The Flow Path to Entrepreneurial Success

set your sights on something bigger and very clear in this very tumultuous time that you were growing up in, and you achieved that.

I think I was rather bored as a child and I didn't get a lot of attention, which was good for me because I went to the library and did a lot of reading. I got enjoyment out of knowledge and learning, and I would just pump everybody I met for knowledge. No one ever lectured me on it, but there was something bigger always to think about.

So the principle is, if you want to go far, go together. If you want to go fast, go alone. Really trying to help systematize what does it actually mean to be an optimized and high-functioning, high-performing team.

I just heard so many group flow triggers in terms of trust building, open communication, feedback, blending of egos. This is really an insanely powerful tool to master as an organization if you want to stay alive in this era.

It's not about how to survive, it's how to thrive, and it's how to deliver value to your clients and customers over and over again.

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Breakthroughs.

Our mission is to decode the neurobiology of flow and cognitive peak performance. Access the minds of maverick scientists, groundbreaking innovators, and world-leading experts to understand what it takes to achieve ultimate human performance so you can feel your best, perform your best, and accomplish your fullest goals. I'm your host, Ryan Doris, and together with bestselling author Stephen Kotler, I present to you Flow Research Collective Radio.

Welcome, Dr. David Tease and Teddy Tease, to Flow Research Collective Radio. Thanks so much to both of you for joining us today. This is going to be an amazing conversation. I'm super stoked about it because you're both peak performance experts, particularly in the realm of entrepreneurship and executive leadership. And your framework, David, of dynamic capabilities had a major impact, to say the least, on the field of strategic management. So let's go origin story first. I'd love to hear a little bit from both of you in terms of how you got into the field of strategic management and leadership coaching. And David, we'll go first. You'll go first.

Well, yeah, so I got my PhD in economics, but I was really interested in the business enterprise and, you know, how firms got to be great and stayed that way. And so I drifted into management and organizations, but always with the lens of looking at it through the perspective of an economist and economic theory and all of that. So I think the contribution is bringing the logic of economics to the field of management, but at the same time being willing to learn from other disciplines, you know, from sociology, from psychology, from old theory, because really management is where it all comes together. And if you're not a social scientist and if you're just stuck in the groove of one particular discipline, you won't be a good manager and you won't understand other managers. So I drifted into it out of great interest in what really is one of the greatest challenges, which is how do you build and sustain great enterprises. That drives not just the wealth of the enterprise, it also drives the wealth of nations. I drifted from economics departments into business schools. And then after that, I drifted into the practice of management and building companies, but I managed to keep them all going at the same time. I'm still a very active researcher, but at the same time I build companies and I also do venture capital as well as a number of other things.

And I think for people who are familiar with your dynamic capabilities framework, that origin story, I think, makes a lot of sense because it's so— it's such an incredibly holistic perspective, right? Which is probably one of the many reasons it's such a powerful framework. And so we're going to get back to you wearing many hats and how you're able to do all of those things in just a moment. But I want to hear from Teddy. Was this in your DNA? It feels like this was, this was fate maybe that you also ended up in this field. Tell us about it.

Sure.

It was fate. Yeah. I mean, it's the, it's the pond that I grew up swimming in. I wouldn't say that I've reached quite the status of Professor David Tease here when it comes to the framework, the pushing forward of the framework, but I mean, what really hit home for me was an early life experience, um, back, uh, and in high school even, like getting into flow on the rowing team. So that's, that's what initially inspired my surges. I found this linkage between what I felt inside my being and what I'd been hearing proselytized from my father from the age of zero. Like all of a sudden these things were starting to connect, perhaps the dynamic capabilities, you know, sensing, seizing, transforming, and flow, and the experience I was having on the crew team started— it started to integrate in a way early on, and I got curious. I got curious about, um, what does it mean to create an ultra-high-functioning team where everybody is in alignment they're pulling in the same direction, and it's not just talk, it's real, you know. How does that vibrate within oneself? Um, so that's— yeah, I guess it was in the DNA, and then the DNA found me and, and, and kicked off the search from that point on where I was, yeah, ultra curious about How do you create and sustain high-functioning teamwork?

I love to hear, David, that you were cultivating dynamic capabilities and flow mastery at the, you know, starting at the age of zero for Teddy. Uh, it's awesome. So let's, let's jump into, because, you know, this is Flow Research Collective Radio, so I immediately now want to hear the role that flow plays in each of your lives, you know, because David, you were just quickly noting the many different hats that you wear. So tell us a little bit about— I think it would be helpful— what are the different roles that you play, the different projects that you have going on, and how does Flow actually help you be successful in all of those?

Yeah, very good question. So just a little background here. I'm a very active scholar and I meet a lot of scholars and they of course assume that I'm 100% of my time is spent in scholarship, but it's not true. There's maybe, you know, 20 or 30%. I'm very active in building companies and in consulting, and people that are doing consulting think that's what I'm doing full-time, and the people that build companies think that, well, building one company is what I do full-time for sure. But then I'm also a venture capitalist, not a very large fund, but a small fund. And I'm helping to build, you know, half a dozen other companies. So, you know, when people actually figure out that I'm doing all these things, they ask me, how do you do it? And to me, it's no mystery because I've always had an ability. I didn't have a word for it until Teddy gave it to me, but I always had an ability to sort of— it's more than focus, but to really get engaged in something and have deep passion about it and stay on it until something significant was done. So I managed to squeeze out without being deliberate about it enormous productivity that has enabled me to take on these multiple jobs and roles and do well at it. But one day I was sitting at the kitchen table and Teddy waltzed up and said— he was watching me write something, I think, and there must have been a lot of commotion going on and I was just staying focused and wasn't bothered by it. And he used this word flow or in the groove. And I started thinking about it, and then I realized, well, yeah, there's something to this. You know, I'm a sailor, and I know what being in the groove is— when you catch the wind just right and you feel the boat power forward. And then because it's powering forward, there's a feedback loop that sustains your interest and focus. And the same thing when you get moving on something, you know, it sustains your interest and focus. So So I've asked myself, how do I do this? And I think part of the answer is that there's so much clutter in our lives and you have to find ways to move it to one side. And what I did early on was I dug into my pocket and I hired people to take care of everything, like taking, you know, doing my financial, my banking, my tax returns. I just sort of happily threw that away to competent people. And that was hard to bite that bullet because it seemed like a big expense. But then my productivity shot up so rapidly that I could afford to pay for it all. So, so getting the clutter out of the way, although you can never remove it all, is part of it. But it's truly about having passion and having a goal and being absolutely committed to those goals. That makes it all work. I don't understand the neuroscience behind it. And I know that's what flow research is all about. So there's an enormous amount that I have to learn, but I kind of know how to do it for myself. Can I tell somebody else how to do it? Other than the simple rules that I just gave you, which are, while they're simple, I think they're important. You know, I cannot write it down very well, but I think I can demonstrate to people how to do it.

I would 100% concur. I think it's, you know, you're saying that you, you can't explain the neuroscience, but what you've just described, right? Having clarity on the work that you have passion around, you have purpose within, you're curious about what you're doing is harnessing your neurobiology of drive. When you're doing those things that drives the secretion of dopamine and all those flowy neurochemicals. So you get into flow and just like you, you just said it, It creates a feedback loop. So you wanna do it more. The more you get into flow doing something, right? You're elevating your mastery and you wanna keep— you create momentum and continue to do that thing. That's how you amplify productivity. And you're nailing one of the suggestions that we make to our clients all the time at the Flow Research Collective, which is have total clarity on that high-value work that you have purpose and passion around, and then ruthlessly eliminate all of the clutter. So You didn't even— you didn't need to go through our training. You're doing it. You're living it. I love it.

Make it very immediate because, you know, last night I sat down at 9 o'clock. I got a paper to finish up and there's a lot of work. And I sat down and, you know, it was 3 AM and I was still going. And if it wasn't for the fact that I had to get up at 7, I probably would have gone through the night feeling absolutely happy delighted, not feeling like I wanted to do anything else. It was kind of like bittersweet to have to give it up and go to bed and get some sleep. And it's that wonderful sense of, gee, I'm making forward progress on something important. You know, whether it's important or not is for others to judge, but you know, if you convince yourself it's important, uh, then you can find that energy. Your body is just full of all these resources, and you may well be right, there may be chemicals that get expressed or something or other neuroscience, I think, is— it's important to understand if you're really trying to help other people. But, but these rules of thumb, uh, they sound easy, but actually getting purpose is— I've noticed a lot of people don't have it. And to me, you know, I never had to struggle to find it, so I can't really relate to people as well as I would wish who have trouble finding purpose. And I really want to dig into the science of flow to figure out how you get people to—

there's, there's an underlying elephant in the room around how you stepped into your purpose in such a clear and beautiful and wonderful way. Um, that might be a topic for another podcast or another, a different room, but my hypothesis is you felt underutilized as a young man in New Zealand. You felt like the third wheel in the family, perhaps, and you set your sights on something bigger, and you set your sights on something very clear, um, in this very tumultuous time that you were growing up in. Um, and you achieved that. And you had the luxury of growing up in a tumultuous time, honestly, even from little old New Zealand.

Does that ring true for you, David? Yeah.

Well, there, there is a, there is something that Teddy's putting his finger on, which is I think I was rather bored as a child and I was, I didn't get a lot of attention, which was good for me because I got on my bicycle and went to the library and did a lot of reading. But somehow or other, I got a sense, I got enjoyment out of knowledge and learning, and I would just pump everybody I met for knowledge. And also, I think behind it all, you know, I knew my father had been overseas in the Second World War and he really had purpose pushed upon him, which was to save democracy in Europe, really, and ultimately the Pacific from the woes of dictators. And there was something bigger. There was always something bigger. No one ever talked about it. No one ever lectured me on it, but there was something bigger always to think about. And being at the other end of the world, you kind of realized that you were in a insignificant place in a way. There were bigger things outside that impacted on you no matter where in the world you live. So I really grew up with a big sense of the world, I think, a sense of broader geopolitical issues that sort of energized me. Nobody in the family life I was brought up with— there was people always thinking about, you know, broader things, family, friends, whatever. There wasn't much focus on the I. We weren't allowed to use the word I. If you use the word I, you were a little bit ostracized. That meant you were very self-centered. Think about that compared to today where everyone is I, I, I rather than we, we, we. And I think that focusing on the I rather than the we tends to cause you to find— it makes it harder for you to find that purpose. Because there's not enough. If it's just I, there's just not enough in I. It has to be we in order to be big.

I think this is an incredible insight, and this is something, to your point, a lot of people have a really hard time dialing in what they feel purpose around. What is their purpose? And they're looking for motivation. How do I grind harder? When really the work they should be doing is dialing in what are they passionate and purpose people around. And your insight around it needs to be about the we is exactly right. So I think part of that journey to finding your purpose, and we call it defining your massively transformative purpose, or your North Star, is understanding what are the problems or questions I'm really curious about intrinsically, and then how can I leverage my strengths and skills to answer those questions in a way that serves someone other than myself. It has to be for the we. And that's where that motivation to be incredibly productive, to tap into flow, untap that is, you know, that's where productivity really lies. I think that ability to amplify productivity, which you're, I think, a living, breathing example of.

Yeah. And what people don't realize is that by pursuing the we, you indirectly do achieve the I because you get carried along with it, which is the same experience that Teddy had in his crew, crew in rowing. You know, without the we, you're never going to get the I, but the we has to come first.

Agreed, 100%. And Teddy, so you coach in the executive space, you coach higher-level leaders. Is this some of the work that you do? With them as well. Do you see this?

We do exclusively executive team coaching. So the principle is, if you want to go far, go together. If you want to go fast, go alone, right? So it's the tortoise and the hare, it's the old metaphor. But the complexities behind human collaboration are, are numerous, and we're trying to make it a little more scientific.

I'm trying to Tell us more about that.

Well, you may have heard of what Pat Lencioni's Five Dysfunctions of a Team, what he told us 20 years ago, teams are shit essentially. And so, you have to do the old pyramid-style framework of building trust and so forth. It was very Maslow's. Style approach to how to do teaming, which transformed a lot of teams and which truly inspired me and continues to. In our current moment of decentralized workforce and hybrid work, there's a little bit more complexity. You don't have time to us to build trust like in the way that one might have 20 years ago. It's basically how do you optimize this open system of a team? How do you normalize someone into a framework, into a group that says we are on this mission, on this path, and you fit into this, and here's why, and here's how you're going to fit into this. I'm working with Keith Farazzi on creating a sort of updated, perhaps revised and improved version for our current moment of what does it mean to be a high-functioning team. We're not talking about 5 dysfunctions, we're talking about 8 shifts, you know, the 8 shifts to a dream team. And so, we're, yeah, we're building this book, anchoring each chapter with executives, from around the world. I won't tell you, I won't spoil the book and tell you what each of the 8 shifts are. Really trying to help systematize, you know, what does it actually mean to be an optimized and high-functioning, high-performing team in the enterprise workspace or in the unicorn space or any space really. And it's this nice balance, right? If I had to summarize the 8 shifts and we can get complex all day, but it would be this nice balance between really optimal in-person time that involves transformational experiences and workshops and so forth, and then following high-return practices across the workflow, you know, during the day-to-day.

It sounds like an incredible resource. I respect you for not spoiling it for us, but I'm now very, very intrigued. And it sounds— I mean, there— this is a major gap. This is, you know, the work that I do in the space as well. And so I see a huge need for this resource, and it sounds somewhat similar to, you know, we have tried to systematize mastery of flow. How can you access flow and really build this process to demystify this thing that people thought, you know, if all of the stars aligned, then, you know, and inspiration strikes, you can get in the flow. Same deal with how do you create a fully optimized collaborative team. So that's, that sounds incredibly exciting.

Yeah. Yeah.

So we're talking about, you know, optimized teams, we're talking about human potential and flow. So, you know, David, you're very famous for your framework on dynamic capabilities. So can you start by just giving maybe a high-level overview of that framework? And then also, and so then we can kind of dig into how does flow maybe parallel some of the capabilities that you talk about cultivating in your framework?

Yes, so I, I came up with this framework called dynamic capabilities, um, and if I distill it down to its most simple elements, it says the following: that contrary to the textbooks in business and economics, which always talk about optimization and efficiency, that's really secondary for business success. What's primary is the ability to dig out and identify new opportunities, to corral the resources that you need in order to address those opportunities and threats. And then if you're successful, you constantly have to be changing and transforming to stay current. So, to get dynamic capabilities, I put dynamic capabilities down to the pursuit of these three mantras: sensing and sensemaking, seizing or execution, and transforming, which is as soon as you get it right, you're going to have to adjust it all. And it's really a model of entrepreneurial management. I worked it out just by observing Silicon Valley firms that are successful and also looking at the failures. And really what dynamic capabilities is, I like to tell people, it's Silicon Valley in a bottle. It's the essence of what makes our companies so powerfully competitive. I think the US is way better at this than most other folks because, you know, we have the entrepreneurial spirit here in America and the willingness to take risk, and we've got the institutions, you know, we've got venture capital, we've got reasonably good government policies behind it, which makes Silicon Valley go. So dynamic capabilities is about, you know, how do you build an enterprise and keep it going. And as I stand back from it, it's, it's really about fast learning in a way, but it's more than fast learning. It's also a set of techniques and processes and procedures to ferret out new opportunities. That's the sensing part. Everybody can often have access to the same data, but unless you actually can see patterns in it, unless you're good at pattern recognition, you'll miss the opportunity. But even if you see the opportunity, there's a lot of people that just sit on their hands and don't have the ability to assemble the resources to go after it. But that's where I think our entrepreneurs are really good. And when I say our entrepreneurs, of course, we bring entrepreneurs from all around the world to the U.S. If you look at Silicon Valley, you know, two-thirds of the entrepreneurs are probably born outside the U.S., but they're taking advantage of the institutional structure here in the climate of Silicon Valley. So Dynamic Capabilities is about, you know, how do you build and sustain great organizations? And it's a little bit like the Good to Great thing, but it's really in a much more explicit social science framework that people that sort of study the literature can relate to. It's not sort of a, it's just a silver bullet. It's something which is rooted in collective understanding of the social sciences.

So it's fascinating. And so I want to double-click on something that you just said that I think is— that really stood out to me. So it's not just about sensing the opportunities and seeing them, right? So there's pattern recognition there, but it's also seizing it. So I'm hearing some decision-making pieces. How do we make decisions as leaders? So, and also potentially overcome some anxiety and that might be attached to high levels of uncertainty. So how do you, how do you make recommendations or coach leaders to think about not just sensing the opportunities but seizing them as well?

Yeah, well, that's, that's a tough one, and it depends on the size of the organization. Of course, a small organization, it's pretty easy to glide from, you know, assuming you've got enough resources, enough financial resources, you glide from, you know, look, I've figured out what's going on in this market, now I've I want to, you know, create a business model to address it and a business plan to implement, I go ahead and do it. There's not much to move out of the way. The challenge gets bigger when you've got a large organization because you may see all of that, but execution can be slowed down by bureaucratic processes. And so what you have to do is build an entrepreneurial culture because if the structure gets too rigid, you'll never get anything done in a timely fashion. So you have to, you know, overlay an entrepreneurial culture because then that enables people to just get together no matter what the rules and processes and procedures are, to push, to change them if necessary, to execute. So fast execution gets hard as you get big, but in entrepreneurial companies they still seem to manage to do it.

And so, and this is, you know, to both of you, because obviously the, the level of uncertainty, you know, just the VUCA in general has been on the climb for the last couple years. How— and I would imagine that that creates a ton of tension in maintaining an entrepreneurial culture in this highly volatile, uncertain marketplace. What are, what are some of the challenges there, and how do you speak to those with leaders?

Well, the first thing I do is teach them the difference between risk and uncertainty, because, you know, if you're a bank or a lot of companies, they've got risk management people running around. You know, risk is about a circumstance where there's known probabilities and you've seen it before. You got a rough idea how often it comes by. But uncertainty is something where, you know, it's black swan after black swan after black swan. And, you know, you have to First of all, be able to figure out that it's a black swan and which way it's swimming, and have a very adaptable and flexible organization because you're never going to be able to predict the accoutrements of deep uncertainty is you can't predict. So if you can't predict, you've got to wait till the future unravels itself a little bit and then act quickly. And that's where scenario planning can be an aid. There's not as many aids that we've figured out for managing uncertainty. We've got thousands of tools for risk management. And what's going on is that people keep pulling out the tools for risk management, and when they've got, you know, checked the box on everything, they think they've solved the problem and that they're ready for the future, but they're not. In fact, they're woefully unprepared because they have, you know, built themselves into a false sense of security. So I'd almost get rid of the risk management department, not for a bank, I might say, But that risk management can fool you. You should have an uncertainty management department just to alert people to the fact that this is not just same as, same as. It's something that's very different. Uh, we have to consider there's a reasonable probability of a war in the South China Sea within 5 to 10 years. This is going to completely overturn everything. You know, supply chains get severed. What we saw in COVID is absolute child's play to the kind of disruption that could be coming next. There's some evidence that people tend to put— when you have a low probability event, they tend to put it to zero. Low probability events get treated as if not going to happen, but in fact, you know, you of course do everything you can to try and keep it a low probability event. But, but you've got to be prepared for, for these things, and scenario planning is one good way to do it.

I think that's an incredibly, incredibly helpful frame to think about risk versus uncertainty, because they're not the same. What about you, Teddy? How are you, how are you coaching leaders in this high VUCA era?

Well, it's all about creating a more flexible organization, basically. Large enterprises that can't adapt will ultimately fail or get outcompeted. Next great startup or the next technology, the next disruptive event will sort of take them over. So decentralized management structures are critically important. So how do you team out? That's one of the most important things we talk about. How do you take a C-suite and actually make it a cohesive teams. So the CIO is talking to the CEO is talking to the CMO, and everyone's collaborating in a way where, you know, every— everyone's functions are cross-functional. So we just call it teaming out. And it's a bit of an awakening process that can happen within a high-functioning leadership team. And there's numerous stories around that, specifically from 2019 and onwards that, um, yeah, that we're researching and excited to tell. I mean, purposeful bond building, everyone in the organization considering themselves as a coach and also a manager, like having that sort of dual role, diversity and inclusion, um, and then just being straight up candor, right? How do you actually be candid in in a Zoom meeting. How do you, how do you share where you are and how you've been? It's critically important to do that, uh, to be honest and upfront, because there's no water cooler time anymore. So those are some of the things that, that I coach around and, um, yeah, help to advise around.

I think those are phenomenal, phenomenal insights. And I know you said teams are teaming successfully teaming is a key ingredient to being successful in the VUCA that we're all living in. But I also heard group flow there being an incredibly powerful piece of that, right?

Yeah, absolutely.

Yeah, always, always a shout out to Keith Sawyer with his book Group Genius. But I just heard so many group flow triggers and what you were talking about in terms of trust building, open communication, feedback, blending of egos. And so that's very much in alignment with what we're seeing. At FRC as well, that this is really an insanely powerful tool to master as an organization if you want to stay not only alive in this era, but also on the cutting edge with first-to-market solutions, etc., right?

Yeah, it's not about how to survive, it's how to thrive, and it's how to deliver value to your clients and customers over and over again. It's not just about how do we achieve flow in 9-to-5 scenarios for ourselves. It's how do we achieve this, uh, the sum is greater than the whole of its parts promise of, uh, of, of teamship.

Yep, exactly. So group flow always going to be more powerful than individual flow. Um, yeah, exactly. So we, you know, we've been dancing around, um, the term, you know, entrepreneurial culture, and I know You know, a term in dynamic capabilities framework that you talk about a lot is a culture of innovation.

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All the best.

So David, can you speak a little bit to What are some hallmarks of an entrepreneurial culture or a culture of innovation that organizations should be trying to foster here?

Well, one of them is to not be afraid of failing and making mistakes. If you don't fail every now and again, if you don't make mistakes, one, you're not learning, and two, you're not taking on enough challenges because whenever there's deep uncertainty, you're never going to have everything cut and dried. If you're looking for perfection, and the right investment opportunity that's going to be precisely correct all the time, you're going to miss a lot. So part of it is building a culture. It's okay to make mistakes so long as you take ownership for them. You recognize that this is part of the life that you're going to have to live. So part of it is that, and we say that in America, it's easy to say because people get it very quickly. We celebrate We actually even celebrate a good failure, whereas abroad, you know, you try that in the Middle East or even in Europe, the notion of failing is anathema. And so what happens is people won't take enough initiative. So there has to be that willingness to accept that. I think the other thing is making a clear distinction between accomplishments and financial rewards. I mean, I think there's a lot of naivete in the public that, you know, that managers get up every day and what they're focused on is just making money. I guarantee you, if you focus just on making money, you won't. At least you won't make much. You may get some short-term stuff, but, you know, if you think about Jobs and Wozniak with Apple, did they get up wanting to make money? No, they wanted to bring the world computing. You know, they wanted to take on IBM. I mean, IBM was a nemesis. That was a sort of a shortcut through to, let's build something that's really friendly. Let's give everybody a computer that they could use that's very, you know, user-friendly. And as Steve Jobs put it, you know, his goal was to, quote, make a small dent in the universe. Yeah, well, along the way they made, you know, quite a bit of money, although for many— the first decade or so of his career in Apple, he didn't really— he wasn't a wealthy guy at all. Eventually he was, but it's a side benefit. And then of course you end up giving it all away anyway. But people have to realize that part of this environment is about, you know, having a vision and having a goal and wanting to have impact. That's the way that you can be entrepreneurial, because then you can find the zeal and the passion to do it. And that means you're going to have to do a few zigzags. You're going to have to back up and say that was a mistake. So that's part of entrepreneurship. I think another part of it is what I call a bias for action. Tom Peters talked about this in his early book, In Search of Excellence. It was a chapter on a bias for action. And when you think about it in the abstract, why should you have a bias for action? Bias is usually something that's considered bad. You're supposed to avoid biases, right? So why a bias for action? Well, it's because action is the way in which you learn. And if you look at the whole Lean Startup methodology, it's all about, you know, you forge ahead, pivot, pivot, pivot, because you're not going to get it right. When there's deep uncertainty, you, if in doubt, do. And this is what a lot of people don't understand, is if in doubt, don't do is the mantra that most people would articulate. But for an entrepreneur, if in doubt, do. Of course, not do in big lumps, but do in incremental ways so that you can begin the process and start to learn. So that's some of the key elements, but you know, there's 100 of them that go along with innovation, and there's no one-size-fits-all.

Those are fantastic recommendations. And I love the second one, the bias, bias to action. We, in our leadership course at FRC, we talk about a very, very similar shoot bullets, not cannonballs. So take small steps, collect data, recalibrate before shooting the big— yep, exactly. I want to go back to what you were talking about in terms of this, this, you know, willingness to accept mistakes. And failures. And I think that I love your connection to this is all rooted in having a vision and a purpose that is not just about making money, it's about something larger, right? That gives it more permission to make mistakes along the way and maybe not have as direct a path to success. Um, do you have any other recommendations? Because I could just hear clients, you know, that I coach saying, that sounds great, but that's not the culture at my organization. So for leaders of an organization, how do you, how do you start to create a culture that really does give people the permission to make these types of mistakes?

Well, that's where the founder's imprint comes in. And, you know, most founders of course are exactly that way, otherwise they would never have got an organization off the ground. But what happens after the founder goes away is, you know, people tend to bring in controls and rigorous process and and what I call ordinary capabilities start to drum out dynamic capabilities. So there's, you know, in large organizations, there's a war between efficiency and innovation going on all the time, and you gotta let innovation win. That's your role as a manager, because you're gonna have all these KPIs coming down, and people are gonna tell you to optimize this and optimize that. And yes, indeed, you know, you do try to optimize things, but you don't optimize everything, or if you put optimization as the god, you will never innovate. So this is where in business schools we're so good at teaching the optimization stuff, we're not as good at teaching the innovation stuff, although we use the words a lot, but the curriculum is often not presented, you know, in a way that enables the graduate to really balance all these conflicting messages that they get. And that's why I developed this framework called dynamic capabilities, because, you know, it, it does help you balance things by seeing them holistically. I like to joke that no business school has a capstone course in the end that pulls it all together for the students. And the reason they don't is because the truth of the matter is the faculty don't know. They don't. We tend to appoint faculty and go through review process, you're going to be a specialist in something. You're going to be an organizational psychologist, you're going to be in marketing, you're going to be in economics, but you need this overarching framework. And, you know, dynamic capabilities pulls it all together. It pulls marketing together, pulls behavioral psych together. It uses a little bit of everything and it gives you a framework to start thinking holistically. And if you go back to guys like Peter Drucker and the great management gurus, they were not formally trained, but they were, you know, expressing many of the same ideas, uh, but without sort of relating it to the social sciences in the way that I've tried to do. But the long and the short of it is, you know, if people don't have this sort of broad-based conceptual lens, you know, we try to give it to them.

And I think that this, the holistic lens that you're providing with the framework is why it's so incredibly powerful. And I think that's a really helpful frame. I'm curious, Teddy, how are, how are you coaching leaders around creating this culture of, you know, a willingness to fail or make mistakes? Because I hear this all the time from my clients. There's so much resistance and there's so much of a mindset around perfectionism, right, that it really fights some of this. But what are your recommendations here?

Well, the key is to open up, right? Comes down to the body, comes down to opening up and sharing how you actually are feeling and why you're feeling that way. That's pretty much it.

I love that. So I'm— what I'm hearing is just raising awareness of when there is maybe that resistance or fear or anxiety around it. What do you do if you're sensing that? What's the next step?

Well, then you allow everyone to introduce themselves and do a little check-in and coordinated accordingly.

Yeah, I'm hearing— I mean, I think that, you know, your, your framework is so rooted in the team space, right? So it's that just maybe open communication, being candid and vulnerable with the resistance, right? Or, you know, the fear around making the mistake and dealing with it head-on as a group. So I think that's a powerful way to leverage, you know, the people around you.

Yeah. Um, let me add a couple of elements to this, which is the role of incentives in the organization and also the role of boards of directors. Sadly, a lot of the incentives that are given management team are very short-term. You know, they're based on, um, essentially on, on stock price, uh, which, you know, if it was truly long run, I wouldn't mind, but it tends to be, you know, 3 to 5 years or something like that, whereas the impact of most managers in a large organization is really not just when they're there, it's kind of when they're gone. So part of what's needed to enable people to feel free and to, you know, build teams the right way and to take a little risk is to, one, have incentives that are aligned for the longer run. And then you need boards that really understand this stuff because at the end of the day, the CEO and the top management team, they didn't kind of put themselves on the line if they think they're going to get thrown out because they, quote, make a mistake. There's been so much talk about, you know, what we need on boards, and no one seems to pay attention to the kinds of issues that are important for innovation. First of all, you need knowledgeable people on boards, not people that represent this, that, or the other thing. You need very knowledgeable people. Sure, they can represent something that they're supposed to be independent and they've got to be highly skilled. I mean, look at Silicon Valley Bank. Where was the board when the management team actually took unknowing risk? This is sort of the flip side of it where they're actually risking things but not really fully cognizant of it because they were essentially using time deposits and putting them longer term in order to capture a few extra points of interest rate and of interest income and drive up their stock price. So you need to have also the apparatus of the company, the culture and the structure and the board governance supportive. Otherwise, teams will be suffocated by this sort of overwhelming atmosphere of control and limitations. So So we have to, you know, both connect the team-level activity to the overall corporate governance. And that's the part that, of course, you know, as an outside consultant, you don't necessarily, depending on who hires you, you may, may not be able to get that holistic, you may not be able to get the holistic mandate that you need to really bring about fundamental change and improvement.

You know, and as you're talking, I was just thinking about how in the normal course of an organization as it scales, it seems like if we're not really intentional about how we're cultivating culture, how we're structuring the organization, we start to move from dynamic capabilities to these ordinary capabilities, right?

Yes, yes. I have, you know, in the Berkeley research group, I'm very pleased to say that our culture that we had at day is still alive, you know, at day— we're at year 12, I think. But every time I talk to everybody collectively, you know, once a year we have a retreat. My last slide, the last bullet point says, beware regression to the mean. And there's these enormous pressures to make you look like everybody else and to do the things that the textbook says you should do, whether they're the right things to do or not. And that will, you know, chip away at greatness and essentially condemn you to mediocrity. So another short mantra that I use is— and people understand it and they're aware of it— beware regression to the mean.

I love it. I think that's an excellent mantra. So, and I'm hearing, so pieces of that are being intentional about who you put in what seat. The culture that you're building, any other kind of pieces that have been vital to maintain your culture?

Well, it's— you've got to keep articulating the culture. And, and part of the way we've built the Berkeley Research Group is we've not done acquisitions. We build from inside and we recruit top talent in. And when you're doing it one at a time, you have a chance to, you know, you meet everybody, you're, you're letting them know who you are, you're letting them know what your values and your culture is, what your incentives are. And by the time, you know, they come on board, halfway through to getting them on your culture, you're not all the way through because they carry the baggage of the last place that they were at. But after a while, you know, with luck, and it almost always happens, they swing around and they, you know, they actually start reading the culture back to us. And what One of the most pleasing things that happened here a year ago, we went out to the organization and just asked people what they thought about various elements of the culture, what it was. And what came back from that survey was, in fact, what we wanted it to be and what we thought it was. So actually having people lower down in the organization and throughout the organization spread around 40 offices in the world tell us what our culture is, and it lined up with what we think it is, that's a very good sign because you could be saying things at the top, but if you don't do them, if you don't act on them as management, it wilts rather fast. So keeping culture alive at the edges of the organization is actually hard as you get bigger, and that's where, you know, constant articulation helps and where avoiding, you know, mergers and acquisitions gives you a better chance of actually keeping it the way you want it to be and the way you need it to be for long-term success.

Yeah, I think that that constant articulation is key, and it feels like another piece to that is just having pristine clarity on what that culture is at the top level of the organization. So you're transmitting that signal incredibly clearly and consistently, right?

Yes.

So I'm curious, we haven't talked much about technology. What, in your, in your opinion, What role does technology play in organizations' ability to be agile, like how you— what you've been talking about?

Well, in my view, to get focused on the things that matter, you've got to kind of outsource, if you will, the— a lot of the day-to-day stuff. And if you can put that onto technology, if you— technology can be your friend, it can also be your enemy. But inasmuch as you can automate stuff and get the routine stuff done, the ordinary capabilities, if you will, embedded in software, then there's more room left for dynamic capabilities. Technology can be a big assist because it can enable operations to run more smoothly, but you have to do it right. Otherwise, it can be the opposite. I was fortunate that in building the Berkeley Research Group, we had good IT people, and I never got a technology problem. On my desk in 10 years because, you know, it was either good people were managing them away or they didn't get so serious that they really risked the operation of the enterprise at large. So that, you know, freed my time and the time of other people to really focus on building the company. And it comes back to what I said about flow. There's many things that'll interrupt flow. I mean, you know, if you got strong flow instincts, yes, you can battle through, but it does help to move the underbrush and technology can help you do that.

I love the kind of framework to think about this as technology is this assistive piece to reduce flow blockers and then, right, protect your bandwidth for all of the dynamic capabilities, the really high-value work. Right?

Right.

Teddy, any, any ways that you're integrating technology or even coaching your clients on how to have a relationship with technology? Because it feels like, you know, we talk at FRC that, you know, your phone, for example, can be a flow catalyst or it can just be a massive flow blocker. So how do you speak to technology in your coaching?

Turn off the phone.

I love it. Period. Mic drop.

Just turn it off. Yeah.

Just turn off the phone, find your flow blocks.

Yeah. I would agree with that. You can't really, you know, my phone is my, my, uh, when I'm doing academic research, of course I want to look something up and it's my computer, but, but you're right. You, you can't be interrupted, uh, to get real high productivity. And, and every time you get interrupted, you know, there's 5, 10, 15 minutes, maybe longer to get back into flow. I tend to agree with Teddy, and that's why school teachers will bag up phones and put them in lockers, because they know it's trouble in the classroom too.

Truly, the more friction we can have away from our phones, the better, in my opinion. So yeah, right there with you. So in an effort just to capture some final points of advice from both of you for our collective, just in your perspectives, any other kind of key lessons or takeaways that you think our listeners should, should hear in terms of how to unlock leadership potential, how to elevate their team's potential?

Teddy, I'll let you go first.

Utilize pets in active recovery.

I'll use one of my favorite words, which is nudge. You know, in, in this world, um, where you're trying to unlock what people have, and they aren't going to bang their heads, it's not going to come out by banging their head, but by nudging and demonstrating and coaching So nudge with a small N, or if the person's deaf, then it becomes a large N, but it never goes beyond a nudge. And then the other piece that people tend to forget is at the end of the day, to get things done, you need competence, you need skills. And, you know, all of this, whether it's flow, whether it's networking, you know, if you don't have basic underlying skills, you've got a very steep mountain to climb and you may never get there. So we can't dismiss the importance of skills and knowledge, particularly if you're in the technology space, you're dealing with Silicon Valley, you've got to have some reasonable amount of background, not an enormous amount to manage, but some knowledge of technology and some aptitude for understanding technology at least in the abstract. You don't have to be a computer scientist to get it all, but you do need knowledge. I once remember talking to Wozniak about the early days of Apple, and of course Steve Jobs would have been nothing without the Woz because he was the engineering genius. He was a computer scientist. He built the Apple II. He designed it and built it. And we wouldn't be having these discussions without him, or at least Apple wouldn't be where it is. We couldn't be talking about Silicon Valley in the way we do without the Gordon Moores and the Wozniaks and others that actually have got deep technology chops.

So just as you were talking there, I realized, so what I get this question from clients all the time. So leaders regularly are asking for insights on on how to think about hiring. How do I, you know, recruit and hire the best talent for a role? And, you know, some of the pieces that you were just talking about in terms of, you know, having a certain level of experience, a skill set— earlier in the conversation, we've been talking about, you know, essentially having a growth mindset, having a willingness to fail, to make mistakes, to learn, to try new things. What are your recommendations for— what's the approach to making a great hire? What pieces do you weigh out more than others, etc.?

Well, it depends what you're hiring for, needless to say. But if I'm wearing my venture capitalist hat, I want somebody who understands technology. If you're going to invest in deep tech, you know, you need, you need it. It's absolutely essential. If it's economic analysis, I want somebody who's got deep education, PhD, and a proven track record. But you also need more than that. I mean, you need that, but then you need the personality of someone who's willing to learn, who's a good team player, and has an entrepreneurial state of mind. Some people are just very wooden, That's not to say there's not a place for them, but for the people that are going to lead and build an organization, that's where you need this excitement and willingness to do something big. And if I'm hiring to fill a gap in the organization, sure, that's one thing. But if I'm hiring for leadership, it's a very different set of skills. And, and I like to say that, you know, particularly in the field of economics, Finding an economist who's entrepreneurial is very, very hard because the field of economics beats entrepreneurship out of people because we have this sort of view of markets as being in equilibrium and everything is sort of smooth. And real world, of course, is one of turmoil and deep uncertainty. So sometimes academic training actually destroys certain skill sets or certain natural instincts of individuals. So we have to bear that in mind as well.

Sure. And even more reason, I think, to be truly intentional about what these skills look like and how to cultivate them strategically. It's so— because they might have been extinguished earlier in careers, right?

Yes. Yes. You've got circumstances where they can be extinguished or they've never been lit up and, and sort of understanding, you know, whether someone has the potential to be lit up by an opportunity set and a path. That's why there's no substitute in an organization like the Berkeley Research Group, for instance. I always say, you know, the top management team is the HR department because we're the ones that recruit the top talent. Yes, of course we have HR because it's compliance and all kinds of other things, but in any organization, I would say the top management team is also part of the HR department in the I think that's, yeah, that's tremendous.

That's tremendous insight. And I love the distinction of, you know, are you hiring for leadership or not? It's going to be a different approach depending on the two. And I think this is also, I think our listeners are going to get some really tangible takeaways of what skills should I be cultivating with this in mind for if I want one of those leadership positions to be really effective. That's awesome.

Yeah. And that's where I think a lot of people run through leadership courses here, there, and everywhere, and it doesn't make them leaders. Because without that, what we talked about early on, without that passion, without that desire to do something bigger than yourself, um, it's no point going to a leadership course. If you're an III person and you go to a leadership course and you come out an III person, you're never going to be a good leader.

Truly. And if you don't have a willingness to lean into some of, you know, the, the— if you don't have a willingness to lean into making mistakes, to take the path less traveled where there is the potential to maybe fail but also grow tremendously. So those are super helpful takeaways. Teddy, anything to jump in and add here? No. Okay, great. Well, so Teddy, you've, you've talked about the book that's upcoming. Um, any, any upcoming projects from either of you that you'd like to let our listeners know about? Um, and also any other places where members of our collective can find you and learn more about you both?

Well, I've got 3 books I'm working on at the same time, uh, at least 2 books and 1 paper.

Uh, but that tracks, that tracks, David, based on everything you've told us.

Only 3? Yeah, well, and I've got to get them off my desk pretty, pretty soon. But I've got Dynamic Capabilities and Related Paradigms, um, coming out in Cambridge University, a little handbook series in the not too distant future. And, and there what I do, which is academics very rarely do it, is you put up your own paradigm, which is dynamic capabilities, but I show how it relates to a lot of other things. Most people are pushing their silver bullet solution to this, that, and the other thing, and leave it to the poor reader to figure out how it relates to the last book they read or something they read 2 years ago or something that they should have read and wanted to read but didn't read. And a lot of dynamic capabilities, I could relate to OODA loops, you know, coming out of the Air Force. I can relate it to to work on Lean Startup, as I mentioned before, I can relate it to work on agility, and I try to help people understand that these sort of live in a common gestalt, and I actually think dynamic capabilities is that gestalt, because what it is at the end of the day is a workable systems theory. What we all need to address the problems of the world is some kind of a systems theory, but systems theory unless you simplify it, is unmanageable because at one level it says everything relates to everything else and everything is interdependent. Well, that's not very helpful as an operational framework. And so at least with respect to managing organizations, dynamic capabilities is that workable systems theory, or as I sometimes joke, it's a poor man's or a poor woman's systems theory. But I'm actually saying that in the sense of it's a simplifying approach that nevertheless is a coat hanger that you can put a lot of ideas together on, because in the real world, problems are not dished up in nice organized ways. They— both problems and opportunities cut across many different fields and many different marketplaces, and you have to have the cognitive skill to sort of pull all that together. So Dynamic Capabilities and Related Paradigms is soon to be published, and then there's likely a a couple of volumes on dynamic competition where I take the same sort of notions around dynamic change or around change and innovation and apply it to competition policy, trying to rework the whole paradigm of antitrust, which is now 50 years old, that we got sort of economics into antitrust thinking. But what we got in was sort of static efficiency economics, and what we need is innovation economics. So I asked ask how would we approach antitrust enforcement if we had this new lens of dynamic competition. So these are obviously pretty big issues and they're exhausting in terms of the challenge, but that's what I hope to do. And then Teddy and I are going to write a book together on leadership. We're going to distill some of our mutual experiences and do something together, I hope, Teddy, and That will be something that we'll have fun doing. Getting into a group together, or getting into flow together, will be the goal. And since we both talk so eloquently about it, we shouldn't have any trouble getting it done. I think that undoubtedly we will.

Sounds like, it sounds like a beautiful goal, and I'm going to keep my fingers crossed that maybe you'll come back. Once one or two of those projects are done so we can unpack them, because they sound like incredible resources. Uh, Teddy, anything else from you?

Nothing.

Okay, well, I want, I want to say thank you again to both of you. This has been such a fun conversation. It's been a pleasure having you both on Flow Research Collective Radio. We'll be putting, um, your websites and ways, uh, to learn more about you in the show notes. So thank you again for spending time with me tonight.

Thank you. And one last point is I do have a David T. Scholar Entrepreneur website up there, which sort of can direct people towards a lot of my writings on dynamic capabilities. And that's a good place to learn what I'm doing and what I'm thinking and what I'm saying and presentations I'm giving and so forth.

Amazing. We'll definitely, we'll definitely link that in the show notes so all of our collective members can, can check that out.

Teamwork.

Done.

Thanks, team.

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