James Fallows:
Greetings, everyone.
Welcome back for the second
half of our morning session.
My name is Jim Fallows from the
"Atlantic Monthly" magazine,
and we are going to hope to
continue the high level of
excitement and interest
we've had for the first
part of the program.
James Wolfensohn mentioned in
his opening remarks that it was
almost exactly two years ago
that the failure of Lehman
Brothers began the economic
consequences we have been
coping with ever since then.
This stuck in my mind because
it was almost exactly two years
ago at a Zeitgeist that was
held on the Google campus in
Mountain View that I had
the chance to interview a
man name Gou Shi Chang.
He was then and is now
the head of the China
Investment Corporation.
In the 24 hours before he came
on stage to be interviewed in
front of the crowd, he had been
responsible for a larger
financial market loss than any
other single person in human
history because he was in
charge of China's holdings
in the world markets.
And so, tens, hundreds of
billions of dollars went away.
Nonetheless, he came
to our conference.
Nonetheless, he answered
questions and he soldiered on.
He said what he was
going to try to do.
I reflected on leadership as
involved people like Mr. Gou.
This was a person who in his
teenage years was building
railroads in Manchuria during
the cultural revolution.
Then went to the Duke Law
School as one of the first
Chinese students, then was a
Wall Street lawyer and then
came back in the 1980s to help
rebuild China's economy.
We've heard about the strengths
of China and India's growth
in this morning's session.
Leaders like that are part
of the strength that
these countries have.
They have their weaknesses, but
that's some of the strength.
We know when it comes to the
U.S. economy, U.S.
institutions, western
institutions, there are many
questions about the caliber of
leadership: Leadership in the
political realm, leadership in
the media realm -- we can't all
be Ted Turner, much as it would
be nice to imagine --
leadership in the military
realm, leadership in
the financial sphere.
This -- in the rest of this
morning's program before our
lunch break, we are going to
explore these various
dimensions of leadership from
people who have lessons to
teach about the experience
they've been through.
We are going to begin with an
academic specialist as you
already have been queued up by
Chrystia Freeland who has made
a science of how people can
make themselves more optimistic
and more positive-minded.
Then we're going to have a Q &
A discussion with somebody who
is in the middle of an
impressive turnaround.
Then we are going to hear from
a leader of an industry itself
that's going through huge
shifts of its underlying
market position.
Then another Q & A discussion
with somebody who has completed
a very, very successful
leadership of a mature company.
Then we're going to have
a surprise for you, too.
So that's what's in
store between now
and our lunch break.
There will be time after the --
before the surprise and after
these initial presentations,
we're going to have all of
the speakers come on stage.
That will be the chance for
all of you to have Q & A.
So that's our ambition for
these next 90 or 100 minutes,
to look at different aspects
of leadership from people
who have lived this world.
To begin this presentation, we
have the great honor of hearing
from Martin Seligman, whose
official title is the
Zellerbach Professor at the
University of Pennsylvania, a
man who has received
essentially every honor that
his field can bestow, his field
of psychology, that he has
won research awards.
He also won, I gather, by
historic FDR-scale landslide,
the presidency of his
professional organization.
So we can see his
political skills, too.
His relevance -- among his
relevances here for our
discussion is the study he's
done on "learned optimism," of
being able to develop the
traits that Ted Turner, among
others, displayed so naturally
and so effortlessly in
our previous session.
He has a book coming out next
year called "Flourish."
Please join me in welcoming
Martin Seligman for our
initial presentation.
[ Applause ]
Martin Seligman: It falls to
me to articulate a positive
vision of the human future.
I don't know if I can do that,
but I think I can talk about
what the prologue has to be
to a positive human future.
I don't think we can have
one unless we envision it.
So what I'm going to do is
talk about what is positive
psychology, what is well-being
and positive interventions
that build these things.
And, finally, I want to talk
about the relationship of
flourishing in individuals,
to nations, to corporations.
Let's start with, "What is
positive psychology?" Where
I came from and psychology
came from, I came from
working on misery.
I spent my life working
on helplessness,
depression, suicide.
And as Jim mentioned, when I
became president of my
association, I looked around
over a decade ago and asked,
"What do psychologists do
well?" We do misery
and suffering well.
And what don't we do at all?
We don't ask what makes
life worth living and can
there be a science of the
positive side of life.
So my mission for the last 12
years has been to shepherd the
science, the funding, the
practice, the possibility that
there could be a rigorous
science and useful practice of
what makes life worth living.
So that's what the next
18 minutes are about.
And in this view, it says that
positive psychology should be
just as concerned with human
strength as it is with
weakness, to quantify it and
to ask how to build it.
It should be just as interested
in making what is best in life
as with repairing pathology.
It should be just as concerned
with your lives and the lives
of your children as it is with
people in great trouble.
And, by the way, I don't mean
this as a displacement of
social science as usual but
rather as a supplement.
And, finally, psychology and
psychiatry have to develop
interventions, not just to
decrease suffering but to
increase well-being
and flourishing.
It turns out that's different,
as you probably know,
Schopenhauer and Freud both
believed the best we could ever
do was to minimize our misery.
I think that's
profoundly incorrect.
And I will talk about
evidence against that.
We want to reduce misery, but
we want to build flourishing.
So what is "well-being"
in this model?
In this model, there is an
acronym for it, PERMA.
The claim -- In many ways
Ted Turner gave my speech.
And it falls to me to say what
he might mean and how if one
can't afford dire pessimism,
what are the elements that one
should think about in building?
So PERMA says there are four
components, each one of which
is measurable and each one of
which there's reason to
think is buildable.
The first is positive emotion,
what generally is called
happiness, the subjective
hedonics of life.
The second is positive
relationships.
The third is meaning
and purpose in life.
And the fourth is
accomplishment.
So flourishing from my point of
view asks the question, "How
do you measure those
things with rigor?
How do you measure
them in individuals?
How do you measure
them in nations?
How can you measure them
globally?" And ask how to build
them, what do we know about the
building of these matters.
So there's too short a time to
take you through the science
underlying this, but what I'll
do is take you through just
three representative kinds of
scientific endeavors that
people in positive
psychology do.
And I'll do it for individuals,
since that's mostly what I have
spent my life working on.
So I spent a lot of time --
40 years ago I discovered a
phenomenon called "learned
helplessness." That was
basically when animals and
people confront events that
they can't control,
they collapse.
They become passive, they
become stupid, their brain
changes, they become more
susceptible to illness
and the like.
And research on this went on
for about 15 years, probably
about 1,000 articles in the
literature on the phenomenon.
But what no one ever pointed
out is when I brought people
and animals to my laboratory
and I gave them unsolvable
problems, inescapable noise,
only about two-thirds of
them became helpless.
One-third I could
not make helpless.
So I asked the question, "What
was it about the third of you
who even though you face
adversity allows you to bounce
back and not become helpless?"
So a field grew up called
"learned optimism." And what
people looked at is before
going to the laboratory or
before a divorce, what's your
theory of setbacks in life?
And it turned out those people
who believed that setbacks in
life were temporary as opposed
to permanent, were controllable
as opposed to uncontrollable,
and were local -- and I'm just
bad at math, I'm not stupid --
rather than pervasive, that was
the third who never
became helpless.
So let's kind of -- I am
going to do optimism
for all three examples.
So we now have a pretty
good handle on picking
out in advance people who
don't become helpless.
So we then went on to ask in
high-level athletics, "Could
you predict what athletes were
going to do after defeat?" So
we took our whole 1988
Olympic swimming team.
And, by the way, the reason
that it's important to do it in
athletics and in swimming in
particular, the relay events
follow the individual events.
And so if a great swimmer does
badly, you want to know whether
or not he's going to be
deflated or inflated, whether
or not to put him
in the relays.
So what we did is -- here's
what we did with Matt Biondi.
We did it with all
of the swimmers.
The coach said, "Matt, into
the pool, swim 100 fly."
Biondi swam it in 50.1.
He came out and Nort said,
"52.5, terrible time."
Rest up for 20 minutes
and swim it again.
Biondi is in the upper
quartile of optimism and
the way I defined it.
It's temporary.
It's local.
And it's controllable.
He swam it the second
time in 49.9.
What we find in general in
Major League Baseball, in
basketball, in Olympic swimming
is that the optimists get
better after defeat and the
pessimists get slower.
So that's the second kind
of study that emerges
from the literature.
And third kind is
physical health itself.
And there is -- looking around
how male and what your age is,
most of you are going to die
of cardiovascular stuff.
[ Laughter ]
So we're quite interested in
quantifying risk factors
for cardiovascular death.
So we measure cholesterol,
blood pressure, all the
usual risk factors.
But we also measure optimism.
And you statistically can hold
traditional risk factors
constant and ask to quantify
what is the effect of optimism
relative to other risk factors.
In a recent study of 1,000
Dutch 65-year-olds, we
measured all these things.
We followed them for 10 years.
350 died of
cardiovascular stuff.
Holding constant all
traditional risk factors, the
upper quartile of Ted
Turnerisms in optimism has one
quarter the risk of
cardiovascular death of the
rest of the population.
And this has been replicated
quite a number of times.
We're fascinated by the
cardiovascular mechanisms
that might produce that.
So those are three examples
of the kind of thing
that science does.
Less depression, more
achievement, particularly under
adversity, better physical
health are three
well-documented
consequences of optimism.
So in the well-being
formulation, PERMA basically
says what we want to measure
rigorously and then intervene
on if we can and what a
positive human future is about
is this question of building
well-being: Building positive
emotion, building positive
relationships, building meaning
and purpose and building
accomplishment.
So, are these things
like your waistline?
I'm going to offend
some of you.
There is a $50 billion
American diet industry.
It is a scam.
The reason it is a scam is that
any of you can lose 5% of your
body weight in about three
weeks by following any diet
on the best seller list.
I did the watermelon diet
and lost 20 pounds.
I had diarrhea for a month.
[ Laughter ]
The problem is 85 to 95%
of people regain all that
weight or more in the
next three to five years.
The question about
interventions is whether or not
building positive emotion
relationships, meaning,
accomplishment is like dieting,
boosterism or you get it back.
So let me take through the
kind of things people who do
intervention in this area.
I'm a naughty thumb
of science person.
I spend a lot of my life
testing drugs and
psychotherapies in
randomness assignment,
placebo-controlled tests.
When I started working on the
positive side of life, I began
to say, Can you ask what
makes people happier
in random assignment,
placebo-controlled testing?
From the Buddha to modern pop
psychology, there has been
about 200 suggestions about
what makes people flourish.
A lot of what we do is we
take those suggestions,
we put them on the Web.
We do random assignment,
placebo-controlled.
We found about 12 to 18 of
them seem to lastingly
increase these variables.
And so let me see.
So with individuals, here's an
example of something that lasts
if you put it on the Web
with no human hands.
If this was -- I think you are
getting a copy of my book
"Authentic Happiness," so
you can actually do this.
In that book, there is
something called "signature
strength tests," which asks
kindness, fairness,
gratitude, what are your
highest strengths.
So we have people take the
signature strengths test.
And then we say, Take something
you have to do at work every
week that you don't like doing
and figure out how to do that
tedious task using your
highest strength.
So, for example, one of my --
one of the people I work with
was a bagger at the Acme
and she hated bagging.
Her highest strength was
social intelligence.
So what she had to do was
to figure out a way to bag
using social intelligence.
So she resolved to make the
encounter with her the
social highlight of
every customer's day.
Now, notice she failed at this
all the time but she put
what was best in her
on all the time.
Basically, when you do random
assignment, placebo-controlled
tests, you find people who
do this six months later are
less depressed and happier.
So that's the kind of
individual thing we do.
For the last decade, we have
been taking these 12 to 18
techniques, none of which
are terribly hard to do, to
schools around the world.
And we train teachers in these
principles and techniques.
And then we measure for the
next couple of years versus
controls, the depression, the
happiness, the anxiety, the
conduct of their students.
And, basically, we found in 21
replications around the world
that when you teach teachers
these techniques of positive
education, that the students
are less depressed, less
anxious and have
better conduct.
So I found myself to my great
surprise at the Pentagon two
years ago with the
chief of staff.
And he said to me, suicide,
post-traumatic stress disorder,
divorce, substance abuse,
depression, what does positive
psychology say about
that, Dr. Seligman?
And I said, Sir, the reaction
-- Post-traumatic stress
disorder is a particularly
nasty combination of
anxiety and depression.
And the reaction of
human beings to extreme
adversity is Gaussian.
On the left-hand side, you
have people who fall apart.
I understand you are spending
$10 billion a year treating
them and you should
continue to do that.
In the middle, you
have resilience, and
that's most people.
And what that means
operationally is that people go
through a very hard time but
three months later by
psychological and physical
measures, they're back
where they were.
And then, most interestingly,
there's this huge group on the
right-hand side that Nietzsche
was right about, "if it doesn't
kill me, it makes me stronger."
These are people who showed
post-traumatic growth.
People who by our measures a
year later after going through
terrible times by physical and
psychological measures
are stronger.
Whereupon, I watched something
I have never seen in my
life happen unlike you.
General Casey ordered that from
this day forward, positive
psychology and resilience will
be taught in the entire United
States Army and measured.
And so that's what I have been
doing for the last two years.
Every month -- oh, and he said
to me, The general staff has
read your stuff about teachers.
We see you teach teachers.
You measure the students.
That's the Army model.
I said, it is?
He said, yeah, we have 40,000
teachers in the Army.
I said, You do?
He said, Yeah, the
drill sergeants.
[ Laughter ]
So your job, Marty, will be
to take all 40,000 drill
sergeants to teach them.
Every month now 150 drill
sergeants come to the
University of Pennsylvania for
ten days and we take them
through a course on flourishing
and these principles.
And this is a work in
progress, but it is the
most important work I've
ever been involved in.
So flourishing individuals,
flourishing schools, can
make the Army flourish.
How about nations?
Does that make -- and does
it make any sense to ask
-- and this is where we're
starting to talk about a
positive human future.
Usually when we measure
nations, when we measure
GDP or unemployment or
illness statistics, we're
measuring what's wrong.
Now, if you're following what
I'm saying, I'm saying that the
downstream effects of
flourishing not only involve
more positive emotion, better
relations, more meaning, more
accomplishment, but it turns
out people who are flourishing
are more productive at work,
they're physically healthier,
and they're at peace.
And so there is the beginning,
both in France and the U.K., of
the measurement of flourishing
by entire nations.
So this is a new study by
Felicia Huppert of the
Well-Being Institute
of Cambridge.
What she does is ask the kinds
of questions we look at to
2,000 people in each of 23
European Union nations, and
what you can see here is 33% of
Danish adults are flourishing
by the criteria I'm talking
about, 18% of Brits,
and 6% of Russians.
So it's -- we believe
it's measurable.
The measure -- you know, you
have measurement errors and the
like, but the measurement of
these dependent variables
is becoming more and
more sophisticated.
So one wants to ask the
question -- and I know David
Cameron and Sarkozy both take
this seriously -- if your
economy -- if the best you can
do in leading a nation is to
stop the hemorrhaging
economically, will that
get you reelected?
Well, I don't think so.
But if you change the nature of
the game so what government
is about is the increase in
well-being of a nation, then
you might ask the question:
Does the policy you institute
increase well-being as well as
does it increase economics?
So that's what's
going on nationally.
And the moonshot of this.
So -- and this is why I'm
excited to talk to a
powerful group like this.
So I've argued that when
individuals are flourishing --
when they have positive
emotion, engagement, meaning,
good relationships and
accomplishment -- that health
problems are less and
aggression is less and
productivity is higher.
So imagine 51%.
That in the year 2051, 51%
of the world's population
will be flourishing.
That's the moonshot of this.
And sort of let me conclude
with some thoughts about that.
So this says that by measures
of positive emotion,
relationships, meaning, and
accomplishment, is it possible
that in 40 years half
the world's population
can be flourishing?
So what is the relationship of
that to the technology that
you are the leaders of?
Well, one of the fascinating
things we were talking about
this morning with Google Earth
is, given that there -- so it
turns out every -- positive
emotion, relationships,
meaning, accomplishment
all have an lexicon.
Turns out there are 80 positive
emotion words and there are
about 80 positive
relation words.
So if you think about what's
going out every moment on the
web is words, you can actually
measure the lexicon,
the use of these words.
So you can do -- mapping onto
Google Earth and using time
scale and looking at events,
you can ask the question: To
what extent does flourishing
-- how much flourishing
is there in the world?
How quickly does positive
emotion damp after the Phillies
within the World Series, if
you're mapping this
locally over time?
How quickly does hate damp?
So you can actually ask the
question globally: How
flourishing is a city and
nation at any given moment?
And so I believe that is an
important possibility here.
And very importantly,
public policy follows
from what you measure.
And what we've measured in
public policy for more than 100
years is GDP and unemployment,
and so that's what policy
is driven around.
But if you believe, as I do,
Jim, that what is GDP for?
So one possible answer to that:
GDP is a surrogate variable
for human flourishing.
On that grounds, you say,
"Well, let's measure the real
thing and ask the extent to
which public policy changes
human flourishing."
And another great possibility
is actually viral gaming.
That is, most of our gaming is
shoot-em-up games now, but
there is reason to believe that
you can use the principles of
shoot-em-up games to build
strength and to become the
grand master of positive
relationships and the like.
And indeed there are
gamers who work on this.
So the final thing I want to
say is, I've said that there is
good reason to think that when
individuals are flourishing,
you can measure it, and that
when they're flourishing,
health problems are fewer,
they're more productive,
and the like.
The same may be
true of nations.
But what is a flourishing
corporation?
And so an individual is
flourishing if PERMA is large.
A nation is flourishing
if PERMA is large.
Can we expand the definition
of what the bottom line is?
So I know all of you will be
forever tied to shareholder
equity, but one can also ask,
in the same way one asks of
GDP: To what extent is this
corporation increasing positive
emotion in the people
who work for it?
How good are the relationships?
And you can quantify that.
How much meaning do people who
work in your corporation have?
So on this notion, a
flourishing corporation has a
different bottom line from the
traditional bottom line.
It's a combination of
achievement, accomplishment,
and of flourishing.
Now, I want to close by asking
historically something
about is this possible.
Is this just a nice positive
vision that could never
take hold in realpolitik.
Florence, in 1450, as you know,
became enormously wealthy based
on Medici banking genius,
essentially, and under the
leadership of Cosimo the Elder,
it asked the question, "What
should we" -- Florence
was at peace.
It was in surplus.
It was not in civil turmoil.
It was not in famine,
not in plague.
It asked the question:
"What should we do
with this surplus?"
And the general said, "We
should conquer the peninsula."
And indeed, Florence
could have done that.
But what Florence decided
to do with its surplus was
to invest it in beauty.
In beauty.
And they gave us what 200
years later was called
the Renaissance.
Now, I'm not suggesting that
the positive human future is
about our taking up sculpture.
Rather, what I've tried to
define is the elements of
a positive human future.
I believe the United States and
the wealthy nations of the
world stand at a Florentine
moment, and it is doubt-safe to
us to decide that the human
future will be about the
building in our citizens of
positive emotion, of relations,
of meaning, and accomplishment.
Thank you.
[Applause]
James Fallows: Thank you very
much, Professor Seligman, for
that wonderfully rich and
provocative presentation.
You can see why his work has
had such influence around the
world and all the questions
it raises in our mind.
We'll save most of
those till later on.
There's only one that I can't
contain myself for right now,
which is: After the 40,000
drill sergeants have been
through the positive flourish
course and they make the next
basic training movie, what are
they going to say instead
of "Hey, maggot"?
There's got to be some
replacement for "Hey, maggot."
So you can tell us
that one later on.
For the next stage of our
exploration of leadership,
we're going to hear from Dr.
Sanjay Jha, who is the co-CEO
of Motorola and CEO
of Motorola Mobile.
He was born in India.
His higher education
was in the U.K.
He spent 14 years at Qualcomm,
and in the last two years and
14 days, as he informs me --
but who is counting -- he's
been in the middle of a very
celebrated transformation
at Motorola.
So we're going to talk about
what he's learned from this
experience, his observations of
the mobile world, his thoughts
about the computing future.
Please join me in
welcoming Dr. Sanjay Jha.
[Applause]
James Fallows: Let me start,
before we get to talking
about your recent business
experience, with a carryover
question from our
first session.
You've heard a lot of
presentations about the
relative secular decline of the
United States and some western
economies in general
relative, in specific,
to China and India.
Your part of the movement that
in my view has already
strengthened the United States
-- that is, its abilities to
attract talent from around the
world -- how do you feel about
this sense of the mood of
American declinism you've
heard this morning?
Dr. Sanjay Jah: My general view
is that it's -- certainly over
the last few years we've gone
through a process where there
is a need for renewal in the
United States, but the strength
of the U.S. has always been the
ability to attract some of the
brightest and the best people.
I think probably if there is
one concern, it is that some of
our immigration policies are
getting in the way of being
able to attract those folks.
But nonetheless, I think this
constant sense of renewal
that's built into the
technology as well as the
culture of the U.S. I think
enables us to compete as
effectively as ever.
I mean, there's no doubt that
there were excesses in the
economic system, but equally,
there is no doubt that there
is more investment being
made in the next-generation
technologies here in the U.S.
than nearly anywhere else.
So I look at what we have done
with the cloud computing.
Google at the head of that.
I look at what has happened
to the U.S. auto industry.
I look at Motorola and the cell
phone business, the last really
important cell phone
manufacturer, and I think that
there is every capability for
us to reinvent ourselves here
in the United States.
I remain very, very optimistic.
James Fallows: And so your
Indian counterparts a
generation younger than you,
would they be as interested in
coming to the U.S. as you were?
Dr. Sanjay Jah: I think it will
depend on a number of things.
I think our education system
here still continues to
be some of the best.
I think that certainly
is attractive.
I think if we continue to
create corporations like
Google, like Motorola, I
think they'll be interested.
But more and more, I think the
vast majority of Indians are
now staying in India and
creating opportunities.
But we shouldn't see that
as lack of opportunity
for our corporations.
I think that creates vast
opportunities for us in
those countries also.
James Fallows: Let's talk
now about your current
company, about Motorola.
You've been there a little
more than two years,
as you were saying.
Describe, if you would, the
situation that faced you when
you arrived and what you've
learned from your decisions,
good and perhaps less
good, since then.
But we'll assume all good.
Dr. Sanjay Jah: Well, in 2006,
we had 28 billion of revenue on
the back of the RAZR franchise
and post the RAZR franchise, I
think we were losing money at
the rate of about a billion
dollars a quarter.
It was a pretty dire
situation, I think.
It was broadly being discussed
that we should shut down the
handset business in Motorola,
and I was at that time in a
relatively comfortable position
of chief operating officer of a
Google-like franchise and I
made the decision to move to
Motorola and take the challenge
of turning around Motorola.
Largely because I fundamentally
believe that there is probably
a larger opportunity here in
technology, in the combination
of Internet and making it
mobile, delivering content and
information in a mobile
environment, and I just believe
that that is the largest
technology opportunity
that there ever has been.
And I felt that at Motorola,
given its brand name, given
its distribution reach, I
could make a difference.
So that led me to that place
where I said, "Yes, I will take
on this job," from really
a place of great comfort.
And I think the thing that I
found was that this almost
complete lack of optimism
inside the organization --
there had been seven presidents
in the course of three years at
that organization so there was
clearly a leadership
vacuum at Motorola.
But the bigger issue was that
I think everyone there was
looking for the next RAZR.
It was still a company which
was looking for a voice-centric
device rather than embracing
the almost seismic shift
that was occurring in
technology at that time.
And I think the biggest change
for me was to get people to buy
into that vision while I was
taking 1 1/2 billion of cost
out of the organization.
James Fallows: And so what --
as you look back on these two
years, a question both is there
anything you would do
differently and you have a
colleague, you know, Mr. Elop,
who is now taking on a similar
challenge at Nokia -- you don't
want to be advising your
competitors, but if somebody
were advising him based on your
last two years, what
recommendations do you
think they would offer?
Dr. Sanjay Jah: Advising your
competitors is an exercise in
futility, so I won't do that.
But I think the first thing I
would say to Stephen is to make
sure that he connects with the
Finnish culture in some way.
I think almost the biggest
challenge in front of him is to
be able to make sure that he
gets the information
that allows him to make
rational decisions.
And I was happy to see Finland
was third on the list of
very happy countries,
flourishing countries.
That certainly is a positive
thing that he will
have to tap into.
But there is a very strong
cultural element in Finland and
he has to make sure that that
cultural element is aligned
with his strategy.
Anytime strategy and culture
collide, strategy always
loses, so there has
to be an alignment.
So that's probably --
The second thing, on a more
personal level, I would say
is that he needs to have a
confidant who is connected to
the Finnish culture that he
can lean on and learn on.
Strategically I won't advise,
but moving aside to Motorola,
moving back to Motorola a
little bit, I think that
that was that was probably
the biggest challenge.
I came in the west coast, and
Motorola is a Chicago/midwest
company where the winters are
extreme and it formulates a
certain culture and a certain
way of looking at the world,
and my -- my view might --
Probably the largest
contribution in Chicago has
been to make it feel like a
high-technology company
rather than a midwest
hardware company.
And I would say that Steve has
to figure out, with clarity,
what is the strategic direction
that he wants to take and
communicate that and align it
as well as he can with the
culture of the country.
James Fallows: And let me ask
you a little bit more about
making Motorola feel like a
high-tech company, having
it feel like a startup.
Professor Seligman was telling
us about ways you can learn
different kinds of
about performance.
It's relatively easy in a
startup, especially on the west
coast, to have a certain
esprit, but if startups
succeed, they become mature
companies and they become
more set in their ways.
How exactly did you try to
do this at Motorola and
what lessons do you
extract from that?
Dr. Sanjay Jah: Very
specifically, I picked four
groups that I thought were
doing very, very advanced
work at that time and I
made them successful.
I rewarded them.
I gave them resources to
make them successful.
And that success was the
basis on which I think our
organization saw where
we wanted to head.
There were a very small number
of small successes, and we
built upon them one at a time,
and I think that that
was the core of it.
I think being clear about the
strategy and being clear on who
are the key people who will
drive that success to the next
level was important for us.
As I think about how do you
keep that startup culture in
large organizations, I think my
fundamental sense is that new
ideas can only be born when
some -- there is some dying of
the old ideas, and how you kill
old ideas whose time has come
and passed, I think that
became important for us.
We weren't making money.
One of the big things for me at
Motorola was that there was no
doubt that we were in crisis.
There are lots of companies
around the world who are -- who
have 5, 7 billion of cash flow
who are, in my opinion, in
technological crisis, but it's
very difficult to bring
transformation if there is no
sense of that crisis, that
sense of imminent death, and I
felt that we had that and that
was a huge advantage to me in
being able to convince people
that we needed to do
things differently.
In terms of startup, I think --
I think in terms of innovation,
again, I have always felt that
the innovation -- there is
an innovating class
in every company.
To innovate, you must have
understanding of a broad
range of subjects, and the
confluence of those subjects
creates the innovation.
And it's a matter of sponsoring
and providing room for those --
that innovating class
to develop new ideas.
That was the core of it.
I felt I had to connect with
maybe 50 to a hundred core
engineers in the company, at
Motorola, who were doing things
of consequence and give
them room and give them
resources to succeed.
James Fallows: And if those
engineers, the ones you're
trying to enlist in this
cultural change, if they were
explaining your message to
their friends and their
coworkers, what would be the
distilled version of the
message that you were
trying to impart to them?
Dr. Sanjay Jah: That's
a good question.
I would think that they would
say that this convergence that
we're seeing of wireless
mobility -- you've seen iPad,
you've seen smartphones, our
own Droids -- that that is the
path for us to grow at Motorola
and that that alone is the
way for us to move forward.
That all the other work that
was going on, I took a huge
amount of cost out of that, and
that they must find -- align
with that, and if they didn't
align with that, then I don't
think we would succeed.
I think that this central focus
on one single thing that was
going to be our future, I
think that's hopefully the
message that they deliver.
James Fallows: Great.
Let me ask you about a
couple of topics relatively
in the news now.
Under your leadership Motorola,
has made a big bet on Android.
Dr. Sanjay Jah: That's right.
James Fallows: And could you
describe the operating system
environment, the operating
system struggles as you see
them in the mobile space?
Dr. Sanjay Jah: So
obviously there are
two fundamental views.
One is the open, horizontal,
operating environment
like Android.
Perhaps Windows Mobile.
And the second one is RIM and
Apple with their vertically
integrated systems
and closed systems.
My view is that I think that
either of the two ways -- the
close integration of hardware
and software and end-to-end
service delivery -- is going to
be the way to meet consumer
requirements, and I think it's
possible to do that both in a
horizontal way, in an open way,
in the Android way, and in a
controlled environment in the
way that Apple delivers
that experience.
I actually think that the pace
of innovation, though, in the
open environment has proven
to be much, much higher.
RIM clearly has a franchise.
I think time will tell as to
how innovative they will be
and how they can sustain
that pace of innovation.
But if you look over the last
two years, I think the pace of
innovation in the Android
franchise and Android ecosystem
has been meaningfully higher,
in my view, and as a result of
it I think we are clearly now
seen as the contender to the
Apple franchise, and I believe
that over a short period of
time, I think you will see us
delivering much higher quality
of experiences because of this
sense of openness, because of
our ability to garner
innovation from lots
of different places.
And so I think both of them are
viable economic models but I
think in the long term, the
open model seems to, at the
present time, be delivering
much higher --
James Fallows: And here's
a related news question.
The whole net
neutrality debate.
Our sponsoring institution,
Google here, has recently and
somewhat controversially taken
a stand with Verizon, with
their manifesto on
net neutrality.
Could you describe what you see
as the merits of this issue
and how you think it will
and should play it out?
Dr. Sanjay Jah: Certainly.
I think the ability to deliver
all applications and all
services without regard to who
is delivering it and what
services are being delivered, I
think that in principle that's
a fundamental principle that
must be supported
very strongly.
On the other hand, I think that
we need to understand that
Verizon or AT&T probably invest
15 to $20 billion in capital
expenditures every year and we
must have an economic system
which gives them motivation
to continue to invest that.
Only two years ago, we could
only get, I don't know, 10 to
20 kilobits per second data
rate and now we can get
megabits per second of data
rate, and as a result, it has
enabled the level
of innovation.
50% of all phones sold in the
United States are smartphones.
Without that data network,
there is just not
that innovation.
So I think as much as we want
to make every application
available in a uniform way, we
need to make sure that the
economic incentive to invest
that kind of capital
expenditure doesn't go away.
And I just think that there are
some very complex issues here
which, without going into the
details, I would simply
say that that economic
incentive has to be there.
James Fallows: And just to make
-- just to follow up for one
further turn, the basic
division that Google and
Verizon proposed, which is in
the wired infrastructure you'd
have sort of strict net
neutrality but not in the
wireless, is that a -- from
your point of view a sensible
guideline going forward?
Dr. Sanjay Jah: The two
networks certainly are
fundamentally different.
In the wireless space, if you
want to deliver quality of
service in the same -- then the
cost of that is dramatically
different, and there is no way
that they have to be -- there's
absolutely agreement that they
have to be treated
differently, yeah.
James Fallows: Okay.
We only have about two
more minutes here.
I want to ask you a final
question before we bring
you back for the panel.
We heard in a previous
presentation from Professor
Seligman trying to be specific
about what it means to be
hopeful, what it means
to be optimistic.
In your business,
innovativeness, risk-taking, et
cetera, these are the mantras
everybody -- everybody talks
about, but in specific what do
you do to try to have learned
innovativeness, to cultivate
what's the right degree of
risk-taking and how do you do
it among your employees.
Dr. Sanjay Jah: With a great
deal of difficulty, I think.
But I think the notion of
flourishing seems to be such an
important notion that -- and I
actually really just listened
to Professor Seligman and I was
thinking that we ought to start
measuring the quality of our
innovation as it correlates to
the quality of flourishing
in the organization.
The -- I just think, again, I
-- the way -- to answer your
question more precisely, I
think what I like to do is to
allow people to take risks but
try to kill as many projects
early as I could as they begin
to seem like they're not going
to deliver the results.
Starting many different
projects seems to be the right
thing, but continuing those
projects to conclusion
virtually always guarantees
that none of them succeed, so
that the decision to --
decision to kill projects is
nearly as important for
us as decision to start.
I think the threshold for
starting projects I have kept
to be quite low, but the
threshold for letting them
continue beyond a certain
phase I have kept quite high.
James Fallows: So you're
-- that would be the
"fail quickly" motto.
Dr. Sanjay Jah: Absolutely.
Fail quickly.
James Fallows: There's
many more things I'd
like to ask you.
I think we've come to the end
of this session now, so please
sit with me here while we
introduce the next session.
Then we'll both come back
jointly for the panel.
The next session, we're going
to have Edgar Bronfman, who you
all know as chairman and CEO of
the Warner Music Group, and
he's going to be interviewed by
Michael Fitzgerald, who is
an accomplished technology
journalist and interviewer.
He's now a Nieman
fellow at Harvard.
He's written for The Globe,
The Economist and New York
Times, ZDNet, and TV.
So please join me now in
thanking Dr. Jah and
welcoming Michael Fitzgerald
and Edgar Bronfman.
[Applause]
Michael Fitzgerald: Thank you.
It's great to be here with you.
I have a question for you
related to, you know, what
Marty was talking about in his
presentation, which is: Are you
a pessimist or an optimist?
Edgar Bronfman, Jr.:
Well, let's see.
I bought a music company
and chose to run it for
the last six years.
You figure it out.
[Laughter]
Michael Fitzgerald:
I could call you a
glutton for punishment.
I mean --
Edgar Bronfman, Jr.: Yeah.
Well, probably that, too.
Michael Fitzgerald: So --- and
indeed when you bought into
Warner Music Group, certainly I
don't think anyone would have
said you were purchasing a
company that was in an industry
that was flourishing, and
furthermore, was not
likely to flourish.
So this was more like, you
know, joining Eeyore in the
seventh circle of hell.
When you come into that
kind of environment --
Maybe it was the sixth circle.
Edgar Bronfman, Jr.: They
told me this wasn't going to
be a hostile environment.
Michael Fitzgerald: No.
When you come into a place like
this as a leader -- and this is
a session about leadership in
difficult times, and you came
into what was a very
difficult place.
What did you say, coming in?
"I have to take these steps to
try to rally people and let
them know that we have
a positive future"?
What was on your mind?
Edgar Bronfman, Jr.: Well,
I think that what Sanjay
said is important.
I think, first of all, the
most important thing that
you can deliver to an
organization is clarity.
They have to have a vision.
And additionally, what Sanjay
Jha is that, you know,
something helps you deliver
clarity like a crisis.
So, there is no question that
Warner Music and the entire
music industry was in crises
when we got there, which made
people more willing to focus on
what we thought the future was.
And the first thing we had to
do, unfortunately, was set an
economic structure that more
closely fit our opportunity,
and that was difficult
to go through.
But we went through
that on day two.
So, that was announced and done
so that people could look to
the future and not be paralyzed
by what was going to happen
next and who was going
to have their job.
And then what we said was, We
think there is a huge future
for content and for music.
And I'm still hoping we were
right because it has taken
longer than I think
it should have.
But I'm very hopeful that the
things that are now happening
very much as a result of the
innovations that Google has
created through Android and the
ability now of wireless
networks to deliver content and
information in more seamless
ways, I think, we'll see
content generally and music
specifically start
to grow again.
It is a more important product
in people's lives than
it ever has been.
Fewer people are paying for it,
but I think that's principally
because there isn't a form or a
forum that makes it easy
for them to do so.
And I think if we can get the
portable model right, which is
reasonable in terms of cost,
accessible and easy in terms
of usage, I think there
is an enormous future.
Michael Fitzgerald: And I
brought this up on stage as
a prop so we could talk
about some of that.
I know that's something that
even in 2003 when this was
probably not even a glimmer
of a figment of someone's
imagination, you
had this vision.
But you had to be
tactical first.
So you mentioned you came in
and in on day two you made
some economic adjustments.
Those were cutting 25% of the
workforce, just sort of
straight off, and killing one
of the labels that was a
major label within Warner.
I mean, those are
hard decisions.
You had probably then to deal
with some shell-shocked
employees.
And I'm curiously about,
tactically, what you decided
to do to kind of go out there
and say, "Okay, now we are
going to move forward."
Edgar Bronfman: First of all,
there is nothing more than
important, I think,
than a culture.
And I think -- I heard a CEO
once in a panel who was asked
the question, "If you can get
your organization to do one
thing better than it currently
does, what would that be?"
And remarkably, his answer,
which I certainly wasn't
expecting was, "listen."
And I thought that was a great
answer, but then it occurred to
me that there are certain
conditions that are requisite
to be able to listen.
So if you are fearful for
your job, you can't listen.
If you think there is no
future, you can't listen.
So you have to create a culture
where in order to get people to
change -- and, frankly, most
incumbent companies in
transforming industries
don't survive.
So if we're going to be any
different, it's because we're
going to have to listen and
learn how to do new things.
So the first thing really I did
was to go out and talk to
people in town halls and email
people directly and answer
their questions and, frankly,
ask and answer the questions
they were too afraid to ask,
like, "Now that my best friend
has been fired, am I next?"
And the answer to that was no.
It's done.
It's over.
We can look forward, and here's
what we're going to do and
here's how we're
going to do it.
And getting people to buy into
the fact that the person at the
top of the company actually
liked the product that they
were producing, believed in
people's ability to do their
jobs and would fund and support
them and then recognize and
reward them was the message
that needed to get out and it
needed to get out broadly and
quickly so we could
move forward.
Michael Fitzgerald: You also
had the situation of you were a
significant investor in the
group that purchased Warner,
but you had a series of
partners that put up more
money than you did.
And you had to, I think,
certainly in the wake of
purchasing them, I mean,
you returned your
money very quickly.
You returned their money
very quickly through a
very successful IPO.
But you also had to do a
lot of sort of managing
of their expectations.
Your company is a very
different kind of company
from the ones that they
had been dealing with.
Can you talk a little bit about
how that was -- how you had to
deal with sort of managing them
as well as this cultural
sort of shift --
Edgar Bronfman: Well, my
financial partners I think, had
never at that time really got
involved in a media company or
particularly a content company.
And I think their expectation,
their history was that most
of the companies they bought
were pretty much like other
companies that they bought.
And there are similarities
in all industries.
I mean, there is revenue and
there's the costs in between
and then there's profit.
And it is a question of
how you manage that.
But creative businesses, film
business, music business, they
really are different, frankly,
than many other businesses.
And I told my partners when I
signed the contract, I said,
"Congratulations, gentlemen.
You have just landed on Mars."
They said, "No, don't worry, we
have seen all this before." And
within a couple months, they
were like, "What the hell is
this?" Part of my job was not
only trying to make the vision
understandable and compelling
to the employees but also
to the investors as well.
Michael Fitzgerald: And I think
just for the folks who are in
the technology industry, one of
the things that I found when I
was writing about Warner Music
recently was that you have an
industry that, I think, as you
put it, it creates something
out of nothing, in effect.
You are sort of tapping into
human genius and figuring out
ways to capitalize that.
And it is a very subjective
kind of industry.
You had mentioned to me at one
point that you had a discussion
with the partners about -- your
fellow investors about what
people were getting paid in
your industry to
produce things.
How did you kind of manage them
through that, sort of make them
-- help them understand this is
the way this business operates?
Edgar Bronfman: It is difficult
in front of this audience
because generally this audience
thins that everybody in the
media business is
wildly overpaid.
(chuckles)
That's probably largely true.
Michael Fitzgerald: Except
me, I'm not wildly overpaid.
Edgar Bronfman: It is a little
bit like how much does
Lipton pay the tea taster?
If you are in a business like a
film business where you are
investing probably a billion
and half dollars a year, $2
billion a year in a film slate
and you have got an executive
who can improve your
profitability rate from 20% of
those pictures to 40% of those
pictures, the increase in your
profitability is enormous.
How much would you or your
competitors pay to have
that person work for you?
And so the people who can make
those editorial decisions and
make them well are enormously
valuable to Warner Music and
our competitors and other
content companies.
That's not to suggest that then
everybody else in the company
should be paid over the odds.
But those people are
very well paid.
And the levels of those pay
packages are simply things with
which private equity was
completely unfamiliar, which
made for many amusing and
otherwise colorful
conversations.
Michael Fitzgerald: These
people are still with you, yes?
Edgar Bronfman, Jr: Yes only
because they can't get out.
All the original partners are
still there 6 1/2 years later.
It helps that all of our
equity was returned in
the first 9 months.
So in a sense they've been
playing with the house's money.
But, nonetheless, they've been
incredibly successful partners.
Michael Fitzgerald: When you
went into these town halls that
you were doing in places, would
this kind of stuff
come up as well?
What were the kind of questions
people were asking you?
Edgar Bronfman, Jr.: People
were concerned about first
themselves, which is
do I have a future?
Will I be able to go
home and tell my family
I'm still employed?
That was the first
thing to get over.
And then it was, okay, is
there a future for this
business and what is it?
And, of course, it wasn't
following the old model.
So we had to introduce a bunch
of different business models.
And we were actually the first
in the industry to do that.
We'll probably get a lot of
pushback this afternoon for
what we call our 360 model
where, when we sign an artist
now, we sign an artist only if
that artist is going
to produce -- sorry.
We're going to share with the
artist not just in recorded
music revenues but in all
the revenues that that
artist brand creates.
And the -- and, fundamentally,
the way I look at the
music business is we're a
venture capital business.
But, instead of investing in 20
or 30 or 40 companies, we're
investing in some like
number, depends on the
country, of artists.
There's no particular reason,
if we're going to be the risk
capital, why we shouldn't
participate in the brand we're
building and in all the
aspects of that brand.
Quite frankly, if we
can't, we don't sign
that artist, full stop.
None of our competitors will
ever lose an artist to us
because we've gave up
on that principle.
And, when we introduced that
principle, all of our labels
said, "We'll never sign
another artist."
I'm like, "Well, that's
okay. because we're losing
money every time we do."
[Laughter]
And, if our competitors
want to commit economic
suicide, so be it.
That's been a difficult model.
It's been difficult for
the managers, agents,
and lawyers to accept.
But, frankly, you know,
we are the risk capital.
And, remarkably, in the 10, 12,
15 whatever years of the
Internet and the ability for
fans to discover artists on
their own, et cetera, there
really has not been one single
sustained commercial career of
an artist that came through the
Internet and not through
a recording company.
Michael Fitzgerald: But it's
only been 15 years, not
necessarily a lot of time.
Do you think that might start
to change 15 years out?
Edgar Bronfman, Jr.: I think
there will be exceptions.
But I think, fundamentally, the
notion that record companies
are irrelevant is basically
based on the principle that
record companies provide
a distribution.
And now that that distribution
is less necessary or -- it
is still actually
fairly necessary.
But that's a misconception.
The value of record companies
is really not in distribution.
In fact, if you think about
it, somebody like Madonna or
anybody else could have hired
any record company to simply
physically distribute
her records for a fee.
The value of content companies,
record companies, creative
content companies is, is really
in the editorial function,
which is trying to determine
the difference between those
people who are very good
musicians and people who can
become commercially viable
musicians and then in
the marketing and
promotion of those.
That's the value-add.
Distribution really is a
commodity, and it's really
always been a commodity.
And, therefore, I think that's
why people misunderstand the
value of a record company.
Michael Fitzgerald: In
fact, you mention Madonna.
She was probably the
most famous defector
from Warner Music.
I think it was 2007 she went
and did a 360 deal of her
own with Live Nation.
So there were other
companies trying to do
this 360 idea as well.
But you're still doing her
distribution, actually.
Edgar Bronfman, Jr.: Yeah.
But we don't pay retail.
We only do 360 deals with
artists we're signing.
Madonna or Green Day or U2,
not ours, but any of these
great artists, they know
what their value is.
Whoever wants them is going
to pay that or more, which
certainly Live Nation did
in the case of Madonna.
We only sign this with younger
acts so that we make the
investment in their career
and we can share as their
partner in the success,
if they're successful.
Michael Fitzgerald: We just
have a couple minutes left.
One of the things I wanted to
talk about was changing sort of
the mindshift culture, if you
will, to use our
Mindshift theme.
You pulled that off at Warner.
You brought people
back who were part of
their storied past.
Why did you do that?
Edgar Bronfman, Jr.: I've
been on both sides of being
acquired and acquiring.
Both roles are difficult.
But there is an
art to acquiring.
And, when you acquire a
business, you've got to -- just
like coming into a family, by
marriage, or whatever, you have
to respect the culture
of that unit.
And one of the ways that we can
tell the people at Warner that
we respected who they are and
why we purchased them was to
bring back some of the people
who were still incredibly
interested and incredibly
viable like Mo Ostin at Warner
Bros., Jac Holzman who is
celebrating this year the 60th
anniversary of Elektra Records.
And then he also founded
Nonesuch Records.
He founded Elektra when
I think he was 19.
And we brought these people
back to say you have a rich
and deep cultural history.
These people can
still add value.
We care a lot about that.
And, while we're going through
all this change, we still also
want to recognize what brought
us here and sort of create some
ballast for the people as we
went through and continue to go
through this enormous change.
And I think the last thing in
terms of mind change that I'd
say is, you know, there is this
issue about open or closed,
Apple and Android and others.
I think music, too, will go
through this issue of being
both a product industry, which
it is now -- you buy a song,
you buy an album -- to being a
service business as well where
what you're buying is not so
much songs or albums, but
access, the ability to share,
the ability to playlist, the
ability to shift content
from any device anywhere to
another device anywhere.
So the business is going to be
-- it will continue to be a
product business, but it will
also become a service business.
And we've got to build
different kinds of products and
have different kinds of people
who can deliver a completely
changed business model
as technology develops.
Michael Fitzgerald: And you're
sort of actually also bringing
up something that we're seeing
around a lot of talk around the
idea of the web, that there's a
lot of fragmentation going on
around the way we receive
information and how way
we choose to get it.
Within your own industry,
when we were talking back in
April, MP3 sales had really
slowed down at the time.
They haven't really kind of
bounced back from that.
We're seeing in the
meantime streaming.
We're seeing other kinds
of formats emerge.
We're seeing a variety of other
services on devices like
these and other things.
What does this sort of -- is
this sort of flattening
something you think
is permanent?
Are people actually paying for
things that they're downloading
and these streaming services
are really -- that are kind
of the beginnings of this
idea you're pointing to?
Those have not been very
profitable for anybody.
I mean, where are we, and
where do we go from here?
Edgar Bronfman, Jr.: I don't
think anyone's introduced
a viable model.
It has nothing to do with cost.
I don't think anyone's
created a user experience
as well as Apple.
And integrating hardware and
software into a user
experience, I wouldn't have
thought -- I'm not a
technologist -- that
it was that hard.
But obviously 7 or 8 years
later it's very hard, because
nobody really has done it.
We're now seeing the beginnings
of others to do that.
I think, as those services
mature, you're going to
see actually a renewed
growth for the industry.
Because making easy, intuitive
services will be critical.
And they're coming.
I think too often network
operators try to
do it themselves.
Technology companies try
to do it themselves.
But now we are seeing services
that really are robust and
intuitive and convenient
for consumers to access.
They're not profitable yet
partly because their business
model isn't mature enough,
which is -- you know, giving
away product to consumers is,
frankly, as Sanjay said,
it doesn't make sense.
There's capital investment.
We all need to recover that.
No one's going produce
the music if no one's
going to pay for it.
So we've made very clear that
we like all these services, but
we're not going to give our
music away to them for nothing.
But we will cooperate with them
so that consumers can access
music in new and different and
I think very different ways.
And I think the next year
or two we'll see a real
renaissance of growth in the
music industry, I hope.
Michael Fitzgerald: So it
almost sounds like you're
saying we have, in the industry
kind of on a broad scale for
consumers, what you had in a
limited way within Warner.
There's a lot of instability,
a lot of question marks.
Is that slowing
demand currently?
Is that why we're seeing
downloads not really --
Edgar Bronfman, Jr.: I think
you're seeing downloads
because there's no
model to replace them.
So, just like when CDs replaced
cassettes and vinyl, there was
a huge boom where people
replaced their catalogs.
And then CD growth slowed.
Obviously, with technology,
everything moves faster.
So you had a steeper
faster curve.
Now you're seeing a
more modern growth.
But there hasn't been a
service model introduced yet.
You only have Apple, and
they've done a great job.
You know, but I do think there
will be people who will compete
with them and that consumers
will be able to access music
in new and different ways.
Michael Fitzgerald:
You're positive we're
on the cusp of that.
Let's be optimistic in
our last question.
Edgar Bronfman,
Jr.: I'm learning.
I'm PERMA.
I'm PERMA.
Michael Fitzgerald:
Thanks, Edgar.
Thanks very much.
(Applause)
James Fallows: So
we have one more.
Why don't you sit on that
side, if you would.
We have one more conversation
before we have our panel, and
then we have our surprise.
And we're very privileged
to have here A.G.
Lafley, who I often think of
as what business people would
want to be when they grow up.
After graduating from college
in the late 1960s, Mr. Lafley
had a stint in the U.S. Navy
and then joined Proctor &
Gamble for a 32-year career
which had every accomplishment
anyone could want, including
president and chairman.
And during the last, I think,
10 years of your stint here
revenues doubled from 39
billion to 79 billion.
Is that approximately right?
A.G. Lafley: That's
approximately right.
James Fallows: That's
approximately right.
But who's counting?
And along the way, he's had a
reputation for talking about
civic responsibility of his
corporation, the values
within his corporation.
So leadership is something you
have thought about during
your entire career.
We are nearing -- there's
a political connection
I'm going to make here.
We're nearing the 50th
anniversary of Dwight
Eisenhower's famous farewell
address when he left the
presidency, that I think, as a
one-time speech writer myself,
is probably the finest example
of political -- serious
political rhetoric in
the United States.
You recently gave your version
of that, a valedictory on
leaving Proctor & Gamble, when
you talked about the values you
learned in your long career of
leadership, of citizenship.
Would you give us what you
think is the most distilled and
extrapolatable version of that
message for corporations
beyond yours?
A.G. Lafley: We must
have had a leak.
Well, I think, as I recall,
I tried to distill 32 to
33 years into a sort of
handful of principles.
And the first one was see
things as they are, not
as you want them to be.
Come to grips with reality.
And I think, in my experience
and listening to my
predecessors, one of the things
that distinguishes optimists
and leaders is they come to
grips with reality.
They see it sooner.
They express it more clearly.
The second thing is -- and
this is no surprise --
I am first, last, and
always customer centric.
I was supposedly, in what --
had spent 22 years at one of
the most successful consumer
products companies
in the world.
And, frankly, our biggest
problem in 2000 was we
were nowhere near close
enough to the consumer.
And I would suggest the whole
discussion about open versus
disclosed systems will be
resolved based on what in
the end the customer wants.
So does she or he want -- will
the open system or the closed
system deliver better value?
Will it deliver a
better experience?
Will it deliver the
relationship that she wants
in her brand and her
product and her service?
Third thing was I'm a huge
believer in innovation.
I know I'm in a very dull,
very mundane industry.
We do toilet paper and
deodorants and feminine
hygiene and lots of
exciting stuff like that.
But what distinguishes us and
when we've been the best,
we've been in the innovation
leaders in that industry.
We spend $2 billion a
year in innovation.
I think we hold 40,000 patents
in the U.S. I think we
have 20,000 pending.
So it is an
innovation business.
The fourth thing was
everybody's a leader, and
I expected we have a
leadership culture.
And we have a system that's
driven by purpose and values,
strategy and principles.
And all I did was try to
express what I'd learned,
where I thought we were.
And I didn't think we had made
as much progress as a lot
of others thought we had
made in the last decade.
So I said there was plenty
of things to do in
the decade ahead.
I think that was it.
James Fallows: And I say
this -- I ask this question
with great respect.
It would be possible to list
all the qualities you mentioned
in a platitudinous way.
We should be close
to the customer.
We should be innovative.
Can you give us some specific
illustrations of what it took
to impose or evoke these
values inside the company?
A.G. Lafley: Okay.
The objective with a customer
is to be so close that you
understand -- in my case, most
of the time, her needs and
wants, even the ones that
she can't articulate.
I was probably five years in
the company, and we had run
some consumer research on
laundry detergent packaging.
And Tide packaging was
rated 4.9 on a 5.0 scale.
And I had been out in homes,
and I had watched women
struggle with our packaging.
How do women open a
laundry detergent box?
None of them use their hands.
Why?
How much did they spend
on the manicure?
How much time did they
put into the manicure?
So they've got screwdrivers
and pliers and all kinds
of paraphernalia out
in the laundry room.
And we're getting a 4.9 out of
5 rating, and we think we're
making the best package in the
laundry detergent agency.
And I can go through hundreds
of examples like that where I
sat and watched a woman in
Japan do her morning
skin care ritual.
I heard people tell me
that something was great.
And then, you know, it clearly
delivered a subpar performance.
So there's a big difference
between saying you're going
to be close to customers.
One other thing, not to
belabor this point.
I now work in private equity.
We have 15 companies.
And one of the questions
I always ask is who
is your customer?
Who is your current customer?
You would be astounded by the
number of companies that cannot
describe clearly who their
current customer is.
Innovation, the big
breakthrough for us in
innovation was we were
great at patenting.
We weren't getting
it commercialized.
We weren't connecting it
to consumers and markets.
So we went to an open
innovation system, called
it "connect and develop."
10 or 15 years ago maybe 10% of
our new brands and products
were partnered with at least
one outside innovation partner.
Last year over half
were partnered.
And I believe there's no reason
why virtually all innovation
shouldn't be patented.
Fundamentally, it's
about association.
It's about connection.
It's about combining
unlikely things.
And I could go on for each one.
So yes, it sounds
like a platitude.
But, if you dig and you dig and
you dig and you get it under
your fingernails and you get
into it every day, it's
really important.
James Fallows: You mentioned
earlier I might have had a leak
to some of your utterances
inside the company.
In fact, we talked about
a week or so ago.
Something you said then that
was fascinating to me is, as
you mentioned, you come from an
industry which is seen as
traditional, stolid, people
would assume it to be lower
technology than, say, Google or
QualComm or Motorola
or whatever.
But you said there were dangers
of complacency coming into
this high-tech industry.
Share with the audience what we
were discussing a week ago.
A.G. Lafley: Well,
I think we were
talking about the worst thing
that can happen is that
you're successful.
And the absolute worst thing
that can happen is you're
wildly successful, because
then you become content.
Okay?
You become complacent.
You can become even
a bit arrogant.
And all of a sudden blind
spots develop all around you.
They can be blind spots
around your technology.
They can be blind spots
around your business model.
They can be blind spots around
your real relationship
with your customer.
And often times you don't even
see the new competitor coming
because they're not an
expected competitor.
They're coming up
from underneath.
They're coming from the side.
So we've gotten waxed a number
of times -- okay? -- in the 33
years I was at P&G by success.
You know, by success.
And we blew up -- we created
the disposable baby diaper
business with Pampers
in the early '60s.
I think Google's share of
searches is somewhere
around 64%.
We had a 99% share
in that business.
When I joined the company,
we had an 85% share
in that business.
And we introduced a new
shaped diaper technology.
And, instead of putting it
on Pampers, we introduced
a new brand called Luv's.
And what do you think happened?
We split the business in two.
So we took Pampers and
reduced it to a 45 share.
We had a 40 share Luv's brand.
And Kimberly Clark came
right up the center
with a new technology.
And they, in the U.S.
at least, they had the
leading baby diaper brand.
I've seen so many times in so
many businesses that you can
lose it because of something
you did, because you didn't see
something coming, because you
didn't have your eyes open,
because you became
too complacent.
James Fallows: And is there any
particular way -- suppose you
were a dominant search company,
how would you apply the logic
of what you're saying?
A.G. Lafley: There is no
perfect defense.
But I believe the best
defense is offense.
If you don't create the future,
you know, you don't want to
leave that to your competitor.
The second thing you
have to do is attack.
You have to be willing
to attack yourself.
What's one of the biggest
reasons that you don't
attack yourself?
You don't attack yourself
because the economics aren't
as good, and they're never
going to be as good.
You're going to be dealing with
maybe higher capital, for sure
lower margins, all the costs of
startup, whatever they
are in your industry.
So you have to be
willing to do that.
And then I think the third
thing is I'm a huge believer in
open innovation, and I'm a huge
believer in partnerships.
We talked a lot about
our billion-dollar
brand businesses.
One of the ones I'm most
proud of is not on the list.
It is with Clorox who is a
fierce competitor in one
industry and who is a big
partner in the wraps and
bags industry, another
very mundane industry.
We took their Glad brand which
was a few hundred million
dollars, invested three
technologies into it, and
it is now a well over a
billion-dollar business.
I have to tell you, very few
people at P & G wanted to do a
partnership with Clorox when
the idea was initially raised.
I would say that would be
a good place to start.
James Fallows: One of the
questions I wanted to ask you
about is a big theme of all the
presentations so far of the
conference has been about
learning skills, learning
traits that you might naively
think are just inborn.
People are either
leaders or not.
They are innovators or not.
We have talked about ways you
can develop these skills.
You have placed a lot of
emphasis inside the company on
training leadership skills.
Tell us more about
that, if you would.
A.G. Lafley: I think I may have
mentioned I really don't
believe leaders are born.
I believe they make
a choice to lead.
You know, in my own case, I was
an accidental CEO, probably --
James Fallows: Just
a country boy.
A.G. Lafley: No, no.
Probably the clearest article
written about me was "The
un-CEO." But sometimes
circumstances -- and they can
be a cause you care about, they
can be something you have
passion for, they can be
something in your community,
wherever, cause you to want
to make a difference.
And so I believe there's
this little spark.
Second thing I'm relatively
sure of is that there are some
leadership tasks, engaging and
envisioning, it's part of the
responsibility; empowering and
enabling; and in the end,
getting it done,
okay, executing.
We have a fair amount of
evidence that we can take new
hires, we can take 20-year
veterans and we can put them
through two-day, three-day,
five-day courses and we
can inspire leadership.
We don't have a style
we're selling.
We want you to be yourself.
But we have -- probably not
unlike what the professor was
talking about, we have sort
of a set of skills and
some basic principles.
And I think they work.
And I guess the last thing I
would say is we're on the
ground in 100 countries.
We're selling in over 160.
We're in probably 25
different industries now.
There is no way you can survive
in this kind of an industry or
world unless you have
distributed networked
leadership.
Command and control
are over with.
James Fallows: You mentioned
the term "responsibility"
in the answer.
You gave that, which is another
theme which has run through
all the presentations so far.
We heard from Ted Turner about
things he thought the media
needed to do differently and
citizens need to do and civic
leaders and philanthropists
needed to do.
We heard from Professor
Seligman again about ways
to develop the right
kind of traits.
We heard in the first session
about ways the Western world
needs to shore up various of
its traits if it is going to
restore its economic
fundamentals.
This is an audience that
is largely, although
not exclusively, tech
industry people.
The tech industry world has
been so far still largely in
the Libertarian phase of its
development of thinking, "We'll
just have our innovations and
the outside world will
take care of it."
What message would you give to
a tech-world audience about
responsibilities they have in
their products, in their
own personal lives?
A.G. Lafley: I start
small, all right?
I think your basic -- your
first responsibility is to
serve a customer, right?
I'm a big fan of Peter Drucker.
He said the first purpose
of a business is to create
a customer and then keep
that customer for life.
So, I think your first
responsibility is to really
serve your customer.
So that means a better value,
a better experience, a
better product and service.
The second thing, I think, very
-- I believe very strongly is
you have a responsibility to
your critical stakeholders.
One of the things I did,
frankly, was put the
shareholder, you know, at the
bottom of the pyramid, not
because the shareholder wasn't
important but if I didn't have
it right for the customer, if I
didn't have it right with our
innovation partners, and I
didn't have it right with our
employees, we weren't going to
deliver for the shareholders.
So I just changed the mix.
The third thing is you have a
responsibility beyond your
technology, beyond your
business, and that's to the
communities in which
you work and live.
And our responsibility in
Mandideep in India is different
from our responsibility in
Lagos, Nigeria, is different
from our responsibility
in Cincinnati, Ohio.
And then lastly, you know, I
really believe you have a
responsibility to the
sustainability of our planet.
And, you know, we -- we tried
to work on our responsibilities
and concentric circles.
We try to work on them
in an integrated way.
So, we're not fixing
technologies and products that
are ill-conceived and
ill-designed, although we have
had to do some of that.
And we don't -- I mean,
we don't get it right
most of the time.
But we try to get it right
a little more often.
And I think those are some
of the responsibilities
that we have.
James Fallows: We have only
two minutes left here.
So here's a final question: In
retrospect as you think about
your business career at Procter
& Gamble, what do you think is
the worst decision you made and
what we can learn from it and
in retrospect the best decision
and what we can learn from it?
A.G. Lafley: I think the best
decision was to -- was really
to refocus on the customer,
okay, and just to put the
customer at the center.
And we have the customer
in most of our buildings
every day, okay?
And we're in customer homes,
living it and working it.
The worst decisions were I
should have divested -- you
know, you are always slow to
-- Capitalism is about
creative destruction.
And while you create on
the one hand, you have to
destroy with the other hand.
And I always felt that we
were quicker to create
than we were to destroy.
And I should have divested or
gotten rid of businesses that
either were non-strategic,
non-performing or just
weren't going to fit.
And my biggest miss by far is
we got the Prilosec switch.
We lost the Claritin switch.
And I had it in my hand and I
deferred to the individual
that was running the health
care business at the time.
And I knew in my tummy that I
shouldn't have, but we would
have had probably the two
biggest switches in the last
decade, if I had made a
good decision there.
James Fallows: Great.
Well, with that,
thank you very much.
And so let's -- we
will stay here.
More chairs will come up.
Our previous speakers will
come up, too, and we'll
have a panel discussion.
[ Applause ]
So I think we will
stay here immobile.
Here is going to be the plan.
Yes, everybody up.
I'm going to have just one
question that anybody can
answer or not, and then we're
going to audience questions.
This is your chance to ask
questions about all this
session and earlier ones,
if you would like to.
There are three microphones
here so, please go to one
of those and queue up.
The question I have for any of
you is related to the themes of
optimism versus pessimism,
leadership versus
helplessness, et cetera.
When I came back from a number
of years living in China, I
wrote a big article on the
"Atlantic" essentially on the
subject of whether America
was going to hell.
The conclusion I came to is
that the fear that we are going
to hell chronically through
American history has been
what's kept us from
going to hell.
The first real Jeremiah sermon
on America's fall from
grace was in 1628.
I said, boy, back in
1620, it was wonderful.
But in 1628, things had
really gone downhill.
So would any of you say on the
optimism-pessimism spectrum,
hearing all the things we have
heard about national and
corporate troubles,
how do you stand?
Are you basically optimistic
about the resilient capacity
in American culture -- in
American business culture
or basically concerned?
Is anybody basically concerned?
Basically on the
pessimistic side?
Good.
Well, that's news in itself.
And make the case
for your optimism.
Edgar Bronfman: I think if you
-- aging more than any of us,
but those of us who manage
businesses around the world and
spend time in other countries,
there's a lot to recommend
to all of them.
But I would say with perhaps
the exception of China, there
is no country in the world that
has the optimism of America.
And that optimism, it is
just -- it is somehow
inherent in our nature.
We need to make sure to protect
it and to nurture it and to do
all the things to preserve it.
But that optimism, that belief
that we can do better than
we've done, that the next
generation can do better than
we've done, that
forward-looking sense, it
simply doesn't exist in most
other countries.
And it has served us well for
centuries, and I think, can
continue to serve us well.
Martin Seligman: I think the
fact that we are a nation of
immigrants and you ask who
stays and who leaves, that in
general it is optimists who
leave and see the future.
It turns out optimism
is 50% heritable.
Sanjay Jha: I think the notion
of immigration has been so
central to this country, I do
think that there are some
changes that need to be made in
terms of our visa situation, in
terms of allowing the people
who get educated in this
country to find jobs, that has
been -- if you look at the
papers being published, 75% of
the papers are now being
published by non-American
side of U.S. schools.
And then we have created an
environment where they can't
stay in this country.
I think that makes no
sense at all for us.
And there has been
a huge campaign.
I think Bill Gates
has been leading it.
I think Eric has been
involved in it.
We really need to find
the solution to that.
I think that's an important
part of the renewal that
we have in this country.
James Fallows: And just on that
point, has that situation
abated at all in the time since
the 9/11 attacks which was when
the big switch came on visas?
Sanjay Jha: Not to my view.
Not to my view.
I think if anything, it has
got slightly worse, yeah.
James Fallows: Again, I would
invite people who would
like to ask questions.
I have some more.
I will ask another one
which follows -- Yes,
a question here?
Hi.
Being a musician who comes from
a part of the world where there
was no business model 20 years
ago when I started a rock band,
Junoon, yet, you know, the
consumer, the customer, the
music listener, there is 1.5
billion people in south Asia.
So the business model evolved.
How do you -- Edgar, this
is a question for you.
How do you see the business
model evolving in the next
ten years, the music
model, for artists?
Edgar Bronfman: Well, as I
said, I think that there's
going to be far more
partnership, I think, between
artists and their those
business parters, whoever
those business partners
may ultimately be.
I think record labels,
music publishers will
be a part of that.
But I think that we're going to
see a globalization of content
that we've never seen before
because of the technology
that's really here but not
really deployed in full force.
So, that people in the
U.S. will be able to
listen to your music.
You will be able to listen to
their music in a much more
free-flowing view -- way.
You will have playlists that
you will be sharing with people
in this country and all over.
And that will allow music
to travel in ways that
it hasn't really been
able to travel before.
In almost every country outside
of Japan, western Europe and
North America, there
is no music model.
Music is basically stolen,
pirated, et cetera.
And it is impossible for
musicians to make money other
than through live performances
and other kinds of things.
And I really do think that
that's another opportunity
for technology, to allow
compensation to flow so that
much more creativity will come
to all parts of the world where
there are genius musicians.
Thanks.
James Fallows: So I have a
question I'm going to ask
Professor Seligman and see if
the other panelists agree
or disagree with his reply.
One could make a case that this
is a time of failing leadership
on many fronts for United
States in particular.
It is very difficult in the
political front to find people
who are willing to put
interests beyond the next
election, the next filibuster
vote or whatever, talk about --
some of the issues Ted Turner
was discussing of long-term
issues of national welfare and
international survival.
The financial community is
probably in its lowest esteem
it has been in public
view for 70 years or so.
My own media establishment,
with the exception of Tom
Brokaw, is not looked on too
well by the world in general.
Objectively, is the quality of
leadership now any better or
worse than it has ever been?
And is this something
that changes over time?
Martin Seligman: Well,
I have a confession to
make about leadership.
I actually once was the
Fox leadership professor.
Every time I hear the word
"leadership," I hold
on to my wallet.
And let me tell you why.
[ Laughter ]
I think followership is
homogenous, and I will tell
you what I think it is.
And I think leadership is
domain specific, that
it depends on what
you are leading.
So I believe when I talked to
drill sergeants or CEOs about
PERMA that what you want to
instill in followers is more
positive emotion, more better
relations, more meaning
and more accomplishment.
So I actually think the
measure and the purpose
of leadership is PERMA.
It is followership.
And that's homogenous.
But the way you do this at
Procter & Gamble or Motorola,
the University of Pennsylvania
or the U.S. Army is
fantastically different in that
the leaders are not
interchangeable.
So I'm very interested
in followership.
A.G. Lafley: I agree.
I don't think leaders
are interchangeable.
I think a big part of what you
try to do is find a person's --
help a person find his or her
meaning, his or her inspiration
and then find the position for
them to play that brings
out the best in her.
And the beauty of a place
like P & G is we have
lots of positions, okay?
But I think that is -- I
think that is a really
important part of it.
And if you think about growing
over a lifetime, we're going to
live longer, you are going to
work -- we are going
to work longer.
If companies like ours are
going to have any kind of a
chance -- See, I believe our
employees vote every three to
five years about, first of
all, whether they are
going to join us.
We don't select anymore.
They choose us.
And I'm sure that's
true at Google, okay?
Second thing is, then
they re-choose us every
two or three years.
So we've got to keep
winning those elections.
And manipulation doesn't work.
Control doesn't work.
None of that stuff works.
So they have to
be re-energized.
They have to re-commit.
I totally agree with you.
I can think of a lot of things
that you would not want to put
me anywhere near because I
would make a huge mess of it.
But for some reason, I
landed in this and it
has worked out okay.
James Fallows: We have
one more minute here.
Did any of you hear anything in
your colleagues' discussions
that you wanted to second,
rebut or elaborate upon?
Sanjay Jha: Just Professor
Seligman's notion of
flourishing, it is a very
central one that I think I
heard today, very interesting.
And interesting to think about
how that concept can be used in
corporations, in terms of
measuring flourishing.
And I don't think
it is surveys.
I think it has to be something
much more subterranean
than that.
Survey is probably a start.
But I would like to hear your
opinion as to how that applies
to corporations, Dr. Seligman.
Martin Seligman: I have spent
most of my life working on
negative emotion, anger
and sadness and anxiety.
And there is a very important
difference between the
positive emotions and
the negative emotions.
And it has to do when you're in
negative emotion, you fall back
on what you already know.
It is not an
innovative emotion.
So to the extent -- if what
you're dealing with in your own
life, your nation or your
corporation is stopping
hemorrhaging, then it is a good
idea to be a performance
manager about anger
and fear and sadness.
But all of you have spent
your life in innovation.
And I think we know, both
experimentally and otherwise,
that when people are
flourishing and in states of
positive emotion, that's when
they expand and do things new.
And that's why my guess would
be that for growth, that
flourishing and the positive
emotions are the evolutionary
substratum of what we call
positive sum games, growth.
James Fallows: There is more to
discuss here, but we have time
for just a two-minute surprise
session which is going to come.
And although Professor Seligman
didn't know this, this wasn't a
setup, his comments about the
importance of followership are
the exact perfect segue to
what we are about to see.
So I and my fellow panelists
are going to go back to our
seats and Derek Sivers is
going to show us a surprise.
And thank our panelists.
[ Applause ]
