions. Most business people equate it with bad news and/or risk. Kaplan sees surprise as opportunity to explore a new perspective. His research shows that surprise and breakthrough are rooted in a firm’s positive mindset response to the unexpected and disruptive.

A surprise flips your script. In order to appeal to the always-full restaurants, Open Table added “guest management” demographic info to its reservation program. Now, the restaurants know more about their clientele — and have a reason to use the Open Table reservation system.

The Four Seasons hotel chain thought its primary target was the business traveler. But based upon feedback about its Website, it learned that vacationers were frequent site visitors. The hidden market was a pleasant surprise.

There’s another type of surprise — the one you intentionally create. Jeff Bezos, Amazon’s CEO, developed Amazon’s positive, risk-averse mindset culture that intentionally creates surprises. He told the shareholders: “I can guarantee you that everything we try will not work. And I am never concerned about that. A big piece of the story we tell ourselves about who we are, is that we are willing to invent.”

Amazon shaped online buying habits via trial and error. eBay created the online auction business when there was no apparent market for one. Apple revolutionized the music and cell/smart phone businesses with products consumers didn’t know they wanted — but just had to have. It also created a market for tablet computers when others had tried often and failed. Those that failed didn’t use surprise to spur success.

Kaplan believes that “reframing failures as stepping-stones keeps us going.” The future isn’t about “what happened”; it’s about “what’s next.” “Optimism fuels action.”

• • •

“The Hour Between Dog and Wolf: Risk-taking, Gut Feelings and the Biology of Boom and Bust” by John Coates (The Penguin Press, $27.95).

Coates the Wall Street trader noticed that young, male traders’ hunches, mood shifts and hot and cold streaks defied rational explanation. Fascinated and befuddled by the phenomena, Coates reinvented himself as a neuroscientist and began investigating risk-taking and decision-making under pressure.

His research found that testosterone is the hormone of success. Rooted in animal behavior, the “winner effect” raises testosterone levels when successful. Those high on testosterone become victims of “irrational exuberance” which leads to a dangerous tolerance of and appetite for risk. Coates sees testosterone as the buy, buy, buy “hormone of economic bubbles.”

Levels fall when failure occurs and cortisol, testosterone’s hormonal antithesis, takes over the stress management of the psyche and actions. Cortisol triggers “irrational pessimism” and risk aversion. It’s the sell, sell, sell hormone of economic crashes.

Women and older men (because of reduced testosterone levels) are more even-keeled so they’re less likely to shift from dog to wolf. Their level-headedness lessens the likelihood of a cortisol imbalance, too.

Operating somewhere between dog and wolf are Coates’s “hunch athletes” who use a combination of gut instinct and brain power to assess situations and take action. They “distinguish significant information from the trivial.”

How? They manage information overload. Hunch athletes use their gut to match patterns with emotional feelings. They sift information to prevent emotion-driven reaction to unimportant data and events. They also ignore the rumor mill. Intuitively, they connect their dots to the important stuff. Doing so allows them react to both the positive and negative rationally.

Set against the background of real-time financial trading activities, Coates takes us behind the scenes of the workings of the financial markets to show us how dogs, wolves and hunch athletes operate in a whirlwind-of-information environment.

Jim Pawlak is a nationally syndicated book reviewer.

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