Doing Business in a Chaotic World PART 2: Making Money Should NOT Be the Main Priority

Leadership is so important in balancing constituents, right? So often in a large company like Eaton, we have employee constituents, we have customers, we have shareholders. And sometimes when we're going too fast, right, we're growing so fast, we have all these things happening, balancing the message between those constituents. And so, you know, for, for those of us in the field, sometimes we can feel like, We have amazing record earnings, we're doing really great, but it feels really tough in the field. How have you seen companies, or how have you seen different leaders balance the message between those constituents and think about goals and the dial of the goals? I love that. And not going so fast that you, you break what you have happening. Do you, have you seen those things going on around you or talk to companies about that?

So I swear this is a good answer. I'm not a hammer looking for a nail, but it really is about the narrative and the best narratives start with why, right? Which is why do you do what you do in the first place? And then everything else are the details underneath. And you can take that communication in different directions relative to the different constituents. But the point is, is there's still a global story to tell., right? So let's take a familiar one. Let's take the Walt Disney Company, right? Super easy. We all understand Disney. And so when Disney gets it right, their leadership, regardless of who they're talking to, regardless if it's a global communication or siloed for one of those particular constituents, it'll always sound very much the same at the start, which is our company was founded for a very simple reason, which is we want to offer people an escape from their lives. We want to offer them the ability to step into a fantasy world, go somewhere else, and leave all of their stresses behind for the time that they're with us, and when they're with us, we will take good care of them, right? This is the driving motivation behind our parks, behind our movies, behind our products, all of these things, right? And then you can talk specifically about how you're doing that. When there are problems, you can say, we let out— we let people down by making this mistake. We weren't taking good care of them like we promised. We need to do better. It allows you to tweak the message, but when you have that context It allows everybody to know what they're contributing to and the details can change. But what happens more often than not, unfortunately, is there is no global context provided. We simply give a message for this, a message for this, a message for this, and a message for this, right? It's like, think of it like this, right? Which is we, the United States, have something, we have values and a cause that make us all American. Those values are written down for us in the Declaration of Independence, and we all buy into them. Now, I can tell you that the city of Los Angeles is very, very different in culture from the city of Mobile, Alabama, right? But they are both American. They both occupy those American values. You know, Mobile or Los Angeles don't belong in France. That doesn't make sense. And so when, when the best leaders talk about the thing that unites us, Then we can talk about the things that are unique to our particular place or where we work or what our challenges are, but we have to know what connects us. And as investors, you should be investing in us because you believe in this. Otherwise, you're just a fair-weather fan. I don't care about you. You come and go. We don't care. It's the ones— it's the investors, employees, and clients who stick with you because they believe what you believe. That's what that does. It reminds us of what connects us.

I love the why. I'm a big fan of why. I talk, I talk about my why a lot with people because I think it does, it does ground us in what we think about and what's important. And, you know, when we think about Eaton, you know, our brand promises, we make what matters work. And so you think, you know, we, we basically power things that enable the lives of people around the globe, which is so important. And we've often heard you talk about the idea So for us, we have a saying called "play to win," and play to win for us is how we're going to culturally win making what matters works, right? But we've often heard you talk about the idea of winning in business as the wrong way to conceptualize, right, how we talk about it, how we do business. So can you address the difference between winning as a short game and winning, the winning culture we're trying to build and this concept. Are you smiling because you like my question or?

I'm smiling because I'm a cynical bastard. Yes. So in the mid-1980s, a philosopher and theologian by the name of Dr. James Karse defined these two types of games, finite games and infinite games. A finite game is defined as known players, fixed rules, and an agreed-upon objective. Football, baseball, right? New business pitch, right? If there's a winner, there has to be a loser or losers. But more important, there's always, always, always a beginning, a middle, and an end, right? Then there are infinite games. Infinite games are defined as known and unknown players, which means you don't necessarily know who all the other players are, and New players can join whenever they want, right? New players can join your, your business whenever they want, right? The rules are changeable, which means every player can play however they want. And the objective is to stay in the game. The objective is to perpetuate the game, right? You want to stay in business forever. If you lose money every single year, eventually you'll have to close the doors., right? The goal is to make money so that you can stay in business, right? So in an infinite game, there are no winners and losers. It doesn't exist. You can't— nobody's ever going to be declared the winner of business, right? When, when Circuit City went bankrupt, Best Buy didn't win anything, right? But if we listen to the language of so many of our leaders, it becomes very clear that they don't know the business they're in. They talk about being number one. Or beating their competition, right? Based on what? Based upon what agreed-upon metrics, time frames, and objectives, right? And this is a problem because when we play with a finite mindset in an infinite game, when we play to win in a game that has no finish line, there are consistent and predictable outcomes. The big ones are the decline of trust, the decline of cooperation, and the decline of innovation. So when you have a new business pitch, I expect you to play to win. Of course, right? But there's a beginning, middle, and end. Once you win the pitch, I expect you to take care of the client, adapt and learn forever so you never have to pitch for them again, right? So you convert from the finite game to the infinite game in the managing of the relationship. It's like, it's like, uh, uh, uh, politicians. They play to win their elections, but once they're elected, they better damn well govern. So Stop, stop campaigning, right? It's the same thing. There's a mindset shift. Now, at a global level, what you're talking about then is how do we have a quote unquote winning mindset if there's no such thing as winning in business, right? That's totally fine so long as it's not an objective because you can't win. You get to pick your own metrics, market share, profitability, number of employees, number of customers. You can pick any metric you want. 1 year, 5 years, 10 years. You can be winners or losers depending on how you slice and dice the numbers. Doesn't matter, you get to pick them, right? Uh, price of your stock price, I mean, who you like, you pick it, who cares? Um, uh, and so you can't win in business. And so having a winning mindset means we're always trying to be better today than we were yesterday, right? We're always moving forward. So a winning mindset means constant improvement. That's what it means. And there's nothing wrong with a winner's mindset, with a constant improvement mindset, so long as it contributes to the infinite game?

I love— it's hard. It's— we are measured, right, by market share, by these pieces that are out there. And sometimes if you're not careful, you are driving short-term decisions because you're looking at what you've got to do to meet expectations of your different constituents, right, and what you're trying to get done. Sure. So it's It is a balance to try to do those two things sometimes and to, to pick where you've got to be at. But, but moving forward and, and from, from where we sit as a sales organization, we're always trying to put the customer as the point of what, what makes sense, right? Like this, this is where we've got to make sure we're making a difference and doing the right thing and communicating to the customer how what our investments are doing and why we might be a little messy right now. But we're doing that because we're going to be here and be able to meet our why of making what matters works on a long-term basis, right? That's a way to think about what you're talking about, correct?

There is a balance. There is a balance. Now, there's nothing— it's all good to drive performance because ultimately money is fuel in the tank to make the car go. And ultimately, a company exists to offer some sort of value in the world. Companies don't exist to make money. They exist to offer something to us, whether it's a product or a service or make our lives easier or more entertaining, whatever it is, right? And we don't buy a car simply to buy gas. We buy a car to go somewhere. We work for a company that wants to contribute to the world and its customers, and the fuel, the money, makes it do that. So of course we want fuel in the tank, right?— but in that order, in that order. And companies that get that order backwards, they think the money comes first and serving the customer is just a nice to have, or serving the customer is just a means to make money versus making money as a way to take better care of our customers, right? That order really matters. And if the balance goes too far off and it does become exclusively about the equity and, and only the money, right? You end up in a really bad place like Boeing where they put so much pressure on finances before anything else that planes are literally falling out of the sky, right? And by the way, that's costing them way more money than simply getting that order right, that we put safety and customer first and then we'll, and if we do a good job, we'll make our money. They got the order so wrong, it's actually costing them more. I mean, the number of planes that had to be grounded, orders canceled, et cetera, et cetera, et cetera. So yeah, this is always a leadership challenge, which is getting that balance right.

So you bring up something that was one of the questions that kind of came in, not even just one. There was a question around, you know, there's a practical side to why. So yesterday I talked about my why. As a part of getting ready for your conversation, I said to people, you know, you might want to be thinking about your own why as we're coming in to listen. And someone kind of said, you know, but there's a practical side to why I work. Most of us have to work because we have to earn a living. We want to take care of our families and all those pieces. But we also have to be a part of this organization that we're here. And how do you encourage people to kind of balance, or do you have to balance those two? Why? Or how do you think about that?

So there's a difference between responsibility and purpose. Right? Um, if all you cared about was, uh, just providing for your family, at least for some people, you could probably get another job somewhere else that's a lot less stressful and you'd make a decent living and like it's fine, right? Um, uh, uh, but at the end of the day, don't you want to work at a place where you feel like you matter? Don't you want to work at a place where you feel like the work you do, like the work you do matters? Don't you want to work at a place where you trust your colleagues and they trust you? In fact, if you talk about the family, don't you want to work at a place where you can come into work and say, "I got my kid. I got some real issues with my kid. It's not been a good week and I'm kind of off my game and I just need you folks to be patient with me, please." And your colleagues say, "Go take care of your family. We got you." Don't you want to work in a place like that? Right. And so when, when people say to me, no, I just work, I just work to provide for my family, it's not really, it's not really true. Yes, functionally, we have jobs to pay for our lifestyles, our families. Of course. Of course. You know, it's not like we just get free checks in the mail.

Right.

Of course. Right. That said, every single one of us wants to feel, wants to feel that we earned the, the, the, the, the money we made. It feels good to do a hard day's work worth the work and see a product made or a customer grateful and see something work and a problem solved. Like, that's actually greater fulfillment, you know. And when people say, 'I just work for the money,' it's actually not true. Because if you work for a great culture with great people and your competitor offers to steal you for slightly more money, and you know what it's like to work there, you've heard the stories, You won't leave. So it's not 100% true that you're just doing it for the money because then you would just bounce from job to job to job looking for the highest salary. And you don't. You don't. And I, we all have many people who left for the money and then came back.

Right.

It's so, it's just fundamentally just not true.

Yes. We, we call, we, when we have that, we call them a boomerang. And, and, and actually we, we get excited when we have a boomerang come back because it reinforces the culture we're building, what we're trying to do. Because, you know, I've worked for Eaton 27 years. I started when I was 10, just in case you're wondering my age. I, and I always say that because I never want people to go like, how old do you think she is? But, but I've worked here that long because I have friends here, right? I have people who I look at and I say, I want to be a part. I trust them. They're looking out for me or they're helping me solve problems or we're in this together getting where we've got to be going to do the right things, right? That's it. That's a big key.

And just to be clear, there are always people in the system who are a little too far gone that they only care about the mushy mushy, right? And there are people in the system who literally only care about the money and they're much more of a mercenary mentality. And by the way, they have no loyalty. They would take the better job offer no matter, no matter where it is. Right. But we have to remember whether it's an individual or a company. There's always a cost for the money we make, right? Ain't nothing for free, right? And that cost can be your mental health, it can be stress, it can be hours. I mean, you care about your family so much and yet you work for a company that makes you work, you know, 20 hours a day. So you want to walk me through that one, right? There's always a cost for the money we make and you want to get it so that the money we make feels— that the stress we feel feels worth it. The money we make feels worth it. Sometimes the hardest I've worked, I felt the most invigorated because I believe in what I'm working towards, where I can work fewer hours and be like, this isn't worth it, you know, I'm making money and it doesn't feel worth it. So it's— there's always a cost and it's striking the right balance.