Innovating Leadership:
Co-Creating Our Future

Resources:

The book on competitive intelligence Greg mentions at the beginning of the show is Inside the Competitor’s Mindset: How to Predict Their Next Move and Position Yourself for Success by John Horn. It’s on Amazon at https://amzn.to/3sHtutS. You can contact Greg at https://zed2a.com.

Our host, Maureen Metcalf, posts a newsletter every week on LinkedIn. You can subscribe here.

She’s also written several award-winning books on leadership development. You can peruse and purchase them here.

Books we’re reading for fun or personal development right now include:

• The Five Lost Superpowers: Why We Lost Them & Hot to Get Them Back by John Reid, et al
• The Parable of the Sower by Octavia Butler
• The Left Hand of Darkness by Ursula K. LeGuin
• Snow White & the Seven Robots by Louise Simonson & Jimena Sanchez

Other episodes you’ll enjoy

• Why Smart Companies Make Bad Decisions with Mats Alvesson
• When Leadership Puts Life on the Line: Navigating Tough Decisions with Beverley McLachlin
• How AI Preserves Humanity at Ancestry with Howard Hochhauser

Guest(s):

Guest(s) Bio:

Greg Moran is a C-level digital, strategy, and change leadership executive with extensive global operations experience. He led corporate strategy for Ford and designed the plan that Alan Mullaly used to turn around the company. Greg held C-level IT positions in app dev, infrastructure, and core banking applications at Ford, Nationwide Insurance, and Bank One/JPMC, respectively. He began his career in consulting with Arthur Andersen Accenture, working across industries with 100 companies over the course of a decade. He is passionate about leadership and culture, and teaches part-time on the topic at Ohio University.

Transcript
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Speaker 1 0:00
The Innovative Leadership Institute produces this podcast. Have you ever laughed at a competitor’s decision, thinking it was completely irrational? But then it worked. Today’s guest, Greg Moran, helps you reframe that thought. Instead of thinking it’s irrational, think what do they know that I don’t? That reframing is part of a leadership mindset. Studying and teaching leadership mindsets is a specialty of the Innovative Leadership Institute. We can help you assess your mindset and see the rational in the events around you. Learn more and take our free leadership assessment online at innovativeleadership.com.

Maureen 0:44
Hi, I’m Maureen Metcalf, your host of Innovating Leadership, co-creating our future. Our guest today is Greg Moran, returning, and thank you so much for being here. And we’re going to talk about how people behave as rational or appear to be irrational.

greg 0:59
Yeah, what caught my attention on this particular topic was a book that came out from a McKinsey partner, a guy named Horn. The book is really more a primer on how to do competitive intelligence inside a large enterprise. But he really opened the book with the premise that he said, “If I had a nickel for every time one of my clients had told me that my competitor is acting irrationally, I wouldn’t need to write this book. It really struck a chord in me with one of my favorite aphorisms, which is everybody acts rationally inside the structure they believe they’re operating in, barring a psychotic break. And I’ve said that for years in all kinds of contexts, and I have never run across a situation where it’s proven to be untrue, so I think it’s a fundamentally important thing for leaders, in particular, I think, to contemplate as they navigate the path of making decisions on behalf of their organizations, leading people, and trying to understand those people’s behaviors and operating in the realm of leadership. I think there’s a super easy cop out that says, “Well, I don’t have to take that into account because it’s not rational, and it’s almost never irrational.

Maureen 2:09
So I was an economics major. We assumed people were always rational self-maximizers, and then I went to work and I saw people do things that, to me, were not rational. And I think your point is so important that even though it doesn’t appear rational to me, given my mindset and my education, to the other person, given a different mindset and a different education, the decisions they’re making are typically rational, given what they’re prioritizing,

greg 2:35
right? And what they believe to be true. It’s a very important distinction because people will say, “Well, it’s not true, so therefore they shouldn’t be acting that way. It’s not important whether or not it’s true. It’s important whether or not they believe it to be true. One of my more indelicate ways of putting this is: I can make you flap your arms like a chicken or bark like a dog. All I need is a gun. The gun is structure. If you believe the gun represents a threat, and I tell you, you better bark like a dog and flap your arms like a chicken until you come up with a better plan. You’re probably going to bark and flap.

Maureen 3:08
Nobody frisked you when you came in. This is a no gun zone.

greg 3:11
It’s an example. No, I have never used that experiment in real life, but it is communicative to people because they all understand that when you perceive a very real and imminent threat, you act rationally inside the context of that threat until you find a way out of the threat. That’s a powerful and obvious example. But threats can be much, much more subtle than that. Performance management systems, as an example, is an area for I think very thoughtful consideration, because those are powerful structures. I’m sure many of your listeners will remember the situation at Wells Fargo about a decade ago, where federal government stepped in and did an investigation, only to find out that 5000 bankers at Wells Fargo had created fake accounts on behalf of their customers in order to hit the metric to get their annual bonus. 5000 people knowingly broke the law. It’s not like these people didn’t know that creating a fake account was an illegal act. They knew it and they did it because if they didn’t do it, they wouldn’t hit their numbers and get their bonus.

Maureen 4:20
A decade ago, I worked for a government as a consultant. We came in to fix some payment problems in a government organization. During that time, someone came into my office and said, “Hey, so and so isn’t delivering the tanks because they haven’t been paid. Client looks up and says there are no outstanding bills. What we uncovered is the payment clerks, when they couldn’t figure out how to pay something billed improperly, something else had been paid improperly, they just deleted it out of the system, throw it away. They were working to the performance system they were given, and they were really good at it. And this wasn’t our most sophisticated employee. This is a someone doing a very basic task, so that. One reinforces and says we need to pay attention to this from bottom to top. We see executives do this kind of stuff all the time. We don’t necessarily think that our entry-level employees are also willing to bend things to make sure that they keep their jobs.

greg 5:16
Absolutely, and I think it’s a huge mistake because I think particularly when you go to frontline workers in in say brick and mortar retail or in manufacturing operations, they’re amazingly adept at figuring out how to do things the most efficiently that they can, and in a way that achieves some level of reward for them, even if the reward is less work for the same pay, or whether it’s getting promoted or whatever it might be. So I agree with you 100% And front line is not particularly correlated with intelligence or ability to do systemic thinking. There’s a whole lot of reasons why somebody might choose to be in a job like that. I remember when I was at Ford, we had 1000s and 1000s of frontline manufacturing employees that had masters and doctorate degrees, but they chose the work that they were in because it afforded them the opportunity to pursue other interests in their lives, including education. So I agree with you 100% We should never correlate rational thinking with the level or you know, role in the organization, and it really comes back to the primary point, which is if somebody is acting in a way that you don’t understand and you believe that person to be rational, i.e. they haven’t had a psychotic break, the first thing you should be doing is trying to understand the structure that’s motivating them, not writing off the behavior or dismissing it, or heaven forbid, punishing the person for behavior that you view as irrational because you can’t see the structure that’s driving their behavior,

Maureen 6:53
especially when you’ve incentivized that behavior.

greg 6:55
Right. The real punchline is if you created the structure and now you’re punishing them for operating inside of it.

Maureen 7:01
Let’s go to the McKinsey example because I think it’s also interesting when we think about doing competitive analysis and how crucial that is to business strategy and decision making. If I write off my competitor down the street because they’re dumb or whatever thing I say that irrational, they make decisions poorly. I may be missing significant business signals that will help me adjust to trends.

greg 7:26
Absolutely, and I can share an example in that regard. When I was running corporate strategy at Ford Motor Company back in the 2000s we had a lot of that going on because the automotive industry overall was under a lot of pressure as we kind of tilted our way into the recession in 2008 there was lots of discussions. As it turned out, at all of the major auto players, domestic auto players, about how their competitors were not acting rationally. Each of the companies were operating inside of different structures. So, just to say, at a macro level, Chrysler at the time was operating inside of essentially a PE firm structure being run by Cerberus at the time and owned by Cerberus, and so they had a set of incentives tied to those objectives. GM was operating as a pure public company, and so as the CEO of a public company, you’re incented around very specific outcomes. And Ford was operating as a public company, but a closely held one. The Ford family still has voting control over the stock, and so of the three companies, Ford actually had by far the greatest strategic flexibility because while we had to take the signals from the market and do quarterly analyst briefings and things like that. We had the opportunity to operate on a longer time frame around what we were trying to accomplish, which gave us strategic flexibility that neither GM had nor Chrysler had. So what happened? We were able to go out and float a bond offering for some $20 billion that enabled us to play through the recession. GM and Chrysler, neither one of them, had that option until it was way too late. The money markets were shut down, so it was a great example of where the structural incentives, the structures that drove our decision making, afforded Ford a significant advantage, and you’ll remember Ford was the only company that didn’t take a government bailout in the recession of 2008 because we had successfully been able to borrow all this money that allowed us to play through the recession without taking a bailout, and that bailout came with substantial consequences for GM and for Chrysler.

Maureen 9:41
Well, and then you add in Tesla, and I’m assuming at various times people have thought that Elon Musk has lost his mind.

greg 9:48
Yes, although I think at this point there aren’t a lot of people that would bet against him on a business venture for sure. There were fundamentals about Tesla, particularly in its. Early days that would tell you it was a bad bet. The people who were willing to place that bet did well. I can think of at least two friends of mine who bought their Teslas by buying Tesla stock and then selling the stock to buy the car, and so the car was essentially free for them because they placed the bet. But the fundamentals from a car business standpoint were not there. It really came down to the underlying belief that people had in the structure that Elon Musk creates for a team to be successful. As fate would have it, it played out. He’s done well with that company. Whether the bloom has come off the rose with mr. Musk or not, history will tell the tale, but certainly with Tesla and with other companies like SpaceX, you can say for sure that he creates a structure that leads to what appears to be to others physics-defying success. But he’s done it multiple times, and so now people are starting to realize he’s the creator of the structure, and whether or not you understand the structure doesn’t really matter. You’re investing in the guy that creates the structure.

Maureen 11:07
That’s going to be also incredibly important in an era where things are upending. I had a conversation with someone running an innovation center earlier today, and talking about the company that owns that organization not being very excited about innovation at this point in time, all the things with business fundamentals and stuff. The idea that if you can’t get excited about innovation right now, you will be at a disadvantage. Underpinning that, the structures that we have believed to be true in the past, many will not be true in the next five years.

greg 11:40
I think that’s right. Although I do think that there are some fundamental premises that structurally can create long-term success, regardless of the economic context. And I think you know, going back to a car industry example, Toyota is a great example of that. Toyota has an underpinning of a set of principles that they operate with that have made them consistently successful over a very long period of time, and that strict adherence to those fundamentally structural guidelines inside of their company has produced results in lean economic times and more let’s call wealthy economic times. Toyota always leads performance in the industry, and sometimes pushes against the mainstream trends. Toyota right now is pushing against the mainstream trends, and they’re on the record as saying that full EVs is not the near term future for the automotive industry, and they’ve tripled down on hybrid technology while making very limited investments in full EVs. They’ve got a set of structural incentives that they’ve looked at using their filters and said that’s the better decision.

Maureen 12:51
And I can certainly see if I were to look at range of the population, the EV whose charging is required every 300 miles in good weather, bad weather, a much shorter distance.

greg 13:04
You sound like you’ve got some experience with this, Maureen. Is this maybe something you might have run into?

Maureen 13:10
Lots of good stories and one not so good story that involved Christmas Eve.

greg 13:16
Yeah, I seem to recall a little bit of stress when you told me that story.

Maureen 13:20
Yeah, I think we had four miles left on the car when we went to some place to charge illegally. Found where a tree had fallen down in front of a charger, and so it was available. The point is, at that point, new Tesla owner. We just hadn’t calibrated the distance. Tesla was still new enough. What was listed in the app as a supercharger station was out of commission in a hybrid car. I could still be environmentally conscious and have a little more comfort that if my battery ran out, I could get gas.

greg 13:51
Right, Toyota’s done the math on that, and their belief is that there’s a transitional period where hybrid electric makes more sense, and that leaves open the possibility of EVs in the future, but EVs that may be driven in different ways and off of a charger, hydrogen fuel cells, etc. That flexibility that they’ve left themselves-if you were to trace back to Toyota’s history and project it forward-you would be listening pretty hard to that signal because it’s probably a pretty good one, unless you don’t have the flexibility to play that option. And what I think we’re seeing with some of the other mainstream players is they don’t have the economic strength to be able to operate through that transition because the R and D costs are fairly substantial. If you don’t have the economic underpinnings to place that measured bet, you’re stuck having to place all your chips on what you think the long-term future is going to hold and hope it plays to your benefit. And it might, but Toyota has more flexibility because they have more economic strength.

Maureen 14:56
In a prior conversation, you also talked about economic and. I’m going to forget the Jamie Dimon term balance sheet.

greg 15:02
Oh yeah, just having a strong balance sheet so that you can weather the storm. And quite frankly, to your point about innovation, invest during the storm. Speaking of Jamie, before we kind of descended into the economic malaise coming out of Russia invading Ukraine, it was probably May of that year, so a few months into the invasion, I was at an event with Jamie, and he said, “I love times like this because my competitors tend to act from a place of fear, and it always presents great business opportunity for me to succeed because I operate from a position or a perspective of opportunity. He said, these always always end up being accretive for my company and for my shareholders and for my customers. And so he was excited about another opportunity, being able to predict based on his experience that his competitors would act from a place of, if not fear, at least indecision and tentativeness.

Maureen 16:01
And that illustrates his structure is one. I have a strong balance sheet, and I have positioned myself to weather this and bet where other people may not have positioned themselves financially in such a strong way during a downturn. They may have to structurally exactly,

greg 16:19
and he does that work when the sun is shining, so he’s always disciplined. You know, the very first voicemail I ever got from him was when he became the CEO of Bank One, and he used the phrase “fortress balance sheet” in that voicemail, and that was pushing 30 years ago. It’s been a consistent theme for him, and it has obviously played to the benefit of Chase in the long term for sure. So that structural benefit really gives him strategic flexibility.

Maureen 16:49
Let’s shift then to practical application because I think all of us have observed someone and said, “Boy, that doesn’t seem rational. My job is in some cases just fascinating because I get to sit back and observe people, and then work with them as a coach or an advisor. And humans are just fascinating. How do I then shift if I’m managing someone and I say, “Boy, that didn’t make sense”

greg 17:12
I think on an individual level, as a leader, when you have somebody on your team or maybe another leader in the organization that does something that you perceive to be irrational, I think step number one: suspend that thought. Don’t assume it’s irrational. You won’t learn from that anyway. If you assume it’s irrational, you have no opportunity to learn from that perspective because you’ve already dismissed it as irrational. Way more instructive, even if it turns out not to be true, even if the person’s had a psychotic break. is way more instructional for you to step back and go, okay. Let’s assume for a moment that that person is rational and that they’re acting inside of some structure that I don’t understand. And if it’s somebody else in the organization, it may involve sitting down with that person and saying, “I don’t understand why you made that decision? I’d love for you to educate me with respect to what factors you took into consideration. If it’s somebody that’s on your team that you’re caring for, and they do something that may not seem rational, sitting down with that person through the lens of “I care about you, you may find out that there’s something. In fact, I’ve had this happen where you find out that there’s something going on in their personal life that they didn’t share with you, but has a powerful impact on their behavior. I remember Stephen Covey using this example in one of his books, where he was on a train in New York for a business meeting, and there was a man on the train, and he had several young children, and the young children were misbehaving horribly. He said, “I run my family in a disciplined fashion, and it was really bothering me. And so I intruded in the man’s thoughts, and I said, “Sir, I apologize, but can’t you see that your children are misbehaving and that they’re making it uncomfortable for all the rest of us on this train? And the man said, “Oh, wow! I’m really sorry. We just came from their hospital. Their mother just passed away from cancer, so it’s an extreme example. It’s an emotive example, but he uses it to illustrate the fundamental principle of seek first to understand, then to be understood. And he said, “Now I would approach that situation very differently, and I would start with, ‘Sir, is there some way that I can help you? I see you must be under some level of stress or whatever, right? But assume good intent and ask the question. And I think all of us need to build in that space to suspend disbelief for long enough to examine the potential structures that might be motivating that behavior. Whether it’s an individual on your team, whether it’s somebody you work with and is a partner of yours, whether it’s a you know somebody you work for, oftentimes that person may have access to information that you don’t have. Trying to understand so that you can be an effective team member is you know another example of that. And then I think it translates to the larger context of competitive intelligence as well.

Maureen 19:58
At this point in time. It seems like acting with grace. So people have so much going on with the post-COVID world and navigating aging parents and kids and everything that goes along with life that’s just more complex than it was even a few years ago. As you’ve said, acting with care. Is there something going on that I can help you with, because this is inconsistent with your traditional behavior.

greg 20:24
We have lots of sayings that people throw out that are very consistent with this larger principle that we’re discussing. Assume good intent. That’s just a little window into this exact same issue. Is you start with the assumption of good intention. So if somebody that you know to be generally a person that acts with good intentions. Does something that doesn’t appear to be consistent with that. You still should assume good intent and then sit down and ask.

Maureen 20:50
When I say something and someone responds differently than I anticipate, it’s typically that sounded different in my head than it did coming out of my mouth. Help me see what you saw that I’m missing.

greg 21:01
I just had this happen last night with a friend. I sent him a text that happened to be about a bicycle. He and and another friend of mine that are cycling buddies, and I sent him a text about a new model bike that I thought was very interesting. He got back to me and said, “So are you saying I should buy this bike? And I’m saying, “No, it’s just an interesting bike, but it’s not a good fit for what you want to do on a bike. And so he got back to me. He’s like, “Why are you sending me texts about bikes I shouldn’t buy?

Maureen 21:30
It’s a good question.

greg 21:31
And so I got back to him and I said something kind of very tongue in cheek that made it clear to him that his response came out way more aggressively than he probably intended, and he got back to me. He’s like, “I have stress. And then he called me this morning and said, “I’m launching a major software delivery today into production, and it was totally on me. It was a perfect example of how the exchange ended up being insightful and innocuous because I didn’t respond in kind. I gave him grace and said something a little bit funny just to let him know how it came across, and then that triggered him revealing the context that was driving his perceived irrational behavior of like coming at me aggressively about sending him a text for something he shouldn’t buy.

Maureen 22:18
People do take your recommendation seriously. It’s good he didn’t just go buy

greg 22:22
it. Wouldn’t have had time, thank goodness. But I agree. And then on the competitive front, the same thing. I saw this all the time in strategy work. Even when I was in the insurance business, you would be in these conversations all the time. I worked at Nationwide Insurance, and you hear people in Nationwide talk about how Geico was being irrational and pricing their product irrationally in a market. You didn’t have to pay attention to that signal because it was irrational, and yet Geico has grown by the equivalent of a nationwide like three times in the last 15 years. So, are they irrational? Probably not.

Maureen 23:01
Evidence would suggest

greg 23:02
no. Evidence would suggest no. Now I’m not saying that’s true of everybody at Nationwide, and I’m certainly not saying that the leadership at Nationwide perceives it that way. I just heard that conversation a lot by people who were in those markets where they were competing with Geico. It would have been wiser to step back and say, “What’s the structural incentive that’s causing Geico to do this? Are they just acquiring market share? Are they undercutting us and then planning to raise rates later? If so, what’s our right move inside the context of that rational strategy? That’s a meaningful thing to do. That’s not a bad strategy. It happens in insurance all the time. I mean, the playing field for insurance competition, at least in the auto business, for the last 20 years, living memory has been we cost 500 less a year than everyone else. There’s not many ads that are much different from that. So that’s the playing field. So if that’s the playing field, and we’ve trained consumers that that’s the playing field, and somebody comes in and says, “We’ll sell you insurance for $500 less. You probably have to play along, or you will lose market share to that player. And maybe that’s okay. Could be a market you want to have less market share in. But the point is, don’t assume irrationality in your competitor. Assume rationality in your competitor and try to understand

Maureen 24:21
it. Where else do you assume irrationality in your life?

greg 24:25
Well, I try not to, but I think we all fall victim to that to some degree. I think we all think every other driver on the road is irrational.

Maureen 24:35
They’re just slow. I got a speeding ticket last week because I assumed someone was. I didn’t understand why they pulled over, and it was because there was a police person, and I accelerated.

greg 24:47
I think the easiest place is in interpersonal relationships, and I think the point that you made earlier is a really good one. If you want grace in life, offer it, particularly when I think you’re working across. Like generational boundaries, I think we talked a few weeks ago on one of our other podcasts about how Gen Y is coming into the workforce with these expectations of being accommodated, and I think the reality is that they’ve been trained and taught that the world has an obligation to accommodate whatever quirks they may bring to the workforce, it’s easy for us that have been in the workforce for a minute to go. Yeah, it doesn’t really work that way. You know, yes, there are some things that we have, I think, gotten better at accommodating over time. But to suggest that we have the capability or even the propensity in business to accommodate the myriad of things that may need accommodating is naive, but it’s not naive if that’s what you’ve been told the world is going to do.

Maureen 25:52
And I also think back to even what I expected when I came into the workplace. I was equally naive, different subjects probably, but I’m horrified when I look back at some of the stuff I did and said. Just glad we didn’t have video back then of people at work.

greg 26:08
Societal norms change over time, and that’s another thing for us, I think, to recognize is the societal norms, mores, and our structures that have a profound impact on how people behave. And some of those mores have changed dramatically over the course of even you know my brief career.

Maureen 26:27
What’s the most notable one that’s changed to you?

greg 26:30
Yeah, that’s an interesting question. I think the relationship between the employer and the employee has changed fairly profoundly, like society’s view of that relationship has shifted. When I started in the workforce, which was in my post college years, was in the late ’80s. I think you entered the workforce with the belief that having a job was a privilege, and that privilege came with the obligation for you to adapt to the company that you are joining and do your best to help them be successful. I simply just don’t think that’s the normative view nowadays. I just don’t think that’s the mainstream view. I think the mainstream view is a company is privileged to have you work for it. I’m overstating a little bit for effect, but I think that’s a fundamental structural shift in the behaviors, even in tough economic times, even when companies are laying people off because they have to to hit their financial objectives, they still view their employees through the lens of I have to earn the right for them to work here. I have to you know work hard at engaging them. That’s shifted very profoundly since I started at Norcource.

Maureen 27:43
Is that because the contract was? If I get a job here and I keep working really hard, I’m likely to get to stay here now with buyouts and mergers and acquisitions and downsizing and all that. No matter how hard I work, I may not get to stay.

greg 27:59
Maybe. I mean, I started my career in consulting with Arthur Andersen, and it was very much an up or out model. You were promotable, or you were gone, and so I don’t think there was an implied contract for the long term. There was an implied contract related to performance that, if you performed, then you would get to the next level, and I think that expectation was there, and I saw you know certainly play out. I started here in Columbus, Ohio, with Arthur Andersen. My start class, I think, was 14. Four of us made senior two years later. Two of us made manager, and I think I mean manager after four years. So the upper out was real, and some people opted out because they just didn’t want to do the work. Some people opted out because they got other opportunities or had life changes, and then a lot of people were forced out as part of the upper out kind of mentality at the time. I just don’t think you’re going to find that structure in place at very many firms now, even in firms that traditionally had been up or out, I think there’s much more a mentality of if you’re a good senior, you can stay as a senior for a long time, and ultimately, if you’re not pulling your weight, it’s really a performance relative to your peers. It’s not you have to be promotable or you’re gone.

Maureen 29:17
I understand if you’re a good senior, you get to stay. Where that becomes problematic is if there’s a bottleneck underneath you that other people can’t get promoted.

greg 29:26
That’s a relative performance perception, right? You become a blocker in an organization, and another great example of what we’re talking about is the changing attitude towards mandatory retirement. A lot of companies dealt with the blocker phenomenon by having mandatory retirement ages, when I was at Nationwide recently, Nationwide changed while I was there. They had a mandatory retirement of 60-five, and they lifted it during the time that I was there, and said it’s no longer really relevant. It’s about your ability to contribute to the organization, and took away that mandatory retirement. And I think we’re seeing. That trend. It was very common when I started in work that there was mandatory retirement ages, including at Arthur Andersen. I think you would find fewer and fewer examples of that structural incentive at companies.

Maureen 30:12
Are we seeing more senior workers wanting to stay but downshift their roles because that blocker phenomenon changes if you’ve been a senior executive, you no longer have to run the company. I don’t know that we’re getting that right yet.

greg 30:27
I agree with you. I think it’s a blind spot for a lot of companies. I think a lot more people, as they approach the later stages of their career, would be willing to downshift than companies think. I think there’s this presumption that nobody would ever take a demotion, and I just don’t think that’s true. There’s ways to cast it differently than a demotion, but in effect, having somebody downshift from a job where they’re working 80 hours a week and traveling all the time to somebody in a position where their experience and wisdom can deliver significant value, but they might be being paid half as much. Maybe fine.

Maureen 31:05
Well, and if I get to go from 80 hours a week to 40 hours a week,

greg 31:09
right?

Maureen 31:09
At some age, I can’t sustain 80 hours a week. I may have hit that. Frankly, I don’t want to do that anymore.

greg 31:16
Right.

Maureen 31:16
And hopefully, I’m paid more for my wisdom. Hence, the wizard comment than I am for hours at my desk

greg 31:23
potentially, but I think even with a pay cut, more people would be willing to do that than companies are willing to assume. Like companies should have ramped down programs and try it because I think they would be shocked at how many people would be more than willing to potentially take a pay cut for more flexibility in their schedule, less rigor. You know, less travel. Travel takes a toll on you, and as you get older, your ability or willingness to get on an airplane three or four times a week starts to really go down just because of the physical toll it takes on you. I used to do one week turnarounds to Europe and Asia all the time. Those are devastating physical events. And if I had to do that now, you know, it would take a big toll on me. I think you’re raising a really, really good opportunity, and it’s a great example of we assume we know the structure that’s motivating somebody who might be 57 years old and ready to slow down. We assume they wouldn’t be willing to slow down, so we’re trying to figure out a way how to get them out of the organization because they’re becoming a blocker. What if we suspended that assumption? Actually, had alternatives for those people that allowed us to not lose the institutional knowledge, wisdom, and the benefit of their experience, but did so in a way that made sense for both the organization and for the person, would we find a whole other realm of potentially flexible employment opportunities for people who can add a ton of value?

Maureen 32:49
This idea of I keep calling it the wizard or the crone or something-someone who brings wisdom-the value to that is immense to elevating the next generation for those of us who stay healthy, hopefully that age pushes out.

greg 33:05
Right. Yeah, I remember when Soya Honda retired from Honda. My whole life, I’ve been envious of the title he then assumed. So he’d been the chairman and CEO of Honda for a very long time, obviously, and he was elderly and at a point where he wanted to downshift, and so he handed the reins of the company off to his successor, and he took on the role, and this was his formal title in the company: supreme advisor. And I’m like, wow, I want to be a supreme advisor someday. Thought it was just awesome, and it just showed the great respect that they had for him as the founder of the company and the wisdom that he brought to the company, even when he wasn’t in a position to potentially be making all the decisions that he needed to make, car business is an extremely hard business. Of all the places I’ve worked in my career, I would say the industry that was by far the most challenging was the automotive industry. It’s extremely hard, and if you get it a little bit wrong, you lose a lot of money in a very short period of time. So it’s not an industry for the faint of heart. There aren’t big margins to allow you to make mistakes and still survive. You’re killing it at 4% in the mainstream car business. Software companies typically operate at 80% So the room for error is substantially different.

Maureen 34:24
So, note to self: work for a software company,

greg 34:27
right?

Maureen 34:28
Are you going to name yourself a supreme advisor?

greg 34:30
No, I don’t think it’s a thing you can call yourself that would just look like the most extreme hubris ever. I anoint myself supreme advisor. I think you would rapidly become the non-existent advisor.

Maureen 34:46
I think next time we do a show, I’m going to announce you as the supreme advisor.

greg 34:51
No, but I’ve definitely at a point in my career where I think the value that I can add to the various businesses that I’m involved with is. Much higher in an advisory role than it would be in you know an FTE role, playing a specific position on the court, if you will, right? Not because I can’t do that work; I might be able to do to my sleep, but it’s not leveraging what I bring to the table in the most effective way. Having me play a role when I’ve had experience across multiple functions of companies and multiple layers of abstraction. I’m way more valuable bringing that to bear on a company that I advise than running their operations department, which I can do. It’s just low leverage given my experience and and what I can bring to the table.

Maureen 35:38
That’s a really good just case in point to illustrate. I know we graduate to consultants at some point, but within an organization, is there a structure that we allow

greg 35:49
in the startup world? The role of advisor is very common. I think it gets used and misused in lots of different ways. But the idea of an advisor has existed for a long time in the startup world, because there’s a presumption, quite frankly, that you might be working with a founder or a CEO who is doing it for the first time and has zero experience doing it. And the concept of the advisor is to have a resource available for that person that they can tap into to help them learn in a way that doesn’t require them to do it in front of their team publicly. They can actually, before they make a big decision, go talk to the appropriate advisor, and you’d expect to have advisors across various different topics that you can sit down with and go, “Okay, I’m about to do this. Is this a good idea? So that mechanism is there in the startup world. I would like to see better structures put in place to ensure that the founders and first-time CEOs, et cetera, have a stronger incentive to take advantage of

Maureen 36:52
it. Okay,

greg 36:54
and I don’t know exactly what that would look like, but I do think it’s an important consideration that I think the boards could really play a role in ensuring that call it prototypical first-time CEO who’s 26 years old and had a really good idea and is a very talented software developer or very talented engineer, but knows nothing about building, scaling an organization, or leading people is tapping into to ensure that they’re making decisions that make sense. You look at very large examples. Could the CEO of Theranos benefited from an advisor that they were working with that didn’t have a structural incentive to take advantage of her? And as we saw the court cases play out, her experienced advisor had a structural incentive to take advantage of her, and did so even on a personal level. They were living together. You sit there and go, “Wow, something failed in that whole process of helping Elizabeth Holmes get set up for success as a CEO. I’m not presuming she couldn’t have been successful. Obviously, a bright person could she have been successful had there been a better structure in place to help her become a great CEO, and not just a bunch of reinforcing structures trying to drive financial reward as fast as possible to a small group of people. Adam Newman at WeWork comes to mind. Travis Kalanick at Huber comes to mind. You can see example after example of people who made catastrophic miscalculations in a world where they were surrounded by brilliant business people, huh?

Maureen 38:28
Think of even the recent some of the banking meltdowns, also surrounded by board members who knew better.

greg 38:36
Right, guess VB is going to turn into some lovely case studies as people try and unpack that situation and say, in the face of obvious data, like somebody who almost knows nothing about banking can read two paragraphs on SBB and go, “That seems like a bad idea, and it was right. It was a bad idea. So this maybe takes us back to the beginning and is a good way to wrap this. You look at that information that any rational person would have looked at and said, “Don’t do that.

Maureen 39:06
What the heck are you doing?

greg 39:07
And they did it right. So this is a perfect example of where we’ve got to step back and look at what other structures were in play at the board level, at the management level, at the societal level that we’re driving SVB to make decisions that were rational to them, but irrational from even the mildest objective scrutiny.

Maureen 39:30
And as we look across our systems and how AI is going to impact it, I keep coming back to that: that we’re going to need significant structural changes because we’re going to see behaviors that are off the rails, not in the best interest of the larger group of people. They will certainly be helpful for a handful. And how do we navigate that as either an organization or a community? How do I navigate to make sure my community stays safe?

greg 39:56
Well, and you have highly varied, even beliefs. About what the journey to monetizing AI looks like. You know, Zuckerberg at Meta is developing some amazing AI assets, and he’s publishing them and giving them to the world. Now, why would he do that? He could monetize those, but he’s choosing not to. The question is why, and have we fully unpacked what structure he’s operating in that causes him to believe that that’s actually the rational thing to do. Meanwhile, he’s got competitors like OpenAI that are operating on a subscription model, and they’re like, “Oh no, no, I want to monetize all my assets as fast as possible.

Maureen 40:33
And you’ve got Microsoft that’s doing something in the middle, right? They’re

greg 40:37
doing something in the middle, but they’ve now released pricing on Copilot. It’s very clear. clear what they were investing in. So they’re investing in a licensing model that’s going to drive license revenue for Microsoft 365 up by a very meaningful amount at a super high margin because the R&D cost is relatively low. The return on that investment at companies that have 200,000 employees and are now going to pay an extra $45 a month for every single employee to have access to Copilot-that’s a lot of money. Making sense of all that and figuring out if you’re looking at it from like some medium-sized company who’s trying to make sense of it all-you know where do you place your bets? You’ve got all these potential assets you can tap into. Some are free, but are they really free in the long term? And what are the downsides of me taking advantage of those frameworks? And it is a very hard thing to unpack. So I think your caution is a thoughtful one in that I’m not saying we should go slow. I’m saying we should really unpack the incentives that an organization has in offering a product a certain way before we sign on.

Maureen 41:47
I think that’s a great way to wrap, Greg, the supreme advisor. Thank you. I’m

greg 41:53
going to regret telling that story I can tell, but it’s always fun to be here, and hopefully this was an insightful conversation for folks.

Maureen 42:01
We trust that you, our listeners, will leverage what Greg has talked about to become more future ready. Please like us and share us.

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