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And if you really study the best flywheels, uh they have a different role.
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And so on the on the right-hand side of the flywheel, the 12:00 to 6:00 is really about what you do in the world, what you do to contribute, what you do that makes people's lives better, what you do that is kind of your net add, right? In some way.
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And whether it be delivering great health outcomes, whether it be, you know, the next powerful generation of chips that multiply more flow over time, whether it's uh a biotech drug that's going to be able to solve anemia, and whatever the thing is that you lower, you know, better returns for your investors, right?
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It's you're doing something in the world.
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And then as you come up the other side of the flywheel, what you find is that it's about generating fuel.
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It's how you convert 12:00 to 6:00, the 6:00 to 12:00 takes that and converts it into fuel.
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I think we're going to start with Bill Lazier and the role of great mentors that sort of changed your life.
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You said he was the closest thing to a father for you, so I want to start there.
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What does it mean to be a father?
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Not in the biological sense, anyone can do that.
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But the essence of what it means to be a father.
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Uh so, in our in our last conversation, you uh when I was looking back on today, I was smiling to myself because I shared the story of going down to New Mexico to try to connect with my real father, my biological father, when he was living in the adobe hut with the dirt floor, and actually that was the first time I think I've publicly shared that story, uh just so you know.
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Um and uh and so that was kind of like the recognition there was no father.
1:55
And so then you flipped it around, so so then why why would I look at Bill Lazier as the closest thing to a father I ever had who was really a father?
2:03
So let's just start Let me let me I guess answer that question a little bit by talking about how I saw Bill as a father, a specific case, and expand that out to what father is about.
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Um so I was very fortunate to come across Bill.
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Uh it was a uh fortuitous event, um ending up in his class the first time that he taught at Stanford.
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And no one knew who he was.
2:31
I didn't know who he was.
2:32
Uh he had had a successful entrepreneurial career and was taking this step of of kind of a renewed path to really now uh invest in young people, and and then shift from building companies to building young people, I think is what was really happening.
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And Bill took this interest in me.
2:54
Um I don't really know why he did.
2:54
Uh it's I I mean I truly can't give you an answer for that.
2:59
I don't I don't think I was a particular standout in a, you know, in in certain kinds of dimensions, but Bill took an interest in me.
3:07
And I think that it starts there, is a genuine interest.
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I just basically interested without any agenda.
3:14
There was no sense of what that Bill felt uh you know, it's not that he wanted me to like start a company so he could invest in it, or uh you know, or he was going to help him with research, or he had no idea that eventually we'd write a book together, or any of that.
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Um Bill just in the in this tremendous sense of generosity took an interest in me, and he would start inviting Joanne and me over to his house.
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His his wife, Dorothy, who I'm still in touch with, just spoke with her the other day.
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Um we um and he would just begin asking questions, and he was he just he just wanted the best for me, whatever that would turn out to be.
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But he also had this kind of faith and belief in in that if I found a way to deploy my energies, I could be effective and useful.
4:06
And and I think that that's um uh that it it was just this investment that he made without ever asking for a return. Right?
4:18
There was there was that's I think the essence of it.
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And then what would happen is uh he also had this real sense of guidance for me.
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Um and and I think one of the things so I can let's just put Bill in contrast to my biological father.
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And my biological father, who um I don't need to go into all the you know, ways in which which he wasn't really a father, but but one of the ways is Bill would talk to me a lot about values. Right?
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He he would talk with me about um you know, commitments and about relationships and about what are you going to serve, and um and and these sorts of things.
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And And until I really started having conversations with someone like Bill, and Bill in particular in great depth in my 20s, uh I had never had a father figure who invested in trying to shape my character. Mhm.
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And uh and and I I I I really was impoverished on that.
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And then Bill stepped in and played that role of helping to shape not what I did career-wise, but who I was as a person.
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And and if he felt that I uh and he would guide, like, you know, he would he would help me try to see this image I always had was I was a super high-energy propulsion machine.
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Um but I kind of didn't have a guidance mechanism, if you like.
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It just crashed into a cliff or something, and and Bill was helping me build that guidance mechanism that was both kind of in in in direction and in quality.
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And uh and he would he would invest in that way.
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So I think it has to do with being genuinely interested in without asking for anything in return.
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And shaping who you are, your character.
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And and and, you know, I am uh I really at that point in my life, I was on a journey to create my own father.
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I mean, that's really we you know, we mentioned that last time.
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I I really was trying to do that.
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It's like I didn't get one, so I'll make one.
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And Bill was one of the central people in that.
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I remember this um coming up with this thing called the personal board of directors, and uh uh it was back in the early '80s, and and I made Bill my honorary chairman of my personal board of directors.
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And when I chose members for my personal board of directors, they were not chosen for their success.
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Uh they were chosen for their values and for their character.
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Can you dive into that a little more?
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I mean, what I'm thinking about here is that we're we're all born with parents. We didn't choose them.
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Some of them are exceptional, some of them are average, and some of them are terrible, and that's not to place anybody in any of those buckets, but this is what you grow up in, and you get this environment, and you you get these habits.
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You you assume these habits from your parents, and that's the patterns that you learn as children.
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And then at some point you take over your life, and you get to choose your habits and patterns.
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Whether you recognize it or not, you can take control.
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You can pick your own personal board of directors.
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You can pick your mentors.
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And those mentors need not be alive.
7:33
Um you know, we can we can sort of choose them, and we can choose to have the best mentors from history.
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What's the approach to pick the right ones?
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Well, so uh first in in in my own case, um I think my experience was maybe both with I had to start choosing early.
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And uh and I uh I think my initial choosing was to get away, um to react to to to to not be uh uh you know, have to depend on something like an undependable father.
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Um and you know, I I mean, no one in my family gave me guidance about where or what I should do or how I should think about things.
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So I think this question of sort of self-direction and self-choice and self-self-molding for me started I was 13 or something, probably when it was really conscious that it really began.
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And there were some pivotal moments in that for me where I just like, I'm just going to do this.
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This is what I'm going to do.
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So um but then uh when I when I entered uh my 20s, I uh when I think about kind of choosing mentors and and creating a father, I I did I did three things.
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Um The first was that I just made a simple goal.
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I'm going to read 100 biographies.
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And I figured that by reading 100 biographies, uh I would get 100 lives.
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And those lives uh would uh would teach me something.
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The beauty of beauty of biographies is you get entire arc of people's lives, right?
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And and so you don't just see them at moments or incidents.
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And I sat down, and uh we got one of the one of the ones that I uh that that that shaped me a lot was was, you know, Churchill's memoirs of the Second World War, 4,996 pages, six volumes.
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It completely shaped the way that I think about how you guide through uh tumultuous, horrendous times, and and I tried to, you know, take the best of, you know, Winston Churchill as a as a guide.
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Uh and then I would move on, and sometimes they were they were folks that were just, you know, just interested.
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I might just take one thing from them.
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And all And then And then that sort of led to the second part of the personal board of directors.
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And I remember very vividly, I was I was driving down Alma Street in Palo Alto.
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And uh and I've always been a very audio person.
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I don't take words off pages very well.
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So, when I when they finally started to be audiobooks, man, I my my learning just accelerated exponentially.
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And I was listening to an audiobook called Plain Speaking.
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And Plain Speaking was uh basically transcripts and consolidations of interviews that a guy named, I think, Merle Miller had done with Harry Truman.
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And uh Truman uh had this one line in there, which was, "The only thing I know for certain is if you don't know the difference between right and wrong by the time you're 30, you never will."
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And I like literally made a right turn, pulled off the side of the road, and sat there and thought to myself, I was in, you know, some somewhere in my early to mid-20s, "I got like 5 years to figure this out, right?"
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That's not I mean, it was a really crystal moment.
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I was like, "How am I going to do that, right?"
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Cuz I I really didn't want to get I I really wanted that.
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And so, uh that's when this idea of I'm going to create a personal board of directors.
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And I'm going to put people on that board who I um admire for their character, right?
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They're the sorts of people I wouldn't want to let down.
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And uh and and so, I drew a little diagram of a like a board table, and I put seven seats around it.
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And of course, Joanne had one, Bill had one.
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Bill was my my first sort of non-Joanne choice.
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And then I then I filled out the rest.
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I put that that piece of paper above my desk.
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And whenever I'd be in situations, I'd look up to that piece of paper, and there'd be those seven seats, you know, and I could picture um I mean, literally, like their names were there.
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Uh and and it was like this guidance mechanism.
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And I would didn't look to it for like you know, how to be successful.
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That wasn't what the personal board was about.
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It was this like moral compass.
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And uh this sense of, you know, what's a what's a richer values-based life based on these people.
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So, then that was the the second part.
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So, biographies, then the personal board of directors, and then the third was very conscious um getting the highest possible um making How do I want to put it?
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Um really really growing from mentor moments.
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And uh and just uh if I had a wonderful mentor moment, it might have only been a day or an hour, or it might be like with Bill, where it was day after day after day after day uh for years, but I would those mentor moments were like they were like sapphires.
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They're just pure drops of gold.
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And I wanted to um have those be like these seeds, these kernels that would would affect me for the rest of my life.
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And And And I have sought mentors.
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It's evolved in and I And so, I had the personal board of directors.
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And then as I gotten older, uh interesting thing is that um most of my personal board members are now deceased, um including Bill.
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And and so, I started thinking now that I'm in my 60s, how do I begin to also have that same mechanism?
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And I I've I've evolved it.
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It's no longer a personal board of directors.
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Now that I'm in a different stage of life, I I have my personal band of brothers. Mm.
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And uh and these are These are people in my life.
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Some of them are are are women, but it's sort of this band of brothers idea.
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And these are these people in my life that again, I wouldn't want to let down.
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Some of them are younger than me, quite a bit younger.
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Um some of them are are about my age.
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And uh and I when I text them, you know, it's Brother Tom, Brother Kyle, right?
14:01
My personal band of brothers, the people who would hold me to account, the people I would not want to let down.
14:11
I think that's a powerful approach.
14:11
I want to dive into some of those mentor moments, specifically with Bill and some of the the lessons that you've He helped you instill in you. Yep.
14:19
One was relationships, not transactions. Mm. Yeah.
14:26
So, um uh So, so, you know, Bill uh and and we write about this in in this uh Beyond Entrepreneurship 2.
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0, which co-authored with Bill.
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And big part of the reason why we're talking about Bill is I re-released this book with a chapter about Bill to really honor Bill and extend his legacy. And And he died in 2004.
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Um and I knew I wanted to write something about him and the profound impact he had on me.
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And I wanted to distill the lessons of this truly great mentor, but kind of basically multiply them as many times as I could uh by sharing Bill with the world.
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And it was Joanne's idea to to do the re-release um cuz I'd always wanted to write something about Bill.
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And And Joanne said, "You Why don't you re-release Beyond Entrepreneurship, which was, you know, with some new material, but really bring it out to share Bill with the world?"
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And that would be the best way to honor him and to contribute He would He would love that he is that he is mentoring even though he's no longer here.
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And so, that that was a huge part of of wanting to do this.
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Not the only part, but a huge part.
15:35
So, in that in there, there are some lessons.
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And one of them is this, this notion of relationships.
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So, if I if I stand back and I think about what are my absolute most primary values, um and and particularly ones that I got from Bill.
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Um if I had if you forced me to pick just two core values in my life that dominate above all others, uh they are curiosity and relationships.
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And the curiosity, I think, has kind of been with me all the way along, but the relationships one I got from Bill.
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And um Bill's basic view of the world was you know, number one, life is short.
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Uh you never know when it's going to go away.
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And in the end, um what does that add up to, right? What is meaningful?
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And Bill believed that people break into two buckets.
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There are those who kind of come at life as a series of transactions.
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And there are people who come at life as building relationships.
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And Bill believed that the only way to have a great life.
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You can have a successful life doing transactions, but the only way to have a really great life is on the relationship side.
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And so, Bill just pounded in me, instilled in me, modeled for me that in the end, it is really deep relationships and doing things you love with people you love and uh and and those connections.
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And So, we got into this conversation though about relationships one day.
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And I asked Bill, "So, okay, but so what makes for a great relationship?"
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And Bill said, "Oh, a really great relationship is one where you if you ask each person independently, who benefits more from the relationship, they would each say, 'Well, I do.'"
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And I said, "Well, isn't that a little bit of a selfish way to look at it?" And he said, "Well, no.
17:32
Just think about this for a minute, Jim. Let me ask you.
17:36
Um Jim, who do you think benefits more from our relationship?"
17:38
I said, "Well, clearly I do.
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I mean, with everything you've done for me."
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And he said, "Well, isn't that just great?
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Because I would answer that I do."
17:49
And uh you know, with with the work that we've done together, with how you kind of, you know, uh continue to bring out of me a a desire to to to teach and to teach better and so forth.
18:00
And we talked back and forth about these different elements and and the sheer joy of our time together.
18:06
And um And what And what And he said, "See, the reason both people can answer that way is because both people are putting uh into the relationship not for what they're going to get from it, but for for what they can give to it.
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And because both people are doing that, both people would feel that they are the ones who are the ultimate beneficiary because of how much the other person gives.
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And I think that, you know, for me, that was like, "Wow, okay, so that's what a great relationship is.
18:40
It's not what you get, it's what you give."
18:42
And uh but over a long period of time, and everything we do here at the Good to Great Project is relationship-oriented.
18:50
I mean, there's not a single day that goes by that we don't think about what is the relationship element of this decision, of how we handle something, of whether we say how we say yes or no.
19:03
Everything goes back to relationships.
19:07
How do you use that in your life constructively?
19:09
Like, do you get out of relationships where you feel like you can't contribute to them, or people are are sort of transactional, or Well, that's a that's a wonderful question from the standpoint of um you know, I've always uh you know, thought a little bit about as as as you know, one of my approaches to discipline when I'm an enormously disciplined I try to be a disciplined person.
19:33
I certainly write a lot about discipline.
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But I think the essence of discipline is uh not doing more, but doing less.
19:39
And it's not about a to-do list, it's about having a stop-doing list.
19:43
And you just triggered something in my mind is, you know, how do you think about who you should you know, who should be on that list, too, right?
19:49
And um I I think that there's sort of a mirroring aspect, right?
19:55
That if if you invest in a relationship and somebody invest in return, it becomes it's kind of a relationship flywheel, right?
20:04
And and you may not always be in touch with each other, you know, constantly, but but there's always um you really feel that that sense of of you know, connection that comes from um you both putting into it, right?
20:24
Even if you don't talk all the time.
20:27
And and then, you know, this is all thing with mentoring is always a little troubling to me because like for example, I don't think you can assign a mentor.
20:37
I don't know how that happens.
20:39
Like you're going to mentor this person.
20:42
That sounds very transactional to me.
20:44
Or when you have uh people who they they really view that what mentoring is about is I'm trying to make connections.
20:50
I'm trying to make my way in Silicon Valley.
20:54
I'm trying to get into the finance community.
20:56
I'm trying to you know, I really need somebody to open doors for me.
20:59
I need somebody That's not mentoring, right? That's networking.
21:02
That's a whole different thing.
21:04
That's very transactional.
21:06
Um and when when what I over time have have I guess I don't have a lot that end up on the on the stop list for the simple reason that I think over time I've developed an intuitive sense for relationship oriented people and my energy just tends to go there.
21:25
So you filter them just naturally like unconsciously. Yeah, I think so. I think so.
21:31
I mean you can tell if you sit down and have a conversation with somebody is is there a is there a connection?
21:41
And and and then I think you know, the the um the other the other aspect is I think great relationships tend to last a really long time.
21:51
And so part of what I I think happens is this this notion that you you know, you spend more and more time with people that you've spent time with over time because those relationships deepen.
22:08
I have friends that go back to the third grade. Yeah.
22:13
I totally I I see that and I feel it and it it's sort of like an intuitive thing, but I always it's almost like a red flag when I meet somebody who's who's you know, older or you know, above 30 and just doesn't have any friends and it's so strange to me and so foreign.
22:30
And yeah, it's so it's so weird.
22:34
And those type those type of people just tend to be transactional people.
22:39
You know, they have a lot of friends, but they're like Facebook friends.
22:41
They're not real friends.
22:41
You can't call them and bury a body. Mhm. Yeah.
22:47
And and I think what's what's really um interesting to me when you say somebody doesn't really have friends like wow, that just I can't imagine.
22:59
I honestly can't imagine a life that I feel that friendship ultimately Bill was of course a mentor, but there's at some deepest deepest level friendship.
23:12
And friendship is one of the greatest arts. Mhm.
23:16
Um and yeah, it's You want to you want to celebrate life with the people that are close to you, right?
23:26
And I think that there's an important aspect to that.
23:27
One of the other lessons you you learned from Bill um was the trust wager. Talk to me about that.
23:35
Well, so this is a this is a very interesting one because uh so there's so Bill uh Bill had this really interesting stance on trust that ultimately affected me.
23:48
And so let's make this both human and and intellectual.
23:53
Uh so when I uh when I left Stanford to launch out on my own and in our last conversation, you know, I described launching out on my own and the the fear of that and the commitment and so forth and and uh uh and and when I sort of left the relatively cloistered world of a place like Stanford, you kind of hit a broader world and um certain assumptions about how trustworthy people are might get dashed by events.
24:21
And I I don't want to call people out on this, but just just suffice it to say that to my great shock I discovered that some people actually genuinely weren't trustworthy.
24:31
And how and and they abused my trust.
24:34
And I'm I'm I was I'm just naive in some in some level, right?
24:40
But you know, when I've had people like you know, Bill Lazear in my life where I'd met people like Jim Stockdale or you know, uh Peter Drucker or people people that just they're just of such a character caliber that I was in a very rare group of of folks. And and so I asked Bill.
24:58
I was really struggling with this.
24:58
I said, Bill, how do you deal with this, right?
25:01
How do you how do you deal uh have you ever had your trust abused?
25:06
He said, oh yeah, of course.
25:06
I've been I've I've had my trust abused.
25:07
Uh it's just part of life.
25:11
And I said, well um and but then he gave me this you know, this one of those great mentor moment.
25:15
He said, this is Jim, this is one of now that you're starting to have this experience and really experience it.
25:22
This is one of the most important forks in life, one of the most important decisions you need to make for the rest of your life.
25:28
You need to decide what is your opening bid?
25:34
Uh when you are establishing a relationship with someone, when you're interacting with the world, is your opening bid to assume trust?
25:43
To assume that someone is trustworthy and to grant them the full benefits of that. Right? That's your opening bid.
25:54
And that trust can be lost, but the bid is trust.
26:00
Or is your opening bid to not trust, but the trust can be earned?
26:08
And he said and he said that so many aspects of your life will be affected by which fork on that you take. That's a stance on life.
26:18
And I said, well, it seems to me Bill, you've chosen the trust bid as the opening bid.
26:23
And he said, yes, I have.
26:26
I said, but but Bill brutal facts.
26:31
The brutal fact is not everyone is trustworthy.
26:34
And the brutal fact is some people will abuse that trust.
26:36
So have people abused your trust? Trust?
26:38
And he said, of course they have.
26:41
And he went on and he described a situation of somebody who was quite close to him uh who um had abused his trust and it had cost him enough that he said it hurt, right?
26:51
Not just emotionally, but financially as well.
26:55
And uh and then and then there's this little kind of cul-de-sac on the whole thing that Bill has, which is the notion of you know, that that you you don't leave yourself exposed to a a catastrophe, right?
27:06
In such a way that if you if you trust your let's say your your CFO and you never look at the books and then you discover one day that you had a problem and your you know, your company is bankrupt.
27:19
You know, you you always pay attention to the cash flow.
27:22
You always watch the numbers.
27:24
You always keep an eye on things.
27:25
Like you don't It's not like you become disconnected from reality.
27:27
But he said, but you know, um so I I I never left myself open to catastrophe.
27:35
But beyond that, yeah, that that one hurt.
27:36
I said, well, did it change your your approach to trusting people?
27:40
He said, no, it's just part of the cost of living.
27:44
And then he went on and he described it as upside and downside.
27:48
And this is it sort of gets into the you know, it just simply hard headed.
27:52
This was a hard headed view.
27:52
He said, I've come to the conclusion when I think across the iterative relationships and interactions and aspects of life that there is far more upside in an opening bid of trust.
28:08
And there is far more downside in an opening bid of mistrust.
28:16
And and he and he and he summarized it as it all goes to the question of people.
28:23
If you really basically want to have your life, whether they be people in your company, whether they people in your life, whether they be your friends, whether they people you rock climb with, whatever it is, right?
28:33
That the very very best people will respond to the bid of trust.
28:43
That if you trust them and Bill trusted me.
28:46
I mean he went to bat for me to teach at Stanford when I yeah, I mean he he trusted that I would do everything I could to come through and he was totally on the line for me.
28:55
Took a risk for me, right? But he trusted.
28:59
And and uh but his view was that if you trust people, the best people will be attracted to that.
29:05
And and you want the best people to be attracted.
29:10
And the second is he said, have you ever considered the possibility Jim that your opening bid affects how people behave?
29:17
If you trust people, you're more likely that they will act in a trustworthy way. So it's a double win.
29:24
It's the best people and they'll behave trustful in a trustworthy way.
29:26
The flip side is if you have an opening bid of mistrust, the best people will not be attracted to that.
29:36
The best people you you won't you know, if if you have this opening sense of you have to earn my trust.
29:40
Now, you may have to earn my trust how good you are at something, right?
29:45
Or earn my respect for your performance or that sort of thing.
29:49
But, if you if I basically like I don't trust you, you have to earn it, well, some of the best people are going to be like, I don't need to put up with that.
29:56
I'll go do something else.
29:56
And for Bill, it was always about again, people and relationships. Right?
30:00
That That's where the trust trust comes from.
30:02
And and he just came at it as a um as a very hard-headed and warm-hearted approach to the world.
30:12
And that's why I think there were so many people whose lives were affected by Bill Lazier.
30:17
He trusted them and they responded in very trustworthy ways in the world.
30:21
And the the the other thing though that on an intellectual front on this is I as I think you know I'm a huge fan of this thing called the Great Courses series where you get college-level courses, 60 lectures, 40 lectures, whatever.
30:34
And I've been doing them for years and years.
30:35
And there's one called Games People Play and it's a course on game theory.
30:38
And of course I know you know game theory well.
30:42
But I you know, I always try to look for one idea that just stays with me for life.
30:48
And what I remember in the summary lecture of that class, if I if I remember right, I hope I'm not embarrassing myself and getting my game theory wrong, but if I remember right, the essence of it was that um in that the best strategy is an opening bit of cooperation.
31:07
Now, the game can unfold from there. Right?
31:11
But that that is you know, a good place to start.
31:13
So, I was very sort of like Bill had this sense of game theory that was in his approach to relationships and humanity.
31:23
I don't know if he ever took a course on game theory.
31:27
I think that's a really interesting way to approach it.
31:29
And I definitely agree with with that personally.
31:33
And my my friend Toby has this concept that I think might help people. It's very visual.
31:36
It's called the trust battery.
31:39
And you can do things that increase your trust or decrease your trust.
31:41
But if you start that trust battery at the say the 75th percentile, um then you know, you're starting from a different place than if it's the fifth you know, you're 5%.
31:51
Your trust battery's full and it's been my experience that the benefits of reciprocal trust and the speed and not living with your guard up all the time is more than worth letting yourself occasionally get screwed. Mhm. And yeah, it happens.
32:05
And I had another friend of mine had this really good concept about when to forgive and when to sort of like and he said as long as it's not malicious, just always forgive.
32:19
Yeah, and that's interesting.
32:19
And I want to ask you a question about that here in a moment.
32:23
One of the things that um uh that that Bill always emphasized was that sometimes you don't know the whole story. Yeah.
32:32
And um and you uh he said sometimes it may not be malevolent.
32:40
It could just simply be a misunderstanding. Right?
32:42
Or it could be just incompetence. Right?
32:46
Somebody might not actually be untrustworthy.
32:48
They might just be incompetent.
32:50
And have messed something up out of incompetence or they made a mistake. Right? And so be careful.
32:55
There's this um uh this moment I call it seeing the hat.
33:00
It's a it's a weird thing, but uh driving down the road in in Boulder and and and imagine a car all of a sudden, you know, veers into your lane from the the lane next to you.
33:10
You're you're both you know, both going the same direction and you're like, oh, you know, the idiotic driver or whatever.
33:14
And then um you notice that what had happened was uh when you went on past further is somebody's hat had blown off in the middle of the road and they were going to maybe step out and grab it.
33:24
And but you couldn't see that. Mhm.
33:26
And the person had veered so that they wouldn't okay, um I think I I think Joanne had this experience and you sort of think about it as like, well, wait a minute, you know, maybe you don't see the whole situation.
33:36
You're jumping to a conclusion about why somebody is doing something when actually if you can see the hat, you'll look at it a little different.
33:45
Yeah, perspective is everything, right? Yeah.
33:48
Speaking of perspective, one of the things that I that I got out of reading the updated version of this was how we confuse living a long life with living a great life.
33:56
You want to talk to me about that?
33:58
Yeah, um so before we do that, let me just pop back and ask you a question because you put something out there that I found very provocative.
34:06
If you don't mind, I would just like to to ask about it and then we'll talk about long life and short life. Forgiveness. Okay?
34:15
Um what do you think it means to forgive?
34:20
And do you think it's hard Go ahead, please. No, sorry.
34:22
What were you going to say?
34:23
No, I was just going to say, and do you find it harder to forgive yourself or to forgive others?
34:29
Oh, definitely harder to forgive me.
34:29
I think, you know, forgiveness just means letting it go, right?
34:33
And if you don't assume malicious intent on people, um it's a lot easier to let it go.
34:38
And we create these stories in our head about how people are, you know, doing things to get us at work.
34:44
And you know, it's just nobody really cares.
34:48
You know, nobody's walking around trying to hurt you.
34:49
And maybe there is the occasional person, but it's not worth living life like that.
34:52
And I think that when people in your life that are close to you that you trust and you're vulnerable with do um let you down in some way, then you know, the the default should be to forgive them unless it's intentionally trying to hurt you and it's malicious.
35:09
Um but when it comes to I I'm probably the same as most of my listeners.
35:12
I mean, I have exceptionally high standards of myself.
35:16
I can't go listen to our past conversation because, you know, like you, I'm like, oh my god, I could have worded that so much better.
35:21
I could have said that more succinctly.
35:23
Or I'm just always sort of like the inner critic in me is is raging not raging, but out of control in some ways.
35:29
And I think that you know, I find it really hard to forgive myself when I have lapses in judgment. And we all do. We're all human.
35:38
I mean, that's part of what it means to be human. Yeah.
35:40
And I think that we need to understand that and perspective helps us see that not only do we do that on occasion and we we hope that other people would forgive us because we're not maliciously trying to get them, but other people they're in the same boat.
35:54
I mean, we're especially right now, we're all just trying to do the best we can. Nobody's at their best. Yeah.
36:00
The tolerance for, you know, what other people are going through just has to be higher.
36:04
And you have to put yourself in other people's shoes. You can realize that. Yeah.
36:08
You know, it's um it's interesting uh the the one the self-critic part and I um that that I have the same experience you do, which is that uh you know, of course for this I needed to go back and and look at our look at our transcripts so that we could think about what we'd want to talk about that we haven't talked about to share with your your your your listeners.
36:30
Um but I'm I'm the same way.
36:30
I mean, I'm often I'll look at it.
36:32
And I I describe it as uh uh it's it's not throwing an interception that that I get upset about cuz I don't throw that many interceptions.
36:43
It's there was somebody standing wide open in the end zone and I missed them.
36:48
And no one will necessarily know that.
36:50
Or also there was a three-pointer that I that was wide open and I just didn't see it. Right?
36:54
And then and then I'll like I'll wake up at 4:00 in the morning and I'll think, oh man, there was a great teaching moment right there that could have been so helpful to people and I missed it.
37:02
And the you know, the I can't get the conversation back.
37:05
And then, you know, if I can't get back to sleep in 20 minutes, that is the rule, then then I'll get up and my solution to that is very simple. I I create forward.
37:12
I uh uh I focus on on what hasn't happened and and what I might go into my creative work or preparing for something or whatever.
37:21
And that's my way of of dealing with it cuz I my ability to kind of go back and you know, think about the three-pointers I didn't take that were wide open or is immense.
37:30
And and so I have to have these strategies for no, you know, that's irrelevant at this point. It's like sunk cost.
37:37
Uh and the best thing you can do is to create forward. Create forward. Create forward. Create forward.
37:44
I actually have a little thing on my wall called the Create Forward Manifesto.
37:46
It's literally right on my wall that I wrote a number of years ago.
37:50
And um uh and I and and one of the really critical lines in it is I want to retire from worry, but not from work. Mhm.
38:02
So, um would you like to talk about long life and short on the on the forgiveness things?
38:07
Just tie up something from last time.
38:10
And I might have mentioned it, but the reason I ask about forgiveness is that one of the hardest things for me um cuz as I, you know, as we talked about before, my my dad died when I was 23.
38:22
And when I went to Santa Fe and left that time to to Albuquerque, rather, visit where I realized there is no dad here.
38:30
It's like that scene in in Apocalypse Now, you know, there ain't no CEO here. There's no dad here.
38:37
And uh and I carried a lot of anger and resentment and judgment about that.
38:43
And and then because my father died, I never had a chance to like reconcile.
38:50
And what I finally realized is if you know, forgiveness is something I had to learn how to forgive somebody who's no longer here. And to let that go.
39:01
And and and that it's the act of forgiveness is something I had to go through even though my father is no longer here.
39:09
And that was enormously liberating. Right?
39:11
I do not need to be judging somebody um and be fueled by that.
39:18
Uh I can and that I like your idea of the word letting go.
39:21
It's letting It's like letting that go. I don't need that.
39:26
I can let that disappear.
39:33
I think that's a good play.
39:33
Yeah, I have no further follow-up on that one.
39:35
I I think that most people just don't let it go, right?
39:39
When they when you bring something up later on, a year later, 6 months later, 2 years later, you're still thinking about it.
39:45
You haven't Or 10, or 20, or 30.
39:46
Yeah, you haven't let it go.
39:48
You You know, and I think that um people like you and me and maybe we've been forced to let things go and forced to find a way to do that, so maybe it's easier for us than some other people, but So, long life and short life, um this is another great lesson from Bill and um and in the uh in in in the in the book, I wrote it as put the butter on your waffles, but uh uh cuz it really captured there's a crystalline moment.
40:19
And so so Bill Bill had this he'll always seem to find a way to be smiling, which isn't necessarily my my approach to the world, and um I would often take things, you know, very seriously and very intensely, and so we were we were writing the original version of Beyond Entrepreneurship uh together.
40:42
And uh on that original version, it was the very first book I ever wrote, and I was struggling to to write uh my working on the writing part of it.
40:52
And I would basically get to the end of the day and I'd throw a bunch of pages in the wastebasket.
40:55
I'm just like, I'm totally inadequate at this, and this is so hard.
40:58
And of course, what you realize anybody who writes, tries to write well, even if over the course of a decade you become a better writer, is it the only reason writing becomes uh easy to read is because it's hard to write.
41:14
And writing is just hard.
41:14
I I think of writing as um uh is like running.
41:20
It It never uh if you're going to run your best it's always going to hurt.
41:29
And so if you can run a 5-minute mile, and then you get it down to 4:30 well, if you run a 4:30 and that's your best time it's going to hurt as bad as when you used to run the 5-minute mile and it was your best time.
41:40
You're just faster, but it's going to hurt.
41:44
And writing is kind of like that.
41:44
It's like, you know, it never gets easier, you only get better.
41:49
So, I was beginning but I hadn't yet really accepted the reality of that's what writing is about.
41:55
And so I'm struggling and I'm throwing things away and I'm just really miserable as opposed to just kind of like this is just what writing is.
42:01
And I go to Bill and uh and I and I sort of whine about my suffering and and I expected Bill to give me a lecture on, you know, this this is like, you know, this is the time to really grit through and you know, it's really going to uh it's really going to hurt, but
42:18
this is just something you have to endure, and you know, it's kind of like you got to keep going, and you know, that sort of like, you know, the the the hard edge thing, and instead, what I got was this this response where he just said, oh, well, okay. Well, if this isn't fun, we should stop
42:30
Well, if this isn't fun, we should stop doing it. Mhm. And I'm like say what? What do you mean?
42:38
We're writing We're writing a book.
42:40
Uh nowhere in the contract does it say have fun, right?
42:46
What are you talking about?
42:48
So, he says, well, you're seriously, he says, look, if this just isn't fun if we can't find a way to make it fun we should just not do it.
42:58
And and it was just this it was so perfectly Bill because he just he so deeply believed that if you can't find a way to make something fun and enjoyable then you just you sort of missed the point because along the way there just aren't that many days and years in life anyways.
43:16
And then the day after we turned in the manuscript for the original edition of Beyond Entrepreneurship uh Bill had a quintuple bypass surgery. He had a heart attack.
43:28
And uh few months after that we were having one of our morning our Saturday morning waffle fest.
43:36
We would go to Peninsula Creamery in Palo Alto.
43:37
And we would meet there at Saturday morning and we would have waffles and talk about whatever, and Bill would We'd just talk about whatever.
43:46
It was just Bill continuing to invest and shape and care.
43:52
And uh he puts butter and syrup on his waffle, like a big piece of butter.
43:59
And and then he puts the warm syrup on it.
44:02
It all kind of mixes together.
44:03
I mean, it's you know, it's really great, right?
44:05
But I I look at it kind of in horror.
44:07
And I go, Bill, Bill, you had a quintuple bypass. What are you doing?
44:12
And he just continues to put the butter on his waffle and enjoy his waffle and has a smile.
44:18
And then he says to me you know, Jim uh when I was being wheeled into the operating room I think I had a smile on my face because I realized right at that moment that I'd had a really great life.
44:40
And if this happened to be like the end and I don't come out of this um Dorothy and I have had a great run.
44:50
And everything from here is going to be gravy on top of that because I really had this sense of this complete sense of common acceptance like if this is it man it was a great run. I've had a great life.
45:04
He said, to know that, to really know that when you're being wheeled in and the and you're going to have the quintuple bypass, and that was my feeling. I wasn't afraid.
45:11
I was just grateful for my life.
45:18
That's the moment I knew I'd really had a great life, and so I'm putting the butter on my waffles.
45:25
And what what Bill um believed was one, just this notion that time just goes by really really fast.
45:39
And it goes faster and faster.
45:39
Now, someday I'd love to hear on your show a psychologist or somebody who can explain to me why it's the same 24 hours, but they're always faster.
45:52
And Bill and I I put this little story in the in the chapter.
45:54
I I I said to Bill one day, I said, Bill, you know have you noticed that time's going by faster?
46:01
He said, well, what do you mean?
46:03
I said, we I just noticed that you know, garbage days, when I have to put the garbage out, seem to be coming quicker and quicker.
46:09
It's like, oh my goodness, it's garbage day again.
46:09
I know it's the same 7 days, but man, it sure seems like a faster 7 days when I was than when I was young.
46:17
And he said, ah, well, wait till you get to my age, and Christmas will start coming around as fast as garbage days.
46:24
And uh but but that notion, he said, you know, time accelerates.
46:26
And so actually you know, I don't know what the psychology of it is.
46:30
I have a weird little theory on it, but but nonetheless, this notion that you know, that the days seem to they're the same 24 hours, but they go by faster.
46:39
And this is the same month, and it goes by faster, and the same year, and it goes by faster.
46:42
Click, click, click, click, click.
46:43
And he just said, he said, what that really teaches me is it's going to be over in an instant.
46:47
I don't care if you get 100 years or 110 years or 70 years, it's over in an instant.
46:54
And um it is short, and I don't care how many years you get, it is short, and it is gone in the blink of an eye.
47:03
So, given that reality Bill said I think in terms of a great life.
47:10
It's the integral, right?
47:12
Summation of all the moments of your life integrated from birth to death, experience TDT.
47:19
And um that's what your life adds up to.
47:23
It's the summation of those moments.
47:27
And Bill was like, however many you get, it's the quality of them.
47:32
And that uh he lived with till the end.
47:33
And then he um woke up from a nap uh December of 2004, and he was walking across the uh to to the bathroom, and he fell dead from congestive heart failure.
47:53
And um Dorothy said he had a smile on his face. And uh that was it.
48:00
And I I lost Bill um and did as did hundreds of other people.
48:10
But he had absolutely a great life, and his impact on all those people was so immense.
48:16
The lives he changed, not just mine, but hundreds and hundreds of other people's lives that he changed.
48:24
Creates that he did more through those people with his life um than almost anyone I've ever met.
48:31
And he's still touching people and changing lives.
48:35
Right, and that's why I I'm bringing this this 2.
48:39
0 version of the book out is to is to bring Bill to all these people who didn't get the benefit of Bill like I did.
48:52
I want to switch gears a little bit here and talk about decision-making, which is something we didn't really dive into last time we spoke, which I was really surprised when I searched our transcript just lightly for decision-making. There was no queries.
49:05
I was like, oh my god, how could I have Jim Collins on the line for a few hours and not talk about decision-making?
49:10
And it's been one of your consistent Totally.
49:12
I I think I just get lost in our conversations and and sort of lose sort of track of some of the things that I want to ask you.
49:19
I just wish we had like I could sit with you for a week, but well, why do so many executives suffer from indecision, but leaders who build great companies don't seem to?
49:30
How do we prevent analysis paralysis from sort of preventing us from making a decision. Hm.
49:43
So, um So, let's talk a little bit about executive decision-making cuz we've looked at it quite a bit.
49:48
So, this this is is interesting because we're talking earlier at the very start when you and I got together about these sort of buckets of of uh of personal journey story and process and content.
50:01
So, this is a good content area.
50:04
So, we know quite a bit about this from our research.
50:05
And just to review for for everyone, maybe if you haven't heard the previous podcast, um you know, our our research method is we study the uh histor- we do match pair.
50:18
We find pairs of companies that were in the same spot, same time, same resources, same potential that then uh had different trajectories.
50:23
And then we study them slices of history uh over time to try to really understand what separated one from another, particularly during the era when one was great and the other was not.
50:36
And uh but the key to that is historical, right?
50:38
Uh and uh and meaning that you try to go back in time.
50:42
You don't you don't read just later accounts of why, you know, Intel decided to do the 1103 memory chip.
50:49
You do have to try to go back and sort of see what did the world look like to the people at Intel when they were making that decision, right?
50:58
So, that you can then sort of follow through this iterative uh it's like an iterated movie, right?
51:02
Watching through step okay, let's freeze here. Here they are in 1972. Here's the context. Here's the environment.
51:08
And then you look over the comparison company and you say, what were they doing?
51:12
They were looking at the same context, same environment.
51:13
How did they make the the decision different, etc.
51:16
And then you you replicate that.
51:16
And you picture it that that if you if you think about uh our research and something that Morten Hansen, one of my great colleagues, uh taught me is the power of breaking things into events.
51:29
Uh last time we talked about luck events, right?
51:30
And at that and and you could think of it as that what we have is, okay, you have say 11 pairs of companies.
51:36
Well, you don't actually only have 11 things to look at or 11 pairs to look at.
51:41
If you then disaggregate them across uh time, right?
51:43
And you take their entire history, well, now you can do something.
51:48
Now you can have hundreds or thousands of decision events. Right?
51:55
So, now you've got buckets where you've got much larger numbers to work with.
51:59
Let's look at all the decision events over time.
52:02
And then look at how they turned out, how they made them to the extent that we can see that, how was it different in the comparison company, and you can begin to do things.
52:08
So, that notion of event analysis through a historical match pair method uh is very much how uh we come at our work.
52:15
And and Morten's uh ability to be able to say, which we use in Great by Choice a lot, which is how to break things into these discrete events that you can look at, you know, many, many uh incidents for for for doing really good analysis.
52:31
And one of the things we looked at uh in our research over times is uh decisions.
52:35
Uh big decisions, small decisions, processes of decisions, and so forth.
52:41
And uh I guess let me just sort of um tick through a few things that became clear from the research on this because it's it's actually quite interesting on on on decisions.
52:51
Uh the um try to be reasonably organized with this.
52:55
So, first let me um let me share a story that uh is it's a I could use a corporate story, but it's actually one that we used in Great by Choice uh about Andy Grove.
53:10
And um it and it and it was when Andy Grove got his prostate cancer.
53:17
Okay, so, we have all the decision points about how Intel made decisions from its inception and so forth, but this one really was a fascinating kind of lens where you can we can maybe all relate to the decision as opposed to knowing how all microprocessors work or memory chips work, and so on and so forth.
53:32
So, Andy Grove gets this um uh prostate cancer diagnosis.
53:35
And I don't remember all the details of it, but you know, at the time, as I understand it, uh there there was, you know, some degree of ambiguity.
53:43
Uh and maybe still today.
53:46
I'm not an expert in prostate cancer or prostate cancer treatments, but there were all these different things.
53:50
I mean, there was the implant seeds and surgeries and radiation and all these different things that you could you could do.
53:56
And uh and and Andy Grove hit And so, you talk about, okay, now you've got a decision to make. What am I going to do?
54:07
Okay, so, you got a real decision.
54:10
I have to decide what I'm going to do about this diagnosis.
54:14
And you're Andy Grove, right?
54:14
You're probably one of the best corporate decision-makers in history.
54:19
So, um one approach would be, I'm just going to follow what my doctor say, or I'm going to follow the standard of care.
54:26
Well, what what he did was he he got good advice from different doctors that are, but then he became like he really analyzed.
54:32
He became He's like he described it like the second PhD.
54:39
And uh and he really went into really learning and analyzing systematically.
54:45
So, I'm getting to your question about analysis, right? He really analyzed this.
54:48
This is a this is a significant life-altering decision.
54:53
So, he's not just going to be like, I just need to decide, you know, and if I make a mistake, I'll self-correct.
54:55
Well, look, if you do certain kinds of surgery, you can't self-correct.
55:01
So, we want to make a good decision.
55:03
But if you just sort of wait forever, well, then maybe the cancer will get you, right?
55:06
So, you've got this tension between the two.
55:10
So, he he does his um his, you know, sort of self-directed PhD in this stuff, and eventually chooses a course.
55:16
I forget what the exact course is. It's in Great by Choice.
55:18
We wrote about it a little bit.
55:19
But in there is something that really illustrates cuz once he made his decision, it was a very clear and unambiguous decision of what he did.
55:29
Um I can't remember the exact sentence we used, but it went something like this.
55:34
What Morten and I observed was that uh it's not a choice between like analysis and bold fast decision-making.
55:43
It's about using really good empirical evidence and really good analysis as the basis for clear and decisive decision. And that's what he did.
55:59
And then notice there's something else, though.
56:01
There's a really critical aspect of the decision-making.
56:03
And so, Morten and I got very, very curious about something, which is we got curious We we were studying companies that went from startup to 10 times better than their industries for the for the book Great by Choice in the most turbulent industries we could find.
56:16
So, that's what we're looking at, semiconductors and you know, software and biotechnology in early days, etc.
56:21
And one of the questions that we really wanted to understand was speed and pace of decisions.
56:26
Is there any um what did the what would the evidence say is the correlation between speed of decision-making and quality of outcome? Right. Okay.
56:39
So, we uh so, we analyzed this.
56:39
And what we found was that um the the 10X leaders had a much wider range of ability between slow, medium, and fast.
56:55
And sometimes they made really big decisions quickly.
56:59
And sometimes they made really big decisions slowly.
57:04
And that wasn't really seemed to be a pattern.
57:06
I was trying to figure this out.
57:08
And so, um uh and often the comparison companies would often act very quickly.
57:13
The sense of like, we got to do something. We've got to move. We've got to write.
57:17
And and so, what Morten and I observed was this is that the first question in decision-making is how much time before our risks change?
57:32
And that uh and and so, let's go back to the cancer case.
57:39
So, where Andy Grove's cancer situation as he understood it going to change in a matter of days.
57:44
His risk profile was going to be the same a week or even 6 months later.
57:47
He had He had He didn't have years, but he had months.
57:54
And so, he used the time he had before his risks would likely change to be able to make a better decision.
58:02
And that um and but then if you have a situation if you have a I mean, I remember when the fires broke out here in 2009, and we got a call from a friend of ours who was in the mountains.
58:11
It's just like, we got to get out of here now.
58:14
It's coming over the hill. Okay.
58:16
So, there are some situations where it's literally minutes or maybe days, and the risks are going to change, right?
58:24
Or it could be something where it's um it could be years, right?
58:28
And and and your risks aren't going to change.
58:32
Either the risk of missing an opportunity or the risk of of getting it wrong.
58:36
My friend Jorge Paulo Lemann grew up in Latin America and and and was very successful in the tumult of of Latin America, said something to me.
58:44
He said, you know, people have such a need to resolve ambiguity and uncertainty that they often act quicker than they need to because it's dealing with their own need to make the uncertainty go away.
59:03
And what we learned in building companies in Latin America is the uncertainty never goes away.
59:10
So, often we learn to like, if we can let events unfold without our risk changing, we will let them unfold.
59:17
But when we need to act, we will act.
59:19
And so, I what I found is the or what what really Morten uh and I found in our research is the question is not fast decision or slow decision, you know, as sort of proxies for decisive or not, it's how much time before your risk changes.
59:37
And then make your decision within that time frame.
59:40
So, that's one big thing uh that that we learned.
59:43
Another big thing we learned is near as I can tell, there is no correlation between consensus decisions and intelligent decisions.
59:50
Uh in the history of corporate history, most great decisions are taken where there's still substantial disagreement still in the air.
1:00:00
And um uh and they are taken with um without a need for uh consensus.
1:00:05
Uh uh the the culture is one of of disagreement, dialogue, debate, argument, uh pounding on tables, whatever, leading to a point of clarity then in a corporate setting followed by executive decision followed by unified commitment behind it.
1:00:24
That's the pattern that tends to more correlate with our better results. I like that.
1:00:33
There's a couple of different directions I want to go there. Yeah, sure.
1:00:35
With consensus, I think it's really interesting.
1:00:37
Groups search for consensus, especially if you have group decision-making instead of individuals.
1:00:43
Individuals search for truth, whereas group wants groups tend to want to go towards consensus.
1:00:49
That way everybody can tell their own story within the group.
1:00:53
If the decision's successful, you go back to your tribe in the organization and you uh you can say that it was because of you.
1:01:01
You influenced the group.
1:01:01
And if the decision's unsuccessful, you can go back to your tribe and the story you can tell is that you tried to to persuade them not to do it.
1:01:08
Nobody's really accountable for those decisions.
1:01:11
Whereas, if you have your name on it, you're searching for truth.
1:01:13
You're searching for the best decision possible. Yeah.
1:01:18
Uh I think that's really interesting, actually.
1:01:20
And I I think that also one of the um uh key things I I think we wrote about this in Good to Great when we're talking about dealing with the brutal facts.
1:01:30
Uh but there's this thing that uh we call autopsies without blame. Mhm.
1:01:37
And not all decisions have good outcomes.
1:01:40
You know, so you know, that we I think we touched last time on this idea of just because you got an adverse outcome and you you know, when you're in your uh poker interview, for example.
1:01:52
You just because you get an adverse outcome doesn't mean you made the wrong decision. Mhm.
1:01:57
Um We don't want to resolve, right?
1:01:57
We don't want to just look at the results of the decision and determine if it's a good decision. Exactly.
1:02:04
You know, and in and in investing, of course, you know, that's one of the big lessons is that you know, you cannot judge the quality of your decision based on the result entirely, right?
1:02:13
You you have to know that there is a stochastic probability that, okay, I think there's a 4/5 chance that this investment will do well.
1:02:19
There's a 1/5 chance it might not.
1:02:23
Uh I'm making the decision for the right reasons.
1:02:25
I'm making the decision with the right analysis. Um I'm placing the bet.
1:02:30
It still might go against us, but that doesn't mean I made the wrong decision. Right?
1:02:34
And uh and so when you have autopsies without blame, the the what we found in our comparison companies and I'm going back to your question about then why does indecision happen?
1:02:45
Indecision often happens because you begin to create a culture.
1:02:47
This is what we see in our comparison companies.
1:02:50
Where when you get adverse outcomes or things don't go as well as you'd like or the decision turned out to be, well, boy, if we'd known X, Y, and Z, we would have done something different, then instead of an autopsy without blame to
1:03:00
understand, to gain understanding, to assume that uh people did their best and so forth, but let's really understand what actually happened so we can make better decisions in the future or refine our process, you search for somebody to blame. And the moment that you introduce
1:03:17
And the moment that you introduce autopsies with blame, Mhm.
1:03:24
as opposed to autopsies without blame, the more you are going to begin to create an environment where it's like, man, the upside downside here of making a decision is you know, you've got upside downside for the company.
1:03:35
It's an agency problem, right?
1:03:37
If everybody becomes indecisive, that's bad for the company, but it might be very good for their careers.
1:03:43
What's really interesting is you were saying that I was sort of thinking about it in relationships, your personal relationships.
1:03:47
The minute you start scorekeeping versus having conversations, you start you you've started this negative spiral, right?
1:03:54
The doom loop, if you will. Yeah. Yeah.
1:03:58
Um so, I um yeah, the decision-making has been uh very uh interesting to study over time.
1:04:08
And I think that if people are waiting for agreement or consensus, that is one of the things that uh uh we found does not correlate with the best decisions.
1:04:17
So, how do we build this uncertainty muscle?
1:04:20
Like, how do we develop our ability to live with ambiguity?
1:04:24
What are What are the patterns to that?
1:04:26
Like, how do we go about doing that? Mhm. So, it's interesting.
1:04:35
Let's talk about the entrepreneurial mindset for a moment on this because um I uh I I used to really puzzle on something, which is if you're risk-averse, why would you take a job?
1:05:00
And and and I used to challenge my students at Stanford on this.
1:05:04
It's like, so I remember a student came to me once and said, you know, I I I hear what you're saying in your class and you really are challenging us to go do something on our own and to create our own companies and you know, I understand that just because I uh I'm I uh uh want to be in business doesn't mean I have to work for Exxon or IBM or you know, a hedge fund that's successful or whatever.
1:05:26
Like, I could carve my own path and uh really you know, do my own way.
1:05:30
But you know, I I'm I just don't have the risk profile for um for doing doing something entrepreneurial.
1:05:37
And and I would say back to my student I remember a student came to my office.
1:05:40
This exact conversation happened multiple times, but I have one specifically in mind.
1:05:42
And I think the student was looking at like a job from Exxon or something.
1:05:48
And I said, um well, what's one of the first things you learn in investing?
1:05:53
Uh now, obviously, the facetious view is the most successful investment strategy is a highly undiversified portfolio where you are right.
1:06:00
Um the problem is that last part, right? You may not be right.
1:06:05
So, one of the first things you learn is, you know, don't put all your eggs in one basket. Right? Diversification.
1:06:12
So, let me ask you a question cuz that's high risk, right? What's a job?
1:06:23
It's all your eggs in one basket.
1:06:27
You basically have made a highly undiversified portfolio bet.
1:06:32
Oh, and by the way, you have very little control over it.
1:06:37
You you you don't get you're exposed to if it turns out that the people running the company are idiots or they make really bad decisions, you've made a bad bet that other people are making bad decisions that are affecting your bet.
1:06:49
And you just threw your whole you're like, it's a 1-0. You have a job.
1:06:55
And the political environment within organizations is So, in an entrepreneurial world, there's risks, but maybe they're more uh clear, right? What your risks are.
1:07:08
There's this market risk, a finance risk, inside organizations, there's this thing called political risks.
1:07:14
Now, those of us who are not good at that, and I'm one of these people who's not good at that, you can get blindsided because you just don't understand how the politics work.
1:07:22
So, now you got that risk in there.
1:07:24
And as Herb Kelleher, one of my other mentors who I admire greatly, always used to say, yes, there are risks to entrepreneuring, but never forget, there are equal risks, maybe even higher risks to not entrepreneuring.
1:07:36
And so, um why would you So, if you really want to be risk-averse, why would you throw all your eggs in one basket that you don't even control and has all this political risk within it?
1:07:44
Why would you take a job?
1:07:49
And um and and so I would have this conversation with a number of my students.
1:07:52
Finally, it began to dawn on me cuz think about it.
1:07:54
See, if you've taken an entrepreneurial path, okay, a product A is not working, product B is not working, I can do C, I can do D.
1:07:59
As long as I stay alive, I can keep keep, you know, doing hands at the table till something does get working, then I can get the flywheel going.
1:08:05
I can build a portfolio of clients, right?
1:08:07
I've got diversification.
1:08:09
I've got different revenue streams.
1:08:11
I can do all this kind of stuff.
1:08:12
And I can do more to control it.
1:08:14
That strikes me as lower risk.
1:08:18
And oh, and by the way, what if you wake up at age 55 and the company that you threw your whole life in turns out to all of a sudden be going through one of these huge downsizings and at age 55, you're out.
1:08:27
That strikes me as horrifyingly risky.
1:08:31
And then it began to dawn on me.
1:08:35
They're actually taking increased risk in order to reduce ambiguity.
1:08:46
If you have a job, you kind of know what you're doing. Right?
1:08:52
It's much less ambiguous.
1:08:52
It's much less It's the paint-by-numbers kit approach to life.
1:08:57
And I follow the paint-by-numbers kit as opposed to I go out on my own. It's a blank canvas.
1:09:01
It's a lot more ambiguous.
1:09:03
What do I What do I start? What colors do I use?
1:09:06
What kind of painting do I want to make, right?
1:09:10
And what I realized is that people, my students anyways, would take increased risk in order to reduce ambiguity.
1:09:19
So, I think people are very ambiguity-averse.
1:09:24
And uh and that's part of why they don't do an entrepreneurial path.
1:09:26
And I used to come into my classroom and I would put up a little equation and I would say, "What are the probabilities of being successful as an entrepreneur?"
1:09:36
And uh let's suppose if it's kind of a multiplicative probability thing.
1:09:40
And one probability is So the end result is probability of success as an entrepreneur.
1:09:47
And um but then you can break that into two parts that lead to that probability.
1:09:52
The first part of that is probability that you will find a way to be successful if you start times probability that you will actually start.
1:10:06
And then I would turn to my students and I would say, "Tell me about the risks on these."
1:10:11
Well, most of those students would look at it and say, "If I really threw my whole life into it, probabilities that I will be successful if I start and I do it in a really smart way or actually not that low.
1:10:23
Um I could find a way especially if I can be persistent long enough to iterate to find a result that will work."
1:10:30
So let's turn to the other one.
1:10:33
Probabilities that you will start.
1:10:37
Well, as you go let 2 years go by, 5 years go by, then you have houses and commitments and all these things and at some point as more and more of the sort of accoutrements of life build up, the probabilities that you will start go down. Mhm.
1:11:00
Cuz now you have loss aversion. A huge loss aversion.
1:11:04
And when you're young, you have nothing to lose.
1:11:06
You know, when Joanne and I took our Thelma and Louise leap and went out on our own, well, I mean, that was really scary, but it but didn't have a whole lot to lose.
1:11:12
Even though there wasn't much of a safety net.
1:11:16
And uh but the further along you get, that probability goes down.
1:11:19
It's a rare person who decides at 55 to say, "I'm launching the entrepreneurial path." Some do.
1:11:27
We talked about George Rathmann last time. There are some that do.
1:11:30
So what that really means is the real swing variable in being an entrepreneur is the probability that you will start, not the probability that you will succeed if you start.
1:11:45
I want to come back to something you said about ambiguity aversion. Mhm.
1:11:46
That makes me think of one of the reasons that we have all these procedures in organizations is because we want to avoid ambiguity.
1:11:57
If we follow the procedure, we're always right.
1:11:59
We don't have to exercise a ton of judgment even if the outcome is wrong, we did what we were supposed to do, we can't get in trouble.
1:12:06
What do you think of that?
1:12:09
So I think this is a really really great question and and and and forgive me for taking a moment to to pause um and think.
1:12:17
And and and as I process through all of our research on this question, here here's what I and I need more time to to validate it all, but based upon the research, here's what I I I would I would say.
1:12:35
Um it's a genius of the and how the best end up dealing with this and a kind of a tyranny of the or of the uh of those who don't do it well.
1:12:44
So let's talk about kind of the the positive model on this.
1:12:50
So we know that uh as our companies and the leaders who built them became enormously successful, um they were really good at uh at certain kinds of replicable recipes.
1:13:05
And uh and and and really really good at those.
1:13:08
So if you take for example, you know, Southwest Airlines which amazingly became the best performing stock over a 30-year period from 1972 to 2002, startup company, three airplanes, uh and then, you know, expanded that across the country.
1:13:22
And if you if you study it very carefully, uh what you'll find is something that this is really a surprise to a lot of people, but again, this is the power of historical analysis.
1:13:30
This is the power of evidence-based research where you're always doing, you know, constant comparative analysis.
1:13:37
So if we look at So So let me actually let's just take this case because it's really going to teach something about all this.
1:13:44
So on the one hand, um in order for really build and make a flywheel go really far, you need to have some replicable recipes that you're going to be staying with more or less for quite some time.
1:13:55
So you go back to the early days of Southwest Airlines and they originally copied their recipe from Pacific Southwest Airlines.
1:14:00
It's actually an amazing startup story because you're you're back in the late 1960s, early 1970s, and uh their original business plan was copy PSA in Texas.
1:14:12
PSA was Pacific Southwest Airlines.
1:14:12
They were based in California.
1:14:14
People who from that era may remember the the air the company that had the planes that were the sort of point-to-point commuter planes that had little smiley faces on the bottom, you know, on the front part of the uh of the fuselage.
1:14:26
It made it look like a smiley face in the sky. That was PSA.
1:14:30
And Southwest Airlines uh basically flew out there and and and uh base copied their model and took it back to Texas.
1:14:38
This was pre-deregulation, so PSA, you know, gladly shared with them how they do things so much so that in fact, if you ever wondered why why Southwest Airlines is called Southwest Airlines based in Texas, well, you know, if you if you basically have the entire recipe and all you do is cross out the word Pacific, you get Southwest Airlines.
1:14:57
I mean, it's not it's it's like a photocopy of the original idea. Mhm.
1:15:01
But but but here was the difference.
1:15:05
Southwest Airlines really understood why it worked.
1:15:07
And at PSA, so now let's actually just let's just stay with me for a moment.
1:15:12
Let's just use this as a great case to illustrate on your point.
1:15:15
There's going to be two parts to this, but the first is So PSA after a certain point, the recipe kind of became rote.
1:15:23
Nobody could explain to you oh why do we do fun things in the cabin?
1:15:25
Why do we, you know, uh keep a certain kind of aircraft?
1:15:30
You know, why do we try to turn the planes fairly quickly, right?
1:15:34
At some point, the sort of real understanding of why this recipe, why do we put raisins in the oatmeal cookies?
1:15:41
You know, why why why, right?
1:15:41
It gets turned into mindless procedure. Mhm.
1:15:43
And if you were to quiz, you would say, "Why does Why do we do that?"
1:15:51
You wouldn't get a good answer. It's what we do.
1:15:52
At Southwest Airlines, Herb Kelleher and uh Rollin King and those folks, they really emphasized and trained their people, "This is why we do the recipe. Okay? Why do we fly only 737s?
1:16:03
Well, let's go through like 10 reasons why we only fly 737s. One set of apart.
1:16:11
Every pilot can fly every aircraft in our system.
1:16:13
One set of training manuals, one set of flight simulators, one set of right?
1:16:17
There's an entire standardized system and then they're perfect for point-to-point and they're really reliable aircraft and don't know don't know and that's why we're going to bet on the 737 and we're going to replicate that.
1:16:26
Why do we not do first class seats?
1:16:28
Why do I everything you could go through and they could say, "There are reasons why we have this recipe.
1:16:31
This is why we have the oatmeal uh why we have raisins in this oatmeal.
1:16:35
Why do we turn the planes really fast?
1:16:38
Not because like 10-minute turn is cool or 20-minute turn is cool, it's because our economic engine is based upon having the planes in the air.
1:16:46
And the longer they're at the gate, the more they're not earning money.
1:16:48
The more they're in the air, the more they're earning money.
1:16:51
Turn the planes, turn the planes, turn the planes.
1:16:53
What's the recipe for a plane coming in, getting it turned, get it back out again, right?
1:16:56
We bake the cookies and we know how to bake the cookies.
1:17:00
And then when we expand out across the country, there's this, you know, they're baking the cookies.
1:17:04
Now we're baking the cookies in Kansas.
1:17:06
We're baking the cookies to Las Vegas.
1:17:08
We're baking the cookies out to Kansas City.
1:17:09
We're baking the cookies out to right?
1:17:11
And and they've got this recipe.
1:17:13
And we did this interesting analysis, Morten and I, where we asked ourselves a simple question.
1:17:19
In turbulent environments, uh it it it's not that the really successful companies had a had a recipe and the other company didn't.
1:17:29
It was something else because both companies had a recipe.
1:17:32
And we found this over and over again in our pairs. The difference was this.
1:17:39
The folks at Southwest understood the reasons and rationale behind the recipe.
1:17:47
So that if there ever came a time when that rationale was no longer supported, you could change a piece of the recipe based upon that rationale.
1:17:59
If for example, you say, "Look, we only do short haul."
1:18:01
Well, why do we only short haul?
1:18:03
Because 737s have a 2-hour range.
1:18:06
And there's a lot of reasons why we do 737s.
1:18:09
Well, what if something changes where 737s now have a 3-hour range or a 4-hour range?
1:18:15
Oh, well, then that rationale doesn't apply.
1:18:16
We could do a 4-hour range. Right?
1:18:19
So see, the understanding of the recipe.
1:18:22
Now, we did an interesting analysis where we basically said, "Okay, if every successful company has a recipe of some things they do over and over again, things they replicate, 20-minute turns, whatever it is, how much do those recipes change over time?"
1:18:39
You've got the really successful companies and you've got the comparisons that didn't do as well in the same period.
1:18:44
And you can actually calculate this cuz you go back and do your historical analysis and so on and so forth.
1:18:49
Here's the interesting thing.
1:18:52
One set of companies changes the recipe about 80% over say 30 years.
1:18:58
And the other changes the recipe about 20% over say 30 years.
1:19:04
Now, here's the pop quiz question.
1:19:06
Which group is the more successful companies?
1:19:09
The 80% change or the 20% change?
1:19:14
The answer is the 20% change. Which surprised us.
1:19:19
We thought that what you would find is that the companies that are the most successful are going to change the most in a changing world.
1:19:28
That's not what we found.
1:19:30
What we found is they don't have to change or not change.
1:19:34
The change the world's changing and we have to change.
1:19:35
We have to change fast and we have to pivot and we have to Right, no. Very deliberate thing.
1:19:39
We understand the recipe and then the question always is what's the what's in the right 20% to change and why?
1:19:49
So, take a great investor like Warren Buffett.
1:19:53
He doesn't do the same thing he did when he first started doing cigar butts.
1:19:59
But there's a lot of elements of the recipe that are the same, but then every once in a while you can make a single change that's pretty significant.
1:20:03
No longer cigar butts, but now let's invest instead of buying cheap companies, you know, cigar butt companies at super cheap prices, let's buy great companies at good prices and hold them for a really long time.
1:20:20
It's still value investing. Right?
1:20:23
And a lot of elements of that, but that's in the 20% to change.
1:20:27
And so what you find is that that ability where people get in trouble is when you have everybody and everybody knows the recipe, but they can't explain to you the rationale behind the recipe.
1:20:38
And then that begins to correlate with their decline and then when they get in trouble because they don't understand the rationale, they panic.
1:20:45
And Pacific Southwest Airlines panicked in the wake of deregulation and fuel shocks and began making wholesale changes to its recipe.
1:20:51
Let's throw out the reasons.
1:20:55
Well, why do we need to do that?
1:20:58
And then they started in a doom loop downwards.
1:21:00
Now, that's a long story on that side.
1:21:04
But there's one other piece.
1:21:04
This is the genius of the and part.
1:21:09
One of my favorite things that came from uh Built to Last was in chapter six.
1:21:16
And it was about the development of Nordstrom over its greatest years.
1:21:21
And we put we put a replica of Nordstrom's uh employee manual in chapter six of Built to Last.
1:21:29
Jerry Porras and I we did this.
1:21:32
And basically what it said was uh welcome to Nordstrom.
1:21:34
You're part of a customer service machine and so forth.
1:21:38
But then it said um Nordstrom rules.
1:21:44
Rule number one, use your best judgment in all situations.
1:21:50
There will be no additional rules. Okay.
1:21:55
So, how do we put these two together?
1:21:59
We were talking earlier about trust.
1:22:02
So, what we really found makes a great flywheel, a great company go is you've got an incredible, replicable, scalable recipe.
1:22:11
It's an overall corporate approach to the world and you really know how that works and you really understand why it works.
1:22:16
And you can and people can explain why it works.
1:22:21
And you multiply your success by baking the cookies with 20% evolution like amending a constitution over time.
1:22:33
But on the other hand, you have people, first two, right?
1:22:36
The right people who you trust, who you can say in the context of our system, which we all understand how it works cuz you're the kind of person we'd like to understand it, you can say to them to the person on the aircraft, if you have an unruly passenger, use your best judgment in all situations. We trust you.
1:22:58
And so when you put the right people who you trust, who were selected for their values and their judgment, next to a highly replicable, disciplined recipe and you put the two of those together, now you have the genius of and that better explains a Southwest Airlines relative to a PSA over time.
1:23:23
A big part of the answer, not the only answer, but a big part. Does that help at all? That's super helpful.
1:23:30
For every Warren Buffett out there, there there's, you know, a thousand people who talk like him, walk like him, and basically try to copy him.
1:23:40
How do you distinguish the people who are copying and don't understand why the recipe works from the people who copy?
1:23:49
And and you know, on the surface, it's really hard to ascertain that.
1:23:51
What are what are the ways that we can go about separating the people that know from the people that don't?
1:24:01
Um can I just get a clarifying aspect of that of that question change?
1:24:04
So, in terms of like if you were evaluating an executive team or evaluating a company, evaluating or for yourself.
1:24:13
I I mean, there's kind of a lot of different ways I could come at this question. Totally.
1:24:17
So, I I think we can apply it to people cuz I feel like that might be easier than to companies, but it would apply to companies too, right?
1:24:22
There there's these sort of people who mimic and copy and then there's people who are the real McCoy.
1:24:28
And how do you separate the different like how do you determine the difference between the two as a casual observer?
1:24:34
What are the ways, the signals, the who really understands it?
1:24:39
Because in good times, they're probably both getting really good results.
1:24:42
But in bad times, you're going to get massively different outcomes as we saw with your your examples.
1:24:49
So, um so I'm thinking through now uh the kind of data set in my head of the utterly uh extraordinary people that um that I've either studied or had the privilege to know and observe up close and some cases they're both.
1:25:11
And um and and I uh it's interesting because you know, one of the um one of the things that Jorge Paulo Lemann, who's a dear friend of mine, uh said to me once.
1:25:26
He said, you know, I think of myself as a teacher ultimately.
1:25:31
I found that a very interesting statement.
1:25:35
And and actually I think though when I think about the great folks who really are the real McCoy is they so deeply understand what it is that they're doing that they are great teachers of it.
1:25:50
What is Buffett's annual reports? They are seminars. Right?
1:25:56
And and let me let me let me share somebody who I really think of as a great hero and I I just is wonderful man uh on so many dimensions, but I think really illustrates this.
1:26:11
And let's take Jack Bogle.
1:26:14
So, um actually can we just can I just share with you a little Jack Bogle story? Of course.
1:26:24
So, uh about three years ago, uh well, cuz as you know from the flywheel monograph, I've been close to Vanguard for for some time and helped them get their flywheel right or they got their flywheel right by me just asking them to get it right.
1:26:37
I guess is really what happened, but uh uh but I I got to know Vanguard well and how they built this incredible flywheel that that that that's just almost perfect right now.
1:26:45
You start with we offer lower cost mutual funds and if we do that, you can't you can't help but deliver superior returns for the same, you know, asset and if we do that, we can't help but have really, you know, satisfied clients because we've done that and if we do that, we can't help but grow assets under management.
1:27:02
If we do that, we can't help but increase economies of scale and if we do that, we can't help but be able to lower costs on mutual funds again and around and around this this beautiful flywheel goes and it's been going for for for, you know, now into trillions of dollars since uh when Jack Bogle founded it.
1:27:16
And I've always admired the purity of it.
1:27:19
And uh and I've always admired Jack Bogle as a result.
1:27:21
So, I was at this thing in New York.
1:27:25
And uh we were we were both being uh inducted into something and I noticed Bogle was there.
1:27:29
I was like, wow, Jack Bogle's there.
1:27:31
So, I I go up to him and he was kind of on his cane and you know, he had a heart transplant many years ago.
1:27:36
And I said, hey, I don't mean to intrude on your space.
1:27:38
I just wanted you to know how much I admire you and what you built at Vanguard.
1:27:44
And he he looks up and he says this warm smile and he says uh Oh, uh Jim, yes.
1:27:48
Um uh uh you know, I've read your books and we should talk sometime.
1:27:55
Do you ever get to Philadelphia?
1:27:58
And I thought uh I can get to Philadelphia.
1:28:00
So, so uh he said, you know, after this, why don't you reach back out to me? We should talk.
1:28:08
So, now at this point he's like 87 or 88, right? He's Jack Bogle.
1:28:14
And so I get home and I tell Joanne about it.
1:28:15
God, I met Jack Bogle and you know, he invited me out to come out to Malvern and and have a conversation and and then I started thinking and I started hesitating cuz I kept thinking, I don't I mean, how many Jack Bogle days are left?
1:28:30
I don't want to steal one.
1:28:33
So, I hummed and hawed and hesitated and finally Joanne said to me, she said, you know, make it easy for him to say no.
1:28:42
But reach back out to him he asked you to.
1:28:44
So, I sent him this email. I said, dear Mr.
1:28:45
Bogle, uh we you know, we met in New York, etc.
1:28:49
And then I just sort of went through this long description of giving him all these I know you're busy, you're probably working on your next book and wouldn't really fit in, but I just wanted to say it was nice to meet you, etc. etc.
1:28:56
And you know, sent the email off giving him every opportunity to say he's too busy, right? It wasn't going to work. I get this email back.
1:29:05
Dear Jim, first, it's Jack, not Mr. Bogle.
1:29:09
Uh I'm so glad you followed up.
1:29:14
I so much wanted to have a conversation with you and I wanted to to follow up with you, but I didn't want to seem pushy.
1:29:23
Please come to Melbourne.
1:29:25
So, I get on a plane, and I go out there, and I I go, and we ended up having almost an entire day together.
1:29:34
And and and first of all, just as kind of an image for life.
1:29:39
Um my my new research that's going to follow, now that I'm kind of done with the what makes great companies, take research after 30 years, and so forth.
1:29:46
I'm turning to the question of why do some people remain incredibly renewed over the entire long arc of a life, so well, and maybe others not as well. So, I meet Bogle. He's 88. And and we sit there.
1:29:59
I mean, a real meeting, a real conversation.
1:30:01
And you got to picture like he had done his Princeton thesis on I think mutual funds essentially in the early days of that in decades and decades earlier, right? I mean, what is that? Six decades earlier.
1:30:14
And he's still incredibly engaged and passionate and energized about this.
1:30:19
When you look into Jack Bogle's eyes, they are burning with an 18-year-old's intensity.
1:30:26
Just coming right out of his eyes and into the room.
1:30:28
We just had the It's like I had you you would have no thought I'm talking to somebody who's 88, who had a heart transplant.
1:30:36
And and uh and then of course the the sort of slight coded to that was when we went to get lunch, and we went and had peanut butter and jelly sandwiches together over in that what they call the galley, which was great.
1:30:47
It took us 20 minutes to walk across the courtyard because his body was failing.
1:30:53
But the renewed engaged mind, oh, that's still there.
1:30:57
And in that day Now, notice what Bogle did.
1:31:01
Bogle had their incredible recipes that make uh Vanguard go, the mutual structure, right?
1:31:09
The the cost on the mutual funds, the highly diversified, the low tax efficient, you know, high tax efficiency because you don't trade that much.
1:31:15
The way indexing is done. All these things, right?
1:31:18
That are part of serving their clients and and the flywheel. It's a different model.
1:31:23
I'm not saying it's a the you know, there are multiple types of investing models that can work, but that's theirs, right?
1:31:27
And it it's it's a recipe.
1:31:29
But when you sit down and you follow Bogle, what did he do?
1:31:31
He became a great teacher of it. His books are lessons.
1:31:39
His conversations, they're not sales. They're teachings.
1:31:43
When he tries to help you understand why uh high expense ratios are a wealth tax.
1:31:57
He helps you deeply understand their recipes and why.
1:32:05
And then he is a teacher of the pieces.
1:32:08
And what I have found is that uh and in his life, he was still teaching right up until his breath ran out.
1:32:16
And what I have found is that, you know, the whether you're talking about, you know, any of these people when Herb Kelleher would talk about what it is that makes Southwest go, the emotion around his people, and he would cry over that.
1:32:28
And his incredible understanding, well, why why don't we introduce meals?
1:32:32
And then he would just go through this reason.
1:32:33
Let me explain this to you. Let me teach you this.
1:32:35
Let me show this with you.
1:32:36
Let me share with you mistakes we made in the past, and what that teaches. He was a teacher.
1:32:42
And when you find someone who is able to teach versus giving you wrote lessons, I think that's how you one indicator of the real difference. I love that.
1:32:58
I think that's such a great answer.
1:33:01
Cuz it shows the depth and the nuance and the sophistication and and and the simplicity that sort of comes out on the other side of it, but it dives into why. Yeah. Yeah.
1:33:10
And if you can't teach it well, you don't understand it.
1:33:19
I want to switch gears here.
1:33:19
I'm cognizant of your time, and there's one thing I want to make sure we get to you before we we sign off.
1:33:24
Yeah, you know, it's interesting because I I I was I just want to share I was quite worried we wouldn't have enough to talk about, and it looks like we're not going to have that problem. Oh gosh, Jim.
1:33:34
There's I can I can keep going for days here.
1:33:39
Um you said you're at the midpoint in your career, and you've spent some time consolidating it onto a map, and I think we've covered you know, a large part of that map on the last list, but one thing we didn't or last time we were on the podcast, but last one thing we didn't hit on was the Stockdale Paradox, and I think that's critically important um to think about right now.
1:34:00
What is it, and why is it important?
1:34:05
So, um so first of all, I I want to uh hearken back to the session you and I did uh a year ago.
1:34:12
And and something I mean, if I I I I when we were communicating about doing this time, which is, you know, simulated by being an entrepreneurship 2.
1:34:21
0, we I guess we just call it BE 2. 0.
1:34:23
Um I I you know, was thinking back to that session, and I was stunned when by how much we could you know, you extracted out of the framework.
1:34:36
What I really realized is if you read that transcript, it really lays out a big chunk of that map.
1:34:40
I mean, essentially, I guess I was already writing it at the time, which is probably was heavy on my mind, but I think that's the first time in that sort of setting that I've really sort of unfolded the map, and you were very kind to let me sort of unfold it uh you know, in its essence.
1:34:56
So, for anybody who is uh the map is now fully in a chapter in BE 2.
1:35:01
0, and so forth, but anybody who wants to sort of hear the verbal version of the unfolding of the map, that previous episode, like you pulled that out of me really well.
1:35:10
And um uh and but there were certain parts of it we went much more in depth on, such as uh the flywheel, and I've I've learned some things about the flywheel since, um including one idea we might want to touch upon.
1:35:20
Uh we talked about uh you know, level five leadership, and we talked about who, and we we talked about a number of them, but and we did talk about brutal facts.
1:35:29
Uh but what we didn't talk about uh was what I think is the ultimate sort of deepest concept uh around brutal facts.
1:35:38
It sort of goes hand in hand with confront the brutal facts, and it's the Stockdale Paradox.
1:35:43
We're in a Stockdale time.
1:35:43
I think we're always in a Stockdale time somewhere in our lives, but this is like a global Stockdale time.
1:35:52
And yet the idea is so timeless that even if somebody's listening to this post-COVID, uh this is an idea to take away for life.
1:36:00
So, how would you like to to address it?
1:36:02
Would you like me to share the Stockdale story and how that concept came to be? Yes, definitely.
1:36:06
I think it's a powerful story. Yeah.
1:36:11
So, um Admiral Jim Stockdale, he he was the highest ranking naval officer in the Hanoi Hilton prisoner of war camp uh in North Vietnam.
1:36:28
He was uh shot down in the late 1960s, and he spent uh seven years in the camp.
1:36:31
And he had leadership responsibility as that officer uh in the camp.
1:36:39
And I had the tremendous privilege uh to get to know Admiral Stockdale a bit when he was studying uh Stoic philosophy across the street at the Hoover Institution, and I was teaching my entrepreneurship and small business class across the street at the Stanford Business School.
1:36:56
And uh I through a uh a student who had actually written a paper on Stockdale kind of led to me having this chance to have this really life-changing conversation with Admiral Stockdale.
1:37:07
We were going to go for a walk on the Stanford campus and have lunch together and talk about whatever.
1:37:14
And in preparation for that, I I read his book uh In Love and War, which is alternating chapters uh written by himself and his wife about his years in the camp.
1:37:27
And I'd like you to picture me reading this book.
1:37:31
And uh sitting there in a kind of a really nice comfortable setting, you know, the Stanford office, and I could look out over the oval, and it's really pleasant, and it's it's about as far away from the Hanoi Hilton prison camp as you could get.
1:37:46
And I I found myself as I began to read the book, felt like this sort of cold penetrating mist was coming in.
1:37:52
And I began to feel this encroaching sense of just despair.
1:38:01
And and because what what it wasn't just the the the the horror of what he lived through, right?
1:38:06
I mean, you you could take you out and torture you at any time, and and they would do that, and put you in leg irons, they would do that, right?
1:38:12
But what struck me as so unbelievably oppressive was the idea that when you're going through it, you have no idea how long this is going to be, or even if it will ever end.
1:38:28
And it's it's it's like we can all endure something if we know the end point.
1:38:32
I can just, you know, it's it's only a 26-mile marathon. Right. It's the ambiguity. Yeah.
1:38:37
There's no ambiguity about end point, or whether even, right?
1:38:42
But imagine you're at mile 20 of a marathon, and you're really suffering, but you have no idea if it's a 100-mile race, a 300-mile race, or a 25-mile race, right? You have no idea. Right? You have no idea.
1:38:51
This may be the last thing you ever do in your life, and this is what your life's going to feel like till the end, right? You just don't know.
1:38:57
And that's what struck me as just the it's the sheer overwhelming ambiguity of the suffering, of how of the extent of the suffering, how long it would be.
1:39:08
So, and then it dawned on me, this this sort of flash of realization hit me. Oh my goodness. I'm feeling this.
1:39:17
And I'm only reading about it.
1:39:21
And I know the end of the story.
1:39:23
But I know that we're going to see each other the following week.
1:39:26
We're going to go for a walk on this beautiful campus.
1:39:29
We're going to have lunch at the faculty club.
1:39:33
And And I thought, my goodness, if I'm feeling this, not living it, and knowing how it turned out, how on earth did he, and I'm feeling despair? Mhm.
1:39:45
How did he not completely capitulate to despair living it and not knowing whether or when it would ever end.
1:40:00
And when I asked him that, he said, "Oh, I I never capitulated to despair because I never wavered in my faith.
1:40:11
That not only that I would get out, but I would turn that into the defining event of my life.
1:40:19
That in retrospect, I would not trade."
1:40:27
I remember exactly where we were standing when he said that.
1:40:30
And we walked all the way over the next, you know, while towards across campus.
1:40:36
And we didn't talk at all.
1:40:36
I mean, it was interesting.
1:40:37
Somebody like Admiral Stockdale feels no need to fill the air with conversation.
1:40:43
And finally, as we're getting close to where we're going to have lunch, I said, "Admiral Stockdale, I'm curious.
1:40:47
Who didn't do as well as you?
1:40:49
Who didn't make it out as strong as you?"
1:40:51
And he said, "Oh, it's easy. It was the optimists." I said, "I'm confused.
1:40:55
I mean, you sounded optimistic back there." He said, "No. I was not optimistic.
1:41:00
Let me explain to you what I mean by optimistic.
1:41:02
What I mean, the optimists are the ones who said, 'We're going to be out by Christmas.'" Mhm.
1:41:10
And Christmas would come and it would go.
1:41:11
And then we're going to be out by Thanksgiving and it would come and it would go.
1:41:14
And another Christmas would come and it would go.
1:41:20
And they suffered from a broken heart.
1:41:25
And this is this this when I learned this lesson from Admiral Stockdale of this duality, I must never confuse the need on the one hand for absolute unwavering faith that you can and you will prevail in the end, with the need on the other hand for the discipline to confront the most brutal facts as they actually are right now.
1:41:56
We're not out of here by Christmas.
1:42:01
We came to call that the Stockdale paradox.
1:42:02
And the way it popped out as I was doing the research for Good to Great.
1:42:09
And in our last podcast, we talked about Kroger and A&P, right?
1:42:11
And we talked about how one of the big differences was that the folks at Kroger confronted the brutal fact of how their world was changing and did superstores, big 20% you know, in their 20% change.
1:42:25
And A&P saw the same brutal facts and denied them.
1:42:29
And there that that was a big difference.
1:42:31
But the bigger idea really came out in the Stockdale paradox.
1:42:36
And that we were observing this pattern in the research.
1:42:38
And one day I just shared that story with the research team.
1:42:44
And I said, "I just keep thinking about this conversation I had with Admiral Stockdale."
1:42:47
And then essentially, what happened is that triggered right there in the disciplined thoughts.
1:42:51
You discipline people, but then in the disciplined thought part of the framework, all of our leaders who led their companies through these often very desperate times, they actually had both sides of that Stockdale paradox.
1:43:02
They had this unwavering faith that they would find a way to get to the other side.
1:43:09
And the discipline to confront the brutal facts as they actually are.
1:43:14
We called it the Stockdale paradox and it became part of the framework.
1:43:20
It is not a business idea, though.
1:43:20
I I don't know about you, Shane, but this has been a Stockdale year. Totally.
1:43:29
I mean, you know, it's just and I have friends who are just like, "Man, I am so done with this."
1:43:34
And I was like, "Man, we're not out by Christmas." Yeah, it's same thing.
1:43:37
I mean, I had friends in March and April who'd be like, "Oh, this will just go for a couple weeks."
1:43:43
I was like, "Man, I think we're going to be here for a while."
1:43:46
Like, you just don't don't start focusing on a date.
1:43:48
Just start focusing on what you control. And yeah. Yeah.
1:43:53
But we will get out of this, which is a good thing.
1:43:55
I want to come back to something you said, which is you've you've learned a lot about the flywheel since we talked last. What have you learned?
1:44:04
Yeah, so um so last time you were you were very kind to let me, you know, share that we were bringing out the flywheel monograph with people and going back to the Amazon story and so forth.
1:44:12
And since then, uh as always with the ideas that come from our research, what I find is that even once I publish something, I get a few months or years or maybe even decades down the road and I understand it more than when I wrote it.
1:44:29
Uh it's not that the idea is no longer right.
1:44:31
It's that my understanding was previously primitive.
1:44:35
And um and so one of the things I don't think we talked about this last time, but this has really become clear to me about a great flywheel.
1:44:44
So we talked last time about the idea that you have to have this inexorable logic.
1:44:47
We talked a few minutes ago about Vanguard, right?
1:44:48
And you get this sense of like if, you know, if you have lower cost mutual funds, then you can't help but deliver superior returns for the same asset, dot dot dot. All right?
1:44:56
And the flywheel drives because of the inexorable logic of momentum of A drives B, B drives C around.
1:45:01
And that's what was the Amazon story.
1:45:04
It was the Vanguard story.
1:45:05
It was the GiroSport design story and so forth.
1:45:10
But then as I began to teach, right, the flywheel, so back to the teaching theme of like you begin to understand things when you can really teach them and share them.
1:45:18
I began to realize that uh a few things started to become uh very clear about getting your flywheel right. Really getting it right.
1:45:25
Like where it's again, it's not it's not about drawing a circle, uh you know, taking a list of action steps and drawing it as a circle.
1:45:31
That's like that rote version of, "Well, we have a flywheel. We don't understand it."
1:45:36
It's about understanding the true logic of momentum, deep deep understanding.
1:45:42
So um one thing I've learned is that there's tremendous power in thinking very hard about what is the the 12:00 point on the flywheel because it has tremendous signaling.
1:45:54
So as your opening point about, you know, creating something like creating the next great bicycle helmets or the next great generation of chips or biotech drugs or whatever, or is it about does it start with getting a certain kind of medical professional like a Cleveland Clinic?
1:46:08
Does it start with lowering costs as as Vanguard's was like, where does the flywheel start?
1:46:14
Even though it's a repeating loop, is there something very powerful about asking that?
1:46:18
So that's one thing I've learned.
1:46:20
But second thing I've learned is that there's a uh and this I think really gets to how people ought to be thinking about today in the entrepreneurial world, building great flywheels and great companies.
1:46:32
There's sort of a right side and a left side of the flywheel.
1:46:34
So when you look at a a flywheel, it's going around the the clock.
1:46:39
I like to think of it is that there's sort of a 12:00 to a 6:00 part of the flywheel.
1:46:43
And then there's a 6:00 to the 12:00 part of the flywheel.
1:46:47
And if you really study the best flywheels, uh they have a different role.
1:46:53
And so on the on the right hand side of the flywheel, the 12:00 to 6:00, is really about what you do in the world, what you do to contribute, what you do that makes people's lives better, what you do that is kind of your net add, right, in some way.
1:47:15
And whether it be delivering great health outcomes, whether it be, you know, the next powerful generation of chips that multiply Moore's law over time, whether it's uh a biotech drug that's going to be able to solve anemia, whatever the thing is that you lower, you know, better returns for your investors, right?
1:47:34
It's you're doing something in the world.
1:47:37
And then as you come up the other side of the flywheel, what you find is that it's about generating fuel.
1:47:42
It's how you convert the 12:00 to 6:00, the 6:00 to 12:00 takes that and converts it into fuel.
1:47:50
So let's go back to that Vanguard one we were talking about earlier.
1:47:53
You get to the, you know, you're generating returns, you grow assets under management, but then that allows you to get economies of scale.
1:48:00
Assets under management economies of scale become fuel to pop down the other side of the flywheel again.
1:48:06
If you get the right medical professionals that then deliver really great health outcomes uh for your patients, and then you begin to attract folks from around the world, and then that generates, you know, services that you get cash flow, which then you can invest as fuel back into the flywheel again.
1:48:23
And so if you really get your flywheel right, you're you're it's like a two-piston machine.
1:48:28
Piston one is, what are you doing that's useful?
1:48:30
What are you doing that makes a difference?
1:48:32
What are you doing that's contributing to your customers?
1:48:34
What are you doing that's, you know, making the health outcomes better?
1:48:37
It's like it's your add in the world.
1:48:39
And the other is fuel capture, fuel generation, fuel capture to go back into the top of the flywheel and then spin it around again.
1:48:47
And one of the things that I think is deeply existential in when you think about all this stuff, is when you do the fuel part, what's that about?
1:48:56
So first of all, there's just the logic of fuel then just then accelerates the flywheel around again, right?
1:49:02
So how do you get the fuel out?
1:49:06
But you have to think of it as fuel.
1:49:10
And one of the great battles that we continue to have is the basic battle between are you ultimately built to last or built to flip?
1:49:24
And and that you have one, you know, it's like it's going to be with us forever, right?
1:49:29
But, it's a basic battle.
1:49:32
If you see that the point of the flywheel is to generate resources that get siphoned out of the flywheel, they're really the purpose is to have that flywheel generate cash to other people to allow you to cash out, to sell the company to somebody else, to right?
1:49:51
It's about to generate just, you know, shareholder earnings. That's siphoning fuel.
1:49:58
And if that's really the point, then you ultimately are on the built to flip side.
1:50:04
If the point is the built to last side, I want to you know, I really want this flywheel to go to a billion turns and 10 billion turns and continue to do great things for the world, then all that is about taking as much of that fuel as possible to fuel the next clicks on the flywheel, next clicks on the flywheel.
1:50:22
And the fundamental existential question, people talk about purpose, we discovered purpose many years ago in our research, but this is sort of the operational version of that. Where's the fuel going?
1:50:31
Is the truth that you want to generate a flywheel that generates fuel that you siphon off or use as a flip?
1:50:41
Or you generating fuel to ultimately make the flywheel bigger, more powerful, greater momentum, doing better things in the world, and last a really long time?
1:50:52
I think that's a great place to end this conversation, Jim.
1:50:54
I really appreciate you taking the time and explaining it, and I think it's perfect perfect point to leave on. Till next time.
1:51:02
Well, I have this feeling that there will be a next time.
1:51:06
I'm uh I'm heading into my uh into my um into my research cave, and uh now, you know, I I feel really grateful for for bringing out uh this this re-release of Beyond Entrepreneurship to bring Built to the World, and thank you for letting me share Built with your listeners.
1:51:27
I I just you just bringing Built to people is very meaningful to me.
1:51:33
And and now I'm going into my research cave.
1:51:36
Uh I'm going to be working on my self-renewal research, and um you know, I I do think of it as I'm at sort of at a midpoint in my career.
1:51:42
I'm only 62, and if I've got good genes, you know, I should be basically 30 years into a 60-year arc.
1:51:48
And that's big if, right, on genes, but I don't know if I I good luck and all that kind of stuff, but if I get that, and I'm turning to these new questions.
1:51:57
So, um although there's lots of other stuff we could talk about.
1:52:01
So, I'll I'll be back, uh but for a while, I'm going to be a nice enneagram five after I get this out in the world and hiding in my cave. Thank you.
1:52:12
I can't wait to see you on the other side. Very good. Thank you again.
1:52:16
Really really joyful to spend time with you.