'Opportunity costs', that ethereal phrase we use to describe what we've lost in lieu of what we chase, is the most expensive cost that exists for a business. 'Opportunity' cost the poor company of the Pequod approximately 2.3 million dollars (and much, much more).
In his article How Effective CEO’s Spend Their Time, Inc. Magazine’s Jim Schleckser writes that CEO’s 'spend a lot of time perfecting their business model; determining what they do and for whom, getting the profit right, getting the pricing right, getting the value proposition right.' In a short video on this topic, he elucidates candidly, 'If you get the business model right, your job is easy; if you get the business model wrong, your life is hard.'
Moby Dick, perhaps literature’s most enduring cautionary tale, is a perilous adventure staked upon the insatiable vengeance of Captain Ahab. The Pequod, a simple nineteenth century whaling vessel, was built for one basic purpose: to harvest whales in order to return a profit for all its stakeholders.
But the Pequod and its crew was commandeered via ulterior motives. Rather than harvesting a multitude of whales throughout their voyage, the Pequod became a vessel for a personal vendetta upon a single, solitary whale. One-third of the way through the novel, the coerced crew is appraised of their mission by Captain Ahab: hunt and kill the white whale, Moby Dick.
'Whosoever of ye raises me a white-headed whale with a wrinkled brow and a crooked jaw; whosoever of ye raises me that white-headed whale, with three holes punctured in his starboard fluke— look ye, whosoever of ye raises me that same white whale, he shall have this gold ounce, my boys!'
Starbuck, an intelligent, brave-hearted member of the crew -Melville’s Levin to Tolstoy’s Anna Karenina- and also the ship’s Chief Mate (a role responsible to the Captain for the safety and security of the ship) recoils at the Captain’s monomaniacal announcement. Retorts Starbuck,
'I came here to hunt whales, not my commander's vengeance. How many barrels will thy vengeance yield thee even if thou gettest it, Captain Ahab? it will not fetch thee much in our Nantucket market.'
(Ahab replies) Nantucket market! Hoot! ... If money's to be the measurer, man, and the accountants have computed their great counting-house the globe, by girdling it with guineas, one to every three parts of an inch; then, let me tell thee, that my vengeance will fetch a great premium here!"
"He smites his chest," whispered Stubb, "what's that for? methinks it rings most vast, but hollow."
The benighted purpose of the Pequod’s ill-fated voyage might seem ominous and obvious to us readers as we journey with the crew (inside the mind of Ishmael, our sailor-narrator) but were you to embark as a neophyte mariner, you would likely remain oblivious to a dark narrative that was about to unfold. What readers (and shipmates) eventually discover instead, is one disastrously misguided, mad voyage.
Were it not for the portentous doom pervading the novel in lingering, fatalistic prose, hunting one massive whale might seem like a reasonable goal. You might not necessarily interpret Ahab’s initial intent to kill Moby Dick as misguided. To the majority of the crew, the purpose did not (at first) seem peculiar, in fact, there was no reason not to assume that this simple deviation was nothing but a slight diversion, one even fitting within the purpose of the Pequod:
- The Captain, a seasoned whaling captain who had successfully completed many expeditions, was at the ship’s helm.
- The motley (though effective) crew seemed more than adequate for the job.
- Their purpose aboard the Pequod was to kill whales; Moby Dick, according to seafaring legend, was one giant whale (and perhaps the bounty of such a rare trophy would prove to be extraordinary).
- All men were sufficiently motivated to kill Moby Dick: the reward for the sailor who spotted the elusive whale was a Spanish ounce of gold (a lucrative incentive for a sailor in 1851).
In business, to deviate from your core purpose is to navigate waters fraught with danger. Though some companies transform themselves through an evolving purpose, most companies adhere to some semblance of its original intent. Clarity of purpose is perhaps most keen in the start-up phase of business where one’s mission follows the illuminating path of solvency and where purpose can be dictated (or at least influenced) by core clients and profit.
But as you grow, opportunities present themselves and these sometimes abound (if you are lucky) to the point of obfuscation: options of expansion, rapid growth, new markets, potential product lines, and more. Harvey Mackay in his book Conscious Capitalism writes, 'Unfortunately, many businesses over time become so preoccupied with surviving, growing, reacting to marketplace changes, or just making money that they forget purpose. The leadership of such an older business may need to go back and rediscover the company’s purpose, much as an archaeologist seeks to discover what brought about a city or a civilization.'
Several years ago, I made a momentous discovery about our purpose in the promotional products business by cold-calling the Vice President of Marketing at a very large bank in our market. Answering the phone abruptly, the Vice President’s irritation was obvious from the moment he barked his greeting. I introduced myself timidly but before I could finish my lead statement, he interrupted, booming with annoyance through the phone, 'Why should I waste my time with you? I have ten of you promo people lined up outside my door!'.
Staggering, I replied, unrehearsed and desperate, with a thought that only occurred to me that moment: 'Sir, I’ll bet you have two full-time people devoted to managing branded products for your many bank branches and you wish you had their time available to promote your bank’s core objectives'. A short, awkward silence followed until finally his voice broke in, direct but softer, 'You’ve earned the right to speak to me again'. I was shocked. I hung up the phone and sat there, attempting to grasp something I knew was significant. I thought we were in the promotional business. I was wrong. We were in the business of making the creation, availability, and distribution of branded products simple for large companies. We alleviated their administrative burden. This wasn’t an answer to the question what, this was an answer to the question why. We were in the business of simple, easy, and control; the products, though important, were secondary.
This was a critical shift. We knew this at one time, it was fundamental to our founding. But somewhere along the way I had become enamored by our industry to the point that I forgot the primary reason why people bought from us. In a sense, I was misguided, infatuated by the glitz of what we sold and I remained oblivious to the crucial reason why customers even cared to think about us. Though I had still remained true to the what (I was selling product after all, or, if I were on the Pequod, I was still hunting a whale) but I had lost sight of our primary purpose.
A business's purpose can become reduced to mere grist in a perpetual daily grind. Purpose can be misguided, misappropriated, forgotten, taken for granted, and even eroded, primarily by the perpetual speed of business (fast decision-making, snap judgments, saying 'yes' to everything). According to Jim Schleckser, getting the business model right (purpose) is the most important job a CEO does. To this, I’ll splice John Mackay’s admonishment that 'the business must work on the implementation of purpose on an ongoing basis', which (according to Mackay) requires perseverance.
Diversions and distractions can be the bane of successful business growth and are generally discovered via hindsight. Ask anyone who has ever attempted to increase their business with new expansion and failed: prolific failure in new ventures is painful and normative. Jeff Bezos, famous for astounding successes in a myriad of wild expansions via Amazon, was also known to veer obsessively into business opportunities that became diversions. Chris Pinkham, head of Amazon’s IT infrastructure stated that 'He (Bezos) was a fun guy to talk to but you did not want to be his pet project. He would love it to distraction.' 
In business, we bandy about the term ‘opportunity costs’ with little regard to just how expensive opportunity actually is. Most ventures don’t end as debilitating regress and many seem like an excellent idea at the time. But what do these opportunities actually cost? What did the Captain’s mammalian detour cost the company, the Pequod?
In short: A few million dollars (and much, much more).
Opportunity costs: In the 19th century, whaling was a lucrative business. In 1853 the sale of whale products exceeded $11 million (in 1853 dollars). To wrap our 21st century minds around the value of whale oil in the 1800s, think crude oil dependance today. Twenty-five to forty barrels of oil could be extracted from an average sized sperm whale. For whale hunters, a single sperm whale could command $3,400; with inflation, that is $85,000 per whale in today's currency. Due to the hazards, profits were slim and one in ten ships were generally lost. It was a risky venture but to the victor goes the spoils: generally, a whaling expedition averaged four years duration and during that time, a harvest of 40 whales was the result, or, in today’s dollars, a whopping $3.4 million in whale sales. Assuming the hapless crew of the Pequod made it back to Nantucket safe and sound, and assuming that in addition to slaying the great white whale Moby Dick they also harvested around a third of what they intended (but only a third, due to lost time and limited supplies), the opportunity costs of mad Ahab’s oceanic tirade was $2.3 million dollars. In other words (presuming a safe return) after paying back their investors from the remnants of their profit, the Pequod as a small business -even if successfully slaying their ivory leviathan- still went (figuratively) under.
Starbucks, the coffee company (appropriate for this article since the famous baristas derive their name from the character Starbuck in the book) proclaims that when it comes to coffee, their mission 'has always been, and will always be, about quality' and they have one simple, solitary aim: good, quality coffee.
But in late 2007, a damp, drizzly November descended on Howard Schultz’s soul. Starbucks reported unprecedented margin contraction, slowed store traffic, and the cannibalization of sales by fast growth and multiple locations. Starbucks was also venturing into a dizzying foray of entertainment related ventures, a diversion that Howard Schultz claimed was ‘hubris born of a sense of invincibility.’ The digression had a deep impact upon the brand, ‘We were pushing products that deviated too far from the core coffee experience. As one Starbucks partner expressed, it was as if we were running a race but no longer knew what we were running for.’ (Ironically: the foray was profitable, ‘The business deals looked great on our profit and loss statements.’) Schultz claimed that these diversions, though profitable, cost the coffee giant one dramatic casualty: the heart and soul of the enterprise. In a bold act of corporate contrition, Schultz reclaimed command of the ship, steering the Melvillian enterprise back on course. 
The well documented reprise of Howard Schultz’s comeback was a journey charted via his ‘transformation agenda’, a document that served as guidepost. The number one goal on the agenda was to reclaim (and forever hold) their primacyas ‘the undisputed coffee authority’. What Schultz likely did was save the ship and crew from disastrous consequences.
There are many more metaphors at play in the watery fields of Melville’s Moby Dick. A significant one that assails most at some time or other: chasing the elephant (or *ahem*, whale) the large multi-figure deal or account. Suffice it to say: that massive client has eluded, haunted, and blighted you long enough; let it go. There are substantial whales in other oceans and they are plentiful in number besides. (But this digression is perhaps a taller tale for another day, back to our principal metaphor).
Somewhere between the extremes of Bezo’s ‘loving distraction’, Starbuck's starry-eyed divergence, and Ahab’s misguided vendetta, lies the narrow road, the simplicity of purpose. It is not easy to adhere to, skeptics (and perhaps a monomaniacal character or two) might attempt to distract you from your intent but it seems that if you are going to obsess about any aspect of your business, obsess about the architecture: refine your purpose, question your purpose, clarify your purpose, but stay true to the fundamental course you were built to charter. To deviate from your core is to profane (an overtly religious term that might apply here) your business's purpose.
It may seem adventurous but it is also a pursuit that just might wholly consume you.
Lit for Biz is a new series of posts that coalesces two seemingly antithetical obsessions of mine: literature and business. The Shakespeares, Melvilles, and Dostoevskys endure because of their application to real life, regardless of era. Marjorie Garber writes, ‘Literature is always contemporary’. Herein I am no different than the sports enthusiast who sees in the game an extended metaphor for life; my examples simply originate from the bookish kind. Fiction, after all, is 'to the grown man what play is to the child; it is there that he changes the atmosphere and tenor of his life' (Robert Louis Stevenson).
Photo credit: Rockwell Kent