Learning from failure (and a few successes) in business
Spend enough time in the world of business and you’ll see it all. Brilliant innovation. Monumental ego. Inspiring leaders. Disgusting jerks. Perfect timing. Wretched timing. Breakthrough thinking. Pigheaded blindness. Unexpected success. Undeserved failure. Undeserved success. Unexpected failure.
For better or for worse, I’ve spent enough time in that world to have drawn a few conclusions about what goes on there. There are of course innumerable factors that influence the outcome of affairs in the world of business; describing them is the work of textbooks and business schools. But a handful in my own experience have proven uniquely critical:
1. Change—when, why, how, and whether to change course
2. Mindset—ways our minds trap us and/or liberate us
3. Timing—insight and sheer luck as determinants of outcomes
4. People—the quirkiness of individuals and corporate cultures
It would be sweet if these influences were as neatly separable as they appear in the categories listed here, so they could be dealt with swiftly, scientifically, definitively. But life anywhere, and perhaps especially in the world of business, is quite a bit messier than that. So you’ll find a little bit of all of them in each of the stories that follow.
As will become clear, my living through some of these experiences wasn’t nearly as enjoyable as writing about them in retrospect. Near-death experiences—whether your own or a client’s—are hardly fun. But I do now savor what these tough times taught me. I hope your reading about them leaves you, too, with some pleasure and benefit.
Princeton, New Jersey
Over the course of my years in business, I’ve started a half-dozen ventures of one kind or another. And I’ve been an advisor to the senior management and boards of many others’ startups as well as established global corporations including Fortune 50 companies. If there is one constant dynamic among them all, it is the relentless requirement to change. Change is the inevitable companion of all ventures, no matter how auspiciously conceived and born. The only question is whether change is to be handled well or poorly—a question that involves matters of judgment, timing, and execution.
After having worked during my twenties in established institutions (schools, colleges, church) and then in a well-established organization (the “Mister Rogers’ Neighborhood” company), I decided to take an all-out plunge into the world of business by launching a new venture I had dreamed up myself. This was seemingly a can’t-miss opportunity (great concept, impeccable access, abundant funding), but I soon discovered that I had a few lessons to learn.
One of them: change or die.
De-fanging the Jaws of Defeat
It seemed like a brilliant idea at the time.
When I worked at “Mister Rogers’ Neighborhood”, we raised money to produce the program from corporations and the government and, occasionally, from private philanthropic foundations. Going after the funding was a big part of my job as president of the company, and so I got to know this territory pretty well—especially the corporate and private sources.
I was struck by two things: first, how relatively easy it was to get the dough, and second, how little thought the donors gave to their own strategy in the use of these precious dollars. For the most part, their grants seemed to be on-the-spot, up-or-down decisions in response to unsolicited proposals that came their way, rather than a decision designed to help fulfill a carefully wrought plan on their part to bring about a specified improvement in society.
There were at the time (1976) about 12,000 philanthropic foundations in the U.S., but fewer than 1,000 professionals at work within them—and the vast majority of these professionals were employed by the forty largest foundations. Most of the work elsewhere was being done on the back of an envelope. During just a handful of casual meetings a year, the trustees would sift through the piles of incoming appeals, name their own favorites, distribute the money, have a nice lunch, and go home.
To my entrepreneurial eye, this looked like a no-brainer: these unstaffed foundations clearly need professional staff, so I’ll put together a professional foundation staff for rent. We’ll be the first consulting group in the U.S. whose sole purpose is to help the trustees of these unstaffed private foundations plan and execute their philanthropic strategy. Brilliant!
Before I leapt, I thought it might be wise to consult with someone who knew the territory. Robert Goheen had recently followed up his distinguished tenure as president of Princeton University with a new job as head of the Council on Foundations, a philanthropic “trade group”. I called on him and described my concept.
“Forget about it,” he said.
Well, that was hardly the advice or encouragement I was looking for. Beg your pardon, Dr. Goheen?
“These people are very self-satisfied,” he explained. “All they want are congratulations, plaques, and dinners in their honor. And their names on buildings.”
But, but, I protested, what about repairing their apparent lack of strategy, about increasing their efficacy, about helping them—in words of one syllable—get more bang for the buck?
“They don’t care about that,” he replied. “Look, it’s very easy to seem successful at this game. The I.R.S. says that you must distribute to qualified 501 (c) (3) non-profit organizations an amount equal to 5% of your assets or equal to all of your investment income—whichever is greater—minus reasonable administrative expenses. How hard can that be?”
Well, clearly this was a big mistake.
Not my brilliant idea for the company. Going to see Goheen, I mean. After all, what could he know, anyhow? Probably has a warped view because of something traumatic that happened to him as a child. Surely it can’t be that my idea for the business is fatally flawed.
Damn the torpedoes! Full speed ahead! Let’s start the company!
Well, there is something to be said for taking action, even (sometimes) wrong-headed action. When I was a student in theological seminary, Dr. Esler was the professor who taught us how to write sermons. One day he said, “You know, there will be days when you will sit down to write a sermon, and both the paper and your mind will be absolutely blank. You won’t have the foggiest idea of what to say—not the first notion. Well, today, I want you to give you Esler’s Rule: ‘Begin anyway!’ After all, if you have something, you can always improve it. But if you have nothing, you have, well, nothing.”
Esler’s Rule has proved to be one of the most important all-purpose mantras I have ever learned. Not just for sermons, but for everything. Especially for business. Way more important, and way more valid, than the simplistic and deceptive axiom “Find a need and meet it”, but I’ll address that one later.
Months later, the business—Foundation Managers, Inc.—was ensconced in spiffy offices in Princeton and a staff of professionals was in place. We were exceptionally well capitalized and well connected as the subsidiary of an investment-banking firm, and we promptly indulged in an extravagant business life-style, flying first class all around the country and hosting lavish dinners to let the rich folks of America and their most trusted advisors know how lucky they all were that we were there to rescue them from their life of mediocre grant-making.
We were received very graciously. It takes a while to learn the difference between graciousness and receptivity, but never mind. I wasn’t there yet. I took all this smiling and nodding and complimentary chatter to mean that Bob Goheen didn’t have a clue. What could he have been thinking, anyhow?
Over the first six months, we did our little song-and-dance a hundred times or more before individuals and families who maintained large private foundations and grant-making programs without benefit of professional staff support. Any day now, they’d begin hiring us to help them do it right.
Any day now.
Any day now?
Hello? Are you still out there? Remember the nice meeting we had back…you what? You think it’s a nice idea…but…not just yet?
Well, clearly they needed more convincing, and we needed more prospects, as well. So we launched some re-visits, and redoubled our aggressive digging to set up more meetings with fresh candidates who might hire us. Our efforts produced many, many cordial encounters. And no contracts.
I have been selling for a long time. Since I was eight or nine, actually, when I carried newspapers. I was twelve years old when I underwent my first formal sales training so I could sell vacuum cleaners (“Airway Sanitizers”) door-to-door in Fresno. I have sold things that cost a few dollars, and a few million dollars. And in every instance, two things have remained true:
First, the formula that I learned in the training class for selling Airway Sanitizers. Our instructor, the district sales manager, told the class—all the rest were adults—that we could rely on the following ratios: 20/10/5/4/2/1. Here’s what the numbers meant: out of every 20 people who are a gleam in your eye, you will only succeed in qualifying and connecting with 10. Of those ten, five of them will grant you a sales call. Of the five sales calls, one will cancel and you will actually make four presentations. You will sell two of those four. And one of the two will renege on the deal.
If you have ever sold for a living, you will immediately recognize the enduring truth of this formula.
The second invariably-valid lesson—even more important—is this: while the very best thing that can happen is to get a “yes” that really means “yes”, the next best thing that can happen is a very fast “no”. A very fast “no”.
It’s the slow “no” that kills you. That lures you into persisting at the wrong thing. That eats up your working capital. That erodes your spirit, your self-confidence, your morale. That inflicts massive “opportunity cost” on you.
The would-be clientele for Foundation Managers, Inc., were masters of the slow “no”. Many had been approached because they were rich friends, or rich friends of rich friends, or well-placed people networked into a social constellation in which no one wanted to give offense. And so with exquisitely good manners they avoided rejecting our proposition bluntly, quickly, cleanly. They kept it “under consideration” until we were almost ruined.
Well, I don’t always learn from others’ advice, but I usually do learn from experience. And by the end of the first year with but a trickle of business in hand, I had learned that these folks were never going to constitute a viable market for us. Bob Goheen had been absolutely, positively, dead-on accurate in his analysis of our target market. They were accustomed to hearing laudatory speeches praising their “generosity” and to hearing endless streams of sycophantic supplicants tell them how wonderful they were.
And we were telling them they were doing a lousy job.
Gee, what could possibly be wrong with that approach?
So I had to make a decision: dismantle the operation, or find a real market for our services.
The fatal flaw in the private philanthropy target-market was the self-satisfaction of our would-be customers, and the self-satisfaction was the product of two factors: first, the tidal wave of affirmation in which philanthropists are constantly marinated; second, the absence of accountability to any standards of excellence. Just give away the money to qualified grantees, and that’s it. How hard could that be? How could anybody criticize you for not having done it better?
So much for “Find a need and meet it”, the oft-repeated but highly misleading mantra that has long lured entrepreneurs. Sure, we thought they had room for improvement, and we could make a very articulate case for our point of view, but they either harbored a different opinion or were simply indifferent to ours.
The trouble with the find-a-need-and-meet-it mantra is that reasonably bright people can look around them and imagine all sorts of ways to do something better: Hey, those people need [fill in the blank].
Well, yes, maybe [fill in the blank] would bring them certain benefits, at least by the would-be entrepreneur’s definition of “benefits”, but that’s not nearly enough. The real question is not whether they need [fill in the blank], but whether they want it. Therein lies a world of difference.
“Need” presupposes a judgment. And whose judgment rules the market—the purveyor’s or the customer’s? You know the answer to that already. The patent office is stuffed with clever inventions that somebody thought represented a better mousetrap but died aborning for the inventors’ inability to synchronize their oh-so-much-better idea with somebody else’s want.
But wait. It gets worse. Their wanting it isn’t enough, either.
When you have found a true “want”, you’re only halfway home. Even if the prospective customer wants what you are offering—knows they want it, declares they want it—there is still the matter of cost.
By “cost” I don’t mean price. We’re not talking about money here. The most formidable cost is changing the status quo. People really do not enjoy change—not real, serious, disrupt-my-routine change.
Most of us have developed a familiar, comfortable way of handling everyday matters in our lives. Even though we are experts in the shortcomings of our normal routines, they are our normal routines. Ours. We own them. Warts and all. And we are very reluctant to trade them in for foreign routines. Our comfort zones feel pretty okay, compared with the unknown.
Throughout my decades of competing against some exceptionally talented competitors in business, I never met a competitor as formidable as the status quo—staying with what’s already in place. Underestimate the cost of changing that one and you’re in the unemployment line right quick.
And it gets even worse. There are two kinds of changes—one is the switch of categories, and the other is the switch of brands. The category switch is a whole new way of doing something (i.e., let Eliot and his colleagues in on our decision-making process and subject our own wonderful thinking to a subordinate role). The brand switch is much simpler and has a lower point of resistance (i.e., I now drive a Chevrolet but think I’ll try a Ford next time.) We were trying to induce a category switch.
So I knew that any fresh approach to managing charitable contributions would have to be directed to a market where there was at least a modicum of hard-nosed accountability for the use of dollars. And I also wanted to find a way to fit our services into familiar frames of reference, so it at least felt more like a brand switch than a category switch. Obviously most governmental spending (except for porkbarrel earmarks) was subject to rigorous legislative and regulatory stipulations and bureaucratic review, but I wanted none of that as a market.
This left the corporate-contributions market. The more I studied it, the better it looked. Despite the capriciousness of many corporate donations (to scratch-my-back, quid pro quo arrangements with other corporate leaders, or to pet projects of the CEO’s spouse) American corporations “give away” hundreds of millions of dollars annually. Most of this was going to “good works”, the kind of blameless civic improvements that anyone would applaud, and to compliance with United Way campaigns. It was tantamount to a sort of additional tax on corporations, to show that they were extra-good citizens.
But I smelled an opening here. What if I could get CEOs to think about these dollars very differently. What if they decided to hold the expenditure of these dollars fully accountable to the fulfillment of corporate business strategy, same as any other as any other expenditures the company makes. What if these dollars were dedicated to strengthening the company’s well-being at the very same time they were strengthening society’s well-being—more of a win/win proposition.
In addition, it seemed like this new point of view could appeal to the egos of those middle-managers who tend the contributions function, transforming them from low-status staff seen as soft-hearted custodians of a leak in the corporate bottom line, to shrewd creators of additional value for the enterprise.
In short order, we had it all worked out. Our plan was to sit with the senior executives of a client company to learn everything we could about their long-range corporate strategy. We would then identify the factors in society that would facilitate or enhance that strategy. Did their success rely on a workforce that was literate? Did it rely on widespread understanding of certain health problems? Did it presuppose a societal acknowledgement of global warming? Did it require technological breakthroughs from sources other than their own R&D team?
Once we knew where they wanted to go and what societal initiatives might smooth the pathway to their success while simultaneously improving society at large, we would map out a multi-year (even multi-decade) grant-making program. This program would establish a durable partnership between the company and an orchestrated network of non-profit organizations we had identified (including some that we would custom-create for the purpose) that could make the difference we were after.
This was becoming a win/win/win proposition. The donor company would accelerate its progress toward its goals. Society at large would gain the benefit of the improvements. And it would mitigate the not-for-profit grantees’ annual frantic chasing around to find somebody—anybody—showing a flicker of interest in their cause this year, from whom they might secure funding for this year’s budget. Instead of their dissipating their energies on this recurring needle-in-a-haystack search, they could spend it on doing their good works, in reliance on multi-year financing from a highly motivated, long-term corporate partner who displays equal determination to achieve their shared goal.
Once again, I was full of confidence in the business concept. But this time around, I had the benefit of my prior foolishness in overestimating the receptivity of a target market. That memory of that foolishness and denial had driven me to a deeper analysis of the possible benefits for my intended clients, and to a scathingly realistic assessment of the barriers I might encounter.
And I also knew I had to be able to put the business proposition in terms that would be instantly, unmistakably clear to my prospect—to use analogies with them that would remove any question about what we wanted to do for them or why they might value it. To use images that kept them in their comfort zone. To get them leaning into me, wanting more. In short, I wanted my pitch to evoke that holy grail of selling: the involuntary head-nod. The nod the prospects don’t even realize they are nodding that signals you have a live one who really “gets it”.
Once the concept was clearly nailed down, I set out to bag a flagship client.
I decided to start at the top with what was at that time the largest corporation in America—AT&T, which had nearly a million employees and a near-total monopoly on the telephone business in the U.S. I approached Charlie Brown, the then-Chairman and CEO of AT&T, a friend whom I knew from our small tennis club in Princeton, and Charlie introduced me to Ed—the senior executive who was responsible for AT&T’s massive advertising, public relations, and corporate contributions programs. Ed and I arranged to meet for lunch at his club in New York City.
The waiter took our drink order and Ed got right down to business. “Okay, Eliot, you called this meeting. What’s on your mind?”
“As I understand it, Ed, you’re responsible for advertising, PR, and corporate contributions at AT&T, right?” I responded.
“Well,” I continued, “you have an outside agency that handles your advertising—N.W. Ayer, right?”
“Yep. Been together for almost a hundred years. We like long relationships.”
“And you have an outside agency that handles AT&T’s PR, too.”
“Right. It’s also a long-time relationship. Great people,” Ed replied.
“Good,” I responded and moved in for the coup de grace. “We want to be your outside agency for corporate contributions.”
Ripples of puzzlement danced fleetingly across Ed’s face as he slowly tipped his head forward so far I couldn’t read his face any more. A long moment later he looked up, fixed me with a clear eye, and said firmly, “Okay, you’re hired.”
Then his gaze swivelled away, slowly drifted searchingly across the room, meandered a little. He chewed on his lower lip for a second. At last he let his eyes drift past mine and said as they settled on his folded hands, “Eliot, I don’t exactly know how to tell you this, but I’ve been in this job for five years, and the truth is I didn’t even know there was such a thing as an outside agency for corporate contributions.”
“Well, Ed,” I replied, “Don’t feel bad. Until you said ‘You’re hired’, there wasn’t. We’re the first one, and you’re the first client.”
His face flushed with surprise and relief, the waiter appeared with our drinks at that very instant, we toasted with a smile but without a word, and a wonderful business—and relationship—was born.
And as I have discovered in every enterprise I’ve been involved with, there’s nothing quite so powerful as a flagship client. Once prospective clients see that you are good enough for AT&T (or Johnson & Johnson or Mayo Clinic or Coca-Cola or whomever, in my other ventures), they are inclined to give you the benefit of the doubt. They figure (properly, in most cases) that the name-brand flagship client had put you through a rigorous vetting process, and when they see that your relationship with the flagship has sustained itself over many years and many additional assignments, their confidence soars. With AT&T atop the client list at our firm, newly-named Corporate Contributions, Inc., this dynamic paid off handsomely.
Having a bright idea and pursuing it is a thrill under any circumstances. But it’s particularly gratifying to create a successful business out of the near-wreckage of a failing one. The truth is that nothing that I’ve ever been involved in has turned out the way I imagined at the moment of conception. The mid-course corrections are both inevitable and almost always vastly more valuable than the original idea.
Sometimes a little luck helps, too. Within a year or so, Judge Harold Greene, presiding over a federal court determination of whether AT&T’s dominance constituted a de facto monopoly, ordered the famous and fateful breakup of AT&T, creating seven spin-off companies—the so-called Baby Bells—that suddenly needed their own corporate contributions strategies.
We were only too happy to help.
The trouble with good ideas—especially if they are your good ideas—is that they seduce you. Pride of authorship is a very powerful force. And sometimes it takes a heroic effort to break free of your idea and do something different.
Someone once asked William Faulkner what he regarded as the most critical quality that a good writer must possess. He replied, “Having the courage to kill your little darlings.” Every writer comes up with a turn of phrase or an image that just tickles him or her to death. But in truth such little darlings often disrupt the reader’s flow of attention to the plot or the line of reasoning. It’s fine to savor your cleverness in having created it, but good writing depends on selective euthanasia.
The same is true for our little darlings in business. If we dreamed it up, how could we possibly turn around and kill it off. As you will see in the next story, one client of mine fell in love with dreams of glory for its little darling, but the kid turned out to be more like Rosemary’s Baby.
Denial comes in all sizes, but not often in billion-dollar doses. But in this case, that was the size of the bait.
Pharmaceutical companies win with “blockbuster” products—the billion-dollar drugs that get a jump on the competition, become the favorite of the prescribing physicians, make huge profits—and pay for the dozens of other drugs the company invested millions to research and develop and test that proved not to be efficacious or, if efficacious, not competitively superior to the alternatives. Every new product in the research and development pipeline carries with it the hopes of the company that this will be the one, the big one, the blockbuster—the cash cow that for the 17-year lifetime of its patent protection will make the company prosper and will cover its losses on its losers.
It was a simple and consistently profitable business so long as the products they sold were in prescription-drug form. Develop the drug. Do the research. Convince the FDA that it was efficacious. Promote it to the doctors. See the prescriptions land on the pharmacy counter. Smile at the routine re-filling of the prescriptions when they run out. Listen to the cash register ring. And ring some more.
Then along came a hybrid category to muddy the waters. They are known in the trade as “nutriceuticals”—products that are in the form of a food or nutritional supplement that also produces efficacious “medical” results. The first wave of nutriceuticals came in the form of foods like margarine that put substances into the body that could lower blood cholesterol. A number of companies set out to capture this market, including my client—a massive multi-national corporation. If you could create billion-dollar drugs, why you could certainly create billion-dollar nutriceuticals, couldn’t you?
After a year of development and testing, they were convinced that they had proved the efficacy. And their projections of the size of the market and demand made it clear—no, really inevitable—that this one could be the billion-dollar winner. Now they just needed to confront the implications of entering into a different kind of marketplace than their usual drugs went into. No longer issuing yet another prescription item that could be promoted to a few hundred thousand prescribing physicians, they had to appeal directly to tens of millions of consumers. No longer channeling it through pharmacies, they had to negotiate for hotly contested shelf space in supermarkets. No longer relying on patients to faithfully re-fill their doctor-ordered prescriptions when they ran out of pills, they had to create re-purchase loyalty in the face of aggressive competitors seeking to divert the customer to their own brands. Oh, and the cost. Their nutriceutical margarine would cost more than twice as much as regular margarine. And three times more than the bargain brands.
Clearly, they had some serious issues to deal with.
So they hired us to help them think through these challenges, and we began as usual by conducting one-on-one interviews with the two dozen or so people who were leading the effort—from the researchers to the marketers to the strategists to the CEO of the division that was developing it.
Well, as it happened, the two days on which we conducted our interviews were the final two days of a wonderfully well organized internal experiment. To generate confidence and commitment among their team, they had all agreed to consume this nutriceutical margarine as recommended on the package—three times a day—for two weeks. To assess the benefits, the members of the team would have their cholesterol measured daily.
The organization of the experiment was truly impressive. Each member of the team was given a code name to protect their privacy, because the daily results were posted on video monitors placed at multiple locations throughout the team’s office. So everywhere you looked, you could see the results: each individual’s code name, their starting level of cholesterol, and a day-by-day charting of their changing cholesterol levels. The display showed every individual’s results, as well as the team’s aggregate results.
Well, did this stuff ever work! And fast. Every single member of the team showed truly significant decreases in their cholesterol levels. And not puny improvements, either. In less than two weeks, most were down by ten percent or so, and some much more than that. No wonder they thought this had to be the billion-dollar deal!
But people are funny about drugs and other medicines that are supposed to be helping them. If you’re in dire shape and the doctor says to take this stuff every day or you’ll die, well, you probably take it and keep on taking it. You may not know what it’s doing inside your body, but what the heck, better be safe than sorry.
On the other hand, if you have a rash and the doctor gives you some ointment to use for thirty days, you’ll use it until you see for yourself that the rash has gone away. If that’s in a week, well, the rest of the ointment is ignored. The tube sits on a shelf in your medicine chest and gets pushed around from time to time until some day a few years hence when you notice it with distaste and think to throw it away.
My one-on-one interviews with the members of team went as usual. Lots of fact-finding about what and why and when and where and how, trying to gather multiple perceptions and perspectives about what they had and what they faced so we could define the threats and opportunities and help them come up with a winning strategy to cope with the challenges.
But some perverse instinct prompted me to throw in an off-the-wall final question as I was closing my first interview. I mentioned that everyone—presumably including my interviewee—had done amazingly well at lowering their cholesterol during the two week regimen of eating their product three times a day. He confirmed that his level was down an impressive 12%. “So,” I asked, “are you going to keep up the regimen after the experiment is over tomorrow? Will you keep eating this stuff?”
“Uh, oh, gee, I hadn’t really thought about it. Hmm. No, probably not.”
I didn’t pursue the issue with him, asking why. But I decided to ask the question to each of the other thirteen people I’d be interviewing that day and the next. And I did. So did my partner, when I told her what I had heard. We asked them all.
One of them said she’d keep eating her company’s amazing cholesterol-lowering margarine. One of them. That’s all. Twenty-two of the twenty-three allowed as how they’d probably not. Along the way, we had started asking why and got a range of answers. “Doesn’t taste that hot.” “My family prefers butter.” “I would, but I don’t always eat where it’s available and don’t want to carry my own supply with me.” “You know, there’s a lot of trans-fat in the product; it may lower my cholesterol, but I don’t think that much trans-fat is good for people.”
Several days later, I led a day-long workshop with the whole team in which we reviewed the formidable array of barriers to success—securing a distribution channel through local “food brokers” who control what products reach the supermarket shelves, competing for refrigerated shelf space with established food producers, price resistance, competition, lack of enthusiasm for the taste, and finally the difficulty consumers would have in perceiving any direct benefit. Unless and until consumers went back to their doctor and had blood tests to confirm that it was “working”, they wouldn’t detect any benefit—and even if their cholesterol turned out to be lower, that may have been attributable to other factors. All in all, the litany of obstacles was pretty grim.
Then I revealed the results of my little survey. I said to the assembled team, “You all ate this product for two weeks. The conditions could not have been more ideal. You got the product for free, despite that fact that it’s very expensive relative to the alternatives. You got direct daily feedback that confirmed that it was in fact improving your own personal health in very dramatic fashion. You had the support and camaraderie and team commitment that sustained your compliance with the regimen.
“And yet, when we asked how many of you were going to keep on eating this product when the experiment was over, only one of you—one solitary person—said they’d keep on eating it.”
The wave of terror that flashed across the faces of the team prompted me to hastily assure them, “Don’t worry. I’m not going to name the one who said they’d continue. So that means you are all free to pretend that you are that one. But let’s consider the implications of this. If you, with all the advantages the normal consumer will never have, don’t want to keep it up, what in the world makes you think they will?”
Shortly thereafter, I sent my written report to the team leader, cataloging the withering array of daunting weaknesses in the initiative. But the report never saw the light of day, of course. Too much had already been invested—too much money, too much hope, too much expectation…all in a company where the culture frowned on doubters or nay-sayers. They plowed ahead with the product launch.
It flopped, of course.
But no matter. By the time the failure was evident, the CEO of the division had already been promoted to far greater responsibilities in the corporation, largely on the basis of his skillfully managing this highly promising diversification into nutriceuticals.
The necessary transformation of Foundation Managers, Inc., into Corporate Contributions, Inc., was the first but certainly not the last opportunity I had to make a mid-course correction in a can’t-miss new business venture that was missing something (like, success). In this next one, we had another chance to learn the folly of “Find a need and meet it”. Folly, despite that fact that this time they really, really, really needed it.
So what. It still doesn’t matter. If they don’t want it, you’re toast.
But in this case, we got revenge. We changed into…them.
If You Can’t Beat Them, Join Them
For ten years, my friend Roger had wrestled with a challenge everyone thought was a fool’s errand: to program a computer to do psychotherapy. Some years before, a clumsy piece of software called “Lisa” on a pretty primitive computer had made the first such attempt, based on the somewhat simplistic notion that a therapy methodology devised by Carl Rogers, in which the therapist largely reflects back to the client almost verbatim what the client just said, could be done by a computer—afterall, computers largely do whatever they’re told, and if they’re told to repeat-after-me, how hard could that be?
Harder than they thought, since the nuances of therapist/client interaction in Rogerian therapy accounted for much of the healing dynamic—something “Lisa’s” creators underestimated and something no computer could ever hope to accomplish.
There was rejoicing among the psychotherapy community at “Lisa’s” oftentimes laughable failure, since they were approximately as enthusiastic about having their jobs taken away by a computer as chess grandmasters looked forward to having IBM’s “Deep Blue” learn to routinely check-mate them.
But Roger was not intimidated. For starters, computers had become far more sophisticated in the decade since “Lisa”. Even more importantly, Roger’s own highly respected therapeutic modality of cognitive-behavioral psychotherapy was demonstrably more effective than Carl Rogers’ valuable but ultimately too-limited innovation. As a psychiatrist and psychoanalyst running the outpatient programs at a major university medical center, Roger had a broad base of observation from which to discern what approaches were working for clients, and which ones were not. He had become an internationally recognized authority in the psychological development of adults. And he thought he could figure out how to cook successful therapeutic processes into a computer program.
If he could succeed, the payoff would be enormous. The need of a stressed-out American population for some transient counseling far outstrips both the available therapists and the available money to pay them. Health insurance companies have traditionally put severe limits on what they will cover, and at prices well over $100/hr., few people can afford many visits to a psychotherapist out of their own pocket.
But a computer program that would let them work their way through their current problem, now that would be a breakthrough for certain. And that is why I persuaded one of my philantropic-consulting clients to fund Roger in setting up a research project to see how far he could carry this idea. They liked the idea, put up a significant amount of money, and the venture was born.
Ten years later, Roger’s computerized psychotherapy program was working. Not just working, but working far better than anyone had dared hope. The decade of brilliant conceptual architecture, dogged experimentation, well-crafted tests and trials, rapidly evolving sophistication of computers, an increasingly experienced research team, and fresh rounds of financing all conspired to produce a program that worked as well as any human psychotherapist for most clients.
Huh? Worked as well as a human psychotherapist?
That’s right. As demonstrated in formal clinical trials at highly reputable medical research institutions, about 75% of clients improved as much as, or more than, carefully matched “control subjects” who received “live”, face-to-face psychotherapy from a top-drawer professional. Hard to believe, but true.
About that time, I had grown restive at the consulting firm I had co-founded some eleven years prior. The more successful we got, the more one client assignment began to feel just like the one before. This quasi-routinization was great for business. It wasn’t so great for me, and I found myself itching for something different. So I found myself engaged in a year-long process of winding down my involvement with the firm in favor of something new.
That something new came in the form of an invitation from Roger. With his program now documented for its clinical efficacy, he felt it was time to commercialize it—something he knew little about. He asked me to join him as President of the company I’d helped get started a decade before and transform it from a R&D shop into a thriving business.
Perfect. Perfect timing for me, and perfect timing for such an innovation in the healthcare business.
It was the late ‘80s, and the revolution that was sweeping through healthcare in those years was monumental. At the start of that decade, hospitals routinely relied on designated, protected “catchment areas” whereby they’d automatically get all the patients who lived in that area, and on “cost-plus” financing whereby they’d spend however much money they felt like spending and somebody (insurors, employers, state and federal governments) would just send them a check to cover all the costs. It was truly a no-brainer of a business.
Until something called DRGs hit. Suddenly the people who paid the bills said they, not the hospitals, would decide how much they would pay for, say, a gall bladder operation. It was a revolution; no more blank-check reimbursement of whatever costs were incurred. Each medical condition was given a code—the “DRG”, or Diagnosis-Related Grouping—to which a price tag was affixed. If the hospital incurred more than that amount, it would lose money on the case. And if they did the job for less than that amount? Hey, a profit on the case! But they had never been very cost-conscious before, and it would be a dramatic mind-shift to get everyone on board with the new system.
To make matters worse for hospital adminstrators, states evaporated the concept of the protected catchment area. Suddenly, there were no walls or moats between hospitals in the same or adjoining communities, and all patients were fair game for whoever could compete for them most successfully.
These were the challenges our consulting company had been helping our client hospitals cope with, the challenges I now found a bit too repetitious to be of continuing interest. But I could see that the challenge was going to be revitalized dramatically in the world of mental health, as yet untouched by the DRG/competition revolution. Because over 90% of healthcare costs are related to medical and surgical incidents, the initial salvos of the revolution were aimed at curbing those monumental costs. The relatively insignificant 10% going to mental health had been given a free pass—so far.
I knew, however, that in due course the scrutiny of the cost-cutters would fall upon the notoriously ill-defined processes and outcomes of mental health treatment. And when it did, the providers of psychotherapy would be hard-pressed to demonstrate whatever value they were providing. Unlike the relatively well-researched and well–documented processes and outcomes in medicine and surgery, what went on behind the closed doors of psychotherapists’ offices was poorly understood, poorly documented, and poorly evaluated.
That would have to change. When the cost-cutters came to call on psychotherapists, they would demand to know what the clinicians did and how it mattered. Why was it worth whatever was paid? Prove it.
Good luck. Most psychotherapists kept few if any records of treatment, other than a few quickly scribbled notes they could consult moments before the patient’s next visit, to ensure some continuity of discussion topics in these so-called “talk therapy” sessions. So, how could they ever possibly satisfy the demands of hard-nosed payers who would demand proof of value—or termination of treatment?
Well, the answer seemed pretty simple to Roger and me. Therapists should use the computer with their patients. It would present them with a highly structured, disciplined thinking process that gets to the heart of their pain and then tracks them through the steps they take to recover from whatever ails them. The computer will document their every step and keep a written record of the entire process, to provide incontrovertible proof of progress and value.
What is more, during the time one patient is working on the computer, the psychotherapist could be reviewing the computer work of another patient with him or her, doubling the volume of clients that could be seen in a day. This would shatter the inflexible ceiling that limits the income of all professionals who work at by-the-hour rates. You can’t make more hours in the day, but if you could get more revenue out of each hour, well, what could possibly be wrong with that proposition?
Everything, as it turned out.
A matter of weeks after I took the product to market, the market taught me—once again—that it had its own ideas and was perfectly capable of ignoring mine. By now I was a bit more adept at listening for the flaws in our proposition, and what I learned came fast and clear.
For starters (and this would have been enough all by itself to doom the approach), every psychotherapist on earth deeply believes that he or she is, as a person, the essential vehicle through which the patient’s healing takes place. This belief holds that the dynamic relationship between my patient and myself stimulates and catalyzes whatever recovery of health my patient comes to enjoy. The relationship is sine qua non, literally “without which, nothing”.
Take that away, put my patient in front of a computer? What, are you crazy?
This belief flows forward unchecked from the earliest history of psychotherapy, a history where it was once quite valid. Freud and others worked with certain categories of patients whose particular difficulties did, in fact, require some re-working of troubling relationships which could be replicated in therapy sessions, enabling the patient to work out interactively with the therapist—through something called “transference”—the damaging feelings they’d been unable to exorcise in real life toward, for example, an abusive father. Such psychoanalytic engagements often lasted for many, many years and resulted in wholesale reconstruction of a patient’s personality. So there was legitimate historical basis for the belief that relationship-is-all.
But the belief hadn’t been updated in more than half a century, that was the problem. Everything had changed. Freud did his seminal work with a tiny handful of patients before World War I, mostly dealing with deep distress Freud regarded as “traumatic hysteria”. By contrast, the tens of thousands of people who sought therapy by mid-century were more likely to be dealing with the common stresses of everyday living—a bad marriage, a devastating loss, unruly kids, a dead-end job.
A more self-interested piece of history also blocked psychotherapists’ ability to embrace computerized therapy. They had themselves undertaken years and years and years of study, in formal academic courses, in internships and apprenticeships, in continuing professional development seminars—all designed to hone their skills and gifts to an exquisite level. They had good reason to respect and protect their sense of themselves as healers.
And now you’re telling me a damned computer can do better than I can?
The personal insult was more than they could bear.
But that wasn’t all. Each of them had been confronted in their studies and training with a smorgasbord of therapeutic schools of thought: psychodynamic, behaviorist, humanist, family-systems, cognitive-behavioral, and so on. Roger’s computer program was based on the cognitive-behavioral approach, and therefore none too appetizing to those myriad therapists who believed their career-long success was due to adherence to a totally different approach.
Hang on. There’s more.
Some were technophobes, not yet remotely comfortable with computers and such. These were people who relied, after all, on conversation to achieve their clinical results.
Others were terminally put off by the tarnished reputation of Lisa. First impressions—especially negative ones—seemingly last forever. Computerized therapy had been tried and failed miserably. Good riddance.
Another nail in the coffin of this hoped-for market was logistical. Most therapists worked in office space that consisted of one room carefully decorated to feel more like a den at home than a doctor’s office, with a couple of comfortable chairs, soft lighting, and a modest desk at which the therapist would later scratch a few notes for the file and compose invoices for patients. This typical setup lacked any space or physical facilities that would accommodate a computer work-station where even one patient could do the program, let alone establish a wholly different operation that might accommodate multiple patients simultaneously plus a place for the therapist to repose while the patients worked at computers. Remember back in the first chapter I warned about the cost of saying “yes” to your offer? Just imagine the cost, in disruption and dollars and mental discomfort, of such a radical revamping of their cozy nest.
Finally, none of them—none of them—had even the dimmest foreshadowing of the DRG hammer that was about to drop on them. They were almost universally oblivious to what was already well underway in their sister worlds of medicine and surgery. The few who knew about it were in complete denial that this could ever happen in the world of mental health. The impending demand for their accountability was a total flop as a motivator for sales.
Our great program a no-brainer? How about a non-starter.
Well, as I have long come to realize, one good mid-course correction is worth an infinite number of Sysiphusian shoves. “Roger,” I said, “these guys are never going to be our customers.” He took no convincing. Even in the few weeks of market testing I had done, he immediately recognized how lethal the barriers were. But what to do? We can’t just trash a decade’s worth of work, and especially we can’t just abandon the possibility of giving millions of people some relief they’ll just never get otherwise.
“These psychotherapists will never be our customers,” I repeated, “but they’d be pretty easy pickin’s as competitors.”
What did I mean “as competitors”?
“Let’s forget about selling the computer program to them and take the business away from them instead,” I continued. “Let’s get into the psychotherapy business ourselves. We’ll set up some offices, using our computer program as the basis of a therapy visit to our psychotherapy practice. Then we’ll sell the service wholesale directly to the people who pay the bills for patients—the health insurance companies that cover mental health. We know we can produce the clinical results they’re looking for, and for half the price of traditional therapy.”
Within months, we opened clinics in a number of southern California locations. Each one featured computers with Roger’s program that was administered by a licensed clinical therapist. The patient spent thirty or forty minutes at the computer, and then did a ten-minute check-out with the therapist who monitored the patient’s progress and checked for any danger signs. In short order, contracts with the largest insurors of mental health benefits in the area provided a steady stream of patients from the 600,000 or so employees they covered for major corporations in the entertainment and aircraft industries.
Doing a one-eighty on the definition of our customer had changed everything. The big insurors instantly grasped the benefits to themselves, their client companies, and the employee-patients who would now have easy access to a non-threating, non-stigmatizing process for dealing with everyday stresses. Because we minimized the amount of professional labor required, we could keep the costs well below what even in their most aggressive cost-cutting mode the payers had ever imagined possible.
In due course, the program migrated to the internet, where—as we had imagined from the outset—it would find its ultimate utility. In addition to the core program, tailored editions could address specific challenges such as overeating.
People wonder how a computer-based program could be as—or even more—effective when compared with a live therapist. There are several reasons:
When confronted with serious life challenges that threaten one’s mental tranquility and even stability, most of us turn first to all manner of self-treatment. Denial, angry outbursts, overeating, alcohol and drug abuse, gambling, sleeping around, becoming reclusive, resigning ourselves to depression, or whatever. Only after we have exhausted all these homespun remedies will we consider actually “seeing somebody”.
This means that once we do finally surrender to the notion of getting some psychotherapy, we have lost all hope that we ourselves can do anything to help ourselves. Now it’s all up to this person with the degrees framed on the wall over the desk to take charge and fix me. So we enter the therapy room and figuratively dump ourselves into the therapist’s lap and wait for them to work their magic.
But at the same time we’re sufficiently ashamed of being stuck the way we are, and of our multiple failed attempts at self-healing, and of whatever that may have led us into, that we’re a bit reluctant to share all our dirty laundry right away. After all, we’ve never met this stranger-therapist before, and we’re very unsure how much we can trust him or her. If we give the therapist too much information—painful, embarrassing information—will the therapist somehow use that against us, or lord it over us, or…? We run a quick ego calculation and realize that giving the therapist all the dirt on ourselves puts us into a one-down position: the therapist is now superior, and we are inferior. Not a heart-warming prospect.
So it takes a person a while—often three or four visits—before they are prepared to give the therapist the real low-down the therapist needs to comprehend in order to get to work on the problem. And even then, the therapist still has to overhaul the patient’s mistaken understanding of whose work it is—it’s the patient’s job, not the therapist’s.
(And there’s also the wild card of the therapist himself or herself. Are they really any good? Smart? Well-trained? Or mediocre. Even if they are usually good, are they having a good day that particular day or are they dealing with some personal aggravation or illness or tiredness that diminishes their competence for the moment? There was a prominent psychotherapist in Princeton who was famous for falling asleep during therapy sessions he was theortically conducting. I witnessed this firsthand as a short-term client. One of my friends who also sought this therapist’s help tip-toed out of the office after the therapist nodded off, ferociously slamming the door behind him with a huge, window-rattling “Bang!” I think the gesture actually relieved whatever was troubling my friend and was tantamount to “terminating therapy”.)
Contrast the dynamic of the overly-dependent new patient’s first encounter with a live therapist, with that of confronting a computer that promises to help the patient solve the problem for themselves. No awkwardness about revealing embarrassing data. No issues with ego-based power struggles. No dancing around wasting time getting ready to trust the therapist. And, most importantly, no possibility that the real work was going to be done by somebody else: It was my problem when I walked in here and, guess what, it’s still my problem. I guess I’d better get to work on it. Nobody else is going to.
And the computer never has a bad day. It’s always going to follow the line of inquiry and produce the clarifying feedback it was designed to do, and for the vast majority of people who let it do its work to guide them through their work, relief comes in about three sessions total. That was the average in our clinics. Three sessions, and people felt they had gotten what they needed. In live therapy, most patients are just getting started in three sessions.
Sadly, most payers have now severely restricted reimbursement for any kind of “talk therapy”—computer-assisted, or not—in favor of medicating people with psychotropic drugs. The pills are cheaper and, when they don’t work all that well, people still have the option of augmenting them with self-destructive home remedies. The cost-cutters have had the last word once again, the best interests of the patient notwithstanding. No wonder Americans pay vastly more for our healthcare per capita than any other nation but endure dramatically worse health status than most other industrialized countries. But that’s another story entirely…
Sometimes change comes so gradually and so constantly that you scarcely notice it. That can be good or bad. In the famous example of the boiled frog, it’s bad. (Rumor has it that if you drop a frog into a pan of boiling water, it’ll jump right out to save itself. But if you had placed that frog into a pan of room-temperature water and then heat the water to boiling, the frog would stay put until it’s cooked.) Bad change can sneak up on you and do you in.
But when my friend Mitch and I started our strategic consulting firm together, we pledged that we’d keep ourselves alert to ever-shifting opportunities. There were two reasons for this pledge. One, we wanted to succeed. Two, we are easily bored. We knew we would need to have an ever-changing array of engagements to keep us humming along at the clip we cherished in our intellectual and creative interaction.
Such deliberately self-inflicted constant change isn’t always comfortable. It reminds me of E. B. White’s observation: “I wake up every morning determined both to change the world and to have one hell of a good time. Sometimes this makes planning the day a little difficult.”
Inertial Guidance Systems are Not Just for Space Ships
When somebody has a big ambition, they often boast that they are “going for broke”. This particular phrase has never held much appeal for me, as “broke” is not a place I’ve ever wanted to wind up. Oh, I understand of course that they’re speaking about taking a big risk in order to seek a big gain, and that “broke” is only one of two possible outcomes. They’re saying that they’re willing to bet the farm in order to pursue the chance of success, despite the risk of going broke. I get it, but I still don’t like the phrase.
One holiday our family was sitting around the fireplace bantering about one thing and another when someone suggested that we come up with a metaphor for each of us. Everybody pitched in. One daughter wound up being characterized as a dolphin, for her brains and her friendliness and her ability to live simultaneously in dual environments—body in the water, but taking oxygen from the air above the water. Our son who is a so-called “endurance athlete” (the kind who do the Ironman Triathlon) was seen as a Ferrari, an exquisitely tuned, widely admired, high-performance, high-maintenance machine.
For me? They settled on “bungee jumper”—somebody who climbs up to high places, enjoys the view for a little bit, and then jumps off for no apparent reason, plummeting toward seeming disaster, only to rebound with a massive “sproing!” and come up laughing.
I like risks—they stimulate me—but the truth is that I’ve never taken one that I thought had any possibility at all of leaving me broke. Some almost have, of course, but I didn’t entertain that idea at the time I took the risk. I’ve always trusted that I could and would rebound, almost no matter what.
That must be why I prefer the term “shoot the moon” when going for something big. For millenia, the moon was the principal symbol for something unattainable. “He’s asking for the moon here.” Big stretch, with no hope of success.
Then came JFK with his pledge—incredible though it sounded at the moment—to put a man on the moon within a decade. Given that almost none of the requisite underlying science to accomplish this feat had been done as of that speech in August of 1961, many applauded the bravado of the vision but predicted that the goal would be quietly laid to rest once the intial flurry of bedazzlement subsided and the insurmoutable obstacles came into focus.
Few appreciated what JFK knew: monumental breakthroughs are possible with monumental determination and resources. Less than a decade later—in fact, only seven years and eleven months later, on July 20, 1969—Neil Armstrong set foot on the moon. (Would that our contemporary political leaders had the courage to commit to such a breakthrough in alternative, renewable sources of energy, among other seemingly intractable challenges.)
So now “shoot the moon” still means to go for it big, but without the undertow of inevitable futility. You really can shoot the moon and actually reach the moon, both in traveling to outer space and, as I have learned, in building a business.
But not, as it turns out, by aiming straight at your target.
No, aiming straight at a target and expecting to stay steadily on one course until you get there turns out to be a pretty low-percentage play. Better to launch in the general direction of your target and then plan on a series of mid-course corrections which become increasingly finely calibrated, based on what you learn along the way.
In space travel, they call this an “inertial guidance system”, and the concept works equally well for earth-bound ambitions.
An inertial guidance system consists of two main elements:
One element is a gyroscope, not all that different from the kind we got at the hobby shop as kids and amazed ourselves by balancing them on a string. Nowadays, of course, the mechanical gyros we played with are supplemented by hi-tech ring laser gyros and fiber optic gyros, but the principle is the same: you need some way to monitor and maintain balance.
The other key element is an accelerometer, to measure linear motion, or speed. When the data from the accelerometer is fused with the data from the gyroscope and compared with the location of the target, it produces a navigational reading that tells the operator to turn a smidgen to the left or the right, and whether to giddy up or ease off.
The key to inertial guidance is that it happens constantly. That’s what makes the subject of this chapter different from the first chapter, in which I had to make a one-time, sharp 90-degree shift away from selling to private foundations and tackle major business corporations instead.
By contrast, inertial guidance is a constant chain of tiny readjustments. What may have appeared to be a relatively direct path for Apollo 11 from earth to the moon was in reality a nearly infinite number of mid-course corrections. At the Kennedy Space Center, NASA got it headed in the right general direction on July 16, 1969, but all the conditions the spacecraft encountered during the next four days en route to the moon were detected by the gyro and the accelerometer in order to determine what adjustment was required right at that instant—and the next instant, and the next instant, and the instant after that.
It’s just the same thing in building a business. In the late ‘70s I had come to know Mitch from our work together on a board of directors. He lived in Chicago where he was a senior executive at Quaker Oats, despite his relative youth. He and I developed an intensely symbiotic intellectual relationship, spending hours at a time on the phone several evenings a week (to the growing annoyance of our much-neglected wives), brainstorming about how to re-invent the world. Soon, we realized we were destined to work together as a team.
And so we extricated ourselves from our current jobs and started a company with one goal: to work together. That was it. Hard to believe, perhaps, but true. Mitch and his family pulled up firmly rooted stakes in Chicago and moved to Princeton on nothing more than the confidence that a fusion of our brains would produce something interesting and maybe even profitable. (Their brave move was perhaps a bit closer to “going for broke” at the time.)
We honestly did not have the foggiest idea of what we were going to do. All we had going for us was a couple of years’ working together on a board that met quarterly, plus those after-dinner, hours-long phone calls between Princeton and Chicago that had our wives muttering.
When Mitch and his family arrived in Princeton and got settled, our second order of business—after taking some office space—was to sit down and figure out what we wanted to do. We knew that we wanted to deliberately meld our minds, because our history together to date had shown such a fusion to be both exhilarating and productive.
So we began by spending all our work time together—close together. Even though we had taken a suite of offices suitable for an eventual staff of six or eight in that location, Mitch and I sat in the same room facing each other over a single antique double “partners’ desk” where we saw and heard everything the other did, spoke jointly on all outgoing or incoming phone calls, and never went to a meeting without the other. We were determined to become one unified thinking machine together. Our behavior must have struck others as pretty inefficient and redundant, but we knew what we were doing and why.
But what, exactly, were we going to do?
To provide us with some structure and process to identify what we might pursue together, we turned to the perennial best-seller What Color Is Your Parachute?. Richard Bolles’ classic guide to job-hunting is designed to help an individual take inventory of his or her passions, assets, limitations, and aspirations to chart a course to their future. But we used it differently. We went through the exercises as though the two of us were one unified, undifferentiated individual, composing from our common factors a profile of the merged “person” whose future we were planning.
When the dust settled on that exercise, we realized that our highest common-denominator priority was children. Both as fathers and professionals, we had a passion for treating children in ways that fostered their talents and dreams. Both of us had been deeply immersed in the world of children in our prior work, felt we had something to contribute, and enjoyed a network of well-placed colleagues in the world of business who might become our clients. So we dubbed our new firm “Childview” and set about selling our sevices as creators of new products, services, and communications for children.
We started working our networks of contacts, scratching around for anything that would get us started, and in due course we turned up a few assignments. Not the kind that dramatically change the world for the better, to be sure, but they seemed harmless and, hey, you have to start somewhere. Even though we had both abandoned pretty good incomes from our previous work, the bank still expected us to make our monthly mortgage payments. They’re funny that way. And so we snatched at whatever we could to get started. At the behest of McDonald’s advertising agency we came up with a strategy for the evolution of Ronald McDonald, and for Topps we came up with a couple of dozen concepts for novel twists on chewing gum. (Please don’t ask me to elaborate. It’s embarrassing enough to have confessed these two gigs.)
Inertial guidance nudge #1: Uh, this isn’t exactly a direction we want to continue in, is it? Gyroscopic tweak to the north. Sixteen miles north of Princeton, to be exact, to New Brunswick, New Jersey—home of Johnson & Johnson.
Some years before, I had secured a multi-million dollar underwriting of “Mister Rogers’ Neighborhood” from Johnson & Johnson Baby Products Company. I was still in touch with the senior executives there, and we sat down to talk. In short order, they asked Mitch and me to help them refine the concepts for some new products they were developing for babies and children. Then they asked us to develop a program of continuing medical education for pediatricians, to enhance physicians’ sensitivity to the needs of children and their parents.
Then to create a corporate re-positioning around the importance of human touch in stimulating both the will to thrive in infants and the parental instinct itself. Then to produce a film for expectant parents on the same matter.
Then to come up with an innovative program for addressing the rampant problem of inadequate prenatal care for single teenage mothers-to-be. And on, and on, and on. We were rolling, and we loved the kinds of assignments we were working on.
Intertial guidance nudge #2: Hey, it looks like we’re in the heath care business, doesn’t it? Aren’t we? Maybe we ought to work on developing more engagements in this field. Gyroscopic tweak laterally, into the rest of the corporation. (Oh, and while we’re at it, perhaps we ought to shelve the name “Childview” and just put our own names on the firm.)
If you want be in the healthcare business, J&J is a pretty darned good place to plant your flag. With scores and scores of semi-autonomous operating companies offering a stunning array of health-related products, they have long been the largest health care corporation in the world. Our satisfied clients at J&J’s Baby Products Company were only too happy to recommend us to their counterparts in other divisions of J&J, and soon we were up to our eyeballs in work on everything from the re-launch of one of their oldest, most low-tech products—the original backplaster—to a sweeping overhaul and realignment of their system of selling and distributing products to hospitals, which were rapidly consolidating their purchasing patterns through large affiliate groups designed to increase their negotiating leverage against companies like J&J. We were rolling even faster, and it all felt great.
Inertial guidance nudge #3: Whomp! What was that? Felt like we hit something. Look at the wobble on that gyroscope! I think it has knocked us off course! Should we go along on the new direction for a bit to see what lies in that direction?
It was the heavy hand of Sears knocking on our door, and it shook our whole building. “We understand from the people at J&J that you guys are pretty good strategic thinkers and businessmen,” they began. “We’ve decided to get into the healthcare business ourselves. So we’d like to buy your company, so you can create our diversification strategy to get into healthcare—we want to be a five billion dollar player within three-to-five years—and then install you in leadership positions in the new healthcare division you will have created.”
Lights started flashing all around—green lights, yellow lights, red lights, all blazing away at once. Green, like in money. Yellow, like in what the hell would Sears do in health care? Red, like in we’d never ever sell our little company and get lost in some monstrous corporation—we’re having way too much fun in our own little boutique here in Princeton and never want to relocate ourselves and our families anywhere else.
But, boy, wouldn’t that be a terrific project to tackle?
The people at Sears made it pretty attractive: take a clean piece of paper, look not just within the U.S. but all around the world, and come up with a plan that will make us huge in a hurry. We’ll provide you with whatever support you need to get the job done.
The timing was particularly tempting, our having just completed a couple of major assignments for J&J and the next projects under discussion were not yet under contract. We could easily back away from them for a little while to do the Sears gig.
Okay, we said. We won’t sell you our company, but we’ll put it in mothballs and give you a year-long, exclusive personal-services agreement. That should be enough time to get the strategy in place. As for joining the eventual Sears healthcare division that would be created, let’s hold that in abeyance until you and we see what it looks like at that time.
We were assigned to work out of the newly-formed Sears World Trade unit based in Washington, D.C. (they had big global ambitions at the time), and Sears leased a townhouse for us in Georgetown so we could be in residence there for a few days each week. (The tale of what transpired in that next year is told in “Blowing It”, elsewhere in this book.) After a year, our work there was done and we were ready to resume our Princeton-based professional life.
Inertial guidance nudge #4: Our gyroscopic balance was fine, but we needed a fresh rocket booster to re-launch the firm. The accelerometer had shown lots of velocity in Washington, D.C., but none in Princeton. What next?
We could always rev up the strategic consulting work at J&J, and we did in fact take on a couple of immediate assignments to ensure continuing revenues. But neither of us wanted to simply reinvent our own wheel from years past. We had always reveled in pushing ourselves to some new “cutting edge”, and so we scanned the horizon for fresh challenges. Our sights fell on the frozen flatlands of southeastern Minnesota. Rochester, to be exact.
Mayo Clinic is perhaps the best-known and most-respected medical facility in the world. Deservedly so, in my estimation. Over a hundred years ago, the Mayo brothers forged a medical team dedicated to the proposition that two heads were better than one, and three better than two—especially when dealing with matters like a medical diagnosis and treatment plan, where a person’s very life might be at stake. They fashioned a style of multi-specialty group practice of medicine that ensured a rich array of expert perspectives would be brought to bear on a patient’s condition before any definitive conclusions were reached or procedures initiated.
They had perfected interdisciplinary practice and created a corporate culture carefully designed to support this kind of ego-free, collaborative, non-profit, modestly compensated practice of medicine. But suddenly they were confronting a world in which newly created for-profit hospital chains were aggressively competing for patients and threatening to erode Mayo’s base of business. As the Mayo Board of Governors considered various means of coping with this threat, they asked us to help them think through their alternatives and make some decisions about Mayo Clinic’s strategy for the future.
So, now we were consultants to what is known as the “provider” side of healthcare. The initial work we did at Mayo, which involved the creation of additional Mayo Clinics in Scottsdale and Jacksonville, was well received, and a longterm flagship client was born. Other engagements with large academic medical centers followed, as well as eventual work with chains of non-profit hospitals around the country where the add-on assignments came strung together like so many beads on a necklace. We happily staffed up to handle the flow of work, and the firm settled into a new course that was to last for almost five years before another nudge in strategy was required. (As part of that exercise, I nudged myself right out the door in search of an entirely new set of challenges for myself.)
In the first seven or eight years, we had taken our firm through many minor and four major mid-course corrections that served us very well. And after my departure, the firm continued to evolve, most recently developing a profoundly important process for analyzing hospital expenditures to determine which courses of treatment provide the most positive clinical outcomes at the lowest possible costs. One day these processes may be established as the national guidelines for U.S. healthcare, saving billions in cost and, more importantly, reducing ineffectual treatment in favor of actions that reliably restore health.
And I can’t wait to see what they’ll turn up next.
Sometimes I compose little aphorisms to sum up a realization. One of them is this: When you’re through changing, you’re through.
Our minds are usually a pretty reliable asset. But occasionally they are our worst enemy. When they resist thinking out of the box, or they cling irrationally to familiar-but-outmoded notions, or they delude us with deceptive dreams of glory, we’re at their mercy.
And a mind can be a merciless accomplice. Especially when it gets protective about what has always worked in the past, even if it’s clearly no longer working. Any capitulation to new thinking feels like the death of fondly held older ways.
But killing your little darlings isn’t the only way to deal with offspring that are not going to fufill your dreams for them. Sometimes you can send them off to rehab.
This is what was clearly called for in the story that follows. The challenge for the client was whether they could transcend longstanding mindsets that were working against them. Could they muster the courage both to acknowledge a blatant need and then make a decision that violated their historic DNA which was programmed to stay the course no matter what?
A few hundred million dollars and a critically important strategic stance in a highly competitive market both hung in the balance.
Thinking Out-of-the-box Ain’t All That Easy
Our brains are programmed to trap us. It’s just that simple. Once they get a notion, they’d much rather repeat it than go to the trouble of getting a new notion.
Now, in lots of situations, that’s fine. I like it that my brain keeps reinforcing my love of Patti and the kids and grandkids and my other friends. And that it keeps prompting me to stop at red lights, scratch what itches, chew before I swallow, keep my wrist firm on a volley, avoid accidental gybes in high winds, counter-steer when the back end breaks loose into a four-wheel drift out of a high speed turn on the track, and stuff like that.
But it can really mess you up in other situations. It cost Johnson & Johnson a couple of hundred million dollars at one point.
J&J had decided to go up against a formidable rival, Procter & Gamble, in the disposable diaper business. P&G’s Pampers had a dominant share of the market, but J&J was confident that it could offer a superior product and set out to make one.
What I have always loved about J&J is their absolute dedication to offering new products only if they are demonstrably superior to every other competitive product in the market. That requirement was one of the three litmus tests—beyond probable profitability—a prospective new product had to pass before senior management would approve its launch. (The other two: show how it leverages the strength of the J&J brand-name, and show how it replenishes that fund of brand-name goodwill for J&J’s future use.)
And in developing their new disposable diaper, that dedication to superiority was evident in full force. A top-level R&D team was assembled with a goal of producing a fabric that possessed unprecedented levels of “wicking” power—the ability to swiftly draw urine and fecal moisture away from the baby’s skin into outer levels of the fabric, to reduce irritation and possible infection. Because J&J has a century of experience and expertise in creating sterile fabrics for its bandages, they had a running headstart on achieving this goal, and they reached the mark pretty readily.
Okay, the first litmus test was passed with flying colors, and it didn’t take much to satisfy senior management on the other two, either. Certainly parents’ historic devotion to other J&J baby products would tilt them toward at least trying out J&J-brand disposable diapers, and their ensuing satisfaction with the superior wicking would replenish their gratitude toward the corporation. Everything was in place.
Except leaky bowel movements.
They moved right on out of the J&J diaper. It turns out the design of the J&J diaper left some gaps around the baby’s legs where runny feces could trickle down onto…well, onto the lap of mommy or daddy or granny or whoever else was dandling the little tyke at the moment. This would seem to be a rather formidable problem.
It was made more formidable as a competitive liability because P&G’s Pampers had just introduced a diaper with snug-fitting, elastic-banded legs that trapped leaky feces before they could escape. Clearly, this seemed like a fine idea.
Except to some J&J true-believers who insisted that the superior wicking was much more important. I even heard one, in a moment I’m sure he’d regret if he ever recalled it, muse that if the point of wicking was to lure the feces away from the baby’s bottom, then having it leak away from there through a gap in the diaper might actually… No, no, I can’t even bring myself to finish his ludicrous defense of his diaper’s inferiority.
They asked us to help them deal with the disastrous competitive performance of this inferior product. Oh, I’m sorry. Inferior product may have sounded a bit harsh. What I meant to say was ‘the challenge presented by the fact that their superior wicking technology’—that’s better—‘just happened to get fashioned into a product that has some, you know, sort of, ummm, certain downsides.’
Well, we did our best. It became clear that the diaper-product management team was totally committed to the idea that superior wicking would somehow, some way, someday overcome the little disadvantage created by slimy feces leaking into people’s laps. Having just invested at great expense in a brand new, state-of-the-art manufacturing facility perfectly designed to produce leaky diapers, they were ill-disposed to invest millions more to radically overhaul it to produce Pampers-like elastic-banded, tight-fitting legs.
Couldn’t we find some inexpensive quick-fix that would enable them to halt the boomerang effect of people who were now swinging over from Pampers to try their product, because J&J’s name was on it, but then quickly abandoning it in favor of going right back to Pampers?
We had some ideas, but our client didn’t like them. We said, okay, if you really refuse to re-tool for elastic-banded legs (our most earnest recommendation), then how about appealing to parents’ sense of style? At the time, every diaper in America was white. Plain white. Parents bought pretty little diaper covers and over-britches that were patterned, but a billion diapers a year came out of the box snow white.
So, we said, how about going to Levi Strauss and Laura Ashley to license some of their patterns that you could inexpensively print right on the outside layer of the diaper. They’d be adorable, and you might at least hold onto some business on the basis of cuteness while you re-think, we earnestly hope, your recalcitrance about dealing with the leaky-leg problem.
No, they said. That would be undignified. Healthcare companies cannot be seen trivializing their products in such a manner. We tried putting decorations on Band-Aids back in the 1940s and got some backlash, so that’s a non-starter. And it could even serve to distract from our main marketing positioning and message: superior wicking!
Two years later J&J abandoned the disposable diaper business, shutting down their zillion-dollar, high-tech, superior-wicking production facility and taking a massive write-off for the loss.
How does this happen? These were all very, very smart people who had been very, very successful at running a very, very profitable company. What was going on here, anyhow? How do people get trapped into such tunnel-vision, into such self-defeating over-commitment to the status quo?
One factor is the set of blinders that knowledge creates. Once we know something, that knowledge can cast a shadow over other, disconfirming knowledge that might be even more valuable.
There is wonderful experiment that illustrates this phenomenon at work. Say two dozen subjects are recruited for this experiment. A dozen of them are asked to sit in a waiting room where they are free to chat among themselves, read magazines, talk on a cell phone, or whatever until it’s their turn to do the experiment.
The other dozen are taken into a different waiting room where there are few distractions—no magazines, and cell phones are not allowed. The lights are off, but there’s plenty of natural light coming through the windows. As they sit there waiting and wondering about what may transpire in this experiment they have agreed to participate in, an electrician enters the room. He’s a garrulous kind of guy, greeting everybody in a very friendly way. He then turns to the light switch next to the door, pulls out a screwdriver, and starts to removes it.
Looking back over his shoulder, he engages the group, as though it would have been rude not to explain to them what he’s up to. “We’re replacing all these older toggle switches in the whole building with new variable-intensity switches,” he explains.
“Did you ever see one of these things up close?” he asks the group as he turns toward them. He holds the old toggle switch out and shows it around to each person. “Here’s how they work. See these terminal posts up here? That’s where you hook the wires with the juice—the electricity—that’s coming in. Now take a look at these other terminals on the bottom here. That’s where you hook up the wires in the wall that go to that light fixture up there on the ceiling”
He makes sure everyone gets a nice close look at the toggle switch.
“But here’s what makes it a switch,” he says as he turns it around to show the back. “See, on the back side of that lever you flick with your finger are these contact points. When the lever gets flicked this way,”—he demonstrates—“it closes the gap between those little points right there so the electricity can flow from the upper terminals to bring the juice across the toggle into the lower terminals where it can be fed to that light fixture there on the ceiling.”
He demonstrates again, then continues. “But if I flick it this way, it breaks that connection, keeps the juice from getting from one terminal to the other one, and bingo, no light! So the most important thing about a toggle switch is…”
By now everyone has heard more than they ever wanted to know about toggle switches and begins wishing that they could have brought their iPod or a good book into the room. But no matter. Moments later, the first of them is called to go to a different room to begin the experiment. The electrician finishes up his work and leaves, too.
Now here’s the experiment they are there to do. Each subject—both the ones from the waiting room where they could do whatever they wanted, and the ones who got the lecture and demonstration about toggle switches—is ushered by himself or herself into a bare room about twelve by twelve. The room is absolutely devoid of any furniture or decorations. Besides the bare floor, ceiling, and walls there are only three things to notice. There is piece of string hanging down from the ceiling over to one side of the room. There is another piece of string hanging from the ceiling on the other side of the room. And over by the door, a toggle switch is lying on the floor, next to the baseboard, right below the now-empty electric junction box where the light switch belongs. It has apparently been left there by the electrician who may have been interrupted half-way through replacing the old one, or who may have left to go get the new one, or whatever.
Each subject is given the same simple assignment: “You see those two pieces of string. I would like you to tie them together.”
Well, how hard could that be. So the subject walks over to one of them, takes it in hand, and then walks over toward the second one and reaches for it. But before the second one comes into reach, the first string becomes gradually stretched out as the subject maintains a grasp on it and finally, the limit is reached. The subject cannot get to the second string without letting go of the first one.
Okay, so that doesn’t work. But maybe I just grabbed the wrong one first. So they drop the original string, and go over to grab the other. With it firmly pinched between the fingers, they head over for the original string. But just before getting it within reach, they run out of stretch again. Can’t reach that one without dropping the other one.
Hmmm. Not done yet. Some subjects will stand directly between the two and reach both directions, stretching as far as they possibly can, even leaping up as though that would somehow increase their wingspan, in what proves to be a futile effort to grasp both strings simultaneously.
At that point, the subjects all invariably scratch their heads—funny how universal that is, as a sign of perplexity—and look around. All they see are the two strings, and, oh, yes, that toggle switch lying next to the baseboard over there by the door.
A bit more head-scratching, and then the people who got the lecture about the toggle switch give up. They are stymied. They declare to the researcher who ushered them into the room that this stupid trick can’t be done. Can’t the researcher see that? There is no way to tie these two strings together, because they’re too damned short to reach with both hands! Having set the researcher straight on this, they go away defeated.
Most of the people from the other group, whose heads are not full of knowledge about what toggle switches do, look down at the switch by the door, and get an inspiration. They pick the toggle up, tie it to the end of one of the strings, and then swing that string like the pendulum on a clock. They stroll over to the other string, pull it toward the swinging one, and when the toggle-pendulum comes near they grasp it. They tie the two strings together and declare victory.
For them, a toggle could be anything—a pendulum weight, or a door stop, or a hopscotch toss, or a beer-bottle opener, and even possibly a manager of electric current.
The others knew too much about toggle switches. They were fixated on its “true” purpose, and they had so absolutized that purpose that they were precluded from seeing any alternative uses for it.
So one problem is the fixation on what you already know. It creates blinders that obscure alternatives. But that’s only half of it. The other problem is that we overvalue what’s in our grasp. Our wishful thinking impels us to think that what we already have will save the day.
Another experiment illustrates this warped thinking perfectly. The researchers are stationed near the check-out counter at convenience stores that sell lottery tickets. Whenever a customer buys a $1 ticket, the researcher intercepts the customer before they can scratch it or whatever else they would do to reveal its value to them.
“Hey,” says the researcher. “I see you have a one dollar ticket there. What do you say I give you two dollars for it.”
The ticket-holder glances down at his or her ticket, pulls it a hair closer to their body, looks back at the researcher and says, “No way.”
The ticket holder has no idea at this moment, of course, whether the ticket they are clutching to their body is worth nothing at all, or a couple of million dollars. But in the instant since purchasing it, they have already invested it with enough wishful thinking, enough hope, to refuse an offer that would double their investment—and permit them to turn right back to the counter and buy two $1 tickets, thereby doubling the odds of a payoff.
“Okay,” says the researcher, “how about three dollars? I’ll give you three dollars for it.”
“Uh-uh, nope. I’m keeping it,” comes the reply.
And so it goes. And goes. And goes.
In a lottery game that is utterly dependent on “the odds”, the subject just passed up a chance to improve their odds by 1,400%
For no reason whatsoever, the subject believes this $1 ticket has some value greater than what they paid for it and greater than what is being offered for it. Pure, unadulterated, wishful thinking.
It keeps going. All the way up to the average breaking point of—are you ready for this?—twenty-three dollars to get the person to part with a $1 ticket that is in all likelihood totally worthless.
There’s nothing inherently wrong with imputing irrational value to something that is dear to you. That’s what The Velveteen Rabbit is all about. No, it’s not inherently wrong, but it is very often situationally disastrous. The trick is to know when the circumstances call for hard-nosed rationality rather than dogged loyalty.
Getting that trick right could have saved J&J a bundle.
That notion that the quality of thinking in organizations is often sub-standard has become a tired cliché illustrated by an endless string of tired examples (e.g., a camel’s being a horse designed by a committee, the blind men and the elephant, etc., ad nauseam). The only reason the cliché and the examples endure is that the proposition is true. The only notable example I know is the Mayo Clinic, the truest example of a “learning organization” I’ve ever worked with.
Elsewhere, organizational decisions are often stupefying, and changes that I dub “spontaneous disimprovement” spring up like dandelions. A prime example of this is when change is driven by faulty thinking that no one blows the whistle on.
In the following story, we see that changing for the wrong reasons can be a lot worse than not changing at all. A good reason is trying to stay abreast of your customers’ wants. A bad reason is trying to milk your customers.
I had a ringside seat at a bout where a company beat itself to death. I watched a good reason for change go up against a bad reason for change, and the bad reason won.
Which meant that everybody lost.
The first time I played tennis in an inflatable building, I was slightly nervous about what would happen if the fabric roof were to rupture and come down on us. Would we have time to flee for safety, or die an ignominious death smothered by vinyl? As it turns out, it’d take a long, long time to settle to the court surface, and so the thought no longer occurs to me in such buildings.
But it does occur to me that the leakage of momentum from a large business is somewhat like that—the air goes out more slowly than one would think, and it takes a while for the once-high roof to come to the ground—but once it begins sagging, the descent is not likely to stop. That’s why the vast majority of the companies that comprised the Fortune 500 early in the 20th century simply no longer exist or got swallowed up by others in their deflated condition.
I had a chance to watch one such deflation at relatively close range. Sears, once owner of what was literally the highest roof in the world, on the Sears Tower, and owner of the highest position in American retailing, was the major underwriter of “Mister Rogers’ Neighborhood” in 1970 when I became president of Small World Enterprises, the company Fred Rogers founded to be the owner/producer of the program. And so I got to know the senior executives of Sears in the course of our partnership to bring “Mister Rogers’ Neighborhood” to American homes.
At the time, Sears utterly dominated retailing in the United States, with 87% of U.S. households doing business with Sears every year. (As their CEO told me sardonically, “If you throw in the people who steal from us, I think we’ve got 100%.”) Their competitive superiority, their share of market, their franchise with American consumers was unparalleled. Montgomery Ward and J. C. Penney, once formidable competitors, were reduced to minor annoyances.
Over lunch one day in the executive dining room high atop the Sears Tower in Chicago, I asked the head of marketing for Sears what accounted for their incredible success. His answer was straightforward.
“We never mistake ourselves for our customers. We executives who sit in these suites are not typical Sears customers, and we never forget that. We make too much money. We have developed too-refined tastes. We are out of touch. And so the folks a dozen floors below us—our market research department—are entirely responsible for our success.
“Whatever they tell us, we believe it, and we do it. If they say that people want green left-handed widgets, we go find the best manufacturer of green left-handed widgets we can find, order a bunch of them, and put them on the shelves. And, by God, they fly right off the shelves into our customers’ shopping baskets.”
Fast-forward ten years. I am now a consultant developing strategies for clients in the world of healthcare—principally Johnson & Johnson at that point. We are approached by a senior executive at Sears, which by now has acquired some new divisions. Sears, the master retailer, is now a sort of conglomerate that includes Allstate Insurance, Dean Witter, and Coldwell-Banker.
“We’re thinking about diversifying into healthcare,” he says. “We’d like you to develop a diversification strategy that will make us a five billion dollar player in healthcare within three years.”
“Just out of curiosity,” I said, “why the number five billion?”
He had a simple answer. “Because at that size it’ll still be only about ten percent of our total sales. Anything less than that, and we’d not take it seriously enough.”
Fair enough. So we set about our task.
Job one, in my book, is to understand the genetic code of an organization. If you want to diversify or to acquire or to initiate any other dramatic kind of growth, you just have to know where you’re starting from. What really makes them tick, down deep? Who do they think they are? What gets them going in the morning? What are the core values? What are the unspoken rules that affect advancement? What vision of success are they pursuing? What hard assets have they amassed? But even more importantly, what kinds of people have been drawn to their work? What is the elasticity of their mindsets and capabilities? What are they good at? What else might they be good for?
We interviewed top executives and middle managers throughout the Sears organization and made good headway on all these questions, but we had one question that could only be answered by the very highest officers, the Chairman and the President. So we asked them, “What did you have in mind when you acquired all these other companies that are now the major divisions of Sears?”
The answer came clear and strong. “We came to the realization that the vast majority of the wealth of Americans is represented by the equity they have in their homes. So rather than settle for selling them a lot of stuff—we already do that—we’re going right after the whole thing.”
“The whole thing?” I puzzled.
“Sure. The equity. We want to get our hands on all that equity, one way or another. That’s why we bought Dean Witter. Heck, we don’t want to be in the stocks and bonds business. We want to develop it into America’s primary mortgage banker. So, we’ll have the whole deal, see? Think about it. We help them buy or sell their house through Coldwell Banker and get those commissions. We carry the mortgage through Dean Witter and get all that interest. We insure it through Allstate and get the premiums. And of course we furnish it with our Sears retail business and get the profits from that. And the clothing that’s in their closets—that’s from Sears, too, and carries great mark-ups for us. We’re going to get it all!”
I found it a little hard to imagine that the folks a few floors down had come up with market-research findings that showed American homeowners just salivating at the prospect of being so abjectly dependent upon an octopus-like Sears siphoning money out of every crevice in their homes. But, who knows? Maybe they did.
Well, don’t count on it. When we submitted our healthcare-diversification plan to Sears’ management many months later, we showed them how it would in fact achieve the financial goals they had challenged us to meet—sales, profits, return on investment. But we also submitted a cautionary advisory to them: “We think you would be unwise to pursue this diversification. In our observations of Sears’ operations and divisions during the course of this engagement, we note that the intended synergies among the newly acquired divisions of Sears remain largely unrealized and are probably unrealizable.
“More important, we detect considerable weakness in your core retailing business, and if that begins to deflate you may find it difficult if not impossible to recover momentum. There are others waiting in the wings ready to displace you if you falter there.”
To their credit, they took our advice and shelved the diversification plan.
Alas, they were too late to stem the impending slide into eventual irrelevance. They had taken their eye off the ball. They had come to disdain their own retailing legacy in favour of a sexier, more intellectually appealing mega-strategy. And as senior management lost its commitment to, and focus on, what their customers really wanted, Sears stores lost appeal. Their seduction by this dream of dominance proved all but fatal. Wal-Mart and others stormed right past, shoving them into an also-ran position.
Their eventual floundering to recover relevance prompted many bad decisions, but none worse than one that virtually renounced their genetic code—and at the worst possible moment, too. In the most ironic, self-inflicted, unkindest cut of all, Sears—the company that for over a century had established catalog shopping as a staple of American merchandising—eliminated their own catalog operations at the very inflection point in retailing history when remote shopping through catalogs, Home Shopping Network, and the internet was taking off like a rocket ship. Billions of transactions are now conducted through the very channels that Sears almost certainly would have pioneered and dominated if they had continued to exploit their own genetic endowment as retail merchants instead of seeking to exploit their customers’ wealth.
On March 22, 2005, the name “Sears” was removed from the New York Stock exchange, as the tired carcass of the company fell under the ownership of K-Mart. The once-most-dominant retail corporation in U.S. history was officially extinct.
I guess the only thing worse than watching someone else beat themselves to death with stupid thinking is beating yourself to death with stupid thinking. That’s exactly what I did when given my first major responsibility for running an organization.
Later, in my career as a consultant, I specialized in helping clients transform themselves into what we call “learning organizations”. One day while creating a sales presentation, I asked myself what the opposite of a learning organization would be. A dumb organization, or something like that? Then it hit me: the opposite of a learning organization is a know-it-all organization. An organization that doesn’t think it has anything left to learn, that has all the answers, that relies on its own thinking rather than seeking to understand what others—including its customers—think and feel.
Ironic that the guy whose earliest performance as an executive were Exhibit A for non-learning folly would later be hiring him to turn them into learning organizations…
The pilot waggled his wings to acknowledge he saw us standing below, then made a couple of passes over the ranch, sizing up the situation. The narrow and rutted road that snaked across the barren New Mexico landscape was not an ideal runway for landing his small plane. Yet that was the deal. I needed to get out of there right now, and he was supposed to get me out.
Several more loops apparently convinced him the pavement was just wide enough to match the spread of his landing wheels, and he settled in to touch down. With a screech and a bounce he hit the roadway dead center, the wheels on his landing gear skittering along with no more than six inches of crumbling asphalt leeway on either side. The plane grabbed at the road as he braked and jounced to a stop a hundred yards from where we stood transfixed at the spectacle.
The audience for this trick landing: My pony-tailed wife in Levis and a denim shirt and cowboy boots, wearing traces of dirt and horsehair from the early morning ride. Our three young kids comparably attired and gritty. And our friends—two other young families grubby the way people get when vacationing together on a 100,000-acre ranch in the middle of nowhere, a hundred miles from a city. And me, standing out in my best suit, crisp white shirt and tie, citified shoes that had been shiny an hour ago but were now powdered with a patina of fine high-desert dust, ludicrously holding a spindly, six-foot-tall sculpture made of welded square nails purporting to depict an Indian legend of the life cycle.
After watching the torturous landing, Patti wondered out loud if this flight was really necessary. Could he take off safely again once I was aboard, negotiating that skinny, bumpy roadway? What if a wheel caught the edge, and we flipped? Couldn’t I just drive to Albuquerque and get a later plane? Did I really have to be back in New York tonight? Couldn’t it wait until tomorrow? But she knew what my answer would be even as she asked her anguished questions.
I was in a panic, and dying in a Beechcraft Bonanza flipped upside-down on a failed take-off from a rutted roadway in Abiquiu, New Mexico, seemed about an even trade with whatever my fate would be if I failed to avert the disaster that was looming in New York City. Or so it seemed to this overambitious thirty-something executive trying to rescue a business that had already suffered a nearly lethal body-blow.
As president of the “Mister Rogers’ Neighborhood” organization, I had ultimate responsibility for finding the money to produce the program. It came from several sources: corporate underwriting from Sears and Johnson & Johnson, fees paid by PBS stations, and income derived from the sale of Mister Rogers-related books and records. The profit from record sales had become a “cash cow” for us, money we really counted on. Records cost only pennies to produce and, in 1974, sold for around $5 in record stores and record departments in places like Sears. In fact, Sears alone accounted for more than 80% of our sales, being at that time by far the dominant family-oriented retailer in the U.S.
Only months before, life had seemed so simple, so secure. I had persuaded Johnson & Johnson to join Sears as a multi-million dollar underwriter of the program. We renegotiated a long-term contract with PBS. And CBS, then king of the record business, was distributing Mister Rogers records to stores all across the country. While the mass commercialization of Sesame Street was claiming the lion’s share of dollars to be spent on such wares, our goals and needs were relatively modest. The record income was providing the precious “last dollars” that put enough in the till to keep producing our low-budget “Mister Rogers’ Neighborhood” programs for as long as our inspiration and energy might hold out.
Yes, everything was going along just fine. Ratings for the program were at an all-time high and growing. Sales of products were clipping right along. And with the development of additional staff and management capabilities at our production facility in Pittsburgh over the previous couple of years, my commuting out to there from our corporate office in Princeton had dwindled from a weekly trip to a monthly trip. I didn’t mind the other travel—to negotiate business relationships with Hallmark and Golden Books and Random House and CBS or to be the public-speaking voice of “Mister Rogers’ Neighborhood” at conferences of parent groups or early-childhood educators or the White House Conference on Children. Fred wanted nothing more than to stay in Pittsburgh making programs, and I fed my ego on being in front of audiences as the spokesperson for our work and the recipient by proxy of the deep affection people expressed for Fred and the Neighborhood. Yes, life was very, very good.
Then, two months before, had come an ominous call from the newly appointed General Counsel of Sears. I had known his recently retired predecessor, but this was my first conversation with his successor. After initial pleasantries, he got to the point:
“Eliot, I have some concerns about the relationship between Sears and your company. Could you come out here so we can discuss it?”
“Sure, but can you give me a headline about what the issue is, so I can prepare for the meeting?”
“I don’t think that will be necessary. It’s pretty simple, really, but not something I want to go into on the phone.”
Several days later I was shepherded into his office high in the Sears Tower, my mind roiling with disaster scenarios. Clearly, this meeting was not going to be about good news.
“So here’s the situation, Eliot,” he began. “I’ve been reviewing a lot of Sears’ relationships since I took over as General Counsel, looking for conflicts of interest. And I think we have one in our relationship with you.” He paused momentarily, then continued: “I have to end it.”
A heavy, dark gray wave flowed over my brain, dimming down my wattage to night-light level. Sears. Millions in production funding. Major vendor of our records and books. Lifeblood. Lifeline. End it? End it? That could end “Mister Rogers’ Neighborhood”! I groped my way back to the light, to hear what was coming next.
“See, here’s the situation,” he continued. “The Sears-Roebuck Foundation that gives you the millions for producing ‘Mister Rogers’ Neighborhood’ is a not-for-profit foundation. The money we put into it is tax exempt. As such, it cannot be employed to further our commercial interests or prosperity. It’s a pro bono publico use of funds.”
I nodded in wary comprehension, and he went on.
“But at the same time, we do a land-office business in ‘Mister Rogers’ records in our stores. My concern is that the funds we give for the production of the program could be construed as promoting the sale of ‘Mister Rogers’ products in our stores. If the IRS were to make that determination, it could do all kinds of nasty things like wiping out the Foundation or asking for back taxes on its grants that might have boosted ‘Mister Rogers’ product income, or who-knows-what. I can’t let that happen, and so we have to eliminate the risk.”
On the edge of meltdown, I mumbled, “What did you have in mind?” But I was already composing the words I’d use to tell Fred and the crew that we were out of business.
“Well, it’s pretty simple. You just have to make a choice. Do you want Foundation funding, or do you want Sears to carry your products? It’s one or the other. It just can’t be both.”
Would you rather cut off your right arm or your left arm?
If it had simply been a financial decision, it would have been easier. Take the Foundation funding. It represented more money than the profits from the records. But we regarded our records and other products as “non-broadcast extensions” of the Neighborhood that children could draw on at the precise moments in their life events when they needed the sustenance Fred provides. Shutting off Sears’ sales of these products was tantamount to taking them out of the market. Our record distributor, CBS, was already deeply concerned that most major record chain stores were rapidly squeezing out children’s records in favor of more shelf space for highly promoted hit records by big-name artists. Without Sears, only a handful of off-beat retailers would remain to serve an audience in the millions.
In the end, the decision was painful but clear: keep the Foundation funding and watch Sears take our records off their shelves. We were far more dedicated to maintaining Mister Rogers’ daily TV visits with his young audience than in selling non-broadcast materials. And so with a gulp, that’s what we did. It walloped the business end of Small World Enterprises hard and fast, cutting our revenues by nearly 70% overnight. But I had confidence we would find a way to rebound. We just needed some time.
We were not to get it.
That’s why I found myself bouncing down the rutted roadway in the Beechcraft Bonanza with my silly square-nails sculpture poking me with each jounce as the plane struggled to lift off before the road turned sharply left just ahead.
The night before, CBS’ Vice-President for Children’s Records had called Michael, my own VP in charge of our music business. When the phone rang, I’m sure Michael was initially relieved to hear who was calling. He had been trying vainly for weeks to secure an appointment to discuss the renewal of our contract with CBS that was due to expire in just a matter of days now. His relief would have faded instantly when he was told, “Michael, I’m sorry to tell you this, but CBS has decided to abandon the children’s record business. There’s just not enough money in it any more. We’re stopping manufacture and distribution of ‘Mister Rogers’ records as of today. This division will close by the weekend.”
Now you know why I was in a panic and in a chartered plane out of Abiquiu. Michael managed to reach me late the night before with the lethal news. CBS is dead and gone. There goes our manufacturing capability and our distribution network. Sears has already disappeared as our major vendor. We have no product and no way to reach our customers. What can we do?
I could fly back to Princeton, for starters, and mount a battle plan. Which I did, and though we knew the market for children’s records was in terminal stages of decline, it made sense to reconstruct as best we could a patchwork system for distribution to reach the remaining outlets. Enter Morty Klein.
Morty was a retired veteran of the record industry who happened to live nearby and took kindly to our plight. He stirred himself out of his days of ease in the retirement community to dress for battle every day with the not-always-honorable denizens of the recording industry. He had built up a phenomenal roster of contacts in the industry, not all of whom were retired like Morty. He worked them tirelessly, looking for an independent manufacturer for our product and for distribution avenues to get our product to market.
Although in good-humored pessimism Michael insisted, when Morty Klein wasn’t around, on pronouncing his name as “More Decline”, Morty did a phenomenal job virtually overnight. Within days he had found an independent record manufacturer and stitched together a network of local distributors that gave us coverage of the major markets around the U.S. We retrieved the record “masters” from CBS to deliver them to the independent record-pressing manufacturer and put new product into our jerry-built distribution network. Within a month or two, parents who could find them were again buying some Mister Rogers records. Our revenues began to recover gradually and it was apparent that our near-death experience wasn’t going to kill us. We just needed a little more time.
We were not going to get it.
How could I have been the president of a company whose revenues depended almost entirely on record sales and not know what records are made of? Perhaps you, understandably, do not know what records were made of and so, now, I can tell you: polyvinyl chloride, or PVC. Well, actually, I did know they were made of PVC—after all, they were called vinyl records. What I didn’t know was what PVC itself was made from.
PVC is a petroleum derivative, and so when there is plenty of oil, there is plenty of PVC to make all manner of PVC-based products, including records. And right up until 1973, there was seemingly an endless abundance of oil flowing into the U.S. from a group of countries in the Middle East who organized their sales through something called OPEC. But on October 17, 1973, OPEC announced that it would cease shipping oil to those nations who were supporting Israel during the 20-day-long “Yom Kippur War” then at mid-point. The US was one of those nations, and our oil spigot was suddenly shut off tight.
Overnight, the U.S. was in a crisis. No oil. No gasoline. No nothin’. Gas stations limited individual purchases to five gallons. Cars with license plates that ended in even numbers queued up for blocks and hours on even-numbered days to snake their way to the pump in hopes of getting there before the station ran dry for the day, as they often did. Their odd-number-plate neighbors got to join the fun the next day.
Meanwhile, the black goo that was pressed into records, PVC, also disappeared. In short order, we got the inevitable call from Ross, the manager of the independent record-pressing manufacturer who was producing our inventory. Michael was out, so I took the call.
“You probably know why I’m calling,” he intoned sympathetically.
By then, I did. Maybe before the OPEC oil embargo I hadn’t had a clue that our product was made from their oil, but I had found out fast as word flew through the industry. Fierce competition and outrageous bidding had broken out among the major record labels scrambling to corner as much PVC as possible to protect their own manufacturing supplies. In an industry famous for its vicious infighting and profligate spending, the war for PVC was ugly and unrelenting.
“We can’t supply you any more, Eliot,” he went on. “We’re having a terrible time getting enough stuff to keep our big customers getting even a trickle of what they need. And while we love working with you guys, we just can’t afford to allocate you any material. We’ve got to keep our big labels happy—well, they’re not going to be happy no matter what, but, you know, keep them from punishing us by taking away their business once the supply picks up again. I’m truly sorry.”
I knew he was. And I knew he had to make the decision he did.
We were done for, pure and simple. Three strikes. Sears. CBS. OPEC. All within months of each other. We closed up shop and remanded all the continuing products and revenues over to our not-for-profit sister organization, Family Communications, Inc., which produces the Mister Rogers’ Neighborhood television programs. They have proceeded ever since to maintain a low-profile stream of non-broadcast products as an incidental sideline to the main work of FCI—ensuring that young children can visit with their caring friend Mister Rogers and use program-related play to nurture their development.
Over the many years since then, I have striven to rationalize the failure of Small World Enterprises—and my leadership of the company. Being a reasonably inventive fellow, I have produced an abundance of rationalizations that I comforted myself with. Heck, Eliot, you couldn’t possibly have foreseen such a “perfect storm” of devastating factors. To have had those three things hit you all within months is a once-in-a-lifetime tsunami nobody would ever expect to experience—or survive.
And, by the way Eliot, it actually would have been unfortunate if you had succeeded in making the Mister Rogers commercial-products division as successful as, say, the Sesame Street retail bonanza. That would have compromised the primacy of the one-on-one relationship between Fred and each viewing child through the “Neighborhood” TV programs. He is about nurturing personal relationships, with no commercial strings attached. Better off that we didn’t confuse the purity of that mission by selling kids all manner of Mister Rogers’ trinkets.
All true enough. But not the whole truth.
The whole truth includes my own ego and greed. Here I was in my early 30s suddenly president of a company with a famous brand name and a highly respected mission. I was young and hungry, eager and careless. I wanted success. I wanted to make money—lots of it—and I wanted to be known as successful and prosperous. I was driven to escape the demonic memories of a childhood soured by bill collectors asking Mom for “something on the account” and teen years without enough money to go skiing or to the shore or do whatever else the gang was doing. Money. Recognition. Admiration. I wanted them so much. And here I was poised on this incredible springboard, ready to launch myself into the stratosphere of fulfillment. We had the record business already going, and I had brainstormed dozens of additional Mister Rogers products—playthings and books and monthly subscription programs.
I had the vehicle, and I had all the answers. Always ashamed of not having enough money but never in doubt about about the presumed superiority of my mind, I knew it all. Nobody could tell me anything. And I was just smart enough to have, for the most part, ideas that were seemingly plausible and might actually succeed. Couple that with my powers of persuasion (and my authority as president of the company), and I was singing from my own songsheet. I pursued and concluded licensing agreements with the best companies I could find—Hallmark, Random House, Golden Books. They were all impressed with the popularity of “Mister Rogers’ Neighborhood” and shared my confidence that Mister Rogers products would fly off the shelves. I was the leader of a band that was flat-out unstoppable.
Princeton, New Jersey, where I live is the birthplace of market research. George Gallup invented the specialty there in 1936 and, over the years, many of his company’s leading lights spun off to create rival firms right here in town. A super-bright friend of mine headed one such spinoff in the 1970s, and he repeatedly urged me to consider the benefits of doing some research into the market’s interest in “Mister Rogers” products. He wasn’t hustling business. He was a friend, and he was coaching me. Please, please don’t ignore this, he was saying. He didn’t care if I commissioned his firm or one of his competitors to do the work—he just knew that I couldn’t make good decisions if I didn’t do a disciplined analysis of the prospective customers and what appealed to them.
I knew he was wrong. I already knew what the customers would like. Because I had dreamed up all these wonderful products. I was off on a free-running high, spinning off idea after idea after idea, drunk with creativity and ambition. How could they not love them if I had dreamed them up?
Well, they found ways.
Product after product languished in the market and was eventually ignored to death. Nothing worked. Nothing.
Had I heeded his advice, I am quite certain it would have been different, and that when the record business collapsed we’d have had sufficient revenues from our non-record products to have weathered the storm. But I didn’t.
In the most supreme irony of all, I did to Small World Enterprises exactly what an overreaching CEO of Sears did to it some years later: I ignored market research. I never asked the customers what they thought might be a good idea. I got carried away with the wonderfulness of my own thinking—and my lust for success on a grand scale. And I produced exactly the same result:
The ruination of a fine business.
Thanks to the advent of systems thinking, the phrase “unintended consequences” has entered our parlance and awareness. Now everybody knows what it means, even if everybody doesn’t invest the time and effort to think systemically about proposed actions in order to detect and avoid said unintended consequences.
At a point when I thought I had retired from the world of business, I was approached by a small, formerly fast-growing medical device company that had hit the wall. Their fast growth was a thing of the past, and they were seeking a fresh strategy to jump-start a more promising growth trajectory. Intrigued by their dilemma, I couldn’t resist tackling it. As always, I spent the early days of the engagement digging into its history, looking for clues about its early success (to replicate if possible), its DNA (to leverage and build on), and its mistakes (to rectify).
In this case, I discovered the mother of all unintended consequences.
Only One Chance to Make a First Impression
If the first time you ever encountered Santa Claus, he gave you a really painful pinch, you would have been highly disinclined to get cozy with the old geezer again. Although he might have been famous for his apparent generosity, dropping off gifts intended to make you and other kids giddy on Christmas morning, you’d never ever really trust him. That first impression, even if inadvertent, would last a long, long time.
That’s true for grown-ups, too. And a painful first impression can damage or even destroy what might have been a mutually beneficial relationship. I saw that happen with a small business I recently came to know and admire. They suffered nearly lethal damage by inadvertently letting the press create first impressions of its product and itself—impressions that, in the media’s zeal for sensationalism, were extraordinarily negative.
After ten years and more than one hundred million dollars of R&D investment, a fledgling company called Aspect Medical Systems, Inc., was ready in 1997 to go to market with a remarkable innovation. They had developed extraordinary expertise in brain function and new technology enabling them to track the level of consciousness in a human brain. Ultimately, they had devised a brain monitor that would tell an anesthesiologist exactly how conscious or unconscious their anesthetized patient was at any given moment.
You might be wondering, “Don’t anesthetists know that already? People have been giving anesthetics to surgical patients for a hundred years. What have they been doing, guessing?”
Well, in a way, yes. An educated guess, to be sure. But still a guess. Until Aspect’s brain monitor came along, the anesthetist relied on secondary indications that sometimes apparently suggested fluctuations of consciousness, but didn’t actually track it and sometimes were actually misleading. Changes in a patient’s blood pressure, a patient’s movement on the operating table, and other observable events might suggest that they were coming to consciousness—what is known as “intraoperative awareness”—but might also be caused by other factors such as the trauma of a surgical incision. Similarly, they watched the patient closely for indicators that the anesthetic dosage was excessive, and the patient was being driven too deeply into unconsciousness. The clinicians relied on these secondary signs because they were the best indicators they had to work with.
But nothing directly measured the actual status of the brain, the very seat of human consciousness, which was after all the organ in the body that their anesthetic drugs were intended to affect. And so Aspect created a high-tech monitor, which they called “BIS”, that was in effect an altimeter of consciousness. By reading brain-wave signals (called EEG, for electroencephalogram) through a Band-Aid-like strip of sensors across the patient’s forehead, the BIS instrument computed and produced a number between zero and one hundred that indicated the patient’s level of consciousness. At zero, the sensors were detecting no electrical activity, meaning the patient was as unconscious as it is possible to be. At one hundred, the patient was fully, completely conscious—as wide awake as one can ever be.
After jumping through all the FDA hoops and other prerequisites to selling a new medical device, Aspect was ready to bring BIS to market. Typically, there are two vehicles for introducing a new product—advertising, and public relations. Advertising is a great medium because you can say exactly what you want to say in your print ad or commercial on radio or TV. You control the appearance, sound, content, nuance—everything. What is more, you can target your advertising to precisely the people you want to pay attention to your news. If you’re after twenty-somethings with a new fashion item, you’d use People magazine and MTV. For a medical device, on the other hand, you’d place ads in the professional journals read by your target audience.
The downside of ads is that they cost money. Lots of money. Lots and lots of money. Ads have to have a home. They don’t float in free space. You have to buy a page in a magazine or buy time on the air that will be occupied by your ad or commercial, and somebody wants compensation for providing it. And you have to pay for it over and over again, to get plenty of repeated reinforcement of your fleeting message.
By contrast, the use of public relations—getting the press to cover your story and tell it to the public through the editorial content of magazines and electronic media—is relatively inexpensive. If you have a good enough story, you pay a PR consultant to “hook” the media on the story, and the media run with it. This is “free ink”—pages of words or minutes of TV time telling the world about your wonderful new product. Now, when a big company has a ho-hum “new-and-improved” version of a routine product—Tide, or Budweiser, or Chevrolet—they are unlikely to get much free ink. Such nominal tweaks on old standards are just not very newsworthy, even by the oftentimes minimal standards of what passes for “news” these days.
But a breakthrough product, something that may save lives or otherwise change things much for the better—something like BIS—is quickly seized on by media eager to hook and re-hook their own readers and viewers, to keep them engaged.
The downside to a PR-based approach is that someone else—the media folks—get to choose how they will tell the story. You tell it to them, and they re-tell it to their audience. Unlike an ad or commercial, you never have final say as to how it will come out. They pick and choose as they please.
Having burned through a hundred million dollars or more to perfect BIS’ ability to detect and display patients’ level of consciousness, the company had little left in the bank to spend on getting its story out. Certainly not enough to buy all the advertising space in professional journals that it would need, over and over again, to tell the complex and wonderful story of what BIS is and does. So they turned to PR.
The company put together a sophisticated disquisition on what anesthesia is and how it works, and they held press briefings arranged by their PR firm. They told the press about what challenges anesthesia presents to the extraordinarily well-trained clinicians who practice anesthesia, and on how BIS could enhance their work. About how it could help reduce the amount of anesthetic drug required, since trials of BIS had revealed that many clinicians were actually using more than was necessary. By tracking the patient’s consciousness level on BIS, the clinician could adjust, or “titrate”, the amounts of drug more precisely and use less. That might mean reduced costs in the operating room budgets. And reduced amounts of drug meant that the patient might emerge from unconsciousness more rapidly, enabling them to exit the operating room sooner. And it might mean a briefer stay in the post-anesthesia care unit, or PACU, before being discharged to their hospital room or even to their own home. And it might mean less incidence of post-operative nausea and vomiting which is often precipitated by anesthetic drugs. Blah, blah, blah…
By now the PR agent is struggling to keep the attention of the media representatives whose eyes have glazed over with all this technical minutiae. They are not hooked. No real story here. Desultory questions from them reveal that the savings on drug costs might be a whole three or four dollars per case. Big deal. They start checking their watches and calculating how they can slip out of this press briefing in time to catch a quick drink on the way home. Until…
The PR story continues with one further benefit: BIS may reduce or preclude intraoperative awareness.
What’s that, they ask.
Well, the story continues, some patients wake up during surgery. During surgery, before they are supposed to.
What?! How could that happen? Suddenly there’s a surge of interest. Tell us more about this, the media reps insist.
Okay. See, an anesthetic is really a cocktail of three different kinds of drugs. One is so the patient won’t feel pain. It’s called an analgesic. The second drug is called a paralytic, and its job is to paralyze the patient so they won’t move on the operating table. You don’t want them flinching or jumping around when the surgeon is making a tiny, delicate cut somewhere inside them. And the third drug is the one that takes away their consciousness. It’s called a hypnotic.
The job of the anesthetist is to keep all three of the drugs in balance, so each is doing what it’s supposed to do. But say one of the cylinders containing the hypnotic drug runs out, or the clinician just isn’t paying close enough attention, or for some other reason simply can’t tell that the patient is becoming conscious again. They just may not know. Anyhow, now the patient is lying there on the operating table and begins to hear everything that’s going on. They hear the chatter between the doctors and the nurses, the background music, the whirring of the machines. They are awake, but nobody knows it. This is the phenomenon called “intraoperative awareness”.
Why don’t the doctors know the patient is awake, comes the question. Why doesn’t the patient tell them?
Two reasons. First, because the patient has a breathing tube stuck down their throat that completely disables their voice box. And second, the patient is paralyzed, remember? They can’t move any part of their body, so they can’t wave or wiggle to give a signal that they’re awake. Oh, their eyes are taped shut, too, so they can’t even try to get somebody’s attention that way, either, by rolling their eyes or blinking fast.
Now the media reps are hooked and driving for the kill. Can the patient feel pain?
Well, that all depends on how adequate the analgesic drug is. If that has been allowed to slip, too, they may feel a little pain—or even, in the worst cases, feel everything. Some people who have suffered this experience describe hideous pain –“like a blowtorch in my stomach”—that lasted for the entire operation, which might have been several hours long. And, of course, they are driven nearly crazy by the inability to move a muscle or scream or do anything about it. It can be a living nightmare. The victims whose experiences were really bad later suffer from PTSD, or post-traumatic stress disorder, that troubles them for many years afterward. Some are so badly traumatized that they refuse ever to see a doctor again, for fear of having another operation. Others sleep in a chair instead of a bed every night, they are so afraid of the bad dreams they have if they lie down again.
Stop the presses! We have a story!
But wait, wait—this intraoperative awareness doesn’t happen all that often, and hey! BIS is not just about heading off intraoperative awareness. It’s there to enhance the clinicians’ ability to tailor an exquisite anesthetic to each patient, so they get just what they need. We want this device to be understood as a tool with broad capacity to…
Yeah, yeah, sure. We’ll try to remember that. Some other time.
Off they fled to file their stories. Within hours, major media outlets—USA Today, ABC News, and others—were shouting the news that inattentive anesthetists were permitting their patients to suffer the unthinkable horror of intraoperative awareness, and that BIS was coming to the rescue. These mass media produced over 100,000,000 “impressions” about BIS in the first few weeks.
There are about 35,000 anesthesiologists and about 44,000 certified registered nurse anesthetists, or CRNAs, in the United States. Unthinkably, their introduction to BIS—their all-important first impression of BIS—came from the sensation-mongering mass media.
This was a double whammy. The media not only too-narrowly defined the purpose of BIS—depicting its primary purpose as preventing a rare but alarming condition called intraoperative awareness. Even worse, their screaming-headlines approach simultaneously humiliated anesthetists everywhere by telling those 100,000,000 readers and viewers that they couldn’t trust these incompetent clinicians to keep them unconscious during surgery.
One chance to make a first impression. One chance. That’s all.
This worst-possible first impression was to damage Aspect for years to come. Not only did it misrepresent the product, BIS, and its true purpose. It also misrepresented the company, Aspect, by making it appear that its marketing strategy was to sell BIS by scaring patients into demanding that it be used to prevent their ever suffering intraoperative awareness. This felt like nothing short of extortion to many clinicians who then rose up in massive and vitriolic resistance, maintaining that they would never buy anything from a company so callous as to adopt such an unethical marketing strategy.
And, by the way, they said, we don’t think intraoperative awareness is any kind of a problem anyhow. So if that’s what your silly little machine does, I don’t need it. I’ve been in practice for thirty years and haven’t had a case yet.
Bad company, irrelevant product. Good bye and good riddance.
Tough to recover from an introduction as toxic as that one. Although diehard “early adopters” grabbed up BIS, they were a small minority of a profession not noted for innovation. Hence the flame-out of the early growth surge. Aspect’s sales representatives were rebuffed time after time. Doors slammed in their faces. Phone calls unanswered, unreturned, or rudely terminated. To some clinicians, they were pariahs, personae non grata in the hospital.
Bad as the situation was on the surface, it was even worse underneath.
The misimpression of the product and the misimpression of the company were compounded by the clinicians’ own misimpression of the incidence of intraoperative awareness. In surveys of the profession, most clinicians estimated that it may occur in, oh, what, about one in every 20,000, 30,000 patients? And they presumed somebody else—certainly not they themselves, not me—must have been the anesthetist involved in such cases. Few believed that any patient of theirs, stretching over decades of practice, had ever experienced intraoperative awareness.
But well-validated studies have shown that about one in every seven hundred patients undergoing a general anesthetic actually has some experience of unintended intraoperative awareness. (The “unintended” is important, because in certain surgical situations some degree of awareness or moments of awareness are anticipated and even desired, including various orthopedic surgeries where mid-operation feedback from the patient is required.) So, the one-per-seven hundred unintended incidents means that a typical anesthetist might have several patients per year who wake up during the surgery when they are not supposed to, or dozens and dozens over the course of their career.
Why would they say they haven’t ever had a case, then?
Because they honestly don’t realize it. To begin with, anesthetists rarely confer with their patients after the operation, probing to determine whether the patient experienced any intraoperative awareness. For the most part, the moment the operation is over and the patient has recovered a measure of consciousness and responsiveness, the patient is spirited away to the post-anesthesia recovery unit where nurses coax them back to full stability before returning them to their hospital room. After the patient is transferred from the operating room to the recovery area, the anesthetist typically never sees the patient again. As for possible negative outcomes, the de facto practice is, Don’t ask, Don’t tell. The anesthetist is the one who withholds the asking.
The “Don’t tell” part is where patients are complicit in the anesthetists’ underestimation of how frequently this event occurs. They underreport it for a variety of reasons. First, patients who do experience intraoperative awareness tend to doubt the validity of their own memory of the incident, finding it hard to believe, and so may not report it at all. Many who do report it never even caught the name of their anesthetist, so they report it to their surgeon who, being relatively oblivious to the phenomenon, often dismisses it as something the patient must have imagined or dreamed.
For other patients, the recall of the incident doesn’t even form in their mind until weeks after they are discharged from the hospital, when the realization gradually dawns on them that something curious—or hideous—happened back there in the OR. Once again, self-doubt often deters their reporting it. Or worse. Some are so severely traumatized that they are driven deep into denial or adopt an intentional refusal to ever think or talk about it, lest they somehow experience the horror all over again.
As a result, many—even most—clinicians do not realize to this day that they personally are responsible for permitting intraoperative awareness to occur in their patients, and their estimates of the incidence profession-wide remain inaccurate. Consequently, even though peer-reviewed studies from multiple continents consistently reinforce the one-per-seven-hundred incidence and also show that BIS reduces that incidence by 80% or more, regular adoption for that use lags far behind what might be expected given the risks involved.
So did Aspect ever recover from such an inauspicious—actually, from such a well-nigh lethal—introduction to its market? Yes, to a degree. But not overnight. And not easily. And not to the extent that would be justified by the benefits of BIS. But it had what it needed to recover, which was integrity and determination. And an innocent trust that truth will out, eventually.
I have worked with the senior management of scores of companies over the years. Great companies, with impeccable reputations and standards. Mayo Clinic and Johnson & Johnson spring immediately to mind. But none has ever surpassed what I saw at Aspect in terms of management commitment to doing the right thing, no matter what the cost.
Aspect knew that patients would benefit from BIS in the hands of clinicians who really “got it” about what this monitor could help them do—not just avoid intraoperative awareness, important as that was, but understand the effects of their anesthetics in a whole new way, tailoring the cocktail to the specific needs and real-time responses of each different patient. Aspect maintained that belief, even if the profession—their intended market—did not yet share their conviction. They were not about to abandon their mission, even though it was now clear that they were in for some mighty tough sledding.
And so they continued to invest in research studies and more research studies, spending millions they could ill afford, to support independent investigators testing out the uses and limits and weaknesses of BIS. When I first encountered the company, they were losing more than a million dollars a month—and merrily spending away on continuing research as though they had a bottomless reservoir of money rather than a fast-disappearing cash reserve. Over the next decade, the continuing research on BIS resulted in over three thousand publications describing what BIS could and could not do—many times more studies than any comparable device ever offered to the profession.
Resistance continued unabated for years, with the profession eager to believe that all this research must be tainted since so much of it had been funded by Aspect. Seemingly oblivious to the massive insult this bias leveled at their own colleagues who were conducting the research, many adamantly insisted that no research that relied in any way on Aspect’s money or loaned equipment could be considered valid. The data surely must have been corrupted to produce outcomes Aspect dictated. After all, isn’t that what a company like Aspect—willing to terrify poor gullible patients with horror stories of intraoperative awareness—isn’t that just what such rotten people would do?
Over time, the initial impression of Aspect twisted some clinicians into ridiculous contortions of resistance. Now it is true that some resistance is the natural by-product of any innovation. The very fact of the innovation inevitably implies that things could be done better. If you are proud of what you have already been doing, this comes as something of an insult. So some resented Aspect and rejected BIS because of that presumed affront, and that’s understandable.
But there was no accounting for the overall extent and ferocity of their reaction. After all, what the company was offering was pretty simple: an altimeter of consciousness, so anesthetists wouldn’t have to guesstimate based on secondary indicators. How complicated could that possibly be? What pilot, once the altimeter had been invented, would choose to fly without one just because they’d never had one before? Not anybody I’d want to fly with. There was something irrational going on here.
And I can tell you what it was. It even has a name. It’s called “The Ladder of Inference” phenomenon.
Imagine that you and I are sitting together in front of my fireplace, and I’m telling you this story. At one point, just for a fleeting moment, I notice you rolling your eyes. Even while I continue the story, another part of my brain starts taking itself up the rungs on the ladder of inference:
Rung #1: Snatch a datum. From all the possible data that I might have noticed about you—how you sipped your wine, how you crossed your legs, how you held your arm or how you smiled and nodded—I happened to notice you rolling your eyes. That’s the datum I’ll carry up to the next rung.
Rung #2: Interpret the datum: My interpretation is that when people roll their eyes, they are skeptical, or bored, or disrespectful. Aha! Let’s climb up a little farther.
Rung #3: Reach a conclusion based on my interpretation: You are stupid. Here I am busting my butt to tell you something very important, and telling it in as compelling a way as any human possibly could, and you are not interested. You are blowing me off. Yes, you are definitely stupid—terminally stupid. Let’s keep climbing.
Rung #4: Take an action based on my conclusion: Tomorrow, I will find someone with whom I can share my new insights about you. Oh, it won’t be gossip, really. Just a casual remark that lets my hearer understand how discerning a fellow I am, my having reached a level of perspicacity about your stupidity that my hearer has not yet attained.
Rung #5: Reinforce my conclusion at every opportunity: Hereinafter, I will notice only data about you that support and reinforce my conclusion that you are terminally stupid. If you ever give me the slightest chance to bolster my now-fondly-held conclusion, I’ll seize it. Heck, I’ll even invent evidence. As a matter of fact, now that I think about it, only a stupid person would sip wine the way you do. I see that you’re holding the glass by wrapping your fingers around the crystal bowl, not by pinching the stem. Your fingers have traces of oil on them from the olives you’ve been nibbling. That leaves smudged fingerprints on the crystal which mask the clarity of the wine so that when you hold it up toward the fire you can’t see the extraordinary ruby hues of this expensive vintage I have served you, glowing lustrously before the dancing flames. True connoisseurs know better and grip only the stem. Heathen! Not only stupid, but uncouth to boot. I’m sorry I wasted such a fine wine on you.
You might subsequently offer torrents of evidence of your brilliance and wonderfulness, but I will be blind and deaf to them. I do not enjoy the tension of cognitive dissonance, and since I’m already comfortably settled into my conclusion that you are stupid and uncouth, I’ll simply ignore anything that might put me to the trouble of rethinking that belief.
(By the way, the real reason you were rolling your eyes never occurred to me. One of your contact lenses had slipped out of position and you were trying to reposition it without conspicuously disrupting my tale that you were actually enthralled by.)
That is the ladder of inference at work. Few phenomena of the human mind are more deeply rooted and consistent. And it’s not always destructive. We rely on it to trigger all kinds of conclusive thinking about repetitive behaviors that would otherwise exhaust us if we had to re-think them each time. When the light turns green, my foot automatically comes off the brake and onto the accelerator. I don’t think about that. But sometimes I pull through an intersection and suddenly wonder, Did that light actually turn green?
Thankfully, the ladder of inference has long since seared that four-step linkage—data, interpretation, conclusion, action—into my mind to trigger all manner of mundane actions. Our everyday behavior is facilitated in myriad ways by the ladder-of-inference process so we can apply our available thinking capacity to more interesting matters.
But it can also work against us, and against others. It worked against the anesthesia profession for half a decade before they collectively began to reassess the sufficiency of the initial datum on which they based their conclusions both about BIS as possibly more than an intraoperative-awareness prevention device, and about Aspect as an unethical terrorizer of patients.
Over time, the mounting research data that demonstrated the values of BIS prompted many to reconsider their earlier judgment, adopting the monitor even while still not yet quite convinced that Aspect was worthy of their patronage. Competitors came along offering their own version of a consciousness monitor, hoping to take advantage of lingering marketplace hostility toward Aspect. But their own clinical research was somewhere between paltry and non-existent, in comparison to the tidal waves of research with BIS, and clinicians are ultimately clinical—if the data aren’t there, they won’t follow. As a result, the competitors struggled to gain viable market share.
Aspect’s market introduction had been disastrously launched on a massive distortion, not of their own making, but they believed that the truth would eventually vindicate them. So they just kept investing in the discovery of more truth, and trusting that in time the profession would find their own respect for truth more compelling than their initial antipathy to the company.
As I write, more than 70% of the operating rooms in the United States are equipped with BIS monitors. Over 8,000,000 patients a year are protected by it. And the BIS market share is around 80-90%, with half a dozen competitors scrapping among themselves for the remains. Aspect was eventually acquired by a very large health care products company and its corporate identity evaporated. So perhaps even more clinicians will find themselves adopting BIS, freed now from their knee-jerk antipathy to a company that no longer exists.
Minds can change. Eventually. But these things don’t come easily.
The Greeks had two words for “time”. One is “kronos” which you’ll immediately recognize as the root of chronological, chronometer, and all the other words that denote time-tracking. The essence of “kronos” is to describe the relative juxtaposition of inanimate objects—the earth and the sun cruising along in their rotational relationships which humans have arbitrarily broken down, for our convenience, into nanoseconds, seconds, minutes, hours, weeks, months, years, millennia, even light-years.
The other word is “kairos”, and its essence is radically different. “Kairos” refers to the relative juxtaposition of people, events, and conditions. We approximate the meaning of “kairos” when we say that something is “very timely” or “in the nick of time” or “high time”.
Certainly the kairos kind of timing is at the heart of those who play the stock market. Buy low, sell high—if you can figure out when those timely moments are actually occurring. And it is just as certainly at the heart of many a successful decision and many a disastrous decision in the executive suite. You’ll see what I mean…
Luck of the Draw
Ken had always known that he wanted to dedicate his life to doing good. During his teens and college years, the images of doing good that played in his head centered around underdeveloped nations—maybe helping them find ways to create prosperity and full employment. So he settled on becoming an international financier.
Smart guy that he was, Ken studied the various top-drawer banking and brokerage houses not to determine which offered the best jobs and opportunities for advancement, but to determine who had the best training program. He figured that once he was well trained, he’d find his own ways to move up and around. And at the time, in the mid-80s, E. F. Hutton ran the best training program in the business. So Ken knocked on their door. Repeatedly.
E. F. Hutton was not interested in Ken, a newly graduated religious studies major from Brown University. They were looking for trainees who had demonstrated more conspicuous affection for the world of business. But they did not reckon on Ken’s monumental persistence, and after more than a year of repeatedly saying “No” to him, they finally said, “Well, maybe.” Perhaps, they may have considered, his won’t-take-no-for-an-answer determination is a quality that could offset his lack of prior education in the field.
Ken passed through the entry-level screening portals and began hopping the hurdles toward being hired. He survived several rounds of interviews with the HR folks and then with mid-level managers. They kicked his tires, pronounced him roadworthy, and sent him forth to meet the Big Boss who would have the final say-so about hiring him.
The Big Boss who ran E. F. Hutton’s operations in the northeast was based in Boston, and he agreed to meet with Ken one Monday afternoon at 4PM, just after the stock markets closed. So on the morning of October 19, 1987, Ken donned his one suit, swept his new bride in tow, grabbed the sandwiches they had made for lunch, and clambered into their little yellow ’78 Toyota station wagon in Princeton, New Jersey, bound for Boston some six hours north.
He was nervous, of course. Who wouldn’t be? More than a year of all-out effort to breach the well-defended walls of E. F. Hutton was about to come to fruition—or not. More than a year of work, hope, fantasy, expectation, and fear. Of course he was nervous. So was his bride.
But they had brought along their tranquilizer-of-choice—music. Both of them love music, and so they had loaded up a basketful of their favorite tapes. Slapping one after another into the slot in their tape player and cranking the volume to offset the whine of the overstressed little Toyota engine, they concocted a raucous rolling concert, hour after hour, all the way up Interstate 95 from New Jersey to Massachusetts. Van Morrison, Talking Heads, the Police, U2, Tracy Chapman, James Taylor, Clash, Bob Marley and Bob Dylan all entertained them while they whizzed along and munched their tuna sandwiches.
They found the E. F. Hutton building with no trouble, arriving just before 4PM. Ken parked, put on his one and only necktie, snugged it up, kissed his bride, and strode confidently forth, dandy new briefcase swinging beside him, into the hallowed halls where his future awaited. An elevator whisked him to the lush offices on the top floor overlooking Boston Harbor, where a secretary told Ken that the Big Boss would see him in just a few moments.
When the Big Boss swung open his office door to welcome Ken in, he didn’t look nearly as imposing or hearty as Ken had imagined. If anything, he seemed somehow diminished, although Ken had nothing but his imagined vision of Big Boss as a point of comparison. With a slow, tired sweep of the arm, the man waved Ken toward a cushy sofa, then slumped defeatedly into an overstuffed chair nearby.
“Well,” he said with a deep sigh, “after a day like today, you still think you want to be in this business?”
With his most sprightly, cheery, optimistic, Alfred E. Neuman “What, me worry?” attitude fully cranked up for the occasion, Ken responded like an puppy eager for adoption. “You bet!” he yelped, all but bounding up. “This is what I’ve been hoping for all my life!”
Some while later, the interview was over and Ken strode confidently back through the marble lobby, out the door to the street. He had nailed it. He was sure he had nailed it. The guy hadn’t said so exactly, but Ken knew he was going to hire him. No question. Hot damn! I nailed it. Where’s my wife? Must be circling the block. I’ve got to tell her! We’re on our way!
“Paper, mister?” squawked the scrawny newsboy standing beside a stack of fresh afternoon newspapers on the sidewalk. With both hands he held up a paper in front of him, like a banner.
“Huh? What?” Ken stuttered, momentarily knocked out of his exuberant reverie.
“Get your paper here, afternoon edition hot off the press. Read all about the big stock market crash today,” the kid said, shaking the paper up and down.
“Here you go,” the kid said as he pushed the paper into Ken’s hands.
Ken flipped it up so he could see the blaring headline: “WORST DAY ON WALL STREET IN HISTORY!”
Oh, shit. Oh, God. Oh, hell. Ken fumbled for some money to give the kid, then sagged back a step or two to scan the front page. The whole surface was paved with bold-faced alarms about today’s Big Crash, about Black Monday of 1987. The normally modulated language of proper-Bostonian reportage disappeared under near-hysterical descriptions: “Dow-Jones Industrials Crushed!” “Investors Flee for their Lives!” “S&P 500 down 20%!” “S&P Futures down 29%!” “Trading halted in many stocks before the close!”
Oh, shit. Ken’s mind reeled with the implications. Or with confusion about what the implications really were. What did this mean? And, oh, shit, what about that interview I just had? Oh, no! Man, what did I do? Oh, shit. That’s why he looked so wiped out. And, oh, God, that’s what he meant when asked me if I still wanted to be in the business “after a day like today”.
Ken’s brain momentarily melted, then immediately regrouped. He looked around, searching for a pay phone. Remembering one in the lobby, he sprinted back inside and dialed my number.
“Eliot,” he blurted, “I’m in trouble.” He reeled off the story, telling me why and how he had come to be utterly unaware of the day’s calamitous events. “What shall I do? I just went through this entire interview and didn’t know a single thing about what had been happening all day. He never said anything about it, and we never discussed it at all. He must think I’m the biggest doofus that ever drew a breath. Should I go back upstairs and tell him that I didn’t know, that I’d been cooped up in the car all day and wasn’t listening to the radio? Oh, shit. What shall I do?”
“Do not go back up there—not under any circumstances,” I advised. “Look at it this way. Either he thinks you are the most hopelessly ignorant cretin in the history of the world, somebody who didn’t care enough about the precious stock market to stay in touch with it every instant the way he and his ilk do, in which case there’s no way in hell he would hire you, or—and I’m suspecting this is the case—you have just re-defined for him the ideal of the person who is able to keep his head while all others around them are losing theirs, and he thinks you’re just the kind of guy they need around there. Either way, your going back up to him won’t change anything. Just hang in there and see what he says when he gets back to you.”
The Big Boss did get back to Ken, the very next day in fact. The good news was that Ken got the job.
The bad news? Ken got the job.
They sent him to New York City where he eagerly underwent the requisite weeks of the deservedly lauded training in the world and workings of finance, and then they fulfilled his dream of being assigned to the Portland, Maine, office of E. F. Hutton. He was on his way. All he had to do now was to build a clientele. How? Simple. Call a hundred and fifty or more unsuspecting citizens every day with an offer to be their stockbroker.
In the weeks after the worst single day in Wall Street history, the investors and would-be investors in the Portland, Maine, area were displaying with a vengeance the rectitude for which Mainers are famous. They were stuffing their money into coffee cans and mattresses, savoring the comeuppance that had struck down the well paid know-it-alls in the world of high finance. Mistaking the rookie Ken for one of those know-it-alls, the people who didn’t hang up on him immediately took full advantage of the opportunity to castigate this handiest representative of Wall Street greed and overreaching, telling him a thing or two about prudence and humility.
No quitter, Ken hung in there trying to make a go of it, lasting eventually for nearly as long as he had persisted in getting E. F. Hutton to hire him in the first place. But cold-call telemarketing is a soul-searing job under the best of circumstances, and these were by any measure the very worst of circumstances. His one hundred and fifty “cold calls” a day, times 250 or so work days that first year, produced about 37,500 hang-up clicks and spontaneous harangues, but scarcely a handful of “keepers”. No clientele, no trades. No trades, no income. Stick a fork in it. This baby was done for—a non-starter from the git-go.
A year earlier, a couple of years later, who knows…?
Look, if any individual had an infallible sense for timing it’d be a miracle. Some are better than others, but even the legendary Warren Buffet lost about ten billion dollars in 2008—20% of his wealth—and he’s a so-called value investor in it for the long haul, not a reckless day-trader.
There is no magic formula for protecting oneself against the infamous “slings and arrows of outrageous fortune”, but it sure doesn’t hurt to ask others what they think from time to time, and to listen to what they say. They may know, or sense, something about the course of events within and beyond the organization that can forestall a heedless and headlong plunge into the unknown where slings and arrows are pretty common features of the environment.
I had long since learned firsthand the downside of being an overly confident know-it-all when I watched Tim reap the rewards of his own predisposition for omniscience…
Icarus Flies Again…With the Same Result
Bad timing is bad enough. Coupled with overreaching, it can be lethal.
The Greek myth of Icarus pretty well illustrates the lesson humanity has learned about overreaching. Icarus was the son of Daedalus, imprisoned together with his father in the Labyrinth from which escape seemed impossible. But Daedalus scrounged up some feathers and wax from which he fashioned wings for them, and they were able to fly up and out over the Labyrinth and flee.
In his pre-flight instructions, Daedalus admonished his beloved son Icarus not to fly too high, lest the heat of the sun melt the wax and Icarus’ wings disintegrate. No doubt nodding in agreement at the time, once aloft young Icarus was quickly overcome with the thrill of flying and forgot—or ignored—his father’s warning. Higher and higher he soared until the fateful moment when his father proved sadly prescient—the wax softened, then turn liquid. The feathered wings flew apart, Icarus crashed into the sea, and he drowned.
‘Twas the seminal case of what former Federal Reserve Chairman Alan Greenspan once laconically described as “irrational exuberance” when characterizing an overheated stock market where share prices had flown too high too fast.
I saw one of those up close.
Tim was a Naval Academy graduate who did a stint at Morgan Stanley as a hotshot young investment banker in the go-go years of the ‘90s. By the mid-90s it was clear that the internet was a once-in-a-lifetime cornucopia of opportunity, and Tim had backed plenty of “e” businesses that made instant millionaires of their founders. The formula was pretty simple: come up with an “e” concept (anything.com), write a business plan, establish some rudimentary organization, maybe even find your first customer (optional), and then “go public” with an initial public offering (IPO) that eager and unthinking investors would snap up at ludicrous prices.
Tim was doing pretty well for himself at Morgan Stanley, taking home a million dollars or more in salary and bonuses every year, but after watching one too many of his investment banking clients walk away from an IPO with tens of millions—even hundreds of millions—that assured a lifetime of wealthy ease, he decided he wanted a piece of that action himself. So Tim accepted the role of CEO of a newly funded internet-based company. The concept was complex but sound, the target market seemingly ripe, and timing looked good.
I encountered him and his company about 1999, at the absolute height of the irrational exuberance surrounding dot-com companies. And Tim’s company was fully infected with the dot-com management mania of the moment—a frantic hiring frenzy to secure sufficient technical talent. With the hordes of new dot-com companies abjectly dependent on a relatively small pool of geeks who actually understood how the internet works and how to create programs and systems to manipulate it, the competition for talent was ferocious. Tim was hiring forty fresh techies every month. Some four hundred fifty new faces would crowd into the offices over the course of that year. That’s four hundred fifty into a company that had fewer than one hundred employees at the time. What was he going to do with all of them?
He wasn’t quite sure, but he was very sure that when he got it figured out, he’d be darned glad they were on his payroll and not somebody else’s. For the moment, just park them in the bullpen. Tim was not going to get caught short on the one resource that was essential to success. One of his senior executives worried aloud about the rate at which they were spending money and warehousing technical talent for whom they had no immediate work.
“You let me worry about that,” Tim replied. “Just keep spending money. You can’t possibly spend it as fast as I can raise it.”
And he was right. Tim hauled in a hundred million here, a hundred million there. His fledgling company was all but drowning in the cash that irrationally exuberant investors dumped into the hands of the irrationally exuberant leaders of this enterprise that had yet to make its first sale to a real customer. In truth, his team really couldn’t spend it as fast as he could raise it.
The bigger problem was one of morale. Not the morale of the executive team that was already in place. The value—on paper—of their stock options was soaring with each new sack full of capital Tim dragged through the door, so they were living large, at least in their fantasy life. But the qualified talent being hired in droves from colleges and competitors had sort of hoped there’d be some interesting work for them to do once they arrived. Alas, the organization’s infrastructure and management system were insufficiently developed to slot them into stimulating and productive tasks on projects that would build the company and their resumes. Some collected paychecks for months of doing nothing, literally nothing, but sit at their work station and fiddle around with personal matters, play video games, and aimlessly surf the internet to see what new wrinkles were emerging from other dot-com entrepreneurs.
Fun for a little while, but that gets old fast. They hung out aimlessly next to each other’s cubicles, like homeless vagrants on a street corner. They took to exchanging snide e-mails with each other, ridiculing their management. Conspiratorial conversations by the water cooler suddenly broke off when one of the executives rounded the corner. Some began taking on programming jobs on the QT, using Tim’s company’s computers to do moonlightiing work in broad daylight for personal clients, even for competitors. But mostly they just stewed. Soon this ever-growing bullpen of grumbling malcontents was giving off an ominous odor. Something clearly wasn’t working.
Just a few weeks later, Tim’s festering problem went away. Literally. The bubble of dot-com mania burst with a very loud bang in early 2000. Within a matter of weeks, the house of dot-com cards blew away, investors fled to higher ground, the easy money vanished, and the bullpen of techies was flushed out into the streets where they joined a gushing refugee tide of fellow geeks suddenly in grim oversupply. Tim’s company—once valued on paper at more than half a billion dollars—simply disappeared. The span of time from the last exuberant month of hiring forty new workers to the departure of the last employee of the entire company and the closing of the office was less than six months. The management team dispersed to find work elsewhere, and the IP (intellectual property) the company had developed was sold off for a few dollars to another company.
The company which bought Tim’s IP, by the way, had somehow managed to resist the nearly irresistable urge to load up with easy money and overexpand in the go-go years. Playing it close to the vest but maneuvering shrewdly to establish alliances with some key customers who eventually helped design and underwrite their development of pre-sold new products, they are currently enjoying a market capitalization of about fifteen billion dollars.
Last thing I heard, Tim was teaching at the Naval Academy.
Remember Ken, the guy in the previous story who had the misfortune to join E. F. Hutton on Black Monday? Remember in this last story when Tim told one of his senior executives who expressed concern about reckless growth, “Just keep spending money. You can’t possibly spend it as fast as I can raise it”? That senior executive was named Ken. Yep, same guy.
When in graduate school I worked on the estate of a hugely wealthy woman who, along with her husband, exhibited pretty good timing. In April of 1929, they wrote to all their friends predicting the crash of the stock market, saying that they had moved all their investments out of the equities market. Furthermore, they said, when the crash happens don’t come looking to us for help. This letter is our help. If you don’t take it now, don’t ask for it later. In September of 1929, they reckoned that the crash was imminent and booked themselves on a year-long, ‘round-the-world cruise.
On the other hand, they got their fortune in the first place by dumb luck. They bought thousands of barren acres on which they hoped to find oil, but never did. However, a local industry sprang to life and so they became real estate developers to cater to the new prosperity. It was the film industry, and they named one of their developments “Beverly Hills” and another “Bel Air”. Their commercial development was referred to as “The Miracle Mile” of Wilshire Boulevard (which acreage they were shrewd enough to retain through land leases, not outright sales).
You’ve got four possibilities: good timing and good luck; bad timing and good luck; good timing and bad luck; bad timing and bad luck.
Lots of luck…
Icarus and Luck of the Draw Converge
Bad timing? Overreaching? The abrupt demise of the once-great consulting firm of Arthur D. Little, Inc., was an unholy combination of the two.
Arthur Dehon Little was a brilliant MIT scientist who discovered acetate and then went on to create the world’s first management consulting company, in 1886. He gambled that many corporations might benefit from hiring a specialty shop periodically to do contract research and create new products, rather than maintain their own fulltime staff of specialists. He set up a lab for rent, and the concept was an instant success. Over the years the firm made significant contributions to a wide range of products and services, ranging from synthetic penicillin to Slim-Fast, from word processing to NASDAQ, from fuel cells to consumer electronics.
But for all the technical brilliance of many of its staff, ADL was a somnolent business enterprise. Practically devoid of commercial ambitions, it was led over the generations by senior management teams who sought nothing more than a comfortably reliable stream of interesting new projects from respected clients. Striving for aggressive financial goals and advantageous competitive positioning was simply not part of ADL’s DNA.
Until the guys from GE came to town.
By then, in the late 1990s, ADL had become a 3,500-employee company with some 50 offices and research labs in more than 30 countries, generating half a billion dollars in annual revenue. Sounds successful, but that’s only if you looked at it in isolation. For almost one hundred years, it had been the premier consulting organization in the world, and post-WWII upstarts like McKinsey, Boston Consulting Group, Booz-Allen, Bain, and other eager beavers strove relentlessly to equal its premier stature and clientele. But ADL remained Numero Uno forever.
Well, not forever, as it turned out. While the gentlemen managing Numero Uno ambled amiably along, contentedly doing one interesting job after another, their competitors were turbo-charging the world of management consulting in the later decades of the 20th century. From its throne atop the industry as late as the 1960s, ADL watched others creep up toward them in staff, revenues, clients, offices, prestige, and power. This did not cause them detectable concern. Nor did they see any reason to change their way of being when the others were at eye level with them. They may have occasionally noticed over subsequent years that they were no longer atop the list of management consulting firms, no longer Numero Uno, then that they had slipped out of the top five, then no longer among the top ten, next to be missing from the list of the top 25… Wait! Wait just a minute here! Is that possible? There must be some mistake. Are you sure? ADL not even one of the top 25 consulting companies?
What the hell’s going on here, anyhow?
You might have thought that ADL’s board of directors would have asked that question many decades ago, but they were largely drawn from the self-satisfied and self-referential ranks of the company, and the few outside directors seemingly drank the same stupor-inducing elixir that made competitive stature and organizational dynamism feel irrelevant if not downright impolite.
But some blinding flash of the obvious startled the boardroom awake one day in the late ‘90s. All these other consulting companies are growing like crazy and making money hand over fist. Might it be possible to actually improve the performance of Arthur D. Little, Inc.? Say, now there’s an idea!
Unsettled by this disturbing possibility, they found it within them to ask the executive leadership of ADL to step aside—the same leaders who had appointed them to the board. They finally realized they needed to look beyond ADL to find management talent that could bring fresh insight, energy, and aspiration to the organization.
They found just the guy, or guys. The new CEO, a seasoned former GE executive now heading a group of turnaround specialists, secured carte blanche from the newly shaken board to bring in his own senior management team, comprised of men who were also tough-minded former GE executives. The team had been working in recent years to rejuvenate laggard enterprises, and they seemed just the right tonic for slumbering ADL.
The team proved to be a little bit disrespectful of some cherished ADL traditions, of course, and made a point of skewering them conspicuously, to make it abundantly clear that the good old days were gone forever. No element of corporate practice or culture escaped their this-is-a-new-day shake-up. Big things fell with a clunk. No more flying first class. Little things fell with a clink. The free bagels and fixin’s historically set out every Friday in the hallways of ADL’s offices were pointedly banished “until such time as ADL’s profitability improves to the point where such luxuries are warranted.”
Once they had gotten everyone’s attention by trashing the precious perks that seemed to matter most to longtime ADLers, they set about the real work of restructuring the company. For starters, they realized that ADL’s enduring superiority and core competence was in the scientific and technological research clients that contracted them to do—the very work that Arthur D. Little himself had launched over a hundred years before. And it was not, by way of contrast, in the myriad “management consulting” practices that had gradually taken root over the years as various of the staff pursued new interests at their own will. The ADL labs and technology professionals were uniformly world class; the management consultants were not.
And so the new team began whacking anything that didn’t look like a science-based service. Their goal: prune ADL back to bedrock, where the competitive superiority was still palpable, and abandon the mile-wide-but-inch-deep distractions. Then, find ways to optimize the financial value of those core businesses.
How? Buried within ADL were some gems that, if standing on their own feet, might themselves be valued at prices far higher than the the current valuation of the entire company. So they planned to take various pieces of the business and spin them out into separate organizations. The fuel cell technology ADL had developed was an obvious candidate. Another: the computer services business.
Bear in mind that this was 1999, the height of the dot-com, internet-transformation mania. Computer-savvy talent was sine qua non for seizing the internet-based opportunities that abounded everywhere. ADL’s competitors were sprouting computer services consulting firms with growth rates of 100% per year or more—and their market capitalization was priced at something like $10 per dollar of annual revenue, versus ADL’s company-wide valuation of less than $1 per dollar of annual revenue. Seemingly, ADL’s own $150 million-per-year computer services group, laden with first-class talent, could itself bring in a billion dollars or more in an IPO, more than double the entire current valuation of ADL.
I thought it was a superb strategy. As the leader of one of those management consulting practices that was whacked, I had no qualms about being tossed out into the street. Not only was it the right thing to do (both for ADL and for me), but it was going to be financially advantageous to me. As a shareholder in ADL stock, I was delighted that someone was going to breathe some life into the moribund valuation of the shares I had been required to purchase as a partner in the firm and the additional shares I had accumulated through bonus and retirement allocations. Their stagnant value over the years perfectly reflected the firm’s own lassitude.
To put my money where my mouth was, I elected to delay the redemption of my ADL stock. As a separated partner, I had been given the option to “put” all my ADL stock back to the company at the time of my departure, cashing in everything at current share prices, or, alternatively, to sell 20% of my shares back to ADL each year for the next five years. I chose to lock in the latter option, fully confident that the later years’ share prices would be far, far in excess of the then-current valuation.
Very, very wrong.
That was when overreaching and lousy timing converged in a perfect storm, a perfectly lethal storm. Converting the undervalued elements of ADL into separate business ventures whose value could be optimized through IPO stock offerings would be expensive. Somebody had to pay for all the legal and financial and organizational arrangements, all the extrication of the units’ entanglements with the parent company, all the fees to the investment bankers who would make a market in the new stocks. It would take millions, tens of millions actually, for each such unit to be spun out of ADL.
The company didn’t have anything like that kind of money lying around, so the new management went out to borrow it from private lenders. They arranged to get their hands on more than a hundred million dollars, at hefty rates of interest and laden with excruciating penalties for delaying or missing any payments on that debt. But, hey, it was 1999, and anything with dot-com in the name was reaping tidal waves of money in IPOs, even businesses with no customers, no revenues, and nothing behind them, and here we had a real, honest-to-God computer services business with $150 million in revenue. The market had already established the value of these businesses at ten times revenue. How could we miss? How could we possibly miss?
The bubble burst before they got to market with the IPO. Investors disappeared. Anybody out there? Hello? Hellllllooooo? Yoo-hoo? Got an IPO here. Let you have a share for twenty-five bucks. No? How about twenty? I can’t hear you. Hello? Fifteen bucks. Gimme fifteen and we’ll call it a deal. Well, then, what about ten?
Psst. We’ve got more invested in it than ten. Can’t sell it for that.
Well, as it turned out, couldn’t sell it for anything.
Ahem. ADL? The repayment of the loan? I see you’re currenly delinquent on an installment. We had included certain, shall we say, provisions for such eventualities. Are you ready to make the payment? Oh, you’re not. Okay. Well, then, I think you’ll see here in paragraph 7.b.(2) that at this point I take your company, and senior management and your board take a hike.
The working assets of a consulting company depart the premises via the parking lot and the subway and train stations every day. The working assets of ADL, seeing the writing on the wall, decided its future was very bleak indeed and sought employment elsewhere. So they took their own hikes, leaving a shell of a company behind.
In the bankruptcy sale, the flotsam and jetsam of once-great Arthur D. Little fetched $97 million—about 20% of its assessed value only a couple of years before. But of course the whole $97 million went straight to the lenders whose money had been spent on the failed spinoff/IPO strategy, and so the shareholders of ADL came up empty.
Those of us who had other investments or still had productive years of work ahead of us in which to recoup our losses adjusted okay, but many ADL retirees and/or their surviving spouses got Enron-ed. By longstanding company policy, their retirement money had been almost totally held in ADL shares which for generations had reliably pumped out generous dividends on which they could live comfortably. Now those shares were suddenly worthless, and their retirement income vanished. Gone. Gone. Gone. Never to return. I guess nobody ever thought about the risk that was being taken on their behalf.
My beloved mentor Leland Hazard (a man sophisticated enough to eschew perfect grammar in favor of making his point) once said to me as I was on the verge of biting off more than I could chew, “My boy, when you want something real bad, that’s just the way you get it.”
You may have heard the ancient proverb of the Kikuyu people, a tribal group in Kenya, Africa: “When elephants fight, it is the grass that suffers.”
I know what it feels like to be the grass, having brought together a couple of colossal organizations to frolic together—and then watched with dismay as a third colossus decided to join the fun and games, which turned the field into a battleground.
This was not fun.
And if it weren’t for colossally bad timing, the outcome would have been very different.
Snookered at the Sistine
What could possibly ever top this, I wondered.
The scene: The Metropolitan Museum of Art in New York City. Christmas time. Snowy evening. The museum is closed to the public. In the large gallery where the Museum’s justly famous Christmas tree stands laden with intricate figurines, only the lights on the tree and candlelight hold back the quiet dark pressing in from the far reaches of the great hall. The candlelight is especially magical. Stout candles on ornate candelabra above, ranks of slender candles on freestanding candelabra, dainty candles in sterling holders at every dinner setting on the dozen or so round tables, glinting off the glittering crystal and fine silver, gently illuminating the china and playing on the glorious floral arrangements.
Here we are. In our finery. Surrounded by sixty or seventy other formally attired friends of our hostess who is staging this elegant dinner to usher in the museum’s exhibition of The Treasures of King Tut’s Tomb. Our hostess is a benefactor of the museum and has underwritten this exhibition which, in retrospect, seems to have inaugurated the era of “blockbuster” attractions in U.S. museums. The exhibition opens to the public tomorrow.
Tonight, it is all ours.
We are all very happy to be there. The setting is ethereal. The company is superb. The food and wine approach perfection. And the post-dinner entertainment is unparalleled: we have the entire exhibit of the treasures of King Tut’s tomb to ourselves. A few score of us, free to wander among the golden treasures at our leisure, lingering for as long as we wished.
There were no guards in evidence.
Driving back to Princeton later than night, I found myself returning to the question: What could possibly ever top this?
The question was one of curiosity, not competitive spirit. I was pushing my imagination. After all, the fabulous find in King Tut’s tomb had become for millions the quintessential fantasy—gold, purest gold, deep yellow gold, gold so fine it looked like you could mold it with your fingers like a cube of butter, all worked into bracelets and crowns and bowls and chains and settings for breathtaking jewels, hidden away and only dreamed of for centuries. When it was unearthed, no one was immune to the compelling discovery. And the near-frenzy to view the exhibit would later confirm the magnetic appeal of the young King and the treasures which were laid to rest along side him.
Could there possibly be, somewhere in the world, another cache of artifacts with that kind of power?
Somewhere along the New Jersey Turnpike about midnight, my mind landed on the Vatican. After two thousand years of ruling the Roman Catholic world, the powers-that-be in the Vatican must have accumulated some pretty interesting artifacts—artifacts that could hold compelling interest for millions of people. We all know about the more visible treasures, like Michelangelo’s ceiling of the Sistine Chapel—but what about other things? Do they have pieces of the cross on which Jesus was crucified? The chalice he used at The Last Supper? The platter on which the head of John the Baptist was presented? The earliest manuscripts of the New Testament? Anything known to have been touched by Jesus? Great jewels or works of art? What’s hidden away in the chambers of that place that might excite the imagination and passion of the faithful, even while appealing to the historical and cultural interests of non-believers?
By the time I got home, the whole plan had bloomed in my head and I sat down and wrote it up before dawn. The Treasures of the Vatican. I could see it all. We wouldn’t settle just for some items to put on display. No, I had a couple of other ideas as well. I wanted everyone to be able to experience the mystery and wonder of these treasures. So, we would time the official opening of the exhibit for Christmas and produce a TV special to air on opening day. The special would bring the treasures and the experience to millions who would never be able to make it to one of the dozen or so museums around the world where it would be on display.
And for those who could make it in person to the museum but not to the Vatican itself, I wanted them to experience the one thing which in public imagination ultimately symbolizes the Vatican—the ceiling of the Sistine Chapel.
How could this be possible?
Just about this time, Polaroid had announced the development of a mural-making camera. This massive machine was capable of scrolling across a surface to capture a swath of picture some eight feet wide. My idea was extravagant but simple: make photo murals of the entire Sistine Chapel ceiling and mount them on the underside of a prefabricated barrel vault ceiling which could be assembled and suspended in the grand hall or an entry way of each participating museum. That way, visitors could crane their necks just like tourists in the Vatican, to be enveloped by a full-sized replica of the Sistine Chapel ceiling on which Michelangelo’s masterpiece had been captured with photographic fidelity.
I knew it would take a coalition of interests to make this happen. I needed a high-level introduction to the Vatican, of course. But even after that, I needed to have the other ducks in a row before I actually approached the Vatican with the plan. Somebody to be the lead museum to organize it. Somebody to sponsor the exhibit. A television producer to handle the Christmas special.
A call to a friend got me an introduction to Joseph Cardinal Baum, then Archbishop of Washington D.C. Yes, he said, he’d be pleased to introduce me and the project to the proper authorities at the Vatican.
What about a lead museum to curate the exhibit, I wondered. The Metropolitan in New York was an obvious choice, and getting access there was no problem. But a bit of digging turned up a controlling factor: there is a covenant among nations that when the contents of a country’s national museum are to be exhibited abroad, only the corresponding national museum of the host country may be the lead organizer. Since the Vatican state is a sovereign nation, only the National Gallery of Art in Washington qualified as the organizer and host for this exhibit.
(It turns out there is an understandable corollary to this arrangement: insurance coverage for travelling masterpieces, which may be valued collectively in the billions, is simply unaffordable for individual museums. Therefore, the governments of the host countries guarantee the safekeeping of these treasures and stand good for payment of any claims for damage or loss.)
So I called the then-director of the National Gallery, J. Carter Brown, and explained my plan. He enthusiastically agreed to serve as the host organizer in the U.S.
Another couple of calls lined up a TV producer with outstanding credentials for this kind of program and—an unexpected bonus—his own independent connections to the Vatican, through a former European colleague now advising the Vatican on various public affairs.
All we lacked was a sponsor. I wanted someone who would sponsor not only the museum exhibit but also the Christmas TV special. This meant looking beyond philanthropists to major corporations. But who would dare associate themselves with something so blatantly religious?
I spoke with a friend who was CEO of a Fortune 25 company. The conversation put him in a quandary. He instantly recognized the potential impact of the event. But, he said, we’re really on thin ice here. A very, very high percentage of the senior executives of our company are Roman Catholic like me. It’s mostly a coincidence, but you couldn’t ever explain that to the satisfaction of a muckraker or a dissident shareholder if they decided to challenge our putting up millions to sponsor this deal. I’m afraid I’ve got to pass. Have you thought about talking with Charlie?
I hadn’t. For good reason. Charlie was at the moment presiding over AT&T—then still the monolith which was later to be chopped up into the Baby Bells. He had his hands full, because one Judge Harold Greene was in the process of deciding whether AT&T was an unwarranted monopoly that should be dismantled or a useful utility whose outstanding service was integrally tied to, and fully justified, its monopolistic position.
But I called him anyhow, and he was intrigued by the idea and suggested that I talk to his colleague Ed who handles AT&T’s advertising, public relations, and corporate contributions. I knew Ed from previous dealings and looked forward to his response to the idea.
It was even better than I might have imagined. The writing was on the wall, and one day their monopoly over U.S. telephone service would be gone. So, Ed said, AT&T was quietly laying plans to move beyond U.S. borders and become an international competitor in communications services. Yet, as a U.S. born and bred company with no previous international experience, they had almost no working relationships with senior members of government or the business world in foreign nations.
Ed instantly recognized that AT&T could use this exhibit to open doors for them in countries where they wanted to do business—especially countries with strong Roman Catholic majorities. Rather than simply make a frontal assault as a business looking for deals to do, AT&T would introduce themselves via the exhibit as people of refinement and vision. He envisioned gala private parties like the King Tut affair where AT&T executives could meet and entertain the elites from government and commerce. One thing would lead to another, and soon enough they would have the relationships and networks AT&T would need to get down to business and expand globally.
Are you concerned with how your customers in the U.S. will respond to an apparent tie between AT&T and the Vatican? Not at all. We think these things you’re going after are treasures of the human family, not just a denomination, and we trust that others will see it that way too. Besides, there’s no proselytising going on here. It’s just an exhibit and a TV special, not a worship service or an altar call.
We quickly established the framework for the project and settled on a budget. Days later, the AT&T board approved it, the requisite calls were made, and we hopped a plane for Rome.
I never met Willie Sutton. But I have seen pictures of him. Slim and trim, like a jockey. Natty. Oh, really natty. But not flashy. Subtle. He came across as remarkably refined considering his humble beginnings and his then-current profession as America’s best bank robber. Finely tailored double-breasted suits, shirts without a hint of wrinkle, silk cravat knotted just right, shoes of buttery-soft black leather. Elegance personified. The perfect costume to cloak a heart of guile.
I did meet Walter. Walter was the head of the Vatican museums and collections. Unlike most high-ranking officials at the Vatican, Walter was not a priest. If he had been, he would have been the best-dressed priest in Christendom, but he was spared that challenge.
Walter was our man to deal with. Everything we wanted fell under his jurisdiction. He had the keys and he had the authority. And he had our attention. After welcoming us ever so graciously, he led us on a private tour of the Vatican’s art galleries and museums, to take inventory and make selections for our exhibit. Everything was closed to the public that day, and so we could move at our own pace. The pace turned out to be glacial. Pointing out works of art which he particularly favored, Walter gave us a docent-like mini-lecture on both the intrinsic qualities of the piece and the historical context in which it arrived at the Vatican. Generous to a fault with his time, he took us meandering through the galleries for hours.
I was bored stiff. To begin with, the Vatican’s collection of art is nothing anybody would go out of their way to see. There are a few nice pieces here and there, but for the most part it’s pretty forgettable stuff by pretty ordinary artists. On top of that, I didn’t envision The Treasures of the Vatican as an exhibit of their art. I wanted their artifacts. I wanted that stuff hidden away down in the basement, glowing in the dark—the stuff that could generate mystique and piety and wonder. The only art I wanted was in the next room, painted on the ceiling of the Sistine Chapel.
Well, of course we’d have to have at least some pieces of framed art, and my producer and our art expert were carrying on a running dialogue with Walter about which pieces we might want. They all seemed to be getting on famously. By the end of the tour, they had agreed on everything that seemed to need agreeing on. And I was almost out of my mind with desire to get into the Chapel, to experience its enchantment and to see if my grand scheme to photo-poster the entire ceiling could possibly work.
Finally, finally, finally we made our way through several back corridors, then into the Pope’s small private chapel just off the rear of the Sistine with its own entryway into it. With polite deliberation Walter opened the door from the Pope’s chapel and ushered us through into the main chamber.
I was confused by what I saw.
We had emerged into a tangle of scaffolding. All I could see was pipes and planks and blue tarpaulins surrounding and hanging over us.
I do beg your pardon for the mess, Walter apologized in his precise, measured English. We have had the chapel closed for some time now while we are restoring the Michelangelo ceiling. Please be so good as to follow me through this contraption and we shall get into the open.
As we emerged from behind the industrial fretwork against the rear wall, the true Sistine Chapel opened gracefully before us. Candlelight muted the color tones but their flickering glow made the fabled ceiling come alive, God and the angelic host seeming to hover over us, to move down over us, to embrace us with majesty and tenderness. Gently rounded, perfectly scaled, softly colored, richly peopled, the ceiling was heaven, and it descended on us. It fulfilled the farthest reaches of my fantasies and my hopes for it.
Now I knew the grand scheme wasn’t impossible. I could see how the Polaroid scrolling could work up the walls, across the broad expanses of the ceiling, under the arches. The paintings on the luminarios—small gable-like window openings—would be tricky, but we’d figure out something.
We were babbling excitedly among ourselves when Walter called us to attention. If you please, come with me. And so we did, following him to the front of the chapel where, picking up on Walter’s unspoken cue, we turned to face the rear some fifty or sixty feet distant. From there we could see that the back wall of the chapel through which we had entered was clad entirely, from the ceiling to the floor, in scaffolding from which great large tarpaulins were hung, like the curtains across a vast theatre stage. They totally obscured the wall.
We looked without comprehension while Walter set the stage. Keeping his steady gaze on the vast curtain masking the back wall, he spoke earnestly. “This greatest of works by the greatest of artists has suffered terribly over the centuries”, he said. “As you can imagine, so many candles. So many years. So much smoke. So much smudge. No one noticed, it was so gradual. But over the years, the genius of Michelangelo became veiled, became dimmed.”
I looked away from the tarpaulin-clad wall to gaze up and all around at the soft colors overhead, looking the only way I had ever imagined them to be. They seemed perfect. Granted, there was a certain sepia tone to it, almost as through it were being seen through a film of root beer. But that’s just how I had always seen it to be in pictures. Isn’t that how it is supposed to look? What was he talking about?
Walter continued. “His Holiness realized that this magnificent work must be cared for with utmost dedication, and so he commissioned a restoration of the painting to carefully remove the accumulated layers of discoloration. I hope you will be pleased with the result.”
Walter made a slight gesture with his right hand at his side, a small wave from the hip. With unseemly suddenness, the massive tarpaulin peeled away all across the top layer of the scaffolding, came tumbling down, yanking away the entire screening as it crumpled and fell heavily to the floor. As it peeled away, glare from intense lights blazed from all over the scaffolding, stunning our eyes, constricting our vision.
When our eyes adjusted, we were shocked all over again. The parts of Michelangelo’s painting on the ceiling and wall that had been hidden now leaped out at us in a Caribbean cacophony of colors—turquoise, orange, purple, red, yellow. What was this, anyhow? What’s going on? What had they done? Who is responsible for this atrocity? These neon figures belonged on the Las Vegas strip, not in the Sistine Chapel.
Turns out Michelangelo was responsible for the atrocity, and it turned out that we loved it. Walter led us back to the rear of the chapel and invited us to scale the scaffold, all the way to the ceiling, to observe the painting and the restoration work up close. In disbelief, we climbed up and up until we emerged on the top level of the scaffold where we were greeted by the chief of restoration. Our disbelief melted almost immediately. We were eye to eye with the figures Michelangelo painted. We could gingerly touch them with our fingers. For the next few enchanted minutes, the chief of restoration showed us the minute details of how Michelangelo had designed and executed his masterpiece.
“See here,” he would say, “See where the arm used to be extended out this way, but he changed his mind and repositioned it lower. See the lines of the original, and then the revision? He had to create more room to let the figure in the background be more visible. And see how rich and vibrant the colors he used—look what happens here when we remove four hundred years of smoke smudge.”
We watched intently as he picked out a section of the mural and ever so gently wiped away the soft veil of grime, letting the sharp, unsettling brilliance of Michelangelo’s palette emerge. My snap judgment about Las Vegas was long gone, and I marvelled at what we’ve been missing for the last few centuries. I was more excited than ever to bring this masterpiece to millions.
Back down on the floor of the chapel, I confirmed with my colleagues that they had completed the financial negotiations with Walter and that we had a list of the art to be included in the exhibit. The more important work that remained was to get into the basement vaults of the Vatican to find the objects of veneration which were sure to reside there, objects that would be of considerably greater interest than art to the hordes of the curious and the faithful who would come to the exhibit.
And, of course, we had yet to make arrangements to create the Polaroid mural of the Sistine ceiling. I walked over to Walter and asked how many more months it would be until the restoration was complete, so we could arrange time to get the Polaroid equipment in there to make the murals.
He gave me a look of slight befuddlement. “The ceiling? I do not understand,” he said apologetically.
The ceiling, yes, I said. You know, we want to create a replica of this ceiling to be part of the exhibit.
His slender face drew in on itself, achieving a slightly cowed look of great sorrow and ineffable pain. “Oh,” he said, “Oh my. I’m afraid… Oh my, oh, there has been some kind of…”
His body bent and sagged just ever so slightly, bearing the invisible weight of the world’s teeming poor. As their burden settled on his slight shoulders, he rolled forward just a bit into a posture suggesting dignified supplication. Paintings of Jesus staggering along under the crushing weight of a heavy cross are no more pathos-filled than the picture Walter presented.
“Oh, I’m afraid there has been some misunderstanding. We have agreed on the works of art, and I believe you also wish to consider objects of veneration which may be in the possession of the Holy See. But the Sistine Chapel, Michelangelo’s masterpiece…” His voice trailed off in contemplative silence. I waited.
“This is a separate matter entirely,” he resumed. “It cannot be included in the arrangement we have negotiated.”
I gave him a quizzical look, and he gave me an earnest sermon.
“You see,” he continued, “this masterpiece does not belong to the Holy See. This masterpiece is too great a treasure to be truly owned even by the church. This is not a painting. This is a miracle, and it belongs to all the people in the world, to the whole human community, to God’s creation. To be sure, it resides physically here at the Vatican, but we are only the stewards of this miracle.”
He checked for a reaction and then went on.
“The church,” he intoned, “bears a grave responsibility for the human community. There are so many who are in need—the poor, the homeless, the orphan. They put great strain on the resources of the church, and we are in constant pain at how little we are able to do in contrast with the magnitude of need. Maintaining the missions is so very, very costly.”
Okay. Now I understand. This is not a turn-down on the ceiling; it’s a negotiation. It’s not that I can’t have the ceiling. It’s just that it’s going to cost me—dearly.
Walter tented his fingers and continued. “You see, we would be irresponsible stewards of this miracle if we did not use it to lift the pain of the world’s poor. He dropped his head in penance, as if contemplating in shame the error of failing to wring some money out of the ceiling to feed the hungry.
When he looked up again, he fixed me with a quiet, steady look that said it all: I’ve got it. You want it. You have access to the bank account of the largest corporation in the world. Let’s make a deal.
I never saw Willie Sutton ask a bank teller for the money, but I’m guessing he could have learned something from Walter about being cool at the moment of truth.
On the plane back to the U.S., I mused about the stance that Walter and the other Vatican officials were able to adopt at every turn. The unspoken but unmistakable message was not obnoxious or arrogant, but just quietly self-assured: we’ve been around for a couple of thousand years now, and if you are unhappy with the terms we’re suggesting today, well, why don’t you drop back by in a couple of hundred years and we can discuss it again.
With the terms of the deal pretty well settled, we were prepared to get to work. But then some potholes appeared in the road back at home—potholes which were ultimately to swallow up the project completely.
As word of our deal spread throughout the arts community, some sharp rivalries reared up. The Metropolitan Museum in New York began to have some ideas of its own about the Vatican, and despite the international accord about national galleries only dealing with their counterparts, the Met moved with force to interpose itself into the situation. They invited us to a meeting. The message was short and sour: they wanted to wrest stewardship of The Treasures of the Vatican away from the National Gallery and be in charge of it themselves. This was big-league rivalry, pure and simple.
Within days, battle lines were drawn: on one side, the Metropolitan Museum of Art in New York, graced by a board of notable worthies; on the other side, AT&T, graced by a board of equally potent heavyweights. But The Met had one other important weapon. They recruited the Cardinal Archbishop of New York to intercede with the Vatican, and he had the capacity to do so with devastating effect. Since the archdiocese of New York is the single largest financial contributor to the coffers of the Vatican, its leader has massive clout. This had all the makings of an epic battle.
The battle never happened. Neither did our project. My clients at AT&T threw in the towel. We could win this fight if we fought it, they said. But even as we speak Judge Green is in his chambers deciding whether AT&T should be broken up or not. This would be the worst possible moment in history, they went on, to be demonstrating to the world how big and tough we are.
We folded our tent, and the Met took over the project, finding their own sponsors. Of course they did what a conventional-thinking art museum would do, bringing over the best of an indifferent collection of framed paintings. They completely missed the big idea. Without the power and mystery of the artifacts, there was no drama to the exhibit and no basis for a TV special. As for the ceiling of the Sistine Chapel, my guess is that it never occurred to them to bring it home alive. The exhibit they did put together toured to a couple of other U.S. museums and was then disbanded.
I never went to see it. I do still see my vision of how it might have been, though.
Of course it all comes down to the people. It always does. People as wise or pigheaded. People as team players or solo performers. People who lead or follow. People that inspire or disappoint. People in teams and organizations that exhibit their own collective idiosyncrasies we call culture. People cultures that in their own unique ways reward or punish, welcome or exclude, synergize or fracture, ennoble or debase.
Early in my working career I learned that some bodies of people can function like a single human body in one organic respect—they reject transplants of “foreign protein”…
Birds of a Feather
The men who work on the railroad weren’t going to be impressed by my college-kid intellect and ostentatious vocabulary. A different set of values dominated here. I could tell that the first day on the job. These guys were really a clan, a family, and it was immediately apparent that I hadn’t been born to the clan. They all wore blue bib overalls, ankle-high black boots, blue denim workshirts, and grey-striped mattress-ticking caps with a pleated crown, like a low-profile industrial version of a chef’s toque with a shallow brim. They all wore them. The only difference was in the relative newness of each man’s gear.
And they all carried the same black metal lunchbox, shaped like a loaf of bread with a handle on top. Thermos of coffee clipped into the lid, two bologna and cheese sandwiches and a wax paper bag of potato chips down below. Maybe pimento loaf instead of bologna for a change of pace. Sometimes a pyrex dish of pudding, too, or a couple of cookies.
I was a hotshot with his freshman year of college just behind him, and these were definitely not my kind of guys. But I was going to do my damndest to obscure that fact. Because I also knew they could make it a long, difficult summer for me if I gave them reason to.
So I made up my mind, first day, that I was going to adopt a strategy of protective coloration. I’d buy garb just like theirs. Whatever their prevailing interests and tone of conversation, I would do my best to ape them. I would eat their lunch, feign interested conversation about their favorite TV shows or bowling league or whatever. The more I thought about it, the more I warmed to the challenge. I would prove privately to myself that I could be and do anything I wanted.
But it took a couple of weeks before the truth emerged. The first week I was kept busy in training, learning the ropes of being a brakeman and switchman for the Southern Pacific Railway Company. “SP” had a major switching depot in Fresno where thousands of cars a day were jockeyed and coupled into mile-long trains that rattled and rumbled off through the flat expanses of the San Joaquin Valley. Some headed south to Los Angeles where they then bent east through the southern tier of states. Others rolled north to San Francisco, Salt Lake, Chicago, New York. The traffic swelled in size and urgency in the summer with the surge of crop-laden refrigerator cars headed East with their highly perishable cargoes of melons and peaches and grapes and lettuce.
We spent a little time learning the how to set switches and brakes, and a lot of time learning how not to get killed doing it.
The job is simple enough. The railyard was a vast sea of tracks running beside each other, sprawling for a mile or more in either direction. The heart of it was ribboned with perhaps forty or fifty parallel sets of tracks that pinched together, like the striations on a corn husk, at the far ends of the yard. What gradually braided them together at either end was a maze of switches, knitting rail to rail to rail to rail until eventually only a single set of silver beams made off across the flatlands for distant cities.
From his perch high in a tower, the yardmaster looked across a scene that spread away in all directions like a giant’s plaything, a grand table for shuffling toy cars around. Before him was a chart specifying the rules of the game for today, the moves to orchestrate as each train was made up for its journey. Pull that empty coal car off the end of track nine so you can pluck these six reefers from behind it. Stash the coaler out of the way over on sixteen. Get the reefers from nine, park them for a minute on ten; get those two flatcars from sixteen and put them on nine, then splice the first three reefers in behind the two flatcars we got from sixteen, since they get dropped in Kansas City, before the reefers for Chicago. Then go back for the other three reefers which are going only as far as Salt Lake.
Railcar by railcar, it is a simple job, but I have given a super-simplified version. Now, multiply that choreography about a hundredfold, and you get the idea of life in the switching yard. Many of the trains, once fully made up, stretched for a mile or more from locomotive to caboose—every single car plucked from some remote location usually buried behind thirty or forty irrelevant cars, to be patched into the chain at the just the right place.
All day long and all night long, back and forth, in and out, long-haul locomotives, yard-bound switch engines, boxcars of auto parts, flatcars creaking under the weight of massive hydroelectric turbine generators strapped to their backs, refrigerator cars packed with chilled produce, hopper cars laden with chemical fertilizers, tank cars top-heavy with crude oil—the endless shuffle went on, twenty-four hours a day. When night fell no one noticed, the huge yard kept in daylight by massive stadium-type floodlights so trainmen in their cabs and dispatchers in their high towers could read the identifying marks on the cars and keep those ponderous marathon dancers changing partners until dawn.
A simple job, but tedious, endless, and dangerous for those on the ground. Everyone carries a picture in their mind of the friendly engineer leaning out the window of the cab, waving as he cruises past the crossing or through the station. And the fireman in the cab with him, doing whatever firemen do now that they no longer stoke coal into firepits to make steam. But in the middle of it all, down there on the ground, the brakemen and switchmen clamber about doing their anonymous work.
A railyard is a maze of switches. Whenever a locomotive reached a closed switch, someone had to get down out of the cab and walk ahead to throw the switch to shift from one track to another. And someone had to stand beside the track at the tail end of the train, perhaps a half mile away from the locomotive, to signal to the engineer—arm-waving by day, lantern by night—how much farther to back up until the last linked car made contact with the next car to be tied on the tail end. Someone had to scramble aboard each car, sprint up the ladder to the top, and spin the iron wheel that would lock the brakes on a car to be parked or unlock them on a car to be moved.
Worst of all, somebody had to step between those monstrous railroad cars to make sure every set of the massive iron couplings was fully latched.
In a yard where dozens of trainmen are throwing thousands of signals to each other in the course of an eight-hour shift that couple and uncouple hundreds of cars, there is always a chance of a signal’s being misread—and an engineer’s setting the train in motion while a brakeman or switchman is pinned between two cars checking the coupling. When that happens, the movement of the train is surprisingly sudden and the time for escape horrifyingly brief.
Although railroad cars are enormous and heavy, and the laws of inertia would suggest that such ponderous resting objects want to remain at rest a long time, there is a contrary dynamic that makes the movement of rail cars sudden and dramatic, all the more so in direct proportion to their distance from the locomotive.
This phenomenon is the accumulated-slack factor. Each coupling between railroad cars has about four to six inches of play in it, a cushion of flexibility required by these pairs of massive steel jaws that need room to grope for and grab each other with only approximate precision as they rock and sway on the tracks. But once contact is made, they must also clench closed like a pair of monstrous fists with enough clunky tenacity to bear the weight of every car between them and the caboose.
The accumulated slack sets up a predictable but dangerous dynamic. When a locomotive pulling a train comes to a firm halt, all the cars behind it come to rest hard against the coupling of the car in front of them. This collapses all the slack out of all the couplings, cumulatively reducing dozens of feet of slack to zero. So, when the locomotive starts up again, it re-opens the slack in each coupling, one car at a time starting with the first car behind the locomotive, before that coupling catches hold at the opposite end of its slack span and begins to move the car behind it. That car jerks forward as the clenched coupling linking it to the locomotive reaches its limit of flex. Now that second car yanks open its own rear coupling to the limit, when it then wallops the car behind it with a forward tug.
Multiply six inches of slack by, say, sixty cars, and this means that the locomotive will have moved thirty feet or so and gained a head of steam before the whiplash effect hits the sixtieth car. No matter what the laws of inertia say about resting objects wanting to remain at rest—even big, heavy boxcars—when that sixtieth car gets belted with the combined forward-moving inertia of a locomotive and fifty-nine other cars, it will leap ahead like a hot rod coming off the line at a drag strip.
This is not a good time to be standing between cars number fifty-nine and sixty.
Or to be standing on top of either of them.
There are other perils to working on the ground at a railyard. Anybody who has ever walked along a railroad track knows the footing is lousy. The stones of the roadbed are large and sharp, constantly offering a twisted ankle or off-balance stumble to the careless. The ties seemingly offer more congenial footing—but they turn out to be spaced too closely or too widely for a comfortable stride. Worse, they are necessarily laid directly in the path of trains.
And so we spent a lot of time on safety measures, like how to keep that rocky footing from pitching you under the wheels of a train during maneuvers. When you jump off a moving train, you cling to the outside of the car facing the train, splayed out like a spider, then swing your forward foot up behind your other calf in a mid-air curtsy, push out with a half-spin away in the direction the train is moving, and land on that foot first. The natural action of your body atop that foot strike will launch you away from the train, rather than under it.
Other tricks of the trade followed—how to jump aboard a moving train, how to spot overheated wheel bearings called “hot boxes”, how to ignore your ears.
Ignoring you ears is particularly important.
You’d think that your ears would be a critically important safety factor in a railyard where you are surrounded by constantly moving equipment. But that’s just the problem—the constant movement. If you listen for the sound of a train approaching, hear it, confirm its location, and then step across a track it is not on—wham! That’s just when you get hit by the train whose own sound was masked by the train you saw, the one you thought accounted for all the noise. The noise is so constant your ears became irrelevant at best, lethal betrayers at worst. It’s like the old axiom about people who live next to the railroad tracks coming not to notice the noise of the trains after a while. What serves as a merciful tuning-out for those nearby residents becomes an occupational hazard for a trainman. Eyes. Everything depends on fast eyes, always scanning, always doubting, always scheming escape routes.
I learned my lessons well. I did not get killed. I did not come close to injury. I even put my new survival skills into practice, never dreaming this practice would lead to my downfall as a railroader.
The usual pattern in the switchyard was for the engineer to bring the train to a full stop about twenty yards short of a switch that needed to be thrown. The brakeman or switchman would clamber down from the cab, walk forward, throw the switch, and then hop back aboard the cab as it inched past over the open switch.
Not this eager beaver. I knew how to jump from a moving train, didn’t I? And how much sense did it make, after all, to bring that whole monstrous business—locomotive, tender, boxcars and all—to a complete stop just to open a switch? Surely I could add a little efficiency to the process.
So I took to leaping from the train about a hundred yards short of the switch while it was still rolling along at a speed faster than a walk but slower than my fastest clip over rocky terrain. I would hit the ground running, sprint clumsily ahead to the switch, throw it, stand proudly beside it as the train kept rolling through, and then leap aboard as the cab passed. What a good team player I was indeed! And how I was improving the efficiency of our whole crew!
But neither the engineer nor the fireman in the cab congratulated me on my innovative contribution to the team effort. The first few days, there was no comment at all. Then, a question surfaced about the unnecessary danger to me of jumping from a moving train. No problem, I countered. I always follow the approved safety training pattern for jumping. I felt good that they cared about me. My campaign to become one of them must surely be working.
Later, the engineer voiced concern about my twisting my ankle running along the rocky roadbed. That’d put me out of action for the rest of the summer, he cautioned, and I sure didn’t want to miss out on a summer’s wages, did I, what with college expenses to cover in the fall and all that.
Gee. They really did care.
After a month or so on the job, I was reassigned to a different crew. On my first leap-and-switch of the day, I was standing next to the thrown switch waiting for the train to roll through so I could swing back aboard the cab. But instead of rolling on through, this new engineer slowed the locomotive inexplicably and it shuddered to a stop right beside me. All the cars behind it came clattering to a rest one against another. Puzzled, I climbed the steps up into the cab.
The engineer lifted himself with menacing deliberateness off his black leatherette stool at the window of the cab and fixed me with a fierce look that spoke hatred. I know that’s a strong word, hatred, but that’s what I saw in his eyes. He advanced on me across the narrow cab and I backed into a corner. I shot a glance toward the fireman who was making a successful effort to preoccupy himself elsewhere. The engineer, a stocky, muscular man of fifty with the face and stance of a boxer, crowded up to me as I backed against the firewall studded with gauges. I could feel the rims of the gauges pressing into my back as I did my best to melt into the surface.
Was he going to swing at me? I had little maneuvering room and would have a tough time throwing a punch myself from my awkward position against the bulkhead. If he did slug me, should I just cover up and hope for the best? Tackle him? Try to knee him in the groin?
He slugged me with his words instead.
“What the hell are you trying to prove, you stupid shithead?”
My mind ricocheted around wildly trying to make sense of what I was hearing. Trying to prove . . . ? Well, I . . . what do you mean?
“I’ve heard all about you. You’re trying to make us look bad, aren’t you, smartass college boy! Running. Running. Want to make us look lazy, dontcha!”
No, wait, I thought frantically. You’ve got it all wrong. It’s just the opposite. I’m going out of my way trying to look just like you. And I am doing so wonderfully well at it, aren’t I? Why, my private goal is even to make you forget I’m a college boy. I bought these stupid Oshkosh bib overalls and have gone so far as to mothball all those four- and five-syllable words I take such great pride in using in the classroom.
“Get your ass up topside!”
“Topside, stupid. You know what topside is, dontcha?”
I climbed the ladder up the side of the locomotive to the roof of the cab, not knowing what might possibly come next. Would he start the train again and take it up to high speed, hoping I’d tumble off? Or was this the equivalent of being sent to sit in the corner with a dunce cap, except here it meant exposure to the blazing sun atop an overheated black locomotive? What was coming?
Once I was topside, I heard his boots clanging on the iron rungs and saw the top of his cap. His face emerged and then the rest of him, still tense with hatred. He pulled himself erect, squared his shoulders, and lifted his right arm slowly as though aiming a pistol at me. I looked steadily at his hand pointed straight at my head, trying to reassure myself that I was correct in my impression that it did not in fact contain a pistol.
All I saw was an accusing finger which, after a silent eternity rife with his anger, he slowly swung away from me to sweep the horizon. He scribed a 360-degree arc, a heavy-footed, slow-motion pirouette on the roof of the cab of a locomotive in the middle of the Southern Pacific railyard in Fresno, California. His movement was almost magisterial, like the Pope spreading a solemn benediction over the teeming masses in Vatican Square.
I followed his sweep, taking in the vast sprawl of railroad cars, a thousand or more, lined up row upon row, fanning out clear into the surrounding farmlands, the scene studded here and there with yardmaster towers keeping watch like scarecrows and with spindly light standards sprouting huge blooms of bulbs at their tips.
The engineer snapped me back to the moment. “See all them cars out there?” he barked.
“Think we’ll get ‘em all switched out on our shift?”
“No matter how hard we work, think we’ll have to leave a few for the fellas on the next shift?”
He bit off and spat out each word of his final sentence, drove it into my face, each one a bullet intended to splatter in my brain: “Then… just… what… the… hell… difference… does… it… make… exactly… how… many… we… leave… them, anyhow!”
Three days later I received a registered letter at home bearing the curt message that, as a result of a grievance filed against me, my services were no longer required by the Southern Pacific Railway Company.
It’s good to feel good about yourself. “Mister Rogers” used to tell millions of kids each day, “I like you just the way you are.”
That’s a fine message for kids, and within limits it’s okay for the rest of us to feel that way, too.
But there are limits…
Am I Not Wonderful?
It does take a certain degree of self-confidence to lead. To found a new business. To become CEO of a corporation. To break new ground with innovative products or services. To put investors’ money at risk. To hold the livelihood of employees in your hand. Yes, self-confidence is probably an essential quality for success in many pursuits.
But beyond that essential self-confidence, there is what we can just call ego. Sheer, unbridled ego. Some business leaders are so addicted to their love of self that they can’t resist plastering their names all over the place. Think Donald Trump. Some, like Trump, run businesses that enable them to emblazon their names on massive buildings, so that the public confronts the self-beloved name at every turn.
But they are only the most conspicuous of these needy folks. Ego springs forth in a million private ways throughout the world of commerce.
A former partner of mine was at one time the right-hand man to Norton Simon, an industrialist who created a massive conglomerate in the ‘60s and ‘70s. My partner had been organizing a hotel conference room in which they would shortly stage a high-level meeting between the top executives of Norton Simon, Inc., and a company they were considering acquiring. He asked Simon about his preferences for the seating arrangements, and got this reply:
“It doesn’t matter. Wherever I sit will be the head of the table.”
I uncovered another exercise in blatant egotism—this time corporate egotism—when reading a strategy document outlining Coca-Cola’s plan for success. They had calculated that human beings require 64 ounces of fluid daily to survive, and their modest goal was to supply half of that amount of liquid to every person on the planet—all six billion of us.
Well, that’s alright—I admire big (even grandiose) ambitions as much as the next guy. But they went on to calculate how much that additional consumption would increase the market beyond what is currently sold by Coca-Cola and “our competitor” (at Coca-Cola, they never, ever deign to speak the name of Pepsi). Of the increase in the size of the market and their aspirations for Coke’s share of that market, they concluded that they wanted it all.
However much the global market expanded in the years ahead beyond its size today, Coca-Cola aimed to seize every single fluid ounce of the new growth. Why? As they actually put it in writing in their strategic plan, “Our competitor does not deserve any share of the increase.”
Deserve? Whoa! Did they say “does not deserve”? Arrogating to onesself the right to make that kind of judgment requires an ego the size of the universe.
Another great industrialist in recent decades was Armand Hammer (remember that name). Hammer led a very successful company called Occidental Petroleum. He was one of the most enlightened business leaders of his generation, virtually alone in his willingness to pursue business engagements with the then-feared-and-hated Soviet Union. He had immense confidence in the power of capitalism and mutually advantageous contractual arrangements to override the political paranoia and paralysis that impeded US/Soviet relations. He prospered as a result.
But he was also proved susceptible to the siren call of ego.
One day the phone rang on the desk of a friend of mine who was the CEO of a company in New Jersey named Church and Dwight,Inc. Most likely you’ve never heard of Church and Dwight. But Armand Hammer apparently had, because the call was from an investment banker Hammer had commissioned to approach Church and Dwight. With the exquisite diplomacy requisite in such a call, and without initially revealing the identity of his client, the banker probed to discern whether there was any possibility that Church and Dwight would entertain a friendly overture to be acquired by a much larger company. The overture was politely declined, in favor of remaining independent. At the time, the company was just beginning to take off, through a brilliant program of diversifying beyond its longtime staple product to build multiple consumer products that employed its core ingredient, leveraging the widespread “brand name recognition” of its staple product.
So the petroleum industrialist Armand Hammer never did get to own Church and Dwight—and along with it the brand name of that staple product.
Which was and is: Arm & Hammer.
The world of business is competitive. Duh. So is every other world in which people strive to win a share of the finite time, attention, allegiance or resources of other people. Think: religious organizations, social clubs, recreational facilities, schools, cultural institutions, ad infinitum.
But that competitiveness is particularly well recognized in business. Some are very good at it. So good in fact that they prevail and establish market dominance even with problematic products. Microsoft comes to anyone’s mind. Others prevail because of product superiority or exceptional customer relationships or price advantage.
And some prevail by cheating…
Hitting Below the Belt
“And so we never want to have anything to do with you again. Please leave now.”
With those words, my partner and I were dismissed from the CEO’s conference room. Game over.
Game over, but the lesson was just beginning—my first serious lesson in business ethics.
Three months before, our small consulting firm had been invited by the CEO to compete for a contract to create a strategic masterplan for the chain of seventeen hospitals he ran. The first phase was to develop an overall plan for the chain, and then move on to create individual plans for each of the individual hospitals. A couple of years’ work and millions of dollars would flow to us before it concluded.
We were delighted but not surprised to be asked to compete, even though most of the other competitors dwarfed our boutique-sized firm. We had developed a solid national reputation through our work with blue-chip hospitals and medical centers, and in dozens of competitive bidding situations we had yet to lose a contest to any of the major competitors.
We didn’t lose this one either. The large chain of hospitals was one of many owned and operated by Roman Catholic congregations of nuns. We had been through an arduous screening process of writing and presenting proposals, capped by a meeting with the Mother Superior of the congregation and the executives who managed their seventeen hospitals. The day after our final meeting, the call came from the Ed, Executive Vice-President of the chain who had managed the competition: Congratulations. The contract is yours. We’ll be touch shortly to set up a kickoff meeting.
High fives all around our office. Jubilation. Celebratory lunch at a fine restaurant nearby, and listen everybody, take the rest of the afternoon off.
Flowing below the jubilation was a massive flood of relief for my partner Mitch and me. We had quietly bet the farm on winning this contract. Once the competition began, we went all-out to learn about the prospective client and their needs, interviewing multiple executives throughout the chain. We lavished extra time on a superior proposal that represented, in effect, a substantial “free sample” of our strategic thinking on their behalf. And during the process, we established the all-important relationship of trust between us and the prospective client on which every consulting contract ultimately rises or fails.
But all those things are just the normal pursuit of business, not “betting the farm”. Our bet-the-farm move was to deliberately let our pipeline of other new business prospects dry up. We knew that if we won this big one, it would immediately consume the entire capacity of our small firm. We also knew that if we did devote our entire firm to it for a couple of years, it would raise us to a whole new level of capability, prominence, momentum and future growth. Because we were used to winning against “the big guys”, we felt this was a reasonable risk to take—even though it would put us in a deep hole if we lost.
But we didn’t lose, and so we waited for Ed’s call to schedule the kickoff meeting. And we waited some more. And we kept on waiting. After two weeks, I called Ed’s office to get the ball rolling. He’s busy just now, I was told. I waited for the “He’ll get back to you” but didn’t hear it. I asked when we might speak together, and she wasn’t sure. I said I’d call back later and she supposed that would okay.
Four or five more calls were equally unproductive. Hmmmmm.
Then, finally, it came: Ed would like you to come for a meeting with him and the CEO on September 11 at 10:00AM.
No problem. We’ll be there.
Mitch was not available so Rick, a senior partner, joined me for the flight out to their offices. We were ushered into a conference room where the CEO, Ed, and their General Counsel awaited us on the far side of the table. Their greetings were muted and the handshakes across the table perfunctory, a duty dispatched with minimum grace. Eye contact was fleeting and guarded.
The CEO opened a folder and extracted several pages of blue stationery, a personal, handwritten letter. “We received this letter three days after our final meeting with you, right after which we awarded the contract to you.” That is all he said, and then he proceeded to read it. This letter went like this:
March 22, 1988
Dear Mother Superior,
I hope this is the right way to address you. I don’t know if it should be mother or sister. I am not a member of your faith, and so I apologize if this is incorrect. A friend who is a Catholic said this would be okay. I am sorry and please forgive me if I made a mistake. I meant no offense.
I just had to write to you. Something is happening that is really wrong and I have to tell you about it. It could hurt you and the other sisters and a lot of people.
Last Wednesday I was flying from Chicago to Newark. There were two men in the seats just in front of me. I do not eavesdrop on people. Please do not think that I am snoopy, but they were so loud that I could not help hearing what they were saying. They had been drinking a lot and sometimes that makes people louder. They kept asking the stewardess to bring them more drinks. They were very bossy to her.
But they made me so angry! They were laughing about having fooled you in some meeting they just had with you so you gave them a contract for a lot of money. It was something about making up strategies for hospitals your religion runs. Money, money, money was all they could talk about. How much money they were going to get from you.
Hospitals are so important. But these men said they could not do all the work you wanted them to do. It must have been a very big contract. Because they kept laughing about how you could have given so much money to their little company. They said they did not have nearly enough people to do the work. But they weren’t worried at all. They said they would just have to “dazzle them with footwork”. Just like they had done with other people they worked for. Dazzle them with footwork was their very words. I could never forget them. And they said they’d never get caught. Laughing about fooling religious sisters. Saying how stupid you were. It seemed so mean. And what about those hospitals. If they don’t know how to do the work, does that mean that patients and doctors would be in trouble. I don’t know because they didn’t give details.
It was just that they made me so sick at heart, to think that people like that would try to put one over on people who have given their lives to God.
I hope you don’t think I am a bad person for listening to these men and taking notes on what they said. I am really not like that, but they were so loud and so mean I just had to listen and to write this letter to you. I hope it was not a wrong thing to do but my conscience would not let me keep quiet.
Thank you for listening.
The CEO looked up from the letter, stony faced. With intense contempt he stated, “And so we want to have nothing further to do with you. Ever. Please leave now.”
I glanced quickly at Ed and the General Counsel. No eye contact. Impassive.
I looked back at the CEO and fixed my eyes on his. “When I was in the fourth grade,” I said steadily, “someone scrawled the word ‘fuck’ in bold letters on the cover of my geography book while I was outside at recess. Before I returned to class, my teacher saw it and assumed I had written it. I was subsequently hauled before the class, publicly humiliated, sent to the principal’s office, and suspended from school.”
I continued, “I was no more guilty of writing ‘fuck’ on the cover of that book than I am of the behavior described in that letter. Just for starters, I do not even drink alcoholic beverages, let alone practice or condone the duplicity the writer describes. But it is clear that you have decided unquestioningly to accept the letter as truth, and so we will indeed leave now.”
The door leading outside to the parking lot had barely closed behind us when Rick exploded.
“Jesus Christ, Eliot! What the hell’s the matter with you! Don’t you and Mitch know enough to keep your mouths shut in public places? You’re the guy who’s always preaching to us: ‘protect client confidentiality!’ He said it like a slap. “How many times have I heard the sermon: ‘Never use client names in public places.’” Slap. “’Avoid conflicts of interest at all costs.’” Slap. “’Do whatever it takes to give the client what they need, whether we lose money on it or not!’” He pushed his red-hot face toward mine. “Don’t you ever listen to yourself?” He spun away, almost bellowing now. “Jesus Christ, I can’t believe it!”
Arms flailing, he whirled into a couple of 360-degree spins as though trying to helicopter himself into the air and disappear, to fly off somewhere, anywhere. When he finished the flailing, his body slumped and his head hung down. Anger spent, he muttered bitterly, “You’ve screwed us all. We’re ruined.”
My God, I wondered, did I have that conversation with Mitch? Obviously Rick believes it. These guys here believe it. Whoever wrote that letter believes it. Am I losing my mind?
I struggled to remember exactly what the letter had said. Mitch and I do talk about how we will staff big projects, and sometimes we really are stretched thin. We do rely on creativity of thought, not just analytical methods, to come up with innovative strategies for our clients. And—Wow! Oh, shit!—we do joke around a lot with each other, forever making outrageous, facetious statements in our playful but deliberate campaign to constantly stretch our minds and break out into new ideas. Do you suppose we did say something like that stuff, and this guy just got it all wrong…….?
We climbed into the car, and Rick’s disgust settled over me like a stench. The trip home was rotten.
Back at the office, we labored to reconstruct the event for the rest of the firm. Rick was still sunk in misery, quite sure that I had betrayed him, the firm, the client, and the principles for which I ostensibly stood. I was groping in confusion, pretty sure by now that Mitch and I had indeed had been overheard on the plane but that the letter writer had just misinterpreted the whole thing about our methods and staffing. What I couldn’t understand, though, was why he had embellished his story by reporting other comments I knew we were simply incapable of thinking or uttering even in our most playful moments.
“Look,” Mitch said finally, “you guys are both still in shock, and I can’t figure out what that letter said or didn’t say. I hear what you’re telling me, but we’ve got to get our hands on a copy of the letter. That’s the only way we’re going to get to the bottom of this thing.”
“What’s the use?” Rick asked bitterly. “What’s done’s done. Let’s just get on with it. We’ve got to bust our butts to rebuild this firm or we’re all going to be out on the street. Dwelling on that letter’s not going to do us any good at all. We’re screwed, and that’s that. Let’s get on with it.”
And so we did. Despite the fact that the CEO regularly trafficked with many of our past and prospective clients, we chose to override our fear that he might be out there poisoning the marketplace for us by spreading word of the letter. It was all-hands-on-deck, putting new leads in the pipeline, closing new contracts, launching new projects. In time, we got rolling again.
But the recovery all took place in a cesspool. The firm stank with self-doubt and paranoia. Were Mitch and Eliot really as despicable as the letter writer portrayed? The question hung like dense, sulphurous smog over the firm, befouling every breath, clouding every glance, choking every conversation, obscuring every view of the future.
Mitch and I found ourselves fully participating in the doubting of ourselves. The question shadowed me everywhere, taunting me to let go of my denial and admit that my dark side really was in control. The cumulative sins of my life assembled themselves into a vivid little universe just there, at the edge of my consciousness, with a magnetic pull that silently drew me to it. Come on, Eliot, just glide on over here and bring that latest little act of infamy with you. Settle down here amidst all the worst that you’ve done. This is your real home. This is the real you. C’mon over.
Meanwhile, Mitch still wanted to see the actual letter, and after much badgering and eventually a threat by our lawyer, Ed sent us a photocopy.
Months had passed, but the letter stunned us all over again. As we read it aloud, people around the conference table couldn’t breathe right, like the oxygen was being sucked from the room, and their eyes lost focus. Then we spread the pages on table and huddled over them like some primitive tribe working over a pile of bones or sheep guts in fearful hope that the gods had a message in there which would put more distance between life and death for us. We read and reread passages to each other, laying the terrible question before us again—did Mitch and Eliot really say those things?—and searching for any clue that would release us all from the dismal fate that awaited if the answer was “yes”.
Our office manager Linda drifted out of the room at one point and returned with her calendar. She flipped through the pages, studied several, and then quietly announced, “The writer says this happened on the Wednesday before March 22nd. You weren’t on a plane that day, or anything close to it. You were both working in New Orleans that whole week.”
The table fell silent. Nobody said anything for several minutes, each spinning some private story to explain what this meant. Is this a puzzle? Is there a code? How can this be? I had long since explained to myself what Mitch and I probably said—our normal facetious banter—and how it was misinterpreted. So I immediately concluded that Linda was wrong and the writer right, such is the power of self doubt and rationalization. Only when she reminded me exactly what we had been doing in New Orleans did I realize how fully entrapped I had been by my dark side—and somebody else’s, as well.
Rick got his friend Lew, a top corporate lawyer and litigator, to drop by that afternoon. Lew settled himself at the conference table, withdrew his half-glasses from behind the silk handkerchief in the breast pocket of his well-tailored suit coat, placed them halfway down his nose and began to read the letter. We studied him intently as he read and detected absolutely nothing. Do not play poker with Lew.
He looked up, removed his glasses, folded them, slid them back into his breast pocket, and pronounced matter-of-factly, “Commercial sabotage.”
I had never heard the phrase before and did not know what it meant.
“Somebody wrote this letter to kill you guys. Made up the whole thing. Fabulous job. Really brilliantly well done. Probably one of your competitors, like the runner-up. Do you know who they hired after they threw you out?”
“Come on, Lew,” I protested, incredulous. “People don’t go around doing that, making up stuff like that just to get a piece of business. That’s ridiculous.”
I was fifty-one years old when I made that statement. Still, Lew managed not be condescending when he begged to differ with me. “Uh, look, Eliot, people do lots of things to get a piece of business, most of it way worse than that letter. You’d be surprised. We see it every day. Hey, it’s a serious part of our law practice.”
I wasn’t convinced, although Mitch and Rick and others in the firm were inclined to agree with his judgment: we had been assassinated by a poison-pen letter from a competitor. No harm in considering the possibility. But what to do about it? What course of action could we possibly pursue to set things right and see justice served?
Well, for starters, our colleagues in the firm could begin to repair their frayed confidence in the integrity of Mitch and Eliot. If the letter was indeed a complete fabrication, the toxic doubt could dissipate and our firm could recreate what had been an extraordinarily close and trusting family feeling among us. That could happen, and it almost did.
But, curiously, no serious effort to seek justice materialized. Lew was pessimistic about ever discovering and proving authorship. And nobody had any stomach for it anyhow. It was as though the restoration of our trusting community, coupled with the recovery of our business momentum, was enough. Let’s not squander our precious energy on trying to undo what was done. Let’s move on.
And there it rested uneasily until we hired Betsy.
As business picked up, we started growing again and needed to bring in another senior partner. We had crossed paths with Betsy repeatedly at industry conferences where we and she often made speeches and led workshops. We were impressed with her, and our conversations grew friendlier over the years. Then one day the timing was right. We were ready to hire, she was ready to move, and she joined our firm.
To give Betsy a running head start, we sat down to review our business history with her. Describing the downturn and rebound of the previous year, we told the story of The Letter, and out of curiosity she asked to see it. Mitch had a copy of it in a nearby file and produced it for her.
The letter was barely in her hand when she gasped, “Oh, my God.” Betsy looked up at us with a swirl of emotions rippling across her face. “Wait just a minute.” She laid the letter on the table, pushed back out of her chair, and hurried from the room.
She returned carrying a handwritten memorandum on the letterhead of her former firm. She placed the memo on the table right next to the letter.
The handwriting was identical. Distinctive, and absolutely identical.
“Hank wrote this letter,” she declared, referring to her former employer—the founder of a prominent and well-respected consulting firm that was a competitor to our own.
Both documents were unquestionably written by the same person. Anyone could see that in an instant. But seconds later we were digging deeper, to reconfirm the already-foregone conclusion. Like eager schoolchildren playing a game, we raced to find the next match-up of individual letters and whole words. Look here! See how when he writes “the” he curls continuously back from the end of the “e” around to cross the “t” with the same line? No, wait, see this? The way he always starts a capital letter with an upstroke from the bottom of the initial letter? Yes, but look over here. He uses one kind of “s” when it starts a word but a different kind when it’s in the middle or end of the word. A dozen or more unique and unmistakable similarities leapt off the pages.
The game went on for a while and then became pointless. There was no doubt. We backed away from the table almost in unison, settling ourselves into the stunning, ugly reality. From micro gesture to macro scrawl, these pages were all written by the same hand. The hand of a really brilliant, really nasty man.
Now we knew who had blown our contract out of the water. Now we knew who had destroyed our relationship and reputation with the chain of hospitals. Now we knew who had savagely damaged our business.
And now we knew who had poisoned the trust, polluted the atmosphere, and toxified the relationships among a group of friends who had once created a truly exquisite working community together.
I wanted to kill the son-of-a-bitch.
We retained the services of the recently retired head of the FBI handwriting analysis laboratories, and he swiftly confirmed our conclusions. He was prepared to testify and demonstrate beyond a shadow of doubt what we all knew was true.
Then we retained a law firm that specializes in investigatory work, and they turned our perpetrator’s life inside out. By the time they finished, we knew everything that was knowable about him and his circumstances, his finances, his work and leisure and relationships, and—chillingly, the discovery of other incidents where he had used the same tactics, sometimes successfully and sometimes not.
We even discovered that he had done it before to us. A large contract we commenced a couple of years before had been shut down almost immediately after the award, on plausible-sounding grounds of changed priorities. But the California-based client proved hard to keep in contact with, offering no eagerness to maintain what had seemed a genuinely warm relationship. We were plenty busy with other clients, so we scarcely took notice later on when they revived the project—and the writer of the letter got the job. Not hard to figure that one out in retrospect.
And we already knew who had wound up getting the work from which we had been so unceremoniously dismissed on account of The Letter.
There it was. We had this guy dead to rights. We conferred among ourselves about how to move in for the kill.
And that’s where the really serious trouble began.
Imagine that. After surviving an unscrupulous assassination of character, after surviving a multi-million dollar loss of business, after surviving the metastasis of self doubt and mutual doubt, suddenly we found ourselves in massive conflict over how to bring this jerk to justice.
I wanted to shut him down. Period. I felt he had no right to continue in the profession, and that clients and competitors had the right to be safe from his predatory practices. I was prepared to make him front-page news in an industry where he was widely known and highly regarded.
Others felt differently. Settle it quietly. Confront him with the evidence. Present him with a bill to reimburse us for the costs of getting the goods on him. Forbid him to compete for any piece of business in the future that we are competing for. That’s enough.
Wait a minute, I’d say. Something’s missing. What about his compensating us for the loss of income from the contracts he destroyed, for the damage to our business momentum? Well, would come the response, the investigation revealed that he has far less money than his prominence in the industry might suggest. Can’t get blood from a turnip. And what if he turns even nastier, retaliating in some ways we can’t even imagine?
The tug-of-war became a real war. I wanted blood, his blood. I didn’t care about the money. I wanted him OUT, and I felt it was our moral duty to drive him out. Others felt equally strongly the other way, and eventually our debates became so volatile they threatened to re-toxify the atmosphere only so recently cleansed of doubt and mistrust.
My pursuit of victory—a pursuit of vengeance, really—became a passion, gripping me and battering others. We were headed for a disaster. It became clear to me that, even if my increasingly agitated insistence on the take-him-out solution were to prevail, the victory would be Pyrrhic. So I relinquished my insistence, and the matter was quickly settled.
The assassin and his lawyer were summoned to the offices of our lawyers. No pleasantries were exchanged, and no handshakes were extended. We gathered in a panelled conference room and settled into leather chairs around the gleaming table. Our lawyer stated what we knew and presented our demands. The writer agreed to our terms, largely through a series of head nods and whispered asides to his counsel who spoke for him. I cannot remember whether he ever actually said any words out loud during the meeting or not. I do know that he never explicitly admitted his guilt.
It was the single most unsatisfying meeting I have ever participated in. Ever. We got what we asked for, but I hated it.
I know for certain that the CEO of the hospital chain who had thrown us out of his office eventually learned of what had truly happened—but he never had the decency to accept a call or make contact with us afterward. Humiliated by his mishandling of an anonymous letter, no doubt. One more victim.
The whole episode took a sad toll. A year later, I withdrew from the firm, ten years after co-founding it with Mitch. I didn’t withdraw just because of The Letter; it was time for me to move on into the next chapter of my life anyhow. But the episode both accelerated my departure and made it vastly more painful. Nine years of extraordinary harmony, deep friendship, and impressive creativity lay obscured behind one last, vivid year that began in corrosive suspicion and ended in conflicted resolution. Without that, we all would have celebrated my transition from the firm into the next chapter of my life; instead, my leaving devolved into an excruciating rending of flesh and psyche, leaving raw nerves that still sent flashes of pain a decade later. It took Mitch and me nearly fifteen years to completely recover our exquisite friendship.
I guess people who commit crimes like The Letter never think about that.
A few years ago, I would have said that last line indignantly, in anger. Now I say it sadly, in pity. What must it be like for him, I wonder, to be so out of touch with the human community that he either couldn’t imagine, or didn’t care about, the damage he caused. I wonder whether he loses sleep about being caught and exposed for the fraud he is. And I wonder what it must be like for him to explain to himself why it was okay to do what he did. Woeful.
We’ve both had a lot of years since then. My life has gotten much better. I hope his has, too.
There are other ways business brings out the worst in people. This is not to say that their being in business made them rotten people. Just that in this arena, there are so many ways to reveal and demonstrate how lousy a person you really are…
Every endeavour has its share of scumbags. We’ve seen them misusing their power and defaulting their integrity in all kinds of arenas—politics, the church, sports, academe, and of course business. The massive scandals of the early 21st century, with multi-billion-dollar frauds at places like Enron and WorldCom, were seemingly de rigueur. Obviously some people will do whatever they think they can get away with.
As for Enron and WorldCom and the like, I only know what I read in the papers. But closer at hand, I have encountered some petty and disgusting examples that lack only scale to put them in the big leagues.
We can begin this tour of my personal Hall of Shame with a visit to the Executive Vice-President of one of America’s largest insurance companies. Wearing my best marketing-and-customer-relations hat, I cheerily offered a couple of really swell suggestions for how they could make the filing of claims more user-friendly.
Mr. EVP looked at me like I was simpler than Forrest Gump. “Are you out of your mind?” he politely inquired. “The whole profit structure of this industry is predicated on unfiled claims. I can tell you right now practically to the penny how many unfiled claims are sitting in the desk drawers of our policyholders, and they’ll never file them, thank God. If they ever dragged them out and sent them in, we’d be sunk! I know for sure, the unfiled claims represent a hell of a lot more money than the profit margin of this company. And don’t look at me like that. It’s the same for all of us in this business.”
How about a lesson in corporate “citizenship”? Back when I was president of the company which developed the computer program that helped people deal with intractable issues in their lives—daily stress, alcohol addiction, chronic dissatisfactions, weight control, and so on—we were looking for some national-scale clients. At one point, I was entering into negotiations with what was then the largest commercially operated chain of alcohol treatment centers. It had begun some years before as an entrepreneurial venture backed by a U.S. government “Small Business Administration” loan of $650,000 and subsequently proceeded to grow at a rapid pace, fuelled by extremely high profits from generous insurance reimbursement in those days for 28-day inpatient treatment for alcoholism.
Of course, I wanted to understand this company before entering into a business partnership with them. I had long since concluded that life was too short to mess around working with people I didn’t like or respect, so I looked into their doings. In remarkably short order, I found everything I needed to know about them—hiding in plain sight in a microscopic-font footnote on the balance-sheet page of their annual report:
“Corporate counsel has concluded that the statute of limitations requiring repayment of the Company’s Small Business Administration loan has expired. This liability of $650,000 is therefore eliminated.”
Relying on the ineptitude of a federal bureaucracy that was tardy in chasing down its debtors, this set of upstanding citizens decided to welsh on the obligation.
I didn’t do business with them.
Nor did I do business with a major tobacco company upon whose CEO I had called at the behest of a business colleague who sat on the company’s Board of Directors. At the time, I was running a consulting group that provided strategic advice to large companies seeking more profitable use of their corporate contributions money. We looked for ways to forge synergistic relationships between these companies and the not-for-profit world to optimize the use of the dollars and the long-term effectiveness of the recipient organizations.
We were ushered into a classic board room—panelled walls of exotic woods, massive rosewood table, leather chairs that tilt and swivel, the whole nine yards of theatrical cosseting some executives feel good about. The chairman and his top lieutenants surrounded the head end of the table and began to give us an overview of their current contributions program and philosophy. After running through the usual uninspired list of good works they support, the chairman got right down to what really mattered.
“Our biggest grant, of course, is to the National Fire Safety Council. It’s our biggest grant, and we’re their biggest donor. And you can bet they know which side their bread’s buttered on, by God. Do you know,” he went on with a gathering intensity that became almost venomous, “Do you know,” he jabbed his finger like a gun, “that in more than thirty years of publishing their fire-safety brochures and stuff they have never once suggested that smoking in bed might be a cause of fires. Not once!” he thundered.
He subsided into a satisfied sneer. “They know what’d happen if they ever did. We’d cut ‘em off just…like…that!”
Okay, let’s get out of there. Join me now for lunch at Lahiere’s restaurant in Princeton, New Jersey. Lahiere’s was the classic, old-line French restaurant in town—been there for generations. Quiet. Established. Refined. Serene. Fine food and wine. My lunch guest was the co-founder of a monumentally successful business built on direct door-to-door or friend-to-friend selling like Avon, Tupperware, and Amway. With his millions, he had diversified into some other businesses, including as it turned out the milling of flour which he sold wholesale to large commercial bakeries.
The salad dressing at Lahiere’s is divine. Occasionally I’m fortunate enough to have them put up a small bottle of it for me to take home. And, of course, the baguettes are the best this side of France itself. Terrific delicate flaky crust, great moist interior. The perfect way to start a meal at Lahiere’s is to order their house salad with the out-of-this-world dressing and then crack open the baguette—holding it over the salad as you do, so the little shards of crust will fall into the salad like small flakes of crouton.
So I passed the bread basket to my guest, eager for him to enjoy what was to come. As I extended the basket toward him, he recoiled and grimaced as if I were holding out a dirty diaper. “I don’t eat that shit,” he barked, with an undertone of incredulity that anyone ever would eat it.
“That’s bleached white flour in there. Can’t you tell? Don’t you know what we do to that stuff? Hell, we bleach it with strychnine and all kinds of bad crap. I’d never let anybody in my family eat that junk!”
Then there are truly wonderful people who wind up in the wrong situation for them—the classic square-peg-in-a-round-hole. I have seen way too many men and women struggling to succeed in a job that was never right for them, not knowing how to do any better and not feeling the courage or freedom to move on voluntarily.
It was Thoreau who said of such, “Most men live lives of quiet desperation and go to the grave with the song still in them.”
So sad, since we all—men and women—yearn and deserve to hear our own heart’s music. But sometimes it takes a sharp painful smack upside the head to knock us free of the dull chronic pain we were seemingly prepared to endure, our song mute within us, until the grave beckoned.
I realized I had no choice but to fire her.
I didn’t want to. God knows, I didn’t want to. I was a young man in my first managerial position and, never having fired someone before, I didn’t know what to do or to expect.
And, at that peak moment of racial tension in the U.S. in 1970, she happened to be the only woman of color in our office.
But I had tried everything I could think of to help her improve her performance as my assistant. Sent her to secretarial courses. Had the office manager tutor her. Changed my own work demands to fit within her inadequate skill set. Alas, nothing worked. Mistakes and errors and missed deadlines were the norm, and nothing she produced could be released into the mail or a colleague’s hands until it had been slavishly reworked, over and over again, to repair the original defects—and to detect and repair the new ones that crept into each corrective revision. In those typewriter-and-carbon-copy days, for Gloria producing the simplest one-page letter was a day-long task, taking nearly as much of my time as it did of hers. Enough, already!
So I called Gloria into my office. We sat in a pair of chairs facing each other. I told her it just wasn’t working, and that I was going to have to let her go.
Gloria sprang from her chair as a tiger leaping from a crouch and flung herself at me, teeth bared, eyes flaring, claws extended and flailing at my face, shrieking in fury. I felt her fingernails rake down my cheeks, the blood making her fingers suddenly slippery. She was a frenzy of assault-and-battery, kicking at my shins and ripping at my face and pounding on my chest, all the while shattering the room with her screams of outrage.
I instinctively drew up my knees and covered my head and face with my arms as best I could, huddled in a kind of fetal position on my chair. I knew I couldn’t just leap up and engage her in a fist fight, ending her attack by knocking her out or something, but I was doing a very poor job of warding off her blows. I frankly didn’t have a clue about what to do, and Gloria was still whaling away at me when Marcia, the office manager, came rushing in to find out what the noisy ruckus was all about. Small but mighty, Marcia instantly grabbed Gloria from behind, wrapping her arms around Gloria and simultaneously pinning Gloria’s arms to her sides as she pulled her off me. Gloria struggled as the two of them lurched around the office, but Marcia held firm and after a little while Gloria, unable to break Marcia’s immobilizing grip around her, ceased her gyrating attempts to wrench free.
As Gloria relaxed her gyrations, Marcia gradually eased her grip. Breathing heavily, they separated just a bit—and suddenly Gloria broke free and ran from the room, running madly down the hallway toward the front door. I knew instantly where she was headed—to the TV studio a block away from our administrative offices, where “Mister Rogers’ Neighborhood” was in production. She was going after Fred next.
I picked up the phone and called Elaine, Fred’s assistant, and told her that Gloria was charging that way with blood in her eye. And so Fred prepared for her arrival in the way that only Fred Rogers might have awaited someone in that condition. Not in fear. Not in a protective posture of self-defense. Not in anything but deep concern for what in the world might be possessing Gloria to be in such pain.
By the time Gloria ran flailing and stumbling across the street, down the block, and through the labyrinth of corridors, studios, and offices that led to Fred’s corner nook at the rear of the building, she was spent. She tumbled into his arms in tears, and the two of them sat down quietly on the sofa in his office.
When she finally was able to speak, she let it all spill out. How she was the first member of her family ever to go to college. How she had studied music and music pedagogy. How she emerged with a degree and the talent to be a professional music teacher.
And how, when it came time to seek a job, she had shriveled in the face of fear, intimidated by the thought that “someone like me” could ever take her proper place in the world of educated and sophisticated people who taught music and comprised the esteemed musical culture of Pittsburgh. After graduation, she never applied for a single job in music.
She settled for a different keyboard instead. One with letters and numbers on it, instead of ebony and ivory. One that produced inane correspondence and gobbledygook reports instead of glorious music.
She hated every minute of it.
Fred made a few calls over the next couple of days. Two months later, Gloria was happily teaching music in Pittsburgh. The last time I heard, she still was.
For most of my working career, I have been an independent entrepreneur enjoying immensely my role as founder or co-founder of each new venture. But some years ago, after serious business reverses, I needed to recover financially. Lacking the time and reserves to start another new business myself, I looked for employment in an established company. And, in due course I found myself in a lucrative job I hated.
I was no better at my new work than Gloria was at being a secretary, but I was better at covering up my inadequacies and repositioning myself within the company often enough to avoid being targeted for firing. As my stock options and other financial inducements to remain in the company grew, so did my willingness to remain in a job I hated. Given my fear of financial insecurity, I would have stayed there until retirement age, I am sad to say. Four or five more years of quiet desperation, the song still—or stilled—within me.
But fortunately, new management arrived and restructured the company. One of their first moves was to eliminate the sizeable division I was managing and fire me.
I got the word at 10:30AM. By noon, I had wrapped up all my affairs there, delegating to others my various works-in-progress and packing up my few personal belongings. Amazed at how easy it was to totally detach in little more than an hour, I headed home for lunch with Patti.
The next morning, as I stood at our kitchen counter pouring our morning coffee, I began to feel funny. There was a kind of buzzing, vibrating feeling arising in my body. I detected it in my feet, first. But it was creeping up on the rest of me. Like a warm carbonating shiver. I figured it had to be a heart attack in the offing.
I put down the coffee pot so I wouldn’t scald myself when it hit. I stood there bracing my hands on the counter and felt the gentle tingle ease its way up my legs, into my torso, and keep on coming. The progression crept up my body for fifteen or twenty seconds before it flooded my head with an effervescence that suddenly burst out of me in a loud crescendo of my own voice that startled and thrilled me: “Thank you, God! Oh, thank you, God!” I heard myself shouting. I quivered all over with deep relief, repeating it over and over again. Thank you, God! Oh, thank you!
Thank you for inflicting freedom on me, freedom I had lost the courage to claim for myself. Thank you for freeing the song in me, this side of the grave.
In the years between my firing Gloria and God’s getting me fired from my hateful job, I had occasion to fire other people whose performance could not be made satisfactory. But despite my unpromising initial experience with Gloria, I engaged in those conversations almost eagerly. I had learned that the person I was going to fire had known long before I did that they were not in the right job for them. They had been living for months or years in some kind of hell they from which they could not release themselves. A hell of fearing they’d be found out. A hell of stressful striving to produce what was beyond their capacity. A hell of self-loathing for failing to pursue a better future.
NB: I speak here of those who are patently underperforming and know it, not the innocents who get caught in a sweeping layoff or the talented young sacrificed to protect the tired senior. I am not so insensitive or heartless as to imagine that all firings are wonderful, but I do know that for certain people, they can be.
Individuals are pretty complicated, as we know. But take a cluster of individuals and forge them into an interdependent community with a life of its own—a team, a company, an institution—and you have an exponentially more complex and intractable entity on your hands. In my work over the years, I have been continually astonished at the power and persistence of corporate culture as a influence, for good or ill, in the decisions and actions of individuals within it. And I have been amazed at the difficulty of significantly and permanently altering a culture that has become counterproductive.
This is not to say that it can’t be done. Just to say that it takes far more thought, effort, determination, and patience than anyone ever imagines…
Even Tired Clichés Bear Truth
Okay, time to use a cliché to illustrate how hard it is to change a large organization.
You know the old cliché about the tanker ships. About how they can’t turn on a dime. Fully laden and under a head of steam, they turn ever so slowly and require a huge amount of sea room to complete a U-turn. With the helm over hard and full power applied, big ships require a mile of sea room to ease themselves around a half circle.
But captains don’t always have that much room, or that much time, to pull off a major change in course. Sometimes they suddenly find themselves in an untenable position—or even headed for disaster—and need to change direction right now.
Well, you might think, why don’t they just make an emergency stop. Then they can just spin around while dead in the water, swapping the bow for the stern, and head off in the new direction.
A mile to make a “U” turn. But you need even more massive amounts of sea room to bring one of these monsters to a full stop. A typical large tanker—say, 200,000 “deadweight tons” (the biggest are 650,000)—that’s chugging along at fifteen knots will need about 2.5 nautical miles to come to rest. Two and half miles straight ahead.
That’s the good news. The bad news is that during this emergency stop, this monster vessel will be all but out of control. Those of us accustomed to anti-lock brakes in our cars pretty much take for granted that we can both slow down rapidly and maintain our steering. Without anti-lock brakes, the front wheels stop rolling and thus lose their ability direct the vehicle. A skidding tire goes wherever the car’s momentum pushes it, rather than leading the car where the driver intends. But anti-lock lets the wheels turn just enough to still steer the car while in a panic stop.
Not so, on a ship. You remember the dramatic moment in the movies where the captain, rivulets of sweat coursing down his brow as he deals with some impending catastrophe, screams to the engine room, “Full speed astern! Full speed astern!”
That’s like us in the old days slamming on the car’s brakes, only to have them lock up and send us sliding in whatever direction the car’s momentum and the tilt of the slippery pavement felt like taking us. We just hung on for dear life and hoped the eventual crunch wouldn’t be too painful.
Pretty much the same for the tanker captain. He doesn’t have any brakes, of course, and so he has to use the ship’s propellers to do the opposite of what they have been doing—churn the water forward now, rather than backward. Got a blender on your kitchen counter? Think of it at high speed, and what’s going on inside that container. Now magnify it in your imagination to a churning mass of water that would fill your local community swimming pool. At full reverse on a huge tanker, the 36-foot-high propellers churn gulps of ocean twice the size of your house every second, creating a Niagara-like tumult of watery turmoil back there under the stern of the ship.
Suddenly the back end of the ship is fishtailing, basically out of control. Like you with your front wheels locked on your car, it’s going to go wherever it damned well pleases.
But, hey, they reverse the engines on an airplane when we land, don’t they? And the plane’s not out of control.
That’s because by the time the plane’s engines are reversed, it’s no longer flying. After touchdown on the runway, it’s just a very fast three-wheeled vehicle rolling along an airplane highway, coming to a stop. The little wheel up front is steering the plane, and the independently braked side wheels can also help steer. And that big tall slab that sticks up at the back of the plane—the rudder—is basically useless as the craft slows.
Rudders work only when something is flowing past them, and the faster the better. Something like air, or water. The push of the air or water on the rudder shoves the rear of the plane or the boat to the other side. Presto! Steering. But once the air or water flowing past them slows down or stops, or becomes hopelessly roiled, they lose their ability to push the craft one way or another and, from that point on, the rudder is just along for the ride.
Underneath the stern of that big ship, the rudder is behind those propellers. When the ship was going forward, the propellers pushed a lot of water fast past the rudder, providing it with lots of power to direct the ship. But once those propellers reversed the flow, they just created a blender-like havoc around the rudder. It lost any influence on the ship’s course, and sheer momentum, wave action, wind, tide, and various other factors beyond the captain’s control accounted for most of the fate of the voyage from that point on.
Good description of the situation at AT&T in 1982.
It is hard to remember, even relatively few years later, what a colossus AT&T was before the breakup announced in 1982 and commenced two years later. By any measure, it was the behemoth to end all behemoths. The biggest business in the entire world. Revenues of $136 billion—in 1982 dollars. A workforce of nearly one million employees. The largest fleet of commercial vehicles on earth. Products and services used daily by some 99% of American households.
That was the problem, of course. That 99% was the problem that led Judge Harold Greene to determine AT&T was tantamount to a monopoly on telephony and require it to be broken up.
And the sheer size and momentum of AT&T was the problem facing Charlie Brown, the CEO of AT&T at that fateful moment, in trying to bring about change in what would be left of AT&T once the spin-off of the seven “Baby Bell” local phone companies had taken place. It might not still be the 650,000-ton monster, but it was still a gigantic organization that was now headed in the wrong direction.
Why was the direction wrong?
This was the heyday of “deregulation”, when businesses and quasi-businesses like hospitals alike were being stripped of their previously impenetrable protection from the harsh competition of a free-for-all marketplace. Since time immemorial, certain protected organizations like AT&T, airlines, and hospitals had been guaranteed a particular share of customers, and often a particular amount of profit. Then, in a breathtakingly short period of time, these organizations that had relied forever on automatic success were flat-out naked in the street with a tin cup in their hands, begging for patrons and revenues. Naked in public. Everybody’s worst nightmare.
All of a sudden, nasty brutes who had never been sheltered before, who knew how to make a buck only by fighting for it and shoving away others who were after the same buck, came charging onto the scene. They could figure out how to make phones and string phone lines. They could start airlines and fly people around. They could start hospitals and get patients. Maybe even better than the guys who’d been doing it. And certainly with more aggressive, hell-bent-for-leather drive.
Aggressive drive? What’s that, the formerly regulated organizations wanted to know. It was a legitimate question. They had never needed it before, and so they became wonderful places of employment for folks who didn’t have much of it. Got a yen to charge around winning business in a hotly competitive environment? Guys like that sold insurance or cars or something. Looking for a comfortable place to do an honest day’s work without worrying about how you’re going to make your quota or meet the payroll? A place with no pressure and a reliable pension when it’s all over? Head on over to the phone company or the post office or the hospital.
So AT&T was peopled with hundreds of thousands of farmers, and not a gun-toting hunter in sight. Back to the movies. You remember, when the ranchers want to keep free range for their cattle but now some settlers have arrived and planted crops, all fenced in. The ranchers get riled up and ride on over there to rip up the fences them lily-livered, sissified farmers put up around their stupid vegetables or whatever. The farmer comes out in his overalls and whines a protest as the snarling cowboys laugh and gallop away, hooves tearing up the tender plants underfoot. The little woman comes out of hiding and asks, oh dear, oh dear, whatever will we do?
By 1984, the breakup had commenced, and things were not going well for AT&T. All the hot-tempered cowboys with six-guns out there in the world of business had decided to ride over, trample their vegetable patch, and drive them out of the valley. Just up the Hudson River, IBM unlimbered its muscles to take on some of AT&T’s high-tech business. Upstarts like MCI and Sprint were hatching plans to snatch away the long-distance business. Even foreigners got in on the raid. Up in Canada, Northern Telecom saw some easy pickings as a low-cost supplier of hardware to the Baby Bells.
Wait, wait. That’s not the way it’s supposed to be. Bad enough we have to fight off all these other guys. But the Baby Bells, these guys who were our business colleagues just moments ago and have been our best friends forever, they’re supposed to buy all their hardware from Western Electric, the manufacturing division Judge Greene let us keep along with the long-distance business and Bell Labs. Isn’t that what we talked about? Doesn’t loyalty count for anything any more?
Not if there are dollars involved. Here’s the price Northern Telecom is setting for a touch-tone unit, the babies said to Ma Bell. Beat that price, and we’ll talk turkey. Otherwise—sorry old pal, but you know, business is business. We’ve got our own bottom line to worry about now.
It was not a pretty sight. Actually, it was pretty ugly. The supertanker called AT&T, even when whittled down by 70% in size, still was saddled with the century-deep history, momentum, and DNA of a non-competitive mindset. Turn it into a lean, mean fighting machine? Not likely. The several hundred thousand employees who remained on the payroll of AT&T were simply not the right people to carry off such a dramatic overhaul of their own organization. They were farmers, not ranchers. They signed on at AT&T for a life of tending crops, not busting broncos and bulldogging rambunctious calves. The organization floundered around, despite the best efforts of senior management. And in the estimation of many, it has never since come close to recovering the vitality and promise that many imagined could spring forth from the assets that formed the core of the new AT&T in 1984.
One day in 1986 I called up Charlie Brown, then about to retire as Chairman and CEO, and asked if I could drop by on the weekend so I could learn from his experience. As we sat on his patio, I took him through what I was seeing happen at the not-for-profit hospitals we were working with. They, too, were struggling—suddenly thrown into competition with well-financed, expertly marketed for-profit hospital chains like HCA who were out to bury them. They, too, were staffed with people who were lovers, not fighters. None of them had anything remotely resembling a marketing department. Heck, they didn’t even know what “marketing” was.
I told Charlie that I saw them facing the same challenges that AT&T had been struggling with for the last three or four years, and I wondered if Charlie had learned any lessons that might be applicable to the hospitals. In his ever-modest and self-effacing way, Charlie looked a bit sheepish and replied, “I’m a little embarrassed that I never thought of the parallel before. I sit on the board of Columbia-Presbyterian Hospital in New York City, and, of course, they’re having a devil of a time with all the issues you describe—the very same issues that are making life pretty hard at AT&T right now.”
So, knowing what you know now, I probed, what do you wish you had done more of, or less of, or earlier, or later, or not at all, or…?
“Two things,” he replied without hesitation. “First, we needed more training of our people. Much more training. Much, much more training. I was too slow to recognize how profoundly the world had changed for us, and how terribly far behind the curve all the rest of the company was, too. We didn’t have a clue.”
How much training, I wondered.
“Let me put it this way. In a situation where you have to change both the thinking and the behavior of an entire company—especially one with the history and inertia of AT&T—and change it as radically as we needed to, well, there’s just no such thing as too much.”
Like, how much?
I’ll never forget what he answered: “Take however much training you can imagine. Go ahead. Just let your imagination run wild. Let yourself go, wherever that takes you, no matter how many hours or days you are thinking of. Now, multiply that number by ten. Ten. That might, just might, bring you somewhere close to how much.”
Charlie was not a radical man, and I was surprised to hear such over-the-top thinking coming from him. But then I remembered an old axiom: The only thing worse than spending a fortune to train your people and then having them leave the company, is not training them and having them stay.
So you think that would have made all the difference?
“No,” he replied, “I said there were two things. The second thing I should have done was to change the management team, and fast. We didn’t do that. We have always been loyal to a fault, and it just wasn’t our instinct to swap out the great people who have made AT&T great over the years.”
He paused, and then said firmly, “That was a mistake. A serious mistake.”
In what way, I asked. What would you have done differently?
“I would have recruited some high-powered heavy hitters from IBM, GE, P&G—all the most successful companies in highly competitive businesses. Tough, smart, aggressive people. People who knew how to win in contests where there are no holds barred. I would have put them in all kinds of key positions. And I would have given them free rein to totally overhaul the company,” he continued.
So you think they could have changed the course of the company.
“No. Not these guys. I just think that would have been the right first step. At the time I brought them in, I’d have told them, ‘Listen, you’re not going to last long here. A couple of years, at best. After that, the old guard will chew you up and spit you out. But don’t worry about it. I’m going to pay you very well, and when the end comes, I’ll send you away with paid-up annuities that will take care of you for a long time.’”
“See” he continued, “all I needed from them was to establish a beachhead. Just the first invasion, the first wave of troops. They would have gotten people thinking differently, rattled old assumptions, challenged people’s way of doing thing, fired a few people who were the most intransigent. Even then, though, they wouldn’t have changed much else.”
He went on to describe how, once the initial beachhead had been secured, the second wave of outside hires could advance farther inland. Their successors would begin to change systems and processes, putting into place the organizational changes that would simultaneously reinforce the new thinking about how to compete and execute the actions required make the company more successful in a competitive environment.
“I thought we could do what was needed in, maybe, a matter of months. Now I know it will take, what, ten years I guess. Maybe more.” He paused. “Probably more.”
When he was finished, he sounded very tired. He looked very tired. He was very tired, in fact. He had tackled the largest restructuring of a business organization in history. It had cost him dearly.
Charlie’s struggle to transform the farmers of AT&T into hard-riding, highly competitive rodeo performers lacked, by his own admission, some mission-critical initiatives. He is in good company. Few understand how deeply embedded are the elements that keep an organization headed in the direction that it has always gone. Unlike the captain of a ship who can, after all, single-handedly spin the rudder over hard to starboard and command full-speed-ahead to force it—absolutely force it—to complete a turn no matter how large and cumbersome the craft, the CEO and senior management of a company or an organization face a dramatically more complex task in redirecting their ship of state.
They have to change the corporate culture.
We hear a lot of chatter about “corporate culture”, but most of it peters out once someone has made a few observations about dress code and office architecture and a few other readily apparent but ultimately trivial features of the operation. The real nature and true complexity of corporate culture has been best described by Professor Edgar Schein of M.I.T., a leading guru on organizational complexity, learning, and development. Moving deep below the tip-of-the-iceberg corporate culture issues that anyone can see, he notes that daily behavior of people in organizations is based on certain learned, shared, tacit assumptions. These are the unwritten rules of the game. They don’t get talked about much, but they get communicated and reinforced every single day.
The operational values of the organization—as opposed to the espoused values articulated in official documents—are the ones that really determine behavior and outcomes. How are blame and credit apportioned, and how are they expressed? Are decisions rapid and sure-footed, or painfully attenuated and couched in protective contingencies that allow easy retreat? How is out-of-the-box thinking regarded—as a nuisance and disruption, or as the very lifeblood of the organization? Is teamwork and collaboration the norm, or is it every person for themselves? How do members of one team with one particular cultural norms—for example, you want the finance folks and the legal department to be pretty buttoned up—to appreciate and play cooperatively with the unpredictable creative thinkers in marketing and advertising, where you hope for unconventional breakthrough ideas that may upset the apple cart but could propel dramatic new growth? Who gets promoted, and why?
You don’t change these things overnight, not even in a small organization. In a behemoth like AT&T, the best Charlie could have hoped to do on his watch was to flick the trim-tab and begin the change in course.
Trim tab? That’s the tiny rudder on the back of the big rudder that gets adjusted first. Even with power steering, the captain of a big tanker can’t just suddenly fling the rudder hard over to one side—thousands of tons of water are coursing down both sides of the hull and keel past the rudder every second, doing their best to keep it aligned straight between them. It would be impossible to forcibly twist the rudder—as big as the side of a five-story building—against that flow just by giving it a push.
Ever tried to open your car door against a really strong wind? Imagine if that wind had been a tidal wave of water instead. No way.
So big rudders have small rudders on them—the trim tabs—that offer less surface area, are easier to turn, and get turned first. Now, a lot of well-meaning people banter about trim tabs, apparently thinking that turning the trim tab to the right is the precursor to turning the big rudder to the right.
Trim tabs work precisely because they are a paradox. You turn them in the opposite direction. When the water pushes against the trim tab on the left, it has the effect of pushing the trim tab against the big rudder—to the right, just where you want the big rudder to be.
Jim Burke got the paradox just right when he became CEO of Johnson & Johnson in 1976. Nearly fifty years earlier, then-CEO Robert Wood Johnson II wrote a company “Credo” that stated the hierarchy of J&J’s values. The Credo declares that J&J’s priorities begin with its commitment to those who use it products, then cascades down to its employees and management, the communities where J&J operates, and—dead last—the stockholders. This radical set of priorities had obviously served the company very well as it prospered magnificently for decades, but Jim sensed that some of the younger generation in J&J were indifferent to it, tempted to shoot for short-term gains to impress Wall Street, possibly at the expense of the customers who had come to trust J&J to put them first.
As a thirty-year veteran of J&J, Jim well knew that a drift away from the Credo was a drift toward mediocrity and eventual decay. But he was also wise enough to know that he didn’t have the power to shove the rudder hard enough to move 100,000 employees in one direction or another. So he trim-tabbed the business trim-tabbing of all time.
“Maybe it’s time to give up on this Credo thing,” he mused out loud to the company. “After all, old Robert Wood Johnson II wrote the Credo a long time ago. Things were different then. Simpler. Less cut-throat competition. Less pressure from Wall Street to keep the share price high.”
So he issued a challenge: he instructed every work group in the entire company to meet together to take another look at the Credo. Their task: decide whether it was time to trash the Credo and become just like everybody else, or not.
You can already predict the outcome of their debates. J&J work teams all across the country and around the globe rose as one and shouted their devotion to the Credo, newly appreciative of exactly how it had contributed to their success in the marketplace and to their personal pride in their everyday work. No wonder his tenure as CEO was so incredibly successful.
This is not to say that Jim got it right and Charlie didn’t. Relatively speaking, Jim’s job was a slam-dunk. It is incomparably easier to remind people of what they already know and love than it is to teach old dogs new tricks. But the point of the paradox of the trim tab remains valid: sometimes you have to make a small feint one direction in order to create a massive movement in the other direction—the direction that you’d really rather go.
Mentors matter most. The single most important person another person can connect with in their work situation is a mentor.
Now, many organizations have learned to appoint more seasoned managers as coaches for younger colleagues to show them the ropes. And this is certainly valuable. But it is not at all the same as a having a mentor.
Because a true mentoring relationship is actually a kind of love relationship. A more experienced manager is palpably drawn to something appealing that he or she spontaneously sees and feels in a younger colleague—something they want to nurture and bring to fruition. The would-be mentor sends signals indicating a willingness to play that role. (Sometimes the signals are so subtle that they are missed by the potential protégé, an everlasting loss.) The mentor becomes invested in the protégé well beyond transferring business knowledge. Often they regard their protégé as the second coming of themselves and want to ensure that their protégé acquires the panache, the know-how, the nuanced understandings, the tactics, and the mindset that will ensure their success.
For those potential protégés fortunate enough to be picked out by a would-be mentor, and fortunate enough to pick up on the signals of invitation, what a priceless gift…
Mentors Matter Most
“Oh, goody!” Leland enthused as I handed him a two-inch thick stack of documents. “Anything this complicated, there’s got to be a dozen ways to beat it!”
He began thumbing through this assemblage of policies, rules, and regulations governing PBS’ programming, including how underwriting credits would be governed.
His confident glee flushed me with relief. I was worried, and I had a lot riding on this.
Some days before, I had brought home the bacon. After many months of effort, I had succeeded in persuading Johnson & Johnson to become a million-dollar underwriter of “Mister Rogers’ Neighborhood”. We were all thrilled. J&J’s money would assure that we had ample funds to produce the new seasons’ programs. For their part, J&J was eager to reap the goodwill that would come from having their name aired on the daily TV programs as a major supporter. A perfect symbiotic partnership. So far, so good.
Until I ran into the PBS bureaucracy.
I had assured J&J that their name would be part of the audio credits spoken at the beginning and end of the program, and that their logo would appear during the voice-over credits. Turns out I spoke too soon.
Sorry, said the powers-that-be at PBS. We have a strictly limited set of fonts that can be used to name the underwriters of our programs. (In recent years, PBS underwriters’ credits are all but indistinguishable from full-blown commercials, but in the early days of public television people were at great pains to be “non-commercial”. Hence the limit of only three unremarkable authorized typefaces.) Pick one of these three, they said. Nothing else will be acceptable.
And, of course, the PBS stance was not acceptable to J&J, who saw immediately that none of the three approved fonts were anything like their famous red script logo. The adamant PBS position was pushing them to the verge of considering other ways they could use the millions of dollars instead of giving it to us. Which put me on the verge of panic.
“This should be fun,” Leland continued. “Hmm, let’s see what we have here.” He wetted his plump thumb at his lips and began peeling through the pages. He gave short shrift to the section on PBS’ approved fonts for underwriting credits. He already knew what that said. He was looking for something else, anything else, that would confound the offending policy.
I sat quietly watching him, knowing I was observing a master at work. Leland Hazard was a monumental figure in the city of Pittsburgh— a prime leader of the amazing post-WW II Renaissance of that city, an esteemed lawyer who had been General Counsel at PPG Industries—who was now working once again as my mentor, showing me how to make improbable things happen against all odds.
My mentor. Leland was my mentor. That is a simple statement, but it means the world to me. Here’s why.
Noted psychiatrist George Valliant has conducted a longitudinal study of individuals who graduated from Harvard, contacting them repeatedly over many decades to assess how satisfied they were with the unfolding of their lives. He discovered a watershed phenomenon: most adults who could identify someone who had served as a mentor to them early in their career were largely well satisfied with what they had achieved. But among those without a mentor, very few were satisfied. The contrast was stark and startling. Mentors made all the difference between fulfilling your hopes and not.
Leland was well into his 70s when he took an interest in me and began to impart to me what he had learned in his career. Not just what he had learned about business, although that was of course invaluable. But far more valuably, Leland taught me about how to make my way in the world. Many decades later, I frequently hear myself quoting him to others—and even more often hear his pearls of wisdom whispered inside my head, guiding an impending action. It is not too much to say that he is the source of almost all of whatever savoire faire I possess.
I got Leland as a fringe benefit of my tenure at “Mister Rogers’ Neighborhood”. He was a director of Small World Enterprises, Inc., when I became its president. While I am lamentably prone to hyperbole generally and especially when it comes to Leland, it is not too much to describe the man as a titan. His half-page obituary in the New York Times certainly would subtantiate that description, acknowledging his extraordinary influence in shaping modern-day Pittsburgh. He used his stature as a senior peer of the realm in the powerful, tight-knit business community there to persuade others to liberate their city from its hideous pollution, deep-seated racism, and parochial views.
His legendary legal career, including winning landmark cases in the U.S. Supreme Court, almost paled beside his other roles and achievements—visionary leader of the Pittsburgh “Renaissance” after World War II when the city transformed itself from a gritty oversized steel mill to a beautiful riverfront city and leading cultural center, author of notable books and articles in prestigious journals, pioneer of efficient urban transportation systems, art conoisseur and patron, civil rights champion, philosopher, advisor to foreign governments, and founding Chairman of the Board of WQED, the nation’s first public television station. (His concern for children’s programming preceded his involvement in “Mister Rogers’ Neighborhood”. Upon the founding of WQED in 1954, he remarked, “On this station you will find a children’s hour designed to determine whether it is necessary for someone to get killed in order to entertain young folks.”)
Though formally retired, he was deeply involved on a daily basis in our work at Small World Enterprises, Inc., and our sister company, Family Communications, Inc., the non-profit organization we had created to receive the contributions needed produce the television programs. He spent ten or fifteen hours a week in our offices or traveling with me to important meetings, shepherding me away from foolishness and toward smarter ways of doing things.
On one occasion I was on the verge of entering into a contract with Hallmark to produce some Mister Rogers books. I had negotiated what seemed a pretty nice contract, and I was proud of it. But Leland began picking it apart, noting this possible vulnerability here and that one there. Over the course of ten or fifteen minutes, he had nit-picked it nearly to death with the most minuscule and seemingly outlandish potential difficulties. Finally he zeroed in on one too many such imagined but highly unlikely problem and I blurted in exasperation, “Leland, come on, that’s never going to happen!”
“My boy,” he responded in his calm, deliberate, ever-so-measured baritone, “my job is to protect you against all those things that you just know are never going to happen.”
Ouch. Okay. Let’s go.
Today, as we pored over the FCC and PBS documents, he was showing me how to beat a bureaucratic system.
“Got it!”, he suddenly crowed as he rubbed his palms against each other.
I looked over as he slid his soft fingers across the paragraph in the middle of a page, re-reading and confirming his find.
“Yes, this should do it,” he concluded with a satisfied grin.
I leaned closer and saw that the document he was reading wasn’t the PBS policies and rules and regulations at all. It was the FCC regulations, the section pertaining to public television.
“Right here,” he pointed. “Listen to this.” He read from the FCC pages:
“Sponsorship Identification. Sponsorship identification or disclosure must accompany any material that is broadcast in exchange for money, service, or anything else of value paid to a station, either directly or indirectly. This announcement must clearly say that the time was purchased and by whom. In the case of advertisements for commercial products or services, it is sufficient to announce the sponsor’s corporate or trade name, or the name of the sponsor’s product (where it is clear that the mention of the product constitutes a sponsorship identification).”
“See?” he went on. “Listen: ‘disclosure must accompany any material that is broadcast’. That means it’s illegal for a program to go on the air unless it discloses who is putting up the money!”
“But how does that help us?” I asked. “That’s what we already want to do—say it’s J&J that’s putting up the money. But J&J doesn’t want to use anything but their logotype, not the one of the three fonts PBS insists on.”
“Ah, my boy…” he intoned. Whenever Leland said Ah, my boy, I knew an important lesson was to follow.
“That’s just the point,” he continued. “Look at that very distinctive Johnson & Johnson logotype. Everyone in the world knows that company—that customized red script font with the ampersand—right?”
“Over the years, they have spent millions in advertising and PR to expose people to that logotype. And they have succeeded brilliantly. They have established it as an indelible image in everone’s mind.”
“So, that specific logotype has become their legal signature.”
I got it.
He pressed the point home: “Any other visual representation of the words ‘Johnson & Johnson’ would be a misrepresentation—a forgery—that might mislead a viewer as to the true nature of the underwriter. And that would violate the FCC requirements.”
I knew enough to know that FCC requirements would always trump PBS policy.
“So that’s it,” he wrapped up. “Just tell PBS that the use of any typeface or font other than a perfect replica of the Johnson & Johnson logotype will put them in violation of this FCC regulation. I think that should do it.”
And it did.
Sometimes you get to know people who are so bright and thoughtful and generous and friendly and caring and visionary that they are just a gift. To you. To their colleagues. To people beyond the organization. I hope that everyone in the world will have such an opportunity. I’d like to introduce you to some I’ve had the privilege of knowing…
Pushing the Envelope
Chuck Jones was a quiet, elfin kind of guy who sat scrunched in his comfortable old chair in a cozy office festooned with pictures of his family— The Roadrunner, Wile E. Coyote, and Pepe LePew. They were his family, because he was their progenitor. Chuck Jones created these characters, and many more, in his storied career as one of the most gifted animators in history.
We talked about his work, and I said that his “Roadrunner” cartoons had a particular appeal for me that was somehow unlike the delight of his other celebrated work, such as the legendary Looney Tunes and Merrie Melodies cartoons that included characters like Bugs Bunny, Elmer Fudd, Porky Pig, and Daffy Duck. Did it just strike me as different, or was there something actually different about The Roadrunner?
“Well,” Chuck said with a smile, “good for you. You have picked up on something—a little game I played with myself. See, I was feeling a little burned out on doing yet another Looney Tunes episode, so I decided to set up a challenge—a kind of creative obstacle course. I thought I ought to make the process a little harder on myself, to see if I could tap into some fresh creative energy.”
The challenge, it turns out, was to push himself to create a new cartoon drama within the boundaries of four absolute dicta:
First, cartooning is a visual medium, and so it should be possible to tell the story entirely in pictures. That’s why there is no dialogue in The Roadrunner, unless you count “Beep-beep!” as dialogue.
Next, there’s too much gratuitous violence in cartooning, he opined. So any aggression in The Roadrunner would be a pure expression of lex talionis…the law of the jungle. After all, coyotes have to eat something, don’t they?
Third: cartoons do seem funnier when there are some pratfalls and splats, but any of them in The Roadrunner would be strictly the result of retributive justice. That is, anything bad that happened to Wile E. Coyote would be as a direct result of his own actions backfiring on him.
Finally, no matter what manner of mayhem Wile E. Coyote planned in order to turn the Roadrunner into a meal for him, the Roadrunner could never leave the road. He had to cope with these ambushes without abandoning his eponymous territory.
No wonder lots of us have a special appreciation for The Roadrunner.
Shifting from the ridiculous to the sublime, Fred Rogers (“Mister Rogers” to millions) is another whose quest drove him to break with tradition in many ways. For starters, he saw TV as more than a showcase for merely displaying something to the viewer on a screen—an entertainer, a ball game, a commercial. He realized it could be a medium for building a relationship, one-on-one.
I have described “Mister Rogers’ Neighborhood” as an illustrated telephone conversation between Fred and a single child. You never hear him referring to “all you kiddies out there in TV land” as was the norm for children’s program hosts, because he only ever envisioned one child out there. And he never included a child of viewing age on the set with him, as typical of programs like “Romper Room” or “Sesame Street”, because they would have competed for his attention with the child sitting at home with whom he wanted to have that special one-on-one relationship. As a result of this concept, as well as his uncanny insights into the workings of a child’s mind and feelings, “Mister Rogers” could sustain a back-and-forth dialogue with a pre-schooler for half an hour a day, five days a week, to the delight of them both.
To be sure, some parents—especially men queasy about Fred’s less-than-macho persona—wondered why he never showed strong emotions on the program. Was he a namby-pamby cipher? The answer was easy. Keep in mind the image of the program as an illustrated telephone call. Fred didn’t show anger or frustration on the program precisely for the reason that Fred was never angry or frustrated with that single viewing child with whom he was in dialogue during the program. There was simply no legitimate reason to show such emotions on the program, out of their real-life context. That would have been phony—something Fred never was—just to prove (to adults, because no child ever missed them) that they existed in his repertoire of feelings.
Fred had the inner strength never to cater to others’ expectations or wants. The inner strength that made this possible was not readily identifiable to the viewer. But it is precisely what made Fred the single most powerful person I have ever known.
I say that as one who has had the pleasure of knowing and working and playing with quite a number of people whom the world considers powerful—board members and CEOs of famous corporations and organizations as well as household-name celebrities, politicians, and the like. They all had abundant amounts of power of one kind or another, but none ever had the kind of power that Fred had.
Fred had the power of self-possession.
Fred owned himself completely, and neither you nor I owned any of him. Not a scintilla. He knew who he was, why he had been born, what he was working to create, what was his present and what was his future (more of the present, thank you), and what he thought of himself.
Fred Rogers liked himself just the way he was.
And what is more to the point, he didn’t care—actually, didn’t ever even wonder—what you thought of him.
Think about that. Here is a man who is being engaged every day by millions of children (and by their parents and often by a clandestine audience of college-age and retirement-age viewers as well, as we learned from our viewer mail). And he has no sense of “audience” whatsoever. It just never occurred to him to wonder what you might be thinking about him. He was totally oblivious, totally uninterested—so he was always free to focus totally on the person he was with.
It’s not that way for the rest of us. On any given day, somewhere between 1% and 99% of our mind is busy calculating how we’re coming across to our audience—the people whose approval we yearn for. Parents. Children. Spouses. In-laws. Bosses. Prospective Bosses. Friends. Associates. Passersby. Transient interactions with sales clerks, for God’s sake.
On a really good day, when we’re feeling okay about ourselves, the percentage is pretty small. On a bad day when we’re feeling sort of inadequate, it can be pretty dominant. Even as I write this, some (today, quite small—but still detectable) part of me is hoping you’ll think well of me when you read this. It’s that way for all of us.
Unless you are Fred Rogers. I swear, it was never a blip on his radar screen. Simply didn’t matter. Irrelevant. Wouldn’t change anything anyhow even if he did know, so why bother even thinking about it?
Fred’s self-possession enabled him to cruise into situations where well-established social conventions would have prompted a more conventional person to toe the line and behave according to role expectations. My favorite example of this occurred in the mid-seventies.
We had struggled for some years with the challenge of creating a week of programs dealing with divorce. We knew that many of our young viewers were living with the effects of divorce—impending, current, or past—and that few experiences could equal its impact on them. We wanted to be helpful to them, but we knew it would be difficult at best, and downright destructive if we didn’t get it right. To make matters worse, we knew we would be stirring up the specter of divorce among the millions of children who had not experienced it but whose own parents would certainly have displayed plenty of behavior in the normal course of marital interchanges that might lead the child to fear its happening to them.
So when we finally produced a week-long series of “Mister Rogers’ Neighborhood” programs on the matter of divorce, we felt it incumbent upon us to alert parents to the fact that we were doing the programs and to prepare the parents for whatever issues or questions the series might raise in their children. We decided to do this through a prime-time “special” for parents, and Fred took to the road to stimulate better understanding and viewership of the special. (Normally, such apparent self-promotion was anathema to Fred, but the exceptional content of this program prompted his exceptional determination to ensure maximum understanding of the series.)
He made appearances on a number of national talk shows and a few widely-viewed local news programs such as the hugely popular WNBC-TV “News 4 New York” in New York City co-hosted by Pia Lindstrom and Sue Simmons. When it came time for them to interview Fred, they lobbed him the typical softball question so he could knock it out of the park. “So, Fred, we understand you have a new special coming up on PBS next week. What can you tell us about it?”
At this point, the conventional thing—you’ve seen it a thousand times—is for the celebrity to launch into a well-practiced, animated prattle about how excited they are about their new production and how much they adored working with their co-star and/or director, then transition into a tantalizing film clip as a teaser for the audience.
Not Fred. He stated quietly, almost sadly, “We have produced some programs about divorce. For a lot of people, divorce is an extremely painful experience that lasts a long, long time.”
Lindstrom and Simmons smiled and nodded on cue. Then they were stunned by Fred’s direct question right back to them: “Have either of you ever been involved in divorce?”
Pia Lindstrom, the daughter of actress Ingrid Bergman, caught on right away that he was asking a serious question and expected a serious answer. So she gathered herself and responded first, noting that divorce had been a regrettable feature of her childhood and, in fact, of her own adult life. She noted that Fred was right about its having long-lasting effect, recounting candidly how even to that day, nine years after divorcing her ex-husband, she occasionally found herself mentally firing rejoinders at him.
When she came to the close of her moving response, Fred silently shifted his eyes to Sue Simmons. She swallowed hard and said she was in the midst of a divorce at that very moment, and that, true to Fred’s characterization, it was indeed the most painful experience she had ever had. She followed herself into the pain and emotionally spelled it out before eventually catching herself and remembering that she was supposed to be the interviewer, not the subject of the interview.
Too late to change roles. Fred deftly caught the ball in transition and closed the interview by simply noting, “Well, that is why we made these programs, and we hope they’ll be helpful to people”
That was it. Six or seven minutes of total air time. Fred’s share: thirty seconds, tops. It was all he needed.
One doesn’t have to be a celebrity like Chuck Jones or Fred Rogers to get away with independent thinking. To the contrary, Chuck and Fred got to be the celebrated individuals they came to be precisely because they permitted themselves to think independently all along the way.
I can hear someone countering, “Yeah, but they were both in the world of entertainment where just about anything goes, and sometimes weird is actually better for your career. Not so in the world of business. It’s too dangerous to break out of the mold, to upset expectations.”
The independent thinkers who have created monumental enterprises (not to mention personal fortunes) are legion. What kind of thinking did it take to decide to compete with the United States Postal Service (Fred Smith of FedEx), or to transform the sedate world of cruise ships into Las Vegas afloat (Ted Arison of Carnival Cruise Lines), or to elevate a simple cup of coffee to a combination gourmet moment and communal campfire (Howard Shultz of Starbucks), or to realize that if computers are supposed to be so darned smart why not teach them, rather than the user, to do the hard work (Steve Jobs of Apple)?
They pioneered new businesses. But every day, within already-established business enterprises, individuals also are seeing opportunities to re-think products and processes and strategies that will propel greater success. New enterprise, or improved enterprise—doesn’t matter. Each recognition of such an opportunity is an invitation to leadership.
My favorite definition of a leader is this: whoever moves first in ways that others want to follow.
“Whoever…” means that leadership doesn’t require a title or a position or formal authority. It means just what it says: whoever. That’s me or you or anybody else with the wits and the gumption to step up.
“…moves…” means that you have to do something, not just think about it or wish for it or whine about it. Leaders take action.
“…first…” means you’re not afraid to take a risk. To be sure, your stepping out first more likely will be successful if you’ve taken into account the other factors we’ve been looking at—change, timing, mindset. But there is much to be said for the old cliché about “Better to ask for forgiveness than permission.”
The key word of “…in ways that others want to follow” is want. An act of leadership makes others want to follow when it can advance their own best interest, even though that self-interest may be expressed in different ways for different teammates. Some may envision that the move will make the enterprise more successful and consequently enhance their financial prospects, while others might be stimulated by a new intellectual frontier it opens up, and still others may see it as a fresh competitive thrust that suddenly gets their juices flowing. The reasons for wanting to follow don’t matter much. All that matters is that they follow willingly. Eagerly is even better.
And the scale of the initiative isn’t the criterion of success, or of leadership. Sure, it’d be nice to carve out a place for oneself in the pantheon of business titans by creating a multi-billion dollar enterprise (or fortune). But what matters more is the day-to-day satisfaction of discovering new possibilities right under your own nose—and digging into them. When that happens—when you lead from wherever you are—you are giving yourself new life and giving new life to everyone around you.
That matters a lot. Henry Thoreau captured the alternative in these compelling lines:
“Most men lead lives of quiet desperation and go to the grave with the song still in them.”
Equally true for women, of course. And the dismal prospect of never singing one’s own song is unthinkable.
Since none of us have perfect pitch in the tumultuous world of business, you can certainly expect a flat note or discordant harmony from time to time. But I believe my own experience pretty much validates the old saying, “The hard stuff that doesn’t kill you outright usually leaves you stronger.”