#110 Jim Collins: Relationships vs. Transactions

0:00 If I stand back and I think about what are my absolute most primary values. They are curiosity and relationships. Bill's basic view of the world. Was Number one, life is short.

0:11 Uh, you never know when it's gonna go away. And in the end What is that up to? What is meaningful. And Bill believed that

0:21 People Break into two buckets. There are those who kind of come at life as a series of transactions. And there are people who come at life as building relationships. They'll believe that the only way to have a great life

0:34 You can have a successful life doing transactions, but the only way to have a really great life. Is on the relationship side. Welcome to the Knowledge Project. I'm your host, Shane Parrish. This podcast sharpens your mind by helping you master the best of what other people have already figured out.

1:04 If you're listening to this, you're not currently a supporting member. If you'd like special member only episodes, access before anybody else, transcripts, searchable transcripts across all the shows. and other member only content, you can join at fs.blog slash podcast. Check out the show notes for link. Today I'm speaking with Jim Collins, author, student, teacher, and researcher of what makes great companies tick.

1:30 His books include Good to Great, Built to Last, How did the Mighty Fall, Great by Choice, and most recently B Two point oh Beyond Entrepreneurship Two Po the Ambitious Upgrade of his very first book. Jim was on the show before, episode 67 to be exact, and it was one of the most downloaded and talked about episodes we've ever had. Today we cover all new ground, including What it means to be a mentor and a father.

1:54 Why we should trust by default. Sustainable relationships. Why we confuse living a long life with living a great life? Why some people suffer from indecision and what to do about it. Risk aversion versus ambiguity aversion.

2:08 Pattern recognition, and so much more. Grab a coffee, it's time to listen. And learn. I think we're gonna start with Bill Lazier and the role of great mentors that sort of change your life. You said he was the closest thing

2:28 to a father for you. So I want to start there. What does it mean to be a father? Not in the biological sense. Anyone can do that. But the essence of what it means to be a father. 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 specific case.

2:45 And expand that out to what father is about. In our in our last conversation, 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. And so that was kind of like the recognition there was no father.

3:08 I was Very fortunate to come across Bill. Ending up in his class the first time that he taught at Stanford. And no one knew who he was. I didn't know who he was. Uh he had had a successful entrepreneurial career and was taking a step of

3:24 of kind of a renewed path to invest in young people and and then shift from building companies to building young people, I think is what was really happening. And Bill took this interest in me. I don't really know why he did. Uh it's vi I I mean, I truly can't give you an answer for that. I don't I don't think I was a particular standout on it, you know, in in certain kinds of dimensions, but

3:48 I think that it starts there is a genuine interest. Interested Without any agenda. It there was no sense of what w that Bill felt Uh you know, is it's not that he wanted me to like start a company so he could invest in it, or you know, uh or is gonna help him with research, or he had no idea that eventually we'd write a book together or any of that. Um

4:09 Bill just Інез тремendoс сенсів. took an interest in me, and he would start inviting Joanne me over to his house. 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. But he also had this

4:29 Kind of Faith and belief. in in that if I found a way to deploy my energies I could be effective and useful. Uh, he also had this real sense of

4:40 Guidance for me. Bill would talk to me a lot about Values. commitments and about relationships and about what are you going to serve. And and these sorts of things.

4:51 Until I really started having conversations with someone like Bill, and Bill in particular in great depth in my twenties I had never had a father figure who Invested in trying to shape my character. I I really was impoverished on that. And then Bill stepped in and played that role of helping to shape.

5:13 Not what I did career wise. But who I was as a person. 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. But I kind of didn't have a guidance mechanism like it just gonna crash 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. He would invest that way. So I think it has to do with being genuinely interested without asking for anything in return. and shaping who you are, your character.

5:48 at that point in my life, I was on a journey to create my own father. I mean, that's really we you know, we mentioned that last time. I I really was trying to do that. It's like I didn't get one. So I'll make one. And Bill was one of the central people in that. I remember this um coming up with this thing called the personal board of directors and uh I was back in the early eighties and

6:11 And I made Bill my honorary chairman of my personal board of directors. And when I chose members for my personal board of directors, they were not chosen for their success. Uh they were chosen for Their values. And for their character. Can you dive into that a little more? I mean th what I'm thinking about here is that we're we're all born with parents. We didn't choose them. 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

6:42 You get these habits, you you assume these habits from your parents, and that's the patterns that you learn. as children. And then at some point you take over your life and you get to choose your habits and patterns, whether you recognize it or not, you you can take control, you can pick your own personal board of directors, you can pick your mentors. And we can choose to have the best mentors from history. What's the approach to pick the right ones? First in in in my own case

7:08 I had to start choosing early. I think my initial choosing was to get away. to to not have to depend on something like an undependable father. I mean no one in my family gave me guidance about where or what I should do or how I should think about things. So I think this question of sort of self direction and self choice and shelf self molding for me started Actually, I was thirteen or something, probably when it was really conscious that it really began.

7:35 And there were some pivotal moments in that for me where I just like, I'm just gonna do this. This is what I'm gonna do. But then uh when I when I entered Uh my twenties. Uh when I think about kind of choosing mentors and and creating

7:48 A father. I I did I did three things. The first was I Just Mir.

7:56 Simple goal. I'm gonna read a hundred biographies. And I figured that By reading a hundred biographies. uh I would get a hundred lives. And those lives.

8:08 would teach me something. The beauty beauty of biographies is you get the entire arc of people's lives. Right. And and so you don't just see him at moments or incidents. And I sat down and one of the ones that that shaped me a lot was was You know, Churchill's memoirs of the Second World War, four thousand nine hundred and ninety six pages, six volumes. Uh, it completely shaped the way that I think. About how you guide through tumultuous

8:33 Horrendous times. And and I tried to you know take the best of You know? Winston Churchill as a as a guide. And then that sort of led to the second part of the personal board of directors. And I remember very vividly.

8:47 I was I was driving down Alma Street in Palo Alto. And I was listening to an audio book called Plain Speaking, and Plain Speaking was uh basically transcripts and consolidations of interviews that a guy named I think Merle Miller had done with Harry Truman. And uh Truman uh had this one line in there which was Only thing I know for certain is if you don't know the difference between right and wrong by the time you're thirty, you never will. 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 twenties.

9:19 I got like five years to figure this out. So I mean it was a cr really clucer moment. It's like how am I gonna do that, right? Because I I really didn't want to get I I really wanted that. And so Uh that's when this idea of I'm gonna create a personal board of directors. And I'm gonna put people on that board. Who I Admire

9:39 for their Character. Right, they're the sorts of People I wouldn't want to let down. And so I drew a little

9:48 diagram of a like a board table and put seven seats around it. And of course Joanne had one. Bill had one was my my first sort of non Julian choice And then I then I filled out the rest. I put that that piece of paper above my desk. And whenever I'd be in situations, I'd look up to that piece of paper and there'd be those seven seats. I mean it's literally like their names were there.

10:11 Uh and and it was like this guidance mechanism, and it w didn't look to it for you know how to be successful. That wasn't what the personal board was about. It was this like moral compass. and uh this sense of what's a richer values based life based on these people. So then that was the The second part, so biographies

10:33 Then the personal board of directors. And then the third. Was really, really growing from mentor moments.

10:43 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 those mentor moments, they were like sapphires. They're just pure drops of gold. And I wanted to have those be like these seeds, these kernels that would would affect me for the rest of my life. And and and I have sought mentors

11:11 it's evolved and and I and so I had the personal board directors and then as I gotten older most of my personal board members are now deceased. um including Bill. And and so I started thinking now that I'm in my sixties, how do I begin to also have that same mechanism and I I've I've evolved it. It's no longer personal board of directors now that I'm a different stage of life. I I have my personal band of brothers.

11:37 S some of them are f are are women, but it's sort of this band of brothers idea. And there's these people in my life that again I wouldn't want to let down. Some of them are younger than me, quite a bit younger. Some of them are are about my age. And uh and I when I text them, you know, it's brother Tom, brother Kyle. Right.

11:56 My personal band of brothers, the people who would hold me to account, the people I would not want to let down. I think that's a powerful approach. I wanna dive into some of those mentor moments specifically with Bill and some of the the lessons that you've He helped instill in you. One was relationships, not transactions. So so

12:17 Yo Bill Uh and and we write about this in in this uh Beyond entrepreneurship two point oh, which Co authored with Bill 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 two thousand four.

12:35 Um, and I knew I wanted to write something about him. And the profound impact he had on me. 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. Uh they are curiosity and relationships. And the curiosity I think has kind of been with me all the way along, but the relationships when I got from Bill. Bill's basic view of the world.

12:58 Was Number one, life is short. Uh, you never know when it's gonna go away. And in the end. Um

13:05 What is that up to? What is meaningful. And Bill believed that People Break into two buckets.

13:12 There are those who kind of come at life as a series of transactions. And there are people who come at life as building relationships. They'll believe that the only way to have a great life Can have a successful life doing transactions, but the only way to have a really great life is on the relationship side.

13:29 And so Bill Just impounded in me, instilled in me, modeled for me. In the end, it is really deep relationships and doing things you love with people you love and those connections. And so we got into this conversation though about relationships one day.

13:46 And I asked Bill. So Okay, but so what makes for a great relationship? And Bill said oh A really great relationship.

13:55 is one where if you ask each person Independently. Who benefits more from the relationship? They would each say, Well I do.

14:05 And I said, Well, isn't that a little bit of a selfish way to look at it? And he said, Well no. Let's think about this for a minute, Jim. Let me ask you. Jim, who do you think benefits more from our relationship? I said well clearly I do. I mean with everything you've done for me. He said, Well, isn't that just great? Because I would answer that I do.

14:23 And he said, See, the reason both people can answer that way is because both people are putting into the relationship, not for what they're going to get from it. for for what they can give to it. 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.

14:46 Everything we do here The good to great project is relationship oriented. 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? Everything goes back to relationships. One of the other lessons you you learned from Bill Um was the trust wager. Talk to me about that.

15:11 Bill had this. really interesting stance on trust that ultimately affected me. And so let's make this both human and and and intellectual. 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 and when I sort of left.

15:31 The relatively cloistered world of a place like Stanford. You kinda hit a broader world and Um certain assumptions about how trustworthy people are might get dashed by events. And I I don't wanna call people out on this, but just suffice it to say that

15:48 To my great shock. I discovered that some people You actually genuinely weren't trustworthy. I was um I'm just naive in some at some level, right, but you know, when I've had people like you know Bill Azir in my life or I'd met people like Jim Stockdale or, you know, uh Peter Drucker, or people that just you know they're just of such a character caliber that

16:08 I was in a very rare group of of folks. And so I asked Bill. Uh have you ever had your trust? Yeah.

16:16 He said, Oh yeah, of course. I've been I've I've had my trust abused. Uh it's just part of life. But then he gave me this you know, it's this one of this great mentor moment. He said, This is Jim, this is one of Now that you're starting to have this experience and really experience it. You need to decide. What is your opening bid?

16:34 When you are Establishing a relationship with someone when you're interacting with the world. Is your opening bid To assume. Trust.

16:44 To assume that someone is trustworthy and to grant them the full benefits of that. That's your opening bit. And that trust can be lost. But the bid is trust. Or is your opening bid

16:58 To not trust. But the trust can be earned. So many aspects of your life will be affected by which fork. On that you take. That's a stance on life.

17:11 And I said Well it seems to me, Bill, you've chosen the trust bit. As the opening bit, and he said, Yes, I have. I said but but Bill Brutal facts.

17:22 Not everyone is trustworthy. And the brutal fact is some people will abuse that trust. So have people abused your trust trust? And he said, Of course they have. 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.

17:42 Right, not just emotionally, but financially as well. And then there's this little kind of cul-de-sac on the whole thing that Bill has. Which is the notion of You don't leave yourself exposed to a a catastrophe, right? In such a way that if you if you trust your

17:58 let's say you're you're 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. You know you you always pay attention to the cash flow. You always watch the numbers, you always keep an eye on things. Like you you don't it's not like you become disconnected from reality, but you said, but you know I never left myself open to catastrophe. Beyond that, yeah, that that one hurt. I said, Well did it change your your approach to trusting people? He said, No, it's just part of the cost of living. And then he went on.

18:29 And he described it as upside and downside. And this is it sort of gets into the you know it just simply hardheaded. This was a hard headed view. He said I've come to the conclusion I think across the iterative relationships and interactions and aspects of life that there is far more upside. In an opening bit of trust.

18:50 And there is far more downside. In an opening bid. Of mistrust. It all goes to the question of people. If you really basically wanna have your life, whether there be people in your company, whether they people in your life, whether they be your friends, whether they're people you rock climb with, whatever it is.

19:10 The very very best people. Will respond To the bid. Of trust. The best people

19:18 will be attracted to that and and you want the best people to be attracted. And the second is he said, Have you ever considered the possibility, Jim, that your opening bid affects how people behave? If you trust people. you're more likely that they will act in a trustworthy way. So it's a double win. It's the best people and they'll behave in a trustworthy way.

19:40 The flip side is if you have an opening bit of mistrust. The best people will not be attracted to that. If if you have this opening sense of you have to earn my trust. Now, you may have to earn my trust how good you are at something. Right, or earn my respect for your performance or that sort of thing. But if you if I basically like I don't trust you, you have to earn it.

20:02 Well, some of the best people are gonna be like, I don't need to put up with that. I'll go do something else. And for Bill it was always about again people and relationships. Right. That that's where the trust trust comes from. And and he just came at it as a

20:15 As a very hard headed and warm hearted approach to the world, and that's why I think there were so many people Whose lives were affected by Bill Azir, he trusted them and responded. In very trustworthy ways in the world. The the other thing though that on an intellectual front on this is I uh as I I I think you know, I'm a huge fan of this thing called the Great Courses series, where you get college level courses, sixty lectures, forty lectures, whatever, and I've been doing them for years and years. And there's one called Games People Play and it's a course on game theory. And of course I know you know game theory well.

20:50 If I remember it right, the essence of it was that the best strategy is an opening bit of cooperation. Yeah. the game can unfold. From there. Right, but that that is a good place to start. So I was very sort of like Bill had this sense of game theory.

21:07 that was in his approach to relationships and humanity. I don't know if he ever took a course on game theory. I think that's a really interesting way to approach it. And I definitely agree with with that personally. And my my friend Toby has this concept that I think might help people. It's very visual. It's called the trust battery. And you can do things that increase your trust or decrease your trust. But if you start that trust battery at the say the seventy fifth percentile Um then you know, you're starting from a different place than if it's the fifth You know, you're five percent.

21:38 uh 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 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.

22:01 One of the things that Bill always emphasized was That sometimes you don't know the whole story. He said sometimes It may not be mi ill intent, it could just simply be a misunderstanding, or it could be

22:14 Just incompetent. Right. Somebody might not actually be untrustworthy. They might just be incompetent. Or they made a mistake, right? And so be careful. Uh there's this um Uh this moment I I call it seeing the hat. It's a it's a weird thing, but Uh

22:29 Driving down a road in in Boulder. And and imagine a car all of a sudden veers into your lane from the the lane next to you. You're but you know, both going the same direction and you're like, Oh, you know, the idiotic driver or whatever. And then um You notice that what had happened was uh when you went on pass further is somebody's hat had blown off in the middle of the road and they were gonna maybe step out and grab it.

22:51 And but you couldn't see that. 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. You're jumping to a conclusion about why somebody is doing something, when actually if you can see the hat. Forgiveness. What do you think it means to forgive? And do you find it harder to forgive yourself or to forgive others?

23:12 Oh definitely harder to forgive me, I think. Uh you know, forgiveness just means letting it go, right? And if you don't assume malicious intent on people, Um, it's a lot easier to let it go and we create these stories in our head about how people are You know. doing things to get us at work and you know, it's just nobody really cares. You know, nobody's walking around trying to hurt you. And maybe there is the occasion, but it's not worth living life like that. And I think that when people in your life that are close to you that you trust and you're vulnerable with do

23:42 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. I'm probably the same as most of my listeners. I mean, I have exceptionally high standards of myself. 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. I could have said that more succinctly, or I'm just always sort of like the inner critic in me is out of control in some ways. And I think that Um you know I find it really hard to forgive myself when I have lapses in judgment. And we all do, we're all human. I mean that's part of what it means to be human.

24:20 And I think that we need to understand that in perspectives. 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 ha uh they're in the same boat. I mean, we're especially right now, we're all just trying to do the best we can. Nobody's at their best. the tolerance for, you know, what other people are going through just has to be higher. And you have to put yourself in other people's shoes so you can realize that. The reason I ask about forgiveness is that one of the hardest things for me

24:50 As we talked about before, my my dad died when I was twenty three. And When I went to Santa Fe and left. that time the the Albuquerque rather um is it where I realize There is no dad here, it's like that.

25:03 seen in an apocalypse now, you know, there ain't no CO here. Whether There's no dat here. And I carried a lot of anger and resentment. And judgment about that. А не позмей дає.

25:16 I never had a chance to like reconcile. I had to learn how to forgive somebody who's no longer here. And to let that go. The act of forgiveness is something I had to go through, even though my father is no longer here. And that was enormously liberating, right? I do not need to be judging somebody.

25:34 And be fueled by that. And that I like your idea of the word letting go. It's Letting it's like letting that go. I don't need that. I can let that disappear. One of the things that I that I got out of reading

25:48 the the updated version of this was how we confuse living a long life with living a great life. You wanna talk to me about that? So long life and short life. This is another great lesson from Bill and in the in the book I wrote it as put the butter on your waffles but uh

26:05 Uh cause it really captures a crystalline moment. And They'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're we were writing the original version of Be on Entrepreneurship uh together. And on that original version, it was the very first book I ever wrote, and I was struggling uh to to write uh my uh working on the writing part of it.

26:34 And I would basically get to the end of the day and I'd throw a bunch of pages in the waste basket. I'm just like, God, I'm totally inadequate at this. And this is so hard. And of course, what you realize. Anybody who writes tries to write well even if over the course of decades you become a better writer. Is it The the only reason writing becomes

26:53 uh easy to read is because it's hard to write. And writing is just hard. I I think of writing as um is like running. If you're going to run your best. It's always gonna hurt. And so if you can run a five minute mile.

27:09 And then you get it down to four thirty. Well, if you run a four thirty and that's your best time. It's gonna hurt as bad as when you used to run the five minute mile and it was your best time. You're just faster, but it's gonna hurt. And writing is kind of like that. It's like, you know, it never gets easier. You only get better. 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. And I go to Bill and uh and I

27:34 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 gonna uh it's really gonna hurt, but this is just something you have to endure and you know, it's kind of like you gotta keep going and you know that sort of like the hard edge thing. And instead what I got was this This response where he's just said, Oh, well, okay. Well if this isn't fun, we should stop doing it.

28:02 Say what? Yeah. What do you mean? We're writing we're writing a book. Nowhere in the contract does it say have fun. What are you talking about? So he says no, you seriously, he says, Like if this just isn't fun. If we can't find a way to make it fun, we should just not do it.

28:20 It was so perfectly built. Because he just he so deeply believed that if you can't find a way to Make something fun and enjoyable. you've sort of miss the point because along the way there just aren't that many days and years in life anyways. And then the day after we turned in

28:36 the manuscript for the original edition of Beyond Entrepreneurship. Bill had a quintuple bypass surgery. He had a heart attack. And a few months after that We were having our Saturday morning waffle fest. We would go to Peninsula Creamery in Palo Alto.

28:54 And we would meet there at Saturday morning and we would have waffles. We'll just talk about whatever. It was just Bill continuing to invest in shape and care. He puts Butter

29:07 And syrup. Piece of butter. And And then that puts the warm syrup on it. It all kind of mixes together. I mean it's yeah, it's

29:15 Really, right. But I I look at it kind of in horror. And I go, Bill, Bill, you have quintuple bipals. What are you doing? And he just continues to put the butter on his waffles and enjoys his waffle and has a smile. And then it says to me You know, Jim When I was being wheeled into the operating room.

29:32 I think I had a smile on my face because I realize right at that moment. I've had a really great life. And if this happened to be like the end. And I don't come out of this.

29:45 Dorothy and I have had a great run. Everything from here is gonna 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.

29:56 It was a great run. I've had a great life. He said to know that. To really know that when you're being wheeled in and You're gonna have the Kuntuple bypass and That was my feeling. I wasn't afraid. I was just grateful for my life.

30:13 That's the moment I knew. I'd really had a great life and so I'm putting the butter on my waffles. And What Bill believed was one, just this notion that time

30:26 Just goes by really, really fast. And it goes faster and faster. Now, someday I'd love to hear on your show. А психологіст, у собой укань томі. Why It's the same twenty four hours, but they're always faster.

30:42 And Bill and I put this little story in the In the chapter I I s I said to Bill one day, I said Bill Yeah, noticed that time's going by faster and he said, Well what do you mean? I said, Well I I just noticed that Yeah, garbage days when they have to put the garbage out. seem to be coming quicker and quicker. It's like, Oh my goodness, it's garbage day again.

31:00 I know it's the same seven days, but man, it sure seems like a faster seven days when I was than when I was young. And he said, Ah. Well, why do you get to my age? And Christmases start coming around as fast as garbage days. But but that notion, he said your time accelerates. And so actually I don't know what the psychology of it is. I have it

31:18 Weird little theory on it, but But nonetheless, this notion that Yeah, that the days seem to they're the same twenty four hours, but they go by faster. And it's the same month and it goes by faster. And the same year and it goes by faster. Click, click, click, click, click. And he just said, he said, What that really teaches me is it's gonna be over in an instant. I don't care if you get a hundred years or a hundred and ten years or seventy years, it's over in an instant. And I don't care how many years you get, it is short and it is gone in the blink of an eye.

31:45 Given that reality. Bill said. I think in terms of a great life. It's the integral, right? summation of all the moments of your life.

31:55 Integrated from birth to death, experience T D T. It's the summation of those moments. And Bill was like however many you get It's the quality of And that he lived with to the end. And then he

32:10 Woke up. From a nap. December of two thousand four, and he was walking across To to the bathroom and he fell dead from congestion.

32:20 And um Dorothy said he had a smile on his face. That was it. And I I lost Bill. As did hundreds of other people.

32:31 But he Had absolutely a great life, and his impact on all those people. So immense. His lives he changed, not just mine, but hundreds and hundreds of other people's lives that he changed. creates that he did more through those people with his life.

32:49 than almost anyone I've ever met. And he's still touching people and changing lives. I wanna 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. I was like, Oh my god, how can I have Jim Collins on the line for a few hours and not talk about decision making? So Well, why do so many executives suffer from indecision but leaders who build great companies don't seem to how do we prevent

33:22 analysis paralysis from sort of Preventing us from making a decision. So we know quite a bit about this from our research, and just to review for for everyone, maybe if you haven't heard the the previous podcast, um Our our research method is we study the uh histor we do match pair, we find pairs companies that were in the same spot, same time, same resources, same potential that then

33:47 uh had different trajectories, 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. The key to that is historical. Right. You try to go back in time. You don't you don't read just later accounts of why

34:07 you know, Intel decided to do the one one oh three memory chip. You d 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. So that you can then sort of follow through this iterative, uh it's like an iterated movie, right? Watching through step by say, okay, let's freeze frame here. Here they are in nineteen seventy two, here's the context, here's the environment, and then you look over at the comparison company and you say, what were they doing? They were looking at the same context, same environment, how did they make the the decision different, et cetera. And then you you replicate that and you picture it that that if you if you think about uh our research and something that Morton Hanson, one of one of my great colleagues, uh taught me is the power of breaking things into events. What we have is okay I could have say

34:50 eleven pair of companies. Well you don't actually only have eleven things to look at or eleven pairs to look at if you then disaggregate them. across uh time Right, and you take their entire history. Well now you can do something now you can have Hundreds or thousands of decision events.

35:07 I so now you've got buckets where you've got l much larger numbers to work with. Let's look at all the decision events over time. And we'll 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. So that notion of event analysis through a historical match pair method, uh is very much how uh we come at our work and and Morton's of ability to be able to say which we use in grade by choice a lot, which is how to break things into these of discrete events that you can look at, you know, many, many uh incidents for for for doing really good analysis. And one of the things we looked at uh in in our research over time s is uh decisions.

35:49 uh big decisions, small decisions, processes of decisions, and so forth. Let me share a story. It's actually one that we used in creating by choice. uh about Andy Grove. So Andy Grove gets this um

36:04 uh prostate cancer diagnosis and I don't remember all the details of it, but Uh at the time, as I understand it, uh there there was a you know some degree of ambiguity. uh and maybe still today I'm not an expert in prostate cancer or prostate cancer treatments, but there were the all these different things. I mean there was the implant seeds and surgeries and radiation and all these different things that you could you could do. And so you talk about okay, now we've got a decision to make. What am I going

36:30 to do. I have to decide what I'm going to do about this diagnosis. And you're Andy Grow, right? You're probably one of the best corporate decision makers in history. One approach would be I'm just gonna follow what my doctors say, or I'm gonna follow the standard of care. Well what what he did was he he got good advice from different doctors, etc, but then he became

36:51 Like he really analyzed. He became he's like he described it like his second PhD. He really analyses this is a this is a significant life altering decision. So he's not just gonna be like I just need to decide, you know, and if I make a mistake I'll self correct. Well, look, if you do certain kinds of surgery, you can't self correct. But if you just sort of

37:11 wait forever, well then maybe the cancer will get you. Right. So you've got this tension between the two. So he he does his his, you know, sort of self directed PhD in this stuff. And eventually chooses a course. I forget what the exact course is in Great by Choice, we wrote about it a little bit. But in there is something that really illustrates.

37:29 'Cause once he made his decision, it was a very clear and unambiguous decision of what he did. Morton and I observed was that Uh It's not a choice between like analysis and bold fast decision making. It's about using

37:43 Really good empirical evidence. And really good analysis. as the basis for Clear and decisive decision. And that's what he did.

37:56 Notice there's something else, though. There's a really critical aspect of the decision making. And so Morton and I got very, very curious about something, which is we got curious, we we were studying companies that went from startup to ten times better than their industries for the for the book Great by Choice. in the most turbulent industries we could find. So that's why we're looking at semiconductors and you know, software and biotechnology in the early days, et cetera. And one of the questions that we really wanted to understand

38:22 was speed and pace of decisions. What would the evidence say? is the correlation between speed of decision making and quality of outcome. And what we found was that the 10X leaders had a much wider range of ability.

38:40 between slow, medium, and fast. And sometimes they made really big decisions quickly. And sometimes they made really big decisions. Slowly. And there wasn't really seemed to be a pattern.

38:54 And often the comparison companies would often act very quickly, the sense of like, we've gotta do something, we've gotta move, we've got right. What Morton and I observed is this is that The first question in decision making Is how much time Before our risks change.

39:11 So Where Andy Groves Cancer situation as he understood it going to change in a matter of days. His risk profile was going to be the same a week or even six months later. He had he had he didn't have years. But he had months. And so he used the time he had before his risks would likely change.

39:29 to be able to make a better decision. I remember when the fires broke out here in two thousand nine and we got a call from a friend of ours who was in the mountains. It's just like we got to get out of here now. It's coming over the hill. So there are some situations where it's literally minutes. Or maybe days. And the risks are gonna change, right? Or it could be something where it's it could be years.

39:53 And and your risks aren't going to change you, the risk of missing an opportunity or the risk of of getting it wrong. My friend Georgia Paolo Lehmann grew up in Latin America and and and was very successful in the tumult of of Latin America. Said something to me. He said, Yep. People

40:09 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. And what we learned in

40:26 building companies in Latin America is the uncertainty never goes away. So often we learn to like if we can let events unfold without our risk changing, we will let them unfold. But when we need to act, we will act. What really, Morton? And I found in our research is the question is not fast decision or slow decision.

40:47 you know, as sort of proxies for decisive or not. It How much time before your wranges? And then make your decision within that time frame. Another big thing we learned is

40:58 Near as I can tell. There is no correlation between consensus decisions and intelligent decisions. uh in the history of corporate history, most great decisions are taken where there's still substantial disagreement still in the air. And they are taken without a need for uh consensus. The culture is one of of disagreement, dialogue, debate, argument.

41:21 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. That's the pattern. That tends to more correlate with our better results.

41:36 I like that. There's a couple of different directions I wanna go there with. With consensus, I think it's really interesting. Groups search for consensus, especially if you have group decision making instead of individuals. Individuals Search for Truth. Groups.

41:50 tend to wanna go towards consensus. That way everybody can tell their own story within the group. If the decision's successful, you go back to your tribe in the organization and you uh you can say that it was because if you you influence the group 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. And nobody's really accountable for those decisions. Whereas if you have your name on it, you're searching for truth. You're searching for the best decision possible. Yeah. Uh I think that's really interesting, actually. And I I think that

42:22 There's this thing that uh we call autopsies without blame. Not all decisions have good outcomes. So just because you got an adverse outcome and you you're when you're in your

42:35 uh poker interview, for example, just'cause you get an adverse outcome doesn't mean you made the wrong decision. The indecision often happens because you begin to create a culture. This is what we see in our comparison companies. 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 understand. gain understanding to assume

42:59 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.

43:12 The moment that you introduce autopsies with blame 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 Yeah, you've got upside, downside for the company. It's an agency problem, right? If everybody becomes indecisive, that's bad for the company. But it might be very good for their careers.

43:33 So how do we build this uncertainty muscle? Like how do we develop our ability to live with ambiguity? What are what are the patterns to that? Like how do we go about doing that? So I remember a student came to me once and said, You know, I I I hear what you say 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 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, I I could carve my own path and

44:03 uh really you know do it my own way. But you know, I I I just don't have the risk profile for doing doing something entrepreneurial. And I said, um Well what's one of the first things you learn in investing? One of the first things you learn is you know, don't put all your eggs in one basket. 'Cause that's high risk, right? Let me ask you a question.

44:20 What A job. All your eggs in one basket. You basically have made a highly undiversified portfolio bet. Oh, and by the way, you have very little control over it.

44:33 You 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. And So in an entrepreneurial world there's risk, but

44:46 Maybe they're more Clear. Right, what your risks are. There's this market risk, a finance risk, account. Inside organizations there's this thing called political risks. Now those of us who are not good at that, and I am one of these people who's not good at that.

44:59 You can get blindsided because you just don't understand how the politics work. Now you got that risk in there. And as Irv Grossbeck, one of my other mentors who I admire greatly, always used to say Yes, there are risk to entrepreneuring, but never forget there are equal risks, maybe even higher risks to not entrepreneuring. So if you really want to be risk averse.

45:18 Why would you throw all your eggs in one basket that you don't even control and has all this political risk within it? Why would you take a job? See if you take an entrepreneurial path. C a product A is not working, product B's not working, I can do C, I can do D, 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. I can build a portfolio of clients. Right. I've got diversification. I've got different revenue streams. I can do all this kind of stuff, and I can do more to control it. That strikes me as lower risk. And oh and by the way.

45:47 What if you wake up at age fifty five 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 fifty five you're out. That strikes me as Horrifyingly risky. And then it began to dawn on me. They're Actually taking increased risk.

46:03 In order to reduce ambiguity. If you have a job You kinda know what you're doing. Right, it's much less ambiguous. It's much less it's the paint by numbers a kit. Approach to life.

46:17 And I follow the paint by numbers a kid. As opposed to I got on my own, it's a blank campus. It's a lot more ambiguous. What do I where do I start? What colors do I use? What kind of painting do I want to make? And what I realised is that people My students anyways would take increased risk in order to reduce ambiguity.

46:37 So I think people are very ambiguity averse. And uh and that's part of why they don't do an entrepreneurial path. 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? And uh let's suppose if it's kind of a multiplicative probability thing. And one probability is

46:59 So the end result is probability of success as an entrepreneur. And um But then you can break that into two parts. that lead to that probability. The first part of that is probability that you will find a way to be successful if you start.

47:14 Times. probability that you will actually start. And then I would turn to my students and I would say Tell me about the risks on these. Well, most of those students would look at it and say, if I really threw my whole life into it.

47:28 probabilities that I will be successful if I start and I do it in a really smart way are actually not that low. I could find a way, especially if I can be persistent long enough. To iterate to find a result that will work. probabilities that you will start. Well

47:44 As you go let's Two years go by, five years go by. Then you have houses and commitments and All these things, and at some point.

47:55 As more and more of the sort of accoutrements of life build up, the probabilities that you will start. Go down. Because now you have loss aversion. A huge loss aversion. And when you're young, you have nothing to lose. But the further along you get that probability goes down. It's a rare person who decides at fifty five.

48:15 To say I'm launching the entrepreneurial path. Some do. We talked about George Rathman last time. There are some that do. 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. Wanna come back to something you said about

48:34 Ambiguity aversion. That makes me think of one of the reasons that we have all these procedures and organizations is because we want to avoid ambiguity. If we follow the procedure, we're always right. 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. What do you think of that? So

48:57 So on the one hand Um in order to really build and make a flywheel go really far, you need to have some replicable recipes that you're gonna be staying with more or less for quite some time. If you take for example Yeah, South West Airlines, which amazingly became the m best performing stock over a thirty year period from nineteen seventy-two to two thousand two. Startup company, three airplanes.

49:19 And they originally copied their recipe from Pacific Southwest Airlines. It's actually an amazing startup story because you're back in the late 1960s, early 1970s. And uh their original business plan was Copy PSA in Texas. The D S A was Pacific Southwest Airlines. They were based in California, 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.

49:45 that had little smiley faces on the bottom, you know, on the front part of the uh of the fuselage and made it look like a smiley face in the sky. That was PSA. And South West Airlines uh basically flew out there and Copied their model. And took it back to Texas. 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

50:07 South West Airlines called South West 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 South West Airlines. I mean it's not it's it's like a photocopy of the original idea. But but here was the difference.

50:23 PSA after a certain point the recipe kind of became roped. Nobody could explain to you well why do we do fun things in the cabin. Why do we, you know, uh keep a certain kind of aircraft? You know, why do we try to turn the planes fairly quickly, right? At some point

50:39 the sort of real understanding of why this recipe, why do we put raisins in the oatmeal cookies? It gets turned into mindless procedure Southwest airlines. Herb Kelleher and uh Roland King and those folks, they really emphasize and train the people this is why we do the recipe. Why do we fly only seven thirty sevens?

51:02 Let's go through like ten reasons why we only fly seven thirty sevenths. One set apart. Every pilot can fly every aircraft in our system. One set of training manuals, one set of flight simulators, one set, right? They're the entire standardized system, and then they're perfect for point to point and they're really reliable aircraft. And that's why we're gonna bet on the 737, and we're gonna replicate that. Why do we not do first class seats? Why do I everything you could go through and they could say there are reasons why we have this recipe. This is why we have the oatmeal. uh why we have raisins in this oatmeal. Why do we turn the planes? really fast. Not because like ten minute turn is cool or twenty minute turn is cool, it's because

51:39 our economic engineer. is based upon having the planes in the air. And the longer they're at the gates, the more they're not earning money. The more they're in the air, the more they're earning money. Turn the planes, turn the planes, turn the planes, and what's the recipe for a plane coming in, getting it turned, get it back out again, right? We bake the cookies and we know how to bake the cookies. And then when we expand out across the country, there's this

52:00 You know, they're baking the cookies. Now we're baking the cookies in Kansas, we're baking the cookies to Las Vegas, we're baking the cookies out to Kansas City, and we're baking the cookies out to right. And and they've got this recipe. And we did this interesting analysis, Morton and I. We asked ourselves a simple question. In turbulent environments.

52:17 It's not that the really successful companies had a had a recipe and the other company didn't. The Folks at South West understood

52:27 The reasons and rationale behind the recipe. 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. If, for example, you say Luc, we only do short haul.

52:43 Well why do we only short haul? Because seven thirty seven's have a two hour range, and there's a lot of reasons why we do seven thirty sevens. Well what if something changes where seven thirty sevens now have a three hour range or a four hour range? Oh. Well, then that rationale doesn't apply. We could do a four hour range.

52:59 The understanding of the recipe. 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 you replicate twenty minute turns, whatever it is. How much do those recipes change over time? One set of companies changes the recipe about eighty percent.

53:19 over say thirty years. And the other changes the recipe about twenty percent. Which group is the more successful companies. The twenty percent change. Which surprised us.

53:31 We thought that what you would find is that the companies that Are the most successful Are gonna change the most in a changing world. That's not what we feel. They don't habit is change or not change, it change worlds changing, we have to change. We have to change fast. We have to pivot and we have to right no.

53:47 very deliberate thing. We understand a recipe and then the question always is What's the What's in the right twenty percent to change. And why? where people get in trouble.

53:59 is when you have everybody everybody knows the recipe, but they can't explain to you the rationale behind the recipe. 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. But there's one other piece. One of my favorite things that came from Built to last. Was in chapter six.

54:19 And it was about the development of Nordstrom over its greatest years. We put we put a replica of Nordstrom's uh employee manual. In chapter six of Built to Last. Jerry Portis and I did this. And basically what it said was

54:36 uh welcome to Nordstrom, you're part of a customer service machine and so forth. But then it said, um Nordstrom rules. Rule number one. Use your best judgment in all situations. There will be no additional rules.

54:52 So how do we put these two together? What we really found makes a great flywheel, a great company go, is you've got an incredible replicable scalable recipe. It's an overall corporate approach to the world and you really know how that works. And you really understand why it works. And people can explain why it works. And

55:11 You multiply your success by baking the cookies. with twenty percent evolution like amending a constitution over time. But on the other hand You have people.

55:22 Who you trust. Who you can say in the context of our system, which we all understand how it works, because 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.

55:38 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 Gather. Now you have the genius of and

55:56 That better explains a southwest airlines. relative to a PSA. over time, a big part of the answer. Not the only answer, but a big part. How do you distinguish the people who are copying and don't understand Why the recipe works.

56:13 from the people who copy. How do you determine the difference between the two? As a casual observer, what are the ways, the signals, the Who really understands it? Because it i in good times

56:26 They're probably both getting really good results. But in bad times you're gonna get massively different outcomes, as as we saw with your your examples here. George Paolo Lehman, who's a dear friend of mine. Uh said to me once, he said, You know, I think of myself as a teacher ultimately.

56:45 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. And let's take Jack Bogle. 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, I guess, is really what happened. Uh and I've always admired Jack Mogle as a result. So I was at this thing in New York.

57:13 we were we were both being uh in inducted into something and I noticed Bogle was there. I was like, wow Jack Bogle's there. 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. And I said, Hey, I don't mean to intrude on your space, I just want you to know How much I admire you and what you built at Vanguard. And he he looks up and he says this warm smile and he says, Uh Jim, yes, um uh you know, I I I've read your books and we should talk sometime.

57:39 Do you ever get to Philadelphia? We should talk. So now at this point he's like eighty seven or eighty eight, right? And so I get home and I tell Joanne about God, I met Jack Bogle and you know he invited me out to come out to Malvern and And uh have a conversation and

57:53 Then I started thinking and I started hesitating because I kept thinking, How many Jack Bogle days are left? I don't wanna steal one. 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.

58:09 But reach back out to him, he asked you to. So I sent him this email, I said, Dear Mr. Bogle. Yeah, we you know, we met in New York, et cetera. 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 how it was nice to meet you, et cetera, et cetera. And Yeah. sent the email off, giving him every opportunity to say

58:29 He's too busy, right? Or was it gonna work. I get this email back. Dear Jim. First it's Jack, not Mr. Bogle. I'm so glad you followed up. 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.

58:45 Please come to Malvern. So I meet Bogle, he's eighty eight. and and we sit there I mean a real meaning real conversation And he got a picture like he had done his Princeton thesis on

58:58 think mutual funds essentially in the early days of that, decades and decades earlier, right? Was it six decades earlier? And he's still incredibly engaged and passionate and energized about this. When you look into Jack Vocal's eyes, they are burning with an eighteen year old's intensity. just coming right out of his eyes and into the room. We just have this it's like I you you would have no thought I'm talking to somebody who's eighty eight. who had a heart transplant. Now notice what Bogle did.

59:24 Vogel had They're incredible recipes that make uh Vanguard Go. to mutual structure. Right, 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, the way indexing is done, all these things, right? That are part of serving their clients and and the five. It's a different model. I'm not saying it's a

59:47 you know, there are multiple types of investing models that can work. But that's theirs, right? And it it's it's a recipe. When you sit down and you follow Boko, what did he do? He became a great teacher of it. His books are lessened

1:00:01 His Conversations They're not sales. Their teachings. А вони фане точ.

1:00:11 Versus giving you rote lessons. I think that's how you One indicator of the real difference. I love that. I think that's such a great answer. 'Cause 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.

1:00:33 I wanna come back to something you said, which is you've you've learned a lot about Um the flywheel since we taught class, what have you learned? One thing I've learned is that there's tremendous power in thinking very hard about what is the the twelve o'clock point on the flywheel because it has tremendous signaling. So is your opening point about, you know, creating something, like creating the next great bicycle helmet or

1:00:58 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? Does it start with lowering costs as Like Where's the flywheel start? Even though it's a repeating loop. Is there s something very powerful about asking now? So that's one thing I've learned.

1:01:17 But the second thing I've learned. There's sort of a right side and a left side of the flywheel. So when you look at a a flywheel scoring around the the clock. I like to think of it as that there's sort of a twelve o'clock to a six o'clock part of the flywheel. And then there's a six o'clock to the twelve o'clock part of the flywheel.

1:01:34 And if you really study the best flywheels. They have a different role. On the right hand side of the flywheel, the twelve o'clock to six. is really about What you do

1:01:48 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 at. Right, in some way. 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 a me uh anemia, it you're doing something in the world.

1:02:15 And then As you come up the other side of the flywheel, what you find Is that it's about generating fuel. It's how you convert the twelve to six. The six to twelve takes that and converts it into fuel. So let's go back to that Vanguard one we were talking about earlier.

1:02:32 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 assets under management economies of scale become fuel. to pop down the other side of the flywheel again. 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 you that generates, you know, services that you uh get cash flow, which then you can invest as fuel back into the flywheel again. And so if you really get your flywheel right

1:03:03 It's like a two piston machine. Piston one is what are you doing that's useful? What are you doing that makes a difference? What are you doing that's contributing to your customers? What are you doing that's you know making the health outcomes better? It's like it's your ad in the world. 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. And one of the things that I think is deeply existential. Is When you do the fuel part.

1:03:30 What's that about? So first of all, there's just the logic of fuel then just then accelerates the flywheel around again, right? So how do you get the fuel out? But you have to think of it as fuel. And

1:03:43 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. If you see that the point of the flywheel is to generate resources that get siphoned out of the flywheel,

1:04:01 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. That's siphoning fuel.

1:04:13 And if that's really the point. then you ultimately are on the built the flip side. If the point is the built to last side. That 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. And the fundamental existential question, when people talk about purpose, we discovered purpose many years ago in our research.

1:04:34 But this is sort of the operational version of that. Where's the fuel going? Is the truth. that you want to generate a flywheel that generates fuel that you siphon off. Or uses a flip.

1:04:47 Or you generating fuel to ultimately make the flywheel? Bigger. More powerful. greater momentum, doing better things in the world and lasts a really long time. 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

1:05:04 uh you know, a large part of that map on last time we were on the podcast, but last one thing we didn't hit on was the Stocktail. paradox. And I think that's critically important Um to think about right now. What is it and why is it important? Admiral Jim Stockdale. He he was the highest

1:05:23 ranking naval officer in the Hanway Hilton prisoner of war camp. Um In North Vietnam. He was

1:05:31 uh shot down in the late nineteen sixties and he spent uh seven years in the camp And he had leadership responsibility as that officer uh in a camp. I had the tremendous privilege.

1:05:44 uh to get to know Admiral Stockdale a bit when he was studying stoic philosophy across the street at the Hoover Institute and I was teaching my entrepreneurship and small business class across the street at the Stanford Business School. Through um Uh a student who'd actually written a paper on Stockdale kind of led to me. having this chance to have this

1:06:02 really life changing. conversation with Admiral Stocktale. We were gonna go for a walk on the Stanford campus and have lunch together and talk about whatever. In preparation for that, I I read his book. In love and war. Which is alternating chapters uh written by himself and his wife about

1:06:20 His years in the camp. And I I found myself as I began to read Uh. Block. Felt like this sort of

1:06:28 Cold penetrating mist was coming in. And I began to feel this. encroaching sense of just despair. And because what what It wasn't just the the the the horror of what he lived through, right? I mean you could he can 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

1:06:47 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. It's it's like we can all endorse something if we know. The end point.

1:07:05 Oh it's only a twenty six mile marathon. Right? But imagine you're at mile twenty of a marathon and you're really suffering, but you have no idea if it's a hundred mile race, a three hundred mile race, or a twenty five mile race. But you have no idea. That's what struck me as just the it's sheer overwhelming ambiguity of the suffering. of how of the extent of the suffering and how long it would be. And then it dawned on me, this this sort of Flash of realization hit me. Oh my goodness.

1:07:29 I'm feeling this. And I'm only reading about it. And I know the end of the story. How did he not completely capitulate to despair? Living it.

1:07:40 And Not knowing. Whether or when it would ever end. And when I asked him that. He said, Oh, I I never

1:07:48 capitulated to despair. Because I never wavered in my faith. that not only that I would get out But I would turn that into the defining event of my life. Then in retrospect.

1:08:02 I would not trade. I remember exactly where we were standing when he said that. And we walked. All the way over the next You know.

1:08:11 Wild torts. across campus. And we didn't talk at all. I mean it was ir interesting, somebody like Admiral Stockdale feels no need to fill the air with conversation. And finally as we're getting close to where we were gonna have lunch, I said, Admiral Stockton, I I'm curious Who did

1:08:28 do as well as you who didn't make it out as strong as you and he said oh it's easy, it was the optimists. I said I'm confused. I mean you sounded uh the optimistic back there. You said no I was not optimistic. Let me explain to you what I mean by optimistic. What I mean. The optimists are the ones who said, We're gonna be out by Christmas.

1:08:45 And Christmas would come and it would go, and then we're gonna be out by Thanksgiving and it would come and it would go and Another Christmas would come. And it would go. And they suffered from a broken heart. When I learned this lesson from Admiral Stockdale of this duality.

1:09:00 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.

1:09:14 To confront The most Brutal facts. As they actually are. Right now.

1:09:22 We're not out of here by Christmas. We came to call that the Stockdale Paradox, and the way it popped out. As I was doing the research. For good to great.

1:09:33 And one day I just shared that story with the research team. And I say I just keep thinking about this conversation I had with Admiral Stockdale, and then essentially what happened is that triggered Right there in the discipline thought. So you discipline people, but then in the discipline 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. They had this unwavering faith that they would find a way to get to the other side.

1:10:02 And the discipline to confront the brutal facts as they actually are. We're in a Stockdale time. I think we're always in a Stockdale time somewhere in our lives, but This is like a global stock deal time.

1:10:15 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. I think that's a great place to end this conversation, Jim. I really appreciate you taking the time and explaining it and I think it's perfect. Perfect point to leave on.

1:10:34 Till next time. Thank you again. Really, really joyful to spend time with you. Hey, one more thing before we say goodbye. The Knowledge Project is produced by the team at Furnham Street. I wanna make this the best podcast you listen to and I'd love to get your feedback.

1:10:54 If you have comments, ideas for future shows or topics, or just feedback in general, you can email me at shanefs.blog or follow me on Twitter at ShaneAParrish. You can learn more about the show and find past episodes at fs dot blog slash podcast. If you want a transcript of this episode, go to fs.blog slash tribe and join our learning community. If you found this episode valuable, share it online with the hashtag The KnowledgeProject or leave a review. Until the next episode.

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