Gary Hamel - What Matters Now Part 1

Today's book is not a 250 page dissertation on leadership teams or motivation. Instead, it's an agenda for building organizations that can flourish in a world of diminished hopes, relentless change, and ferocious competition. It's not a manual for people who want to tinker at the margins.

Instead, it's an impassioned plea to reinvent management as we know it, to rethink the fundamental assumptions we have about capitalism, organizational life and the meaning of work our guest presents an essential agenda for leaders everywhere who are eager to move from defense to offense, reverse the tide of commoditization, defeat bureaucracy, astonish their customers, foster extraordinary contribution, capture the moral high ground, outrun, change, and build a

company that's truly fit for the future. It's a pleasure to welcome back a friend, a guest, and the author of the latest in the series, what Matters Now, how to Win in a World of Relentless Change, ferocious competition, and Unstoppable Innovation. Gary Hamel, welcome back to the show. Thanks to be back Aidan. I'm absolutely loving it.

You have had your head below the parapet, but I've been looking up at the amount of comments and feedback we're getting from this series, so we're delighted to have you back.

I mentioned before in one of the episodes where you dedicate the book to your late dad, Paul Hamel, and in this you dedicate the book to your brothers, Loren and Lowell, and I thought we'd give them a shout out to do a proper job of this entire series. They are, one year younger than me. They're identical twins. They've both been, CEOs of large healthcare organizations. They're physicians, as well, extraordinary leaders. I've written about cases from the work they've done.

They're great change managers. So yeah, I felt, super lucky to have them, to learn from them and have them as best friends as well. Amazing. Amazing man. I would be delighted to say that about my brothers. And, big shout out to the two Ls as well. Two more of the Hamel clan. The clan has done very, very well, Gary, so let's get stuck in May.

Maybe I'll say just I'd love you to share just a word about the book, because this structure of this book is very different from your other books. You did something different, a little bit of a twist, an innovation of the business book as well. Yeah, you know, I thought, rather than, one long idea endlessly worked out, I really did wanna create an agenda, on what are some of the big issues facing businesses and not just one issue. And then in each case, a series of vignettes.

So in this book, you can start and stop anywhere you like. It's basically a series, I think of about 25 short. Yeah, just a three or four page. I wouldn't even call 'em chapters, but, really easy to read. Hopefully everything, every chapter of standalone has a core idea of something worth learning. And, hopefully it's a little more fun than, plowing through a really, really long thing where the scenery doesn't change much from chapter to chapter.

And the timing of this book is important as well, because it was just after the financial downturn, 2008, 2009. And a lot of the things that we'd taken for granted, the American Dream, Trust in institutions, et cetera, had all eroded. So this is the backdrop to when you wrote the book and tees us up perfectly for the very first chapter, this mini chapter that you talk about.

And in chapter one, you talk about the importance of values. And you say, as we struggle with the uniquely complex challenges of the 21st century, it is good to remind ourselves that what matters most now is what's always mattered our bedrock values. And to your mind, you talk about the importance of stewardship. And in there, you name Five Things, Fealty, charity, prudence, accountability and Equity. So maybe we'll start there because , there's a reason you picked that as the first chapter.

Yeah, I think, , obviously through that financial crisis , and since then for other reasons, , we've lost a lot of faith in large institutions and in capitalism itself, if you look right now among, gen Z, about, 40% say they have a positive or very positive view of capitalism. And a slightly larger group, 44%, would say that about socialism. In the UK among young people, that difference is even greater. Where people really think, young people really think that socialism would be a better system.

I think they'd struggle to find where it has really worked and produced, prosperity and so on. But I understand, the frustration. It is so often as we've talked about Aidan, it so often feels like capitalism works for the few rather than the many. And you see that, in the fact that the gains are so incredibly unequal. We know that most people believe around the world. Most people believe that capitalism does more harm than good. This is a big study, just before covid.

And, I think, globally about 54, 50 5% of the respondents said capitalism does more harm than good, which is an extraordinary indictment of a system. that's lifted several billion people out of poverty. and yet when you look at large institutions, they often seem rather unprincipled. and, we can have these kind of pale, commitments to, ESG and DEI and so on.

but a lot of it is greenwashing or ethic washing, where underneath it all, you can still be quite, doubtful about the ethical commitments of businesses. And, I think back to Adam Smith, he recognized that capitalism could not survive without a deep kind of moral underpinning. That without that it would decompose into kind of selfishness and, different parts of society vying against each other. I think it's important to come back periodically and ask ourselves how are we doing on that?

I think companies have a somewhat unique challenge because malfeasance gets a lot more attention. anything any company does in the world becomes public knowledge very quickly. If you pay a bribe somewhere or if you have a supplier who's abusing their employees, it's difficult to hide that. But I do think, the values are at the bedrock.

And I think one of the things that happened, and I don't wanna overstate people can decide for themselves to what extent this happened, but I had this sense that companies, became quite arrogant and maybe still are. and the idea is we have this power, we can do pretty much what we want and so on. And they forget that, the corporation is not a person. It does not have, what, in America we'd call inalienable rights. it is a fiction.

it is a legal fiction that we've agreed can exist and contract and act, with certain boundaries around it. And at any time society can renegotiate those boundaries, in ways that, may be better or worse. But it's not like, organizations have some, fundamental rights that cannot be, uh, changed. CEOs need to be very careful because, often, they may complain about regulation, oversight and so on, but it's often the product of their own kind of malfeasance.

and sadly, all of those regulations work a little bit like a ratchet. when we put them in, they very seldom ever come out and typically we're trying to, control the behavior of maybe the worst five or 10 or 20% of firms. And yet, everybody pays the price. So within organizations and then across organizations, we should expect leaders to really work hard to hold each other accountable to these high standards because when they don't, and trust erodes, everybody pays the price.

I'm doing an interview Gary tomorrow for PBS, the US Channel on the American Dream. So they're asking some Irish people about their American dream and I really don't know what to say anymore. 'cause for me, growing up as a kid, , we had American tv, you know, it was stuff like murder She Wrote and Highway to Heaven, and even Little House in the Prairie. and we all looked to America as the kind of, place to be and the place to learn, and the place to grow.

And even when I was older then in my teens, say friends that show friends and you tried to Dress like Joey and all those type of things. And it's gone to skew in latter years and. I still wanna believe in that dream, but it seems that values have gone awry. Yeah, I think lot of leaders seem very, I don't want to say corrupt, but kind of morally ambivalent. they don't have the courage to speak up, and talk about abuses, and problems in a forthright way.

it's a little bit like, my gosh, if we shine a light on this thing, we're only going to make the problem worse. Well, no, you're not, because if everybody knows those problems are there and you're kind of in a state of denial, that doesn't help. So I, there's a set of things that at least I believe are pretty much indefensible and I want leaders to be very public about that. I think it's indefensible that a ever bigger share, of the world's wealth is controlled by an ever smaller global elite.

I think that is indefensible, particularly when that wealth is often the product of monopoly power or the ability to kind of control and shape the system. It's not simply, you know, we had the best products and consumers, lined up to buy them. I think It's objectionable when companies, spend great sums to try to tilt the regulatory playing field in their favor. Now, I understand that regulators have great power and you have to be there representing your interests.

But you know, what I would say in that case is be very, very careful that you never let any daylight between what you think are your interests and the interests of your customers. and I think I said in one of our other conversations that, so often if the company, chieftains are sitting down with the regulators, the interest of consumers are probably not on the table. So that I think is indefensible. I think the 300 to one differentials in CEO pay versus frontline employees is indefensible.

that's up by about, five or six times over the last 40 years. Governance structures that are there primarily, to, thwart, shareholder action. that treat employees as mere factors of production or that give, 90% of the share options, share grants, to the top team, companies that do business in repressive regimes and particularly now, companies that willingly damage the psyche of our children wait for, public bodies, to kind of set rules around that rather than taking the lead.

So, yeah, I think, if I'm a CEO, I understand that my freedoms are at risk unless I am on the front line talking about these things, encouraging my colleagues to, have high ethical standards. too seldom do I hear leaders out in front on this.

Which leads us to the next point, , you called it learning from the crucible of crisis. And I'm still hurting, as I told you before, we came on air from the crash because I bought a property in 2006, in my first property, et cetera. terrible timing to buy a property. But what you said in the book was, why did Wall Street's finest fail to heed them, or more pointedly?

Why did they so completely abandon their responsibilities as the guardians of capitalism's most important citadels as it unfolded, the subprime banking crisis revealed a Shakespearean catalog of moral turpitude. It was a perfect storm of human delinquency, deceit, hubris, myopia, greed, and denial were all luridly displayed. Beautifully said, terribly played out., There were obviously a large set of factors that came together to precipitate that, crisis.

There was regulatory failing in the United States. They'd moved quite quickly to, lift some constraints on investment banks. they had lobbied hard to, raise their leverage, ratio so they could, take bigger, more risky bets. you had a government, agency that was, supposed to help people get mortgages and was buying a lot of these subprime mortgages that created kind of demand for them. So hard to put the blame in one place, but for sure, that's right.

I think it was a kind of Shakespearean litany of human foibles. there was certainly a lot of deceit. a lot of the mortgage brokers who were going out and securing these loans lie about their credit worthiness. And, there were thousands of cases ultimately brought against these mortgage brokers.

There was a huge amount of hubris that somehow through financial engineering, you could, and clever packaging by arranging these, loans into different tranches and so on, you could reduce the risk, the underlying risk of all these bad credit decisions. but however you package shit, it's still shit. There was a lot of myopia. you know, they had seen housing prices go up for about 20 years.

And of course most of these bankers, they're fairly young, young people, they have no longer historical perspective. And so their models are all built on the premise. This keeps going on forever, even when it was becoming kind of ludicrous, to think that the prices go any higher. And, you know, you might not have seen a hundred year storm, but that doesn't mean was not headed your way.

it goes without saying, there's a huge amount of greed, that encompassed even the credit rating agencies that kind of let their standards slip. but also within these banks, so this is a kind of a more practical business lesson. They had separate out the responsibility for risk, which was with risk managers and responsibility for sales.

And so you had salespeople compensated just on how much volume, how much income you brought in, but with no accountability for protecting the balance sheet, which is pretty much crazy if you separate, those two things out. a lot of greed, a lot of money to be made. And then just a lot of denial at the end. you couldn't find anybody to take accountability. There was no mea culpa. And I think, you know, the fact that nobody went to jail.

And the fact that some of the richest, people in the country were able to, privatize the gains and then socialize the losses. that was probably in my lifetime, that was capitalism's, worst moment. Yeah. said at the time I thought that on every bank who got any kind of a bailout, I thought we should, like, force them to have a tattoo on their forehead, in reverse. So you see it every morning when you look in the mirror, and it would say like, alchemy is not possible.

things that can't go on forever don't, risks and returns are always correlated in the end. and stupidity is contagious. And, yeah, I mean, it's hard to imagine how, a financial system could be so deeply infected. but, you know, it's a lesson. And, you know, there was a lot of, negative sentiment poured on the bankers. In fact, it's basically when I stopped wearing, suits, I said, I never wanna look like a banker again.

if you think about the incentives, you know, for most of us, if we had the incentives with that kind of money, knowing that we were probably backstop by the government of things went really wrong. I'm not so sure we wouldn't have done the same thing. So I don't want to, make it seem as if the bankers are particularly, morally, suspect.

But, it does say that, every day you've gotta pay a little attention or be conscious of are the ethical assumptions I'm making in whatever decision, whatever I'm doing. am I okay with that? And I'm proud of that? and am I willing to own it? and it's so easy to point the finger until it's your turn. That's the thing, isn't it?

I feel sorry for some people in banking now 'cause there's good people obviously in banking, but they've all been so badly tarnished and it's so risk averse now that it's so hard for them to innovate. I work with banks now and I feel so bad for them because it's like they're personally liable as well. So if there's a mistake, it comes down on them. So it's really hard for 'em to navigate it. it's true. And that's the dilemma is that when an industry does not police itself, somebody else will.

And then everybody is under that, new regime. but again, they kind of got what they deserved. In fact, I used to say this is before the financial crisis, that the two biggest profit centers for most banks are customer ignorance and obfuscation or complexity. and, you've seen this play out with all kinds of, regulatory issues and so on with banks, disguising fees and, making it difficult for customers to understand exactly what they're paying for things.

but you know, you can find that in every industry. It's not unique to banking. Sins of the fathers and mothers. But I, I loved what you said next. I heard this great line. I don't know who said it, but who told me was Hal Gregerson. He was on the show before and he said that tenant farmers don't pick up rocks. and I thought it was just a beautiful saying that you also have tenant CEOs or tenant leaders, they're like custodians of the role. They're not that interested in the future.

But what you talk about is that we need to rediscover farmer values and to achieve resilience, you have to do the work.

And you talked about your parents-in-law actually, and how they did it by working 14 hour days, six days outta seven, by taking few vacations and foregoing many luxuries by building up cash reserves in good years so that they could survive bad ones by diversifying crops to reduce exposure to fluctuating prices and by paying themselves modestly while investing everything they could in land and equipment.

I think that point with the one that you mentioned earlier, those are two good ones to juxtapose because if you don't feel like something is yours and you don't feel, that you are truly accountable for what happens. It is very easy to become, lax. the other way I heard that expression is somebody said, nobody ever washes a rental car. If you have a farm and it's your land and, there's nobody else to blame. now that doesn't mean there aren't lazy and incompetent farmers.

There are, but I was always very impressed, by their work ethic. people who started, with almost nothing, rented a tractor for $5 a day, ended up building, thousands of acres of agricultural land and a huge farm and so on, just by sheer unbelievably hard work and accountability. I have a feeling in some ways we've kind of gotten decadent. we've kind of lost that connection between sacrifice and hard work and gains.

if you look more generally with the west, going into debt, having record high levels globally, having record high levels of indebtedness, certainly in my country, in the United States, household debt, corporate debt, government debt is all at record highs. I kind of have this sense, that would've probably appalled, a generation three or four generations back.

But I kind of have the sense that we've just put the future in Hawk to create the illusion of increasing standards of living they really haven't.

our productivity growth rate is not very high, but we just go deeper into Hawk because we want, the two overseas vacations a year and we want the second or the third car, and we want the designer close, and so on I think that's a dangerous thing for society when the connection between sacrifice, this willingness to forego immediate gains and so on, when that loses out to simply, the desire to have it all and have it now and damn the future. I do think been in danger of that.

I wondered, I wrote about this actually in my notes. I took your notes and I added it to them, and I felt that it's a problem in generations at the moment, and it's not the current generation's fault in a way, like they've been ushered that way. And there's an old saying, the first generation makes it, the second generation spends it and the third generation blows it.

And it's a little bit of that where every generation is a little bit softer than the one that came before, and they forget the origin story, that struggle story. I think in companies it's the same thing.

a generation may not be just 25 years or one CEO, but you do see something similar it's the creators, the entrepreneurs, the builders, and then you have the caretakers, the administrators, the good managers And then you have the undertakers, which is, the vulture capitalists, the private equity and so on.

And I think one of the challenges there, is that if you've never had to build something from scratch, you have no idea how hard it's,, you've built a business, you've built a series, you understand just how difficult that is, right? in time and commitment and energy and lying awake at night and thinking about things. And I think our organizations are filled with people who never had to build anything. all they had to do was manage something that was already there.

It's the difference between, accumulating a fortune and then having some money manager, manage it for you. if it was up to me, I would, in any reasonably large organization, never let somebody become CEO unless they had built a new business, or maybe a new brand but where it wasn't simply about incrementally improving something, but you literally had to pull something out of the dirt and make it real. because if you don't understand that process, you don't know how hard work it is.

You know, I've started several companies, it's, ball breaking. but I think a lot of administrators never, you never experience that. You never know that. so you don't even value the people around you who might be willing to do it. We talked about this before. It's like for me it's like going to the gym. If you don't do it, the muscle atrophies or you don't even know there's one there in the first place. You gotta go through the struggle. But the next thing you talked about was renouncing.

Capitalism's, dangerous conceits. And there's a couple of things here I thought, I dunno if you've ever heard the beautiful metaphor of tsunami stones. So in Japan and places that are prone to flooding, they have tsunami stones and on them are written, do not build houses here because this is liable to tsunamis and they're us in most places. They're grown over by grass or vegetation or just graffiti Dover. And I was like going, well that's one of the problems in organizations.

There's no way to go. This happened, 2008 happened and this is how it happened to remind us of these things. And I wondered, had you any advice for organizations to pass the button to the future and go, don't let this happen the an ethical downturn, or it could have been some bad decision where we bet the farm or some poor decision making by the leadership team. Yeah. Well, I would say two things there.

One, as I said, don't ever assume that you are not equally vulnerable to those, human temptations, degree, denial, hubris and so on, because we all are. I remember, I think his name was Chuck Price, who was, maybe the CEO at Citi, big US bank. And somebody questioned him, like, why did you ride this thing all the way out to the end and over the cliff? couldn't you see disaster looming? And he said, as long as the band is playing, you have to dance.

There'll always be a rationale, most typically the one that teenagers use. Everybody else is doing it. There will always be a rationale. So I do think, it's not bad to have that reminder of greed, hubris, denial and so on. And think about like, is that tinging this decision in any way? you know, that personal moral accountability I think is important.

I think the other thing is creating an organization where every single employee like a risk taker and has the power to be a whistleblower without consequences. we might have talked about this company, WL Gore, makes Gore-Tex and material size company, but one of the things that struck me when I got to know them some years back was I was sitting in a meeting for more than an hour or two, somebody would ask, is there a waterline issue here?

there something we're not seeing that could hit us underneath the waterline? And that could be, we had a regulatory, screw up. We let down a customer, we took a financial risk. We didn't really see. And so there was this awareness that we collectively the stewards of this organization. Now, in that case, they all are owners and so they have that sense. But you have to have that instilled everywhere. it's not, this group over here is our risk manager.

And you may have obviously some specialists who are doing that work. But everyone has to, feel, it's my accountability to keep the company off the rocks. and clearly that did not happen in the investment banks where, as I said, these responsibilities were completely separate and you had the risk managers trying to hold the reins on these runaway horses so yeah, I think those two things, be aware of your own temptations and subject your decisions to a little bit of ethical scrutiny.

And don't be too quick to kind, give yourself, an excuse and then, train everybody and understand what are the sorts of risks we face as a business? How do they present themselves? And also, why might we not be as attentive as we should? because it may cost us something to, change this, or it may be embarrassing to admit that we've done something, with our customers that perhaps we shouldn't have.

so you gotta, yeah, it's going to be embarrassing, but we'd rather recognize a problem earlier than late. If anybody's listening that works in the banks, don't worry. It's not just you, Gary says. When it comes to free markets, there's plenty to be cynical about the food industry's long and illicit love affair, where trans fats Merck's disassembling about the risks of Vioxx.

Facebook's occasional cavalier attitude towards customer privacy, the seldom promises of airline executives to improve customer service and the everyday reality of hidden bank fees, overinflated product claims and buck passing customer agents. I thought it was funny that you mentioned Facebook and this, you wrote this back in 2009, so you, you were onto them back then and we saw how bad that went.

Yeah. And I think it's only gotten worse, there's a new book, I don't remember the name of this woman, but she was head of, meta Global Affairs, who's kind of pulled the curtain back on some of this. and, yeah, I think if you were looking for a modern equivalent of that kind of moral failing we saw in investment banking, it would be social media. I think there's just no doubt of that. We've, and I could give you some inside stories here, which I probably shouldn't to be prudent.

But, there has been just willful denial of a growing body of evidence that. Shows how destructive this is to young minds and to social development, and so on. And, it's at least as bad as the tobacco companies and the years they spent denying the harmful effects of, tobacco. Google had that famous mantra, don't be evil. I go, guys, that's a pretty low bar, right? I mean, and you failed at even that, oftentimes. with privacy and with social media companies have not been forthcoming.

it's taken huge lawsuits and government regulation to get them to, accept even the most basic levels of, control and responsibility. And it's scandalous. it's just no other way of saying it. It's scandalous. I don't, I dunno if you saw, there was an ad campaign was the UK ad campaign. You might've seen it when you were lecturing in London where a nuclear bomb or some type of bomb gets delivered to somebody's house and they're like, on what? What's this? And they're going, oh, you own it.

It's part of your investment stock portfolio. And I always think of it as one of those where you may be critical of somebody, like one of the social media companies or an alcohol company or a tobacco company. And oftentimes we may be through our pension funds or through some type of investment or. Actually strategically investing in those companies. And that's where you go, is that, we'll, that's where we contribute and we don't even maybe admit it to ourselves.

Yeah, I think that's a fair point. I think that sense, you know, we can all be complicit. you have to draw your own, boundaries there. I do worry that we may see more of this rather than less of this as, any sense of a societal consensus around right and wrong and, moral boundaries seems to be in some danger and, eroding.

yeah, we'll have a reckoning and we probably have to have some deeper conversations about, how do we, set the boundaries as a society on this and at different times through history. we've done this, if you go back, I guess it must have been the beginning of the 20th century, Teddy Roosevelt, the great campaigner against, monopoly power and the trust. these were the most powerful institutions in the United States, standard Oil and so on.

He pulled them apart and, said, you can't have institutions that are that powerful and unaccountable. and we've seen that now around the way social media is shaping behaviors and, gatekeeping information and so on. So maybe it's just inevitable that every generation or so you gotta come back to this, be reminded that these institutions serve us and not the other way around. That we have a right to hold them to certain standards of accountability. And, we have to assert that, right.

I don't think the problem ever goes away. I think you deal with it. every generation has to deal with it a new, I suppose. but it's, it's, it's pretty disconcerting that we let, monopoly power in tech. And the influence it has over human development and so on goes so far with so little in the way of effective breaking. It's such an analogy though for business.

I often think society goes through a similar S curve as businesses That, you get to this breaking point, the great civilizations get to this breaking point. There's chaos. And then from the chaos, new order stems from that, Sometimes you just have a long period of chaos. Yeah, and it can feel like that at the moment.

I know for many, many people there, there's a, the next thing you say is you, you talk about the reclaiming of the noble, and here you say, why is the language of business so sterile, so un uninspiring, so relentlessly banal? Is it because businesses is the province of engineers and economists rather than artists and theologians? Is it because emphasis on rationality and pragmatism squashes idealism?, I'm not sure, but I do know this.

Customers, investors, taxpayers, and policy makers believe there's a hole in the soul of business. And the only way for managers to change that fact and regain the moral high ground is to embrace what Socrates called the good, the just, and the beautiful. Yeah, I think again, multiple causes for that. and let me come back and, and justify the premise in a minute. But, I think there are multiple causes. you know, partly because we have kind of, pushed the sublime, out of the frame.

For all the advances of science and reductionism and, and, the assumption that we live in a purely material world, you know, and you, we've, we've abandoned those higher order deeper human longings, and I think human truths. , One of the, one of the little exercises I sometimes give to, to a, a company or a group of employees is to go look at their CEO's speeches or go look at, the annual reports and so on, and just look at the words, that are used there.

And you'll, undoubtedly see words like, you know, superiority, focus, cost, quality growth and so on. But you'll almost never hear words like joy, truth, honor, beauty, justice, love wisdom. And, and again, yeah, I think that's part of it. There's a very super smart English philosopher, Ian Mcg Gilchrest, I think he must be in his mid seventies now. He's a great friend of the show. we've had him on a few times. Okay, Beautiful books. Yeah. I learned so much from him.

his argument is like the left brain, the rational mechanical part of us has, taken over the Western world and reigned supreme. I think his argument in one of his books, the Master and the embassy is like, the left brain is a really good servant, but it's not a very good master. What you want is the right brain that is a seed of values and wisdom and perspective and nuance. So let's not get, too metaphysical here, I love it, Go ahead. I do believe that, long before I read his work.

I said again, partly in chess, that, the average, accountant, engineer, manager has, a left brain, the size of a watermelon and the right brain, the size of a walnut. they've just been called to use only one half of themselves.

you see this in our organizations and, you have to be pragmatic, of course, in a business, but I think we often get so conservative, so utilitarian, so process focused, so driven by data, so obsessed, in our pursuit of, meager efficiencies that we can't dream of doing anything bigger or greater.

One of the things I, when I first really started thinking about this, I was at an Apple event, when they used to do these big product launches, but Steve Jobs would get up on stage and talk and so on, and he almost never talked about what made Apple, apple. And by the way, this is then not now. So I'm not talking about Apple circa today. This is now, 20 years ago perhaps, or almost. And he said, let me tell you what I, how I see Apple.

And he put up like an image of two street signs, at an intersection. and one said technology, and one said the liberal arts. And by liberal arts, that's what he meant. He meant Socrates. He meant the things, the principles that we have around justice and beauty and truth and so on. and, they were trying to work at that junction.

They were trying to take technology and humanize it and make it beautiful and something you wanted to look at and hold that felt like, it spoke to you rather than just like a mechanical thing. And I think that's a very difficult thing to marry those ideas. but I think that's what they did. you know, we talked at one point, I think in our series about, John Mackey when he was founding Whole Foods, and he said, I wanna create a company based on love instead of fear.

the founder of Southwest Airlines, his name's now gonna escape me. Herb Kelleher, he talked about love over and over again with no embarrassment, no shame, standing in front of his organization and, saying, this is the most powerful force of binding an organization together. So, yet I think most of us would feel really weird and nervous and a little bit out of place, like standing up in some corporate meeting and talking about love, like reading the Bible in a brothel, right?

Like, just like, doesn't add up. But I think that's really, really sad because, if you look at all of the greatest human accomplishments in history. they were all driven by, these values, you know, joy, truth, fidelity, beauty, so on. And, Viktor Frankl, the famous Austrian, philosopher and psychologist and Holocaust survivor, you know, he talked about the fact that human beings cannot be happy in an existential vacuum.

in fact, he said the following, he said, in the absence of a transcendental purpose, human beings will be bored, cynical, and selfish. And you wanna just think about that for a moment. Like, to what extent are our organizations or our lives feel like bored? And we're constantly trying to distract ourselves with some nonsensical thing on TikTok or something cynical. Where, when you hear leaders talk about, human beings being their most important asset or whatever else, like Yeah, yeah, yeah.

Highly cynical and actually quite selfish, where, it's kind of the zero sum game where you're after your career and your bonus and your promotion and so on. If there's no higher order shared purpose that ameliorates those things, that's the kind of organization you end up with. I think at least we have to admit we've kind of, driven the human out of our organizations. Purpose is such a, I see purpose everywhere. Like as in you retire.

I've seen people retire who were magnificent in their retirement and then just degrade so quickly, it's like time is on fast forward for them and it's because of that lack of purpose. And then you're kind of going, you see that and then you see people, we've talked about it before. Where they retire on the job, and again, no purpose. Maybe have a great hobby outside work, but they're certainly not given discretionary effort to the company.

Yeah, let me see I can, find a quote here that I often use in my students. We can have all kinds of purpose. You can have a purpose, which is to get rich and have a career and, surround yourselves with luxury and so on. So I think. the purpose has to have a certain ability to it as well. I'm gonna forget who said this, but the point was this, that, we don't stop dreaming because we get old. We get old because we stopped dreaming.

you know, our institutions and almost all the systems and processes inside of them, Aidan or built, and I don't wanna pick on anybody, but they were built by accountants and engineers and managers and they probably have a serv of pragmatism, right? and that's great because you need that. But the greatest author in German Johann Wolfgang von Goethe, he said, dream, no small dreams, for, they have no power to move the hearts of men. I think we kind of forget that.

and you know, the problem with bureaucracy is if you cannot tell people how you're going to achieve something, they'll give no credit to the goal, right? If, I might say what we need to get here, but if I cannot say how, like, why would we do this? Like, you don't even know how to get there. So let's give up, you know, we'll talk about the, transformation at, Roche in some future episode. But they started that with no idea of how, I mean, nothing truly worth doing ever comes with the roadmap.

Can you see the end from the beginning ever? And so if you start by saying, we need a clear roadmap. I need every step laid out. I need to know, we can actually do this. You'll never do anything worth, doing. And, reclaiming rehumanizing the language of business, and rebuilding kind of our humanity inside our organizations, I think is hugely important.

And if nothing else, it just means being respectful of people who have dreams, being respectful of people who talk about their work with more meaning and with this higher sense of purpose, rather than roll your eyes.

And, so yeah, I think, again, I'm not sure exactly how to solve this problem, but I think we just have to be aware that we have, to use Max Weber's term, disenchanted our organizations and I think have paid a price because, you know, without that higher purpose, that stretch, that noble purpose, you're gonna have an incremental organization doing things that are, not that impressive. and with AI we're only fast tracking all of that as well.

if the AI's based on efficiency, you know, we're in trouble.

So chapter two or section two, as you call it in the book, because each section has five chapters in it is called Innovation Matters Now, and there was an opening line here and it's gonna reach through the screen or through the EarPods into people's hearts here who work in innovation. You said, when you seem to be caught in a cycle of endless retrenchment, it can be hard to be optimistic, even if you believe the world is filled with more promise than peril.

And if you're a champion of innovation, it's harder to put on a happy face if you're a mid-level vp. You've probably had a pet project gutted by some newly empowered bean counter. If you're a struggling entrepreneur, you may have had to lay off some key talent and cut expense to the bone. And if you're a consultant who helps other folks to innovate, you've maybe won spending freeze away from posting yourself at a busy Intersection with a hand lettered sign that reads will brainstorm for food.

In recent years, left brain types have had the upper hand while starry-eyed innovators have struggled to get a hearing. Nevertheless, before innovation slips any further down the list of corporate priorities, we need to remind ourselves that we owe everything to innovation. Yeah, I think it's true. You know, as human beings, I think we're at our happiest when we're creating and innovating. I mean, obviously innovation is what lifts the human condition.

innovation and agriculture and in communications and so on is what makes our lives, better. it's what raises productivity and allows us to afford, important social priorities. you know, it's the only insurance against irrelevance in a world where so much is changing. So, yeah, I guess my whole career, I've often been. perplexed by how could this be so important and yet be so minimized. in most large organizations, you know, the answer is really simple.

Our organizations are built to do something else, right? They were built to do the same things over and over again with ever increasing, productivity and, so on. And, innovation was always a tangential, you know, a relatively tangential activity. I think that's still the case. If you wanna make innovation a deep competence in a company, like everybody's job, every day, you have to re-engineer. every system, every process, every structure.

So it is innovation friendly rather than innovation, toxic. that means making innovation a large part of executive compensation. it means ensuring that you are setting aside a sufficient amount of capital expenditure and operating expenditure, and getting that behind projects that meet a real task of being innovative. it means when you hire every hiring decision you are asking, you know, you're kind of testing, can this person think laterally?

Thinking creatively, it means training every employee on the basic disciplines of design thinking and creative thinking, and so on. So it's, again, it's not that it's that hard to do. very seldom do you see companies treating this as a systemic problem, which is kind of odd because if you go back over the last. 30, 40 years, you know, the big re-engineering craze, we turned our organizations inside out to create more efficient supply chains, global supply chains.

Now we're gonna probably have to reconfigure those again, given the de integrion that's going on in the global economy. You know, a decade later, every company was like turning everything upside down for digital transformation. it's not like we don't know how to do difficult things kind of systemic things, but we've just never said. And you know, part of my suspicion around this is that very few leaders get promoted because they have that skill, because they're great innovators.

It's not something they're comfortable with. It's not something, that they feel like I'm an expert at. So it just gets downgraded. they have a hard time recognizing it, even when they see it. And so, they're happy to put in all kinds of systems for financial control and so on, but like, I don't really know about this. I wouldn't know how to manage it, and so on. That's, probably part of it.

also we've had this kind of mythology around innovation that, innovators are these rare, amazing people, , like Steve Jobs, and they come along once every so often and they're geniuses and they're just wired differently than the rest of us. you can't teach people, you can't make that systematic. So I think for all those reasons, I would argue that, and I think I could back this up, that probably most organizations are using maybe 10 or 15% of their, potential innovation capacity.

Gary as you say here, you say it beautifully. If life had adhered to Six Sigma, we'd still be slime. Yeah. Well, life has to make a lot of mistakes, the species forward and, If genetic transcription was perfect every time you get no mutations, and therefore no progress. I think ultimately stakeholders have to put more pressure, investors have to put more pressure on companies.

You know, I think I was saying the other day, Procter and Gamble, I do not believe has created a major new brand in 40 years. And you go, like, how you have so many people and so much resource and so much data coming from your customers, like how in the world can that be possible? and you know what I'm always quite, inspired when I see innovation and really basic products and services , and you realize like, what can be done.

You know, there's a, non-alcoholic beer brand in the US called athletic beer. And it was just a couple of people passionate about creating beer without alcohol, did hundreds and hundreds of experiments. They're now, I think, the number third beer in what is a very competitive market with powerful competitors and so on, just because they were like, believed it could be better. or I go back, almost a half decade.

And I look at the group of people at, Nestle who said like, Hey, wouldn't it be great if we could give you like a barista experience and espresso coffee in just like a machine you could get at home or in the workplace and so on. They spent years and years perfecting that. so innovation is not, this gigantic breakthrough always, and you're going to win a Nobel Prize or you get a bunch of patents.

It's just, being able to see where customers are ill-served, where the incumbents have missed some opportunity, and then having the persistence, one of the wonderful stories and then I'll stop with stories, but another kind of story about like. how you can innovate literally in anything. I don't believe there's any such thing as a mature industry. anybody who's in London for sure, you've had a sandwich at Pret a Manger, right? They're all over London.

I guess in maybe some other cities in the uk. I think there are a few in New York, these are two young guys at Bristol University who said like, why can't fast food be healthy? and it took 'em years to figure out how to do that, how to get the supply chain right? How to get the labor practices right? So people are building these, you have people making the sandwiches and so on every morning from fresh ingredients and now I could hardly imagine being in London without having that at my disposal.

so that possibility is everywhere all the time. but I don't think most CEOs believe that. And certainly very, very few have said, let me look at everything we're doing and see if we can make it innovation friendly.

Beautiful. And I don't want people to think it's all negative. We only really cover chapter one and chapter two very, very positive. We're gonna move on to. If you're reading along with us three, four, and five the next day and finish off this, there's another one in the beautiful series of Gary Hamel. Gary, for people who wanna reach out and find you for keynotes, for workshops, et cetera, where's the best place? the website is, gary Hamel.com.

You can find me at LinkedIn, just under, my name and on x it's just Prof Hamel. Author of What Matters Now, Gary Hamel, thank you for joining us. Pleasure.