Cameron Rice Nathan Smith Ian Goldberg Michael Medford.

Great by Choice: Leading Above the Death Line

Cameron RiceNathan SmithIan Goldberg

Michael Medford

Introduction to Productive Paranoia Productive Paranoia 1 Productive Paranoia 2 Productive Paranoia 3 Closing and Key Points

Overview

May 8, 1996, David Breashears looks down from Camp III nearly atop Mt. Everest

Noticed below a small group led by guides Rob Hall and Scott Fischer heading up the Mt.

Conditions didn’t feel right so Breashears and group asked themselves, what if?◦ What if it was too crowded, what if the weather forced

them to stop, what if a bottleneck forms forcing them to turn around?

Group led by two guides suffered in part of the greatest disaster in Everest history

What if?

Two sets of team leaders on the same day, on the same mountain, both feeling business pressures and tremendous experience, why does one lead his team to 10x success?

The most important decisions were made months before they were even on the mountain◦ Breashears prepared bringing excess rations and planned for

every possible situation

Build buffers and shock absorbers far beyond the norm of what others do

Separating 10x Companies

Expect conditions to unexpectedly change, violently and fast

By asking “What if”, you can prepare ahead of time◦ Build Reserves◦ Irrationally large margins of safety◦ Bounding risk◦ Hone disciplines in good times and bad◦ Handle disruptions with strength and flexibility

“The only mistakes you can learn from, are the ones you survive.”

10x Companies Lead with Productive Paranoia

“Its what you do before the storm comes.” David Breashear’s Intel is like climbing

Everest with an Imax camera Cash reserves and conservative balance

sheets are like extra oxygen containers. The world is not stable, predictable, or safe.

Productive Paranoia 1

Journal of Financial Economics analyzed 87,000+ companies

10x companies◦ Cash-to-asset ratio◦ Cash-to liabilities ratio

Shock absorbers and financial buffers

Systematic Analysis

Term created by Nassim Nicholas Taleb All 10x companies must learn to act

paranoid about the future regardless of how well there current performance is.

Remain conservative.

Black Swan

1991, Herb Kelleher explains why his balance sheet is so conservative.

“As long as we never forget the strengths that enable us to endure and grow in the midst of catastrophe; as long as we remember that such economic catastrophes recur regularly; and as long as we never foolishly dissipate our basic strengths through shortsightedness, selfishness, or pettiness, we will continue to endure’ we will continue to grow; and we will continue to prosper.”

Southwest does it right

9/11 All other airlines cut operations; SW did not

cut a single job or a single flight. In fact Southwest was the only airline that

turned a profit in 2001 & 2002! In 2002 they opened more locations and

achieved greater market cap than everyone else.

10 years later…

After these events Herb was asked by the media for a response and as he choked on his own tears unable to finish his own sentences he said, “You can attack us, but not beat us; you can try to destroy our freedom, but you’ll only make us stronger; you can inflict horror, but you cannot make us terrified. We will Fly!”

Herb Kelleher’s humbleness

Do 10Xers achieve outsized success simply because they took more risk?

Productive Paranoia 2: Bounding Risk

3 Categories of Risk for enterprises◦ Death Line Risk◦ Asymmetric Risk◦ Uncontrollable Risk

10Xers avoid these risks


Type of Decision 10X Companies Comparison Companies

Number of Decisions Analyzed

59 55

Decisions Involving Death Line Risk

10% of Decisions 36% of decisions

Death Line Risk

Type of Decision Made 10X Companies Comparison Companies


59 55

Decisions Involving Asymmetric Risk

15% of Decisions 36% Decisions

Asymmetric Risk

Type of Decisions Made

10X Companies Comparison Companies


59 55

Decisions Involving Uncontrollable Risk

42% of Decisions 73% of Decisions

Uncontrollable Risk

Time-based risk


Behaviors that correlate with successful outcomes:◦ Hyper vigilance◦ Adjustment of decision speed◦ Make deliberate, fact-driven decisions◦ Superb execution once decisions are made


Behaviors that correlate with unsuccessful outcomes:◦ Arrogance◦ Failure to adjust decision speed◦ Reactive, impulsive decisions◦ Failure to increase intensity

Ensure superb execution


Zoom out, then Zoom in

http://www.youtube.com/watch?v=Ahg6qcgoay4




Only 50 percent of people notice the gorilla Focused on counting Spend most our lives dealing with what is

right in front of us 10X leaders don’t miss the gorilla,

especially if it’s a dangerous threat


Captures essential manifestation of productive paranoia

Dual-lens capability 10X leaders remain obsessively focused on

their objectives and their environment Push for perfect execution and adjust to

changing conditions They count the passes AND see the gorilla


Zoom out◦ Sense change in conditions◦ Assess 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 of plans and objectives


Motorola began to pull ahead of Intel in “design wins”

Could become the standard and could make it difficult to move forward

Zoomed out: Developed a new strategy Zoomed in: In a week, formed team and

traveled across the globe ◦ Turned the tide and gained 2,000 design victories

Motorola vs. Intel

Despite being fast paced, remained calm and clearheaded

Formulated smart strategy 10X teams don’t freeze up or react

immediately Think first, even when they need to think

fast Even 10X companies don’t have a perfect

record

Motorola vs. Intel

Fast moving threats does not mean to abandon disciplined thoughts and disciplined actions

Do not panic Think first, and respond fast enough


Build Cash Reserves and Buffers: to prepare for unexpected events and bad luck before they happen

Bound Risk: Manage time based risk Zoom Out, then Zoom In: Remain hyper

vigilant to sense changing time-based risk

Key Points

Cameron Rice Nathan Smith Ian Goldberg Michael Medford.

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