Three Principles Of Leadership
I recently delivered a keynote speech at the 10th Annual Booth-Kellogg Entrepreneurship Through Acquisition Conference, hosted by the University of Chicago’s Booth School of Business, Polsky Center for Entrepreneurship and Innovation, and Northwestern University’s Kellogg School of Management. Below is a summary of the message I shared, and you can watch the session here. There was also a Q&A session after the speech that you can watch here.
The Layoff That Changed My Career
On a January night more than 20 years ago, I was in a Motel 6 in Fort Wayne, Indiana, wide awake at 3 a.m. I was 29 years old, and I hadn’t slept well for weeks. I was anxious because a label-printing company I’d bought a few years earlier had been teetering on the edge of going out of business following the recession of 2001. I’d found a buyer who could keep the business afloat, but we had to lay off about 25% of the workforce. I was due to deliver that news in a few hours. I was terrified, but I had no idea that all my worries paled in comparison to what would actually happen that day. I also didn’t realize it would be a turning point in my career.
I went over the numbers again and again, looking for a way to give people more severance and a softer landing. Finally, I closed my spreadsheet; spent a few minutes flipping through “The Power of Positive Thinking,” which I’d started reading every night to try to convince myself things would be okay; and headed to the plant at 6 a.m. As I walked in and I smelled the familiar scent of ink, I spotted the CFO — I’ll call her Dana — who had spent two months keeping the secret of what was about to happen, she was the only other person in the company who knew what was going on. We brought all the people being let go into a conference room, and I launched into the speech I’d practiced hundreds of times — thanking everyone for their work, sharing everything we had tried to save their jobs, and explaining that, unfortunately, today would be their last day.
I was about to move on to the details about severance, COBRA, and outplacement services, when Dana broke down in tears — and many other people in the room did, too. After I finished my speech, everyone walked out in silence, their heads down. I could feel their fear, sadness, and anger. My colleague handled a similar layoff in our other facility in Detroit, Michigan. Several hours later, at the Michigan facility, one of the employees who had lost his job returned to the office wielding a loaded gun. While we were able to talk him down, the experience cemented in my brain the seriousness of my role as an investor in small companies.
Learning to Lead
Nobody prepared me for how difficult entrepreneurship was going to be. One of your top employees might hand in her resignation without notice. You will miss revenue projections. One of your software systems might fail, taking your customers offline. You could be threatened with litigation or default on bank covenants. All of those things happened to me. This year. And there is still a month to go.
Though that day in Fort Wayne remains one of the worst of my career, I learned a number of lessons that would stay with me for the rest of my life. When I worked on Wall Street before starting my journey in entrepreneurship, the acquisition models I learned to build typically included a line titled “cost synergies,” representing redundancies that could be eliminated after Company A bought Company B. But that day in Fort Wayne, I realized that “cost synergy” was code for a man who had to go home and tell his wife and young son he’d lost his job, or a single mother who didn’t know how she was going to make rent or put food on the table. I resolved that I was never going to be part of “cost synergies” ever again. I was going to devote my career to creating jobs — by building companies.
I also realized that when you buy a business, you’re not just an investor; you’re a leader. You’re accountable; people’s lives are depending on you. And when I took a hard look in the mirror after that day, I realized something pretty devastating: I wasn’t a very good leader. Walking into that plant, I realized I had let everyone in the company down. I never wanted to be in that position again.
So, for the last 23 years, I’ve devoted myself to becoming the best leader possible. I’ve met with an executive coach every week for 14 years; I’ve taken courses; I’ve consumed thousands of hours of podcasts, books, and other content. I’ve endeavored to codify what I learned with my team at Alpine, through the classes I teach at Stanford Business School, and on this blog.
Over the course of 23 years as an entrepreneur, I have learned three important lessons of leadership.
Principle 1: Do the Thing That Turns You On
I started buying companies before I even graduated from business school, while I was still living in the dorms at Stanford. I loved it. But instead of chasing that energy and passion after I finished my degree, I built an expected value matrix, considered the risk-adjusted probabilities of my various options, and took what I thought was the “safe” job.
Well, that “safe” job wasn’t all that safe. I ended up in a role where I didn’t decide when I worked or what I wore, much less which deals I bid on or invested in. The math I’d relied on to make my career decision had been way off — because I hadn’t factored in the stress and toll of spending eight hours every day doing something I didn’t really care about. In that so-called “safe job,” a part of me died, and there is no comparison between the way I showed up in that role and the way I’ve shown up for the last 23 years of entrepreneurship. When you do something you’re excited about — something that turns you on — you will tap into superpowers you never knew you had.
“When you do something you’re excited about — something that turns you on — you will tap into superpowers you never knew you had.”
That doesn’t mean it will be easy. As Buddha figured out 2,800 years ago, you will experience suffering no matter what you choose to do in this life, and that includes the things you’re passionate about.
Life is suffering, so choose something worth suffering for.
The question is, “How do I figure out what is worth suffering for?” To help my students get clarity, I give them a simple exercise: Imagine you find a lamp, and inside is a genie with one specific power. It can’t grant any wish, but it can ensure that whatever career you throw yourself into will eventually work out great. It’s going to have ups and downs; it might take longer than you think or be harder than you think. But ultimately, you’ll succeed. Whatever you would do if that genie granted you that wish, that’s what you would do in your life, absent the fear of failure. And I would argue, in most circumstances that is what you should choose to do with your life.
If you want to be a great leader, do the thing that turns you on.
Principle 2: Extend Your Time Frame
I’ve acquired more than 500 companies over the course of my career, and not a single one of those entrepreneurs — not one — became successful quickly. Most often, they’ve been growing their business for decades. And even if they started the company less than 10 years earlier, it was built on their pre-existing 20, 30, or 40 years of experience. Yet we’re all sold this idea that things are supposed to move at lightning speed — and so many of us make the mistake of thinking that if that doesn’t happen quickly, we’re failing or falling behind. We compare ourselves to our classmates and peers and think, “I am behind. I should have started earlier. I’ve wasted too much time.”
But think about what happens if you optimize for speed early in your career. In the first two years after graduation, your highest-paying job opportunities will be doing the things you’re already good at — your individual contributor skills, often your analytical skills. Entrepreneurship, on the other hand, doesn’t pay much in the early days, because you’re not going to be very good at it at first.
“Entrepreneurship, on the other hand, doesn’t pay much in the early days, because you’re not going to be very good at it at first.”
A friend of mine optimized for his first few years. He became a convertible bond salesperson. It paid well and he was decent at it. Twenty-three years later, he has learned to short stocks, buy bonds, buy stocks, short bonds, and run a mean Black-Scholes. But after 23 years of entrepreneurship, you’ll have learned how to rally the troops after the worst quarter your business has ever seen. You’ll have learned how to hold people accountable and have difficult conversations. You’ll know how to launch a new product or service, how to create business plans, and how to convince people to join your cause. You’ll learn how to raise capital — and how to raise your employees’ self-esteem. You’ll also learn how to sell as though your life depends on it, because it often will. You’ll sell investors and candidates on your vision, customers on your product, and yourself, every morning, to keep going on a path that won’t always be clear. You will learn to imagine a world that doesn’t yet exist, and to make it reality through a group of people who trust you to lead them. Your goal shouldn’t be to maximize your first- and second-year earnings — it should be to maximize who you get to become over the course of decades. Give yourself the benefit of having a lifelong love affair with your career.
“Your goal shouldn’t be to maximize your first- and second-year earnings — it should be to maximize who you get to become over the course of decades. Give yourself the benefit of having a lifelong love affair with your career.”
If you want to be a great leader,
Do the thing that turns you on and
Extend your time frame.
Principle 3: Beware of the Two Most Dangerous Words in Entrepreneurship
In 20 years as a lecturer at Stanford, I have worked with many students to help them determine their “Genie Goals,” the thing they’d do if that genie ensured their success. In those 20 years, not one of them has ever said, “Graham, I know what my “thing” is, but I’m just not going to do it.” Instead, they utter the two most dangerous words in entrepreneurship: “Not now.”
Another college friend of mine said the same thing after graduation and took the safe job. He hated it, and he told me he was going to quit — as soon as his bonus arrived in January. But when I saw him a year later, he was still there; this time, he said he was sticking it out until his equity vested in December. The next year, he stayed because he was about to get married. The year after that, they were expecting their first child. Then it was a mortgage. Then private school. Two decades later, he was at that same company, wishing he could go back in time and just take the leap.
The truth is, there will never be a day when the clouds part and a ray of sun shines down and a voice says, “Now is the time.” The salary, free lunches, bonuses, and training programs will always feel safe. Entrepreneurship will always feel scary, uncertain, risky, and too soon. You will feel like an impostor. You will feel like you need more experience. But you don’t. You just need to recognize that “not now” is nothing more than fear in another form.
“Entrepreneurship will always feel scary, uncertain, risky, and too soon.”
If you want to be a great leader:
Do the thing that turns you on,
Extend your time frame, and
Beware the two most dangerous words in entrepreneurship: “Not now.”
Leadership Changes Lives
Close to 70% of workers in the U.S. and Canada aren’t engaged in their jobs, according to a recent Gallup poll. That’s 7 in 10 people spending nearly half their waking hours doing something they aren’t excited about. Imagine how someone shows up in the rest of their lives when they don’t feel valued, or they aren’t proud of their work, or they don’t like their colleagues or don’t feel like their work has meaning. Imagine how they show up for their partners, their kids, their friends, their extended families, their whole communities.
Now imagine that those same people felt empowered at work; that they saw how what they do matters and how it’s connected to a larger purpose. They are inspired at work. They work with people they like and trust and admire. How would they show up in the world?
As a leader, you have the opportunity to change the lives of your employees. You will get kicked in the teeth along the way. There will be suffering. But if you do the thing that turns you on, lengthen your time frame, and beware the two most dangerous words in entrepreneurship, you can and will make a difference in countless lives.
The bad news about getting started is that no one else can give you permission — not a consultant, not your parents, not a coach. But the good news is, yours is the only permission you need.
You didn’t come this far to play small. You can make a dent in the universe. Start now.
Good luck!