Are They Giving Us the Business
By Philip Terzian
My lifelong aspiration to be a Master of the Universe got a huge boost in 2001 when Jack Welch, legendary CEO of General Electric (GE) in the go-go 1980s/90s, published his accumulated thoughts on the business of business, Jack: Straight From the Gut. It taught me, a veteran company man and wage-earner dreaming of an annual bonus, to throw away my prayer beads and toss the how-to-succeed guides. From then on, under Jack’s tutelage, the only business consultation I required was intestinal: If something felt like the right thing to do – in my gut – I did it.
This worked reasonably well for me – as well, that is, as any business philosophy works for a journalist – until recently, when GE’s long, steep decline prompted its expulsion from the Dow Jones Industrial Average. This shocking reversal of fortunes prompted not only a reassessment of Welch’s stewardship at GE, but of my own approach to business as well. My gut remains a reasonably reliable barometer, certainly reflected in abdominal sensations felt when consulting my investment accounts. But, perhaps, the time had come to find another workplace/marketplace guru. Accordingly, I consulted the New York Times’ Business Best-Seller List.
On the assumption that the top five titles on the Times list would reflect not just literary quality but success where it counts, I settled first on Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World With OKRs by John Doerr (Portfolio). The author is a venture capitalist and, in a long career, has underwritten any number of successful businesses, including an initial $12.5 million contribution to Google’s founders, Larry Page and Sergey Brin.
This had a poignant resonance for me. Once, many years ago, I was introduced to Mr. Brin at a Washington, D.C. reception, and we chatted for a few minutes. He was perfectly polite and engaging, in his way, but I was at a distinct disadvantage since, at the time, I had only the haziest notion of what Google was, or did. Needless to say, if I had known then what I know now about Google – that is to say, in Welchian terms, if I had listened more closely to my gut that evening – I might have offered Brin a vote of confidence comparable to Doerr’s $12.5 million, albeit at a reduced level.
But here is what separates Doerr from the everyday, run-of-the-mill venture capitalist: Investment based on gut instinct is fine, but what counts is how executives put that cash to work. This was impressed on Brin and Page, who adopted Doerr’s “proven approach to operating excellence” called “Objectives and Key Results” – the OKRs of his title. As Doerr describes it, the OKR method requires companies to set goals by defining the Objectives they seek to achieve, and achieve Key Results for those Objectives within a particular time frame. The secret ingredient here is transparency. When everyone in an organization, from top to bottom, knows precisely what its Objectives are, and work cooperatively to achieve Key Results, success is essentially guaranteed.
As with most breakthroughs in human thought, OKRs’ simplicity can be deceptive. Too many business enterprises seem to fail because they don’t really know why they’re in business, or what kind of businesses they wish to be. OKRs concentrate the minds of executives, managers, and employees alike, giving them the tools to achieve the goals that lead to Key Results – and reward investors like Doerr. And to emphasize this proven prescription for success – or, conversely, avoidance of failure – Measure What Matters is full of stories about Google’s initial growing pains, references to hip entrepreneurial rockers like Bono, and testimonials from Bill Gates.
By contrast, Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou (Knopf) is an objective lesson in what can happen when gifted, even inspirational, entrepreneurs like Theranos’ Elizabeth Holmes turn their backs on OKRs. Carreyrou is the Wall Street Journal reporter who, initially and almost singlehandedly, revealed that Miss Holmes’ invention and marketing of a deceptively simple pinprick blood test was, in effect, simply deceptive.
This did not prevent the good-looking, husky-voiced Stanford graduate from raising hundreds of millions of dollars in investor capital, attracting big names to her corporate board, or earning the attention of prominent admirers such as former president Bill Clinton. But thanks to Carreyrou’s reporting, Holmes and her well-publicized venture are now in deep legal jeopardy, and the Theranos enterprise takes its honored place in the annals of business fraud.
Yet, having just ingested Measure What Matters, my gut suggests that there might be another approach to the subject. Suppose Holmes, instead of hustling money and publicity, had instead concentrated her considerable skills on defining her business Objectives and driving managers not to cover their tracks but to define a series of measurable Key Results? In the end, the famous blood test was essentially nonexistent, but strategic application of OKRs might well have led to more practical goals and marketplace success. We’ll never know.
That, certainly, is the lesson gleaned from Shoe Dog by Phil Knight (Scribner). Mr. Knight, of course, is the business and marketing energy behind Nike, the global athletic-footwear franchise whose corporate “swoosh” logo, since the early 1970s, has been among the world’s most ubiquitous commercial symbols.
It might not have occurred to Knight, when he began importing low-cost Japanese running shoes in the early 1960s and selling them out of the trunk of his Plymouth, that his venture would lead to the multibillion-dollar enterprise he commands today. But in his singular way, Knight applied OKRs before OKRs had a name: Simply stated, his Objective was to import (and later manufacture) more and more running shoes, and his Key Results were to sell his expanding volumes of footwear at ever-higher profits. And it worked.
This was the outcome of a youthful decision – taken while backpacking through Europe and Asia – to seek an unconventional path in life and (in the words of Bill Gates) gradually absorb the lesson that “business success [is] a messy, perilous, and chaotic journey riddled with mistakes, endless struggles, and sacrifice.” To be sure, not every
twenty-something idealist translates his ambition into dominating the world of running shoes, and with such success. But the lesson of Shoe Dog may well be that a gut instinct, combined with an OKR-style business plan – and faith in the spiritual nourishment of shoes – can lead to annual sales of $30 billion.
In that sense, the two final titles on the Times list draw these various threads together. In Principles: Life and Work by Ray Dalio (Simon & Schuster), the New York investor and hedge-fund manager builds on Doerr’s essential insights. The key to business success is a set of Principles to which you and your company can adhere, and a clear understanding of what’s important to your company – and to you personally.
This is achieved not just by a perception of Objectives and Key Results, but by the equally-important element of trust between boss and employee. In Dalio’s experience, it is bad business to mistreat or mislead the people dependent on you for their livelihood, and worse to allow company problems to fester. As he tells it, better to face challenges and solve them – to follow your gut, as it were – than to sacrifice the vital element of trust when things go awry.
Similarly, in I Love Capitalism: An American Story by Ken Langone (Portfolio), the billionaire investor reveals his admiration for the economic system that has enabled him to accumulate such prodigious wealth, and by way of his own life story, illustrates how business success is possible – maybe even inevitable – with the proper combination of ambition, dedication, hard work, good luck, as well as honesty, fidelity to principles, and faith.
But whereas Knight, Doerr, and Dalio tend to concentrate on details of their own particular businesses, Langone chooses an inductive route. His wealth is a result of his own reliance on Welch’s gut instinct and Doerr’s Objectives and Key Results, but the larger lesson of I Love Capitalism is that his personal success is emblematic of capitalism’s larger virtues. If Ken Langone can do it, so can you.
All of which, from these various commanding heights, is surely true. And if the New York Times Business Best-Seller List teaches anything, it is that Welch’s Gut is probably as valid as Dalio’s Principles, and Doerr’s Key Results are as vital as Knight’s vision of a world united by footwear. The only outlier here, of course, is Holmes, whose gut appears to have lost its moral compass, and whose failure to appreciate OKRs is everyone’s loss.
Philip Terzian, a senior writer at The Weekly Standard, is the author of Architects of Power: Roosevelt, Eisenhower, and the American Century.