5. Courage to Lead | THE 5 PRACTICES

The courage to lead.

This one is.

Embarrassing that it has to be on the list, but nonetheless it must. Because everything that I have explained to you today is unbelievably difficult. It is extremely hard to make decisions with a just cause in mind when so many of the pressures on all of us are pushing us to make the finite short term decisions. If you work for a public company, the pressure is overwhelming from the outside. To focus on the finite at the expense of the infinite. Sometimes we put pressure on ourselves to focus on the finite. We become so obsessed with the arbitrary goals we set for the end of the year that sometimes we abandon our own values in order to make the sale, gain the client, move the numbers. And if we do that too many times over the course of years, it's to the detriment of our own organizations. It's to the detriment of our own people.

It is unbelievably hard to keep a just cause in mind as the guiding principle, especially if you have to make decisions that hurt in the short term. It is unbelievably to commit yourself to this lifestyle, this practice of good leadership, where you obsess about the trusting teams like a family. It's never perfect. It's about human relationships. Sometimes it's confounding to us. And yet for us to acknowledge that our responsibility as leaders is not to drive the results, but to create an environment in which our people can work at their natural best is unbelievably difficult. It is so much easier to just hire and fire people willy nilly and drive the numbers and create all kinds of incentive structures based solely on someone's performance. Except for the fact that it drains the energy of people, it drains the trust of them, it drains inhibits cooperation and innovation, and eventually it runs out of steam. It's hard.

It's much easier to direct all of that discomfort and anxiety we have about competitions and our weaknesses at others. But the problem is, if we become so obsessed at winning, sometimes we do things that are quite unethical. It's like running in a race where I'm obsessed with beating the other runner. I may resort to tripping him, I may win the race, but I'm still a slow runner. And in this game there is no end of the race. It keeps going and going and going and going and going and going and going. And to change our mindset away from having competitors to having worthy rivals and being honest with ourselves about our weaknesses is unbelievably hard. The capacity for existential flexibility. Most people in this room will never have to do it. Not once, however, are you building your organization so. So that the organization and future leaders are prepared to be able to do it. Do the people know the just cause? Is it a culture of trusting teams so that future leaders can make the flex if they need to, even if you've never had to? That's the responsibility of leadership, to prepare the organization for the next leaders. If you are perfectly satisfied with the fact that when you quit, your company will go belly up, I got no beef with that. Just be honest about it. You're playing a finite game, and it's just for fun. And you're going to see how much you can accumulate in your time there, and then you're done. There's no problem with that. But some people have an ambition that the company can outlast them and even grow greater than when they ran it. Kind of like the same ambition we have for our children. That's hard. It's hard to maintain an infinite mindset. It's hard to adopt an infinite mindset. It takes unbelievable work, and it takes unbelievable courage.

The company cvs, the chemists in the United States, have had a vision, statement, had a just cause that they would protect the health of their employees and their customers. And they kept finding themselves in these very uncomfortable meetings. They would be meeting with hospitals and doctors, and they'd have a wonderful meeting about how they could partner together the chemists and the medical professionals. And at the end of the meeting, somebody would say, don't you sell cigarettes?

And so one year, they decided that they were going to remove all the cigarettes from all of their shops. It was a move that would cost them billions of dollars of revenue. Billions with a B.

Wall street lashed out against them at the announcement. They stuck to their guns. Analysts said silly things like those cigarette sales will now go to other places, predicting the future. And yet, when all the sales were. All the cigarettes were moved out of their stores, something happened. Sales either stayed the same or went up. Turns out, although cigarette sales didn't go somewhere else, what ended up happening is more people stopped smoking in the towns in which CVS's existed. In fact, what also happened is people were so enamored by the fact that they would make such a courageous decision based on cause and not money, that people spent more money at CVS or travel out of their way in order to do business with cvs. And the employees spoke with remarkable pride about how much they loved working at this company that was so courageous, that was willing to do the right Thing over the expedient thing. Their competitors, Rite Aid and boots, their CEOs were interviewed and asked, are you going to remove cigarettes from your stores? Incidentally, both those organizations had vision statements on their websites. You guessed it. To protect the health of our customers. Same vision. And yet Rite Aid said, we're continuing to examine the situation and we continue to sell smoking secession products. In other words, they're going to sell a nicotine patch next to a pack of cigarettes, which is much like selling a donut next to a diet book. One is an impulse decision, the other one requires a little work. Turns out even somebody who wants to go on a diet still buys a donut if you offer them the opportunity.

Boots was even funnier. They said that we are selling cigarettes in compliance with all local, state and federal laws. That's not courage. The law is a much lower standard than ethics. And this is one of the problems we have in the world today. The standard of business is too low. The standard of modern business is predominantly driven by a theory proposed in the 1970s, but by a man named Milton Friedman. Milton Friedman was an economist who gave us the responsibility of business. He said, the responsibility of business is to maximize profit within the bounds of the law. That is a very low standard. Let me show you what the bounds of the law produces. When the Titanic was built, it was considerably larger than all the other ships that existed in the day. And the regulations that governed lifeboats in the day were governed by size. And they didn't have a lifeboat for all provision yet. And the largest vessels of the day were ferries. And the Titanic was four times larger than the largest ferry. So what the Titanic's builders did, expressly to save money was put empty berths for lifeboats on the decks of the Titanic. But they only put enough lifeboats as required by regulation, which, as it turns out, was one quarter of the number of passengers that they would be carrying because the regulation didn't require it. So they didn't do it. They knew that the regulation would eventually catch up, which is why they put the empty berths. We all know what happened in 1912. The Titanic struck an iceberg and sank. And guess how many people died? You guessed it, 75%, 25% certain survived. The Titanic broke no laws. In other words, the law is a very low standard. It is not high enough standard. And unfortunately, thanks to Milton Friedman and people who embraced Milton Friedman in the 80s and 90s, so many business theories were developed based on this standard that the responsibility of business is to maximize profit within the Bounds of the law. The concept of shareholder supremacy showed up, which means we prioritize the wants, needs and desires of shareholders over the wants, needs and desires of customers or even employees. This is like an owner of a football team trying to build a great team by asking the fans what we should do rather than asking the players what they need. Doesn't work so well. But because of the 80s and 90s, these boom years, the concept of shareholder supremacy became normalized. The ideas of using redundancies on an annualized basis in order to balance the books things. Think about that for a second. We're going to use someone's livelihood so that we can meet our arbitrary projections at the end of an arbitrary time period. And companies use redundancies and layoffs even when they're profitable. They just weren't as profitable as they predicted. Think about the ethics for that for a second. Forget about the people who lose their jobs. Think about the unbelievable stress it causes to the people who kept their jobs. Because what they've basically been told is this is not a meritocracy and no one here is safe. Do you think they're giving you their all the next year? No. They're hiding from you and they're lying to you and they're faking every single day. Because that's the business model we've provided. The idea of rank and yank, where we promote the top 10% of performers and fire the bottom 10% of performers, became normalized in the 80s and 90s.

The evisceration of regulations to protect us from.

Speculative investing were destroyed in the 80s and 90s in the name of profit. And now we've had three stock market crashes in the past 30 years, where from the Great Depression up until the 1980s we had zero.

In other words, we have an outdated business model. Even GE itself, Jack Welch was hailed as a hero of business for everything that he proposed. He was a Milton Friedman acolyte. He became the poster child of what leadership looks like in the 80s and 90s. GE needed a $300 billion bailout in 2008, and who knows if it's even going to survive for the next five years. It was not a company built to last. It was a company built with finite mindset for finite success.

We need to completely reimagine business as it exists. We need to reject the finite mindedness of the 80s and 90s, and we need to embrace the infinite mindedness for the next millennium.

And the irony is, it's good for businesses. It's good for business. The organizations that are led with a finite infinite mindset. Those infinite minded organizations tend to outperform their competitors over the long term. They tend to have much higher levels of innovation, much stronger teams where the people don't leave and quit at the slightest shudder. They hunker down and say, how can I help? And for those of us who have to work there, those are the jobs we love.

All of this raises an interesting question. What does it mean to live an infinite life? Clearly our lives are finite, but life is infinite. We're born, we die, but life continues with us or without us. Which means, though we don't get to choose the rules of the game, we do get to choose how we want to play in this infinite game. And we can choose to live our lives with a finite mindset or an infinite mindset. To live our lives with a finite mindset means we wake up every single morning trying to make more money than anyone that we know to maximize the amount of power that we have to gain.

Power and sort of oversee the world, control the world domination.

And when we die.

We leave it all behind. It's only fun while we're living. Can't take it with you.

People hate us. It causes health problems. You look at a lot of these finite minded entrepreneurs who've done really well in life and go look in their medicine cabinets, look at the qualities of their marriages, the relationships they have with their children.

And it paints a different story.

To live our lives with an infinite mindset means we wake up every single morning and think to ourselves, how can we have a positive impact on the people around us? That one day I can meet a remarkable entrepreneur, a remarkable business leader, and say, how did you become who you are today? And they will mention your name, they will talk about the lessons they learned from you, how they learned to be a better version of themselves, to take care of the people around them, and that everything that they've learned today came from somebody else. In other words, you have literally lived on beyond your own years. I had a chance to sit down with Sir Richard Branson and I asked him a question. I said, how should we judge you after you die? I asked him, I said, what did you build at Virgin? What about Virgin? Are you most proud of that? You will want to be remembered after you die. And he got very annoyed with me and he said, do not judge me by anything that I have ever done at Virgin. He says, if you want to judge the quality of my life, you judge the quality of my children.

That's an infinite mindset. Every single one of us has a choice. Whether we want to live our lives with a finite mindset or an infinite mindset. It is just a choice.

Sa.