Leading Above The Death Line Great By Choice: Chapter 5 Team 4

Productive Paranoia David Breashears on May 8, 1996 on Mt. Everest First ever IMAX movie from the highest point on Earth After a rough night of intense weather, Breashears looked down to see large groups of climbers making there way to the camp

What if? What if: His team had to delay for a day due to continued storms? A bunch of people crowd the small tip of the mountain as they are trying to film? Dozens of climbers stacked up at the bottleneck just before the summit where only one climber at a time can pass? The combined weight of so many people caused anchors to rip out of the ice? The previous night’s severe wind presaged a change in the weather? An unexpected storm swept up the mountain and wiped the climbers off the surface? The traffic jam of climbers are inexperienced, weakened, exhausted, disoriented and block their way out?

The Decision Breashear and his world class film climbing team decided conditions didn’t feel right They secured their belongings at the camp, and would climb down and then back up a few days later after the mountain had cleared

Productive Paranoia Passed both Rob Hall and Scott Fischer, two well known Everest guides, and their groups on the way down Both guides thought it was unnecessary to turn back, as the weather seemed to be clearing up nicely Breashear and his team went back anyway

Productive Paranoia 15 days later, Breashear climbs back up and finds Hall and Fischer and several other climbers dead, frozen high on the mountain The greatest Everest disaster, with 8 dead in 24 hours

Productive Paranoia Two sets of team leaders, same time same day, tremendous experience, and burdens or responsibility and business pressure (one to lead clients for a large fee and another a multimillion dollar movie deal) Only one leads his team to 10X success Shooting the IMAX film Bringing every team member home safely

Productive Paranoia Decisions made ON the mountain: Breashear went back down on May 8 Hall ignored turnaround time by hours Decisions made BEFORE the mountain: Breashear brought extra oxygen for 3 weeks, and even gave some to the other team Hall brought enough for only one summit

Productive Paranoia 10Xers lead their companies with productive paranoia 10Xers always assume conditions can and will unexpectedly and violently change 10Xers are hypersensitive and always ask, “What if?”

Leading above the Death Line Hitting the death line means that the enterprise dies outright or becomes so damaged that it can no longer continue with the quest to become an enduring company. When you hit the deathline: game over Now, we will discuss the three core practices for leading a company with productive paranoia

Productive Paranoia 1 Extra Oxygen Canisters (preparing for the storm) Having a good cash to asset ratio 10x companies mentioned having 3-10x cash-asset ratio Knowing as a company to be ready for devastation even in good times Understanding that their will be a Black Swan (never know how bad or when it’ll happen, low-probability disruption that is unforeseeable) Any Particular Black Swan = 1% Some Black Swan = 100%

Good Companies Stay productively paranoid in good times What you do before the storm is what matters most Extra “oxygen canisters” long before the storm hits EXAMPLE: Southwest Airlines 9/11 Only major airline company to profit in 2002 Managing in good times to do well in bad 1 billion cash, highest credit rating, didn’t cut a job or single flight (got planes in air asap)

Best Buy Experience is one of the ways they continue on Public company since 1985 Allows them to adapt and survive through Black Swans They have a huge focus on “happiness” (happy customers-employees-shareholders) = good company

Productive Paranoia 2: Bounding Risk Did the 10Xers take more risk or less risk to achieve their dominance? Explored 3 categories: Death line risk Asymmetric risk Uncontrollable risk

Productive Paranoia 2: Bounding Risk 10Xers lead their companies with a conservative, risk-averse approach. Fired bullets instead of cannonballs Research shows that these 10Xers took very little death line, asymmetric and uncontrollable risk. After finishing the risk analysis, there was additional category of risk called time based-risk

Productive Paranoia 2: Bounding Risk Sometimes acting too fast or too slow increases risk. 10Xers tended to take their time, to let events unfold then react then react to circumstance.

Productive Paranoia 2: Bounding Risk As a productive paranoid, you want to be cognizant of lurking dangers and vigilant about possible disruptions. Successful companies with emerging markets remain calm when faced with uncertainty and are willing to let time pass until the risk remains stable. One of the most dangerous false beliefs is that faster is always better, that you're either quick or your business will fail. NOT TRUE!

Productive Paranoia 3 Zoom out, Then Zoom In Daniel J. Simons and Christopher F Chabris “We spend most of our lives dealing with the plans and activities right in front of us, ticking tasks off our lists, clicking past mile markers on our big projects, responding to the incessant demands on our time. And we can easily miss the gorilla right in front of us.”

Zoom Out Sense a change in conditions Assess the time frame: How much time before the risk profile changes? Assess with rigor: Do the new conditions call for disrupting plans? If so, how?

Zoom In Focus on supreme execution of plans and objectives Never compromise excellence for speed

Example Intel vs. Motorola How would Best Buy use this approach?

Not All Time in Life is Equal Amundsen Planned to go to North Pole in 1911, not South Pole Everything was set and prepared North Pole fell…redirected energy to the South Pole Kept new destination plan secret from everyone September 9, 1910

Zoom Out/Zoom In Amundsen not impulsive very detail-oriented, prepared, disciplined If he had stuck with North, his original plan, he would not have his 10X achievement Had to zoom out to consider changed conditions, then zoom in to execute the new plan

10Xers Ability to recognize defining moments that require change of some sort because of opportunity, peril, or both Buffers already in place with options and flexibility to adjust; huge margins of safety Sense change, zoom out “How much time before the risk profile changes?” Zoom in, focus on superb execution Never compromise excellence for speed

Not all Time in Life is Equal Some moments count more than others: 1911 Amundsen made most of it May 1996 on Everest for David Breashears September 11 th Airline Industry-Southwest came through We all face these moments and can choose to seize or squander them 10Xers are prepared for these moments They respond to unequal time with unequal intensity, when it matters most