Christensen, C.M., Allworth, J. & Dillon, K. (2012). How Will You Measure Your Life?. New York, NY: Harper Business.

This is a book I enjoyed reading tremendously. Both Shuai and Anne-Flore have read it before and they spoke highly of it as well. The biggest reason why I like it so much is that it adds new dimensions to one concept that I personally value a lot.

Theory

Trained in the traditional Chinese educational system, we’ve been told our entire life that theory plus real-life practice equals to one’s true capability. That’s why Chinese students pay so much attention and spend so much time studying theories. However, theory has always been the most familiar stranger to me: I work with it a lot but I have a hard time articulating what it is. That weird feeling was lessen when I read about Christensen’s definition of theory:

“Theories are statements of what causes things to happen, and why”

The “why” in this definition is critical because it implies that the theories that Christensen talks about here are theories that reveal the fundamental causal mechanism and therefore they are supposed to be deterministic (versus stochastic: there are a lot of things in this world that we could not figure out why yet. Therefore, instead of coming up with purely wild guess, we try to come up with more systematic guess based on statistics and probability). Once the definition of theory is introduced, Christensen further argues what he thinks good and robust theory should be:

“A good theory doesn’t change its mind”

In other words, a good theory is very general, it could be applied to very different companies or very different contexts and still hold true. And good theory can help us “categorize, explain, and, most important, predict”. If a theory is not good enough, one could easily find out by looking for the anomalies. Below are a few theories that I think are very powerful.

The Theory of Disruptive Innovation

New and small competitors could pose serious threats to industry giants (what causes things to happen) because they enter a market with “a low-priced product or service that most established industry players view as inferior. But the new competitor uses technology and its business model to continually improve its offering until it is good enough to satisfy what customers need” (why). It is worth mentioning that back in 1997, as Christensen recalls in the book, he was invited by Grove, then chairman of Intel, to explain to his core team the implication of this theory for Intel. The outcome of that meeting was the launch of Celeron processor targeting the low-end market, which helped Intel successfully fight off the threats posed by smaller player AMD.

This theory is also applicable to Apple’s recent fall. While Tim Cook mostly blamed Apple’s earnings miss on the macroeconomy (the trade war between China and the U.S.) and the slowdown of Chinese economy (strangely enough, just two months ago, Cook told investors a totally different story), a more fundamental issue is Apple’s neglect of those much smaller players who entered the low-end market with inferior products roughly 5 to 6 years ago. In China, these are Huawei, Xiaomi, Oppo or even Vivo. When they first started, they did not have good products. They were at most OK products with very low price. But as the theory says, they used technology and business model to continually improve their products until they were good enough to satisfy what customers need. On the other side, seeing the gradual market share growths from those much smaller players, Apple’s strategy was not to launch a great product with competitive price to fight those players in the low-end market, but to increase the unit price of each of its new Iphones to offset the decreasing number of units sold. It doesn’t take a genius to figure out the strategy is just not sustainable. There is a limit to the number of people who are willing to pay $1,000 for a new phone that does not have innovative breakthroughs, not even mention a global economic downturn that could well be around the corner. Trusting this theory, I boldly predict that the competition that Apple will be facing is unprecedented. This competition is not just in Greater China, but soon in Europe and eventually in North America.

The Theory of Resource Allocation

When your resource allocation (time, energy, talent, and wealth) is not consistent with the strategy, then you are not implementing that strategy (what causes things to happen) because resources are limited and from where you are to where you want to be lies a lot of things that compete for your resources but are not supporting your strategy. If not managed carefully, “your personal resource allocation process will decide investments for you according to the “default” criteria that essentially are wired into your brain and your heart” (why). As Christensen points out in the book, one of those “default” criterias is to prioritize things that give immediate returns even though we know it very well that to achieve what we truly want would require “long-term work, the things that you won’t see a return on for decades”. Think about investment, we all know the power of compound interest. But for us to see the huge reward of it requires years of consistent contributions (I am talking about investing in index fund here specifically) regardless of the ups and downs of the market and in reality very few people could execute that strategy. Think about mastering a skill and becoming an elite in the field, we all know 10,000 hours of deliberate practice would take us there. But 99.9% of the people back down when things get hard, not even mention doubling down when things get the hardest. Think about raising good children, we all know years of attention, care and education are required, but then job promotions, nicer cars, bigger houses get in the way…