B (3:00)

That's a great background. We opened the book with Warren Buffett slime that it's only when the tide goes out that you learn who's been swimming naked. He suggests that for today's leaders, the tide is staying out. So does that mean we don't know who's been swimming naked? And what companies or sectors of the economy would you say are exposed, I guess about today's stock market moves. Is it software companies?

A (3:27)

Well, today that's true, but I think let's back up. When Buffet said that quote, he was talking about economic cycles. He was talking about during good times, a rising tide raises all boats. And when economic times get tighter or more challenging, we find out who's got good leadership and who doesn't, who's got good unit economics and who doesn't, who's really in charge of running their business. Business. And I like to say that the tide is out and staying out. Because if we go back Even to say 2000, we had in sequence the dot com meltdown, 9 11, the global financial crisis. We had what I'll call populism 1.0, Bolsonaro in Brazil, Brexit, the first Trump administration yellow vest in France. We had the pandemic. Now we've got this current dynamics in the global market. I'm going to argue this is the new normal and leaders need to be ready for this. You referred to today's stock market. Well, that's a great example. Every day we wake up and we look at our phones and we turn on our computers and it's like, what the hell happened last night? And no matter what we read, we're not surprised.

B (4:35)

Right?

A (4:36)

And my point is that for leaders is like, this is normal. So it's not time to like, lose our minds. It's not time to like, you know, try to kind of go hide in the corner. This is what we do as business leaders. And so if this is the new normal, what are the skills that we need to get through this? What companies are exposed to this and what industries, all of them. There's no place to hide. And while it can be scary, and we'll talk about that more as we continue our discussion, I think most leaders can do this and hopefully we can learn some best practices from some of the men and women who I had the good fortune of doing research on and them and their companies and people who none of them are perfect and they get things wrong, but they're actually, I think, doing a pretty good job. And we can learn from what they got right and where they missed.

B (5:24)

We're going to talk about two companies, one of which I wrote about in my book Coming Back, and you worked at intel, and I was surprised at what has happened at Intel. To what extent are you surprised with what's happened at the company? And what about Boeing? That's another cautionary tale. You talk about when leaders prioritize short term over the long term. Is that what happened at Intel? How similar are these two cases? And sometimes I think it's that the business managers took over the CEO function at intel, that had a role and the engineers left. That's one of. There are a lot of factors involved. But how similar are these cases? Because both of those cases had business leaders. And why do these companies have their crises? What do you think these companies could have done differently?

A (6:11)

Well, so I think. So the thing that's similar about them is we have two iconic organizations that were known for discipline, engineering excellence, good process, et cetera. And so that's where they're similar. I think the specifics of each one is different. In the case of intel, and, you know, it's very close to my heart. I had the good fortune of doing Andy Gross research for Only the Paranoid Survive. And I was there when we were the most valuable company in the world.

B (6:40)

We were great at. Go ahead, go ahead.

A (6:47)

No, no worries. The thing about intel was, you know, we were great at design of silicon and semiconductors and architecture. We were great at manufacturing. And there was just a cadence of how the organization worked. There was great operational discipline inside of the company. I remember I would go to meetings at intel and consistently I was the dumbest guy in the room. Consistently. You know, the men and women at the top were just brilliant and you had to work hard to keep up. I think where intel got sideways and Andy talked about this before he passed away, was it didn't matter what the question was. The answer was high performance CPUs. But the environment outside changed. People started doing more computing capabilities on their phones. Yeah. And that replaced a lot of computers and, and media changed. And so like the exogenous issues outside of intel really were so dynamic and the company was so stuck in its old ways that they couldn't see the world. So this notion of, wait, well, we're going to sell microprocessors for an iPhone and it's going to literally cost, you know, a third of what we Sell the other ones. Our absolute dollars are going to be lower, our margins are going to be lower. And so everyone's like, no, no, we can't do that. That's almost like less than us and beneath us. But then that became the dominant platform. And then I think you had a series of leadership challenges. Craig Barrett, who took over after Andy, great process leader, great manufacturing, struggled with innovation. Paul, also under Adolini's tenure, I think that's where we saw the decline, I think of the manufacturing competencies and the leadership on architecture. And he also missed the market changes then in the shift to AI. Right. As we get in kind of the 2000 and tens and Krasnik, et cetera, that's when the wheels came off. And so I think it was really just an unwillingness to admit that the world had changed and take the steps that could have, which would have been painful and hard, but great leaders would have been able to. Boeing is a little bit different. Boeing's issue was after the merger with McDonnell Douglas, you went from an engineering culture to a finance culture in a safety critical business. Right. You know, it's like when you get this wrong, people die. And so like kind of they lost their North Star of designing great airplanes that can never fail. And so when they started outsourcing parts of the supply chain, you saw them basically hollow out a lot of the competencies and capabilities in an industry that still required a lot of strong vertical integration. And so, you know, it was really kind of labor arbitrage. And I'm going to argue that's what Globalization 1.0 was, was lab arbitrage. But I think in a business like Boeing, when they thought that it was more important to be kind of the financially driven at the expense of safety critical features and capabilities, they kind of lost what mattered. So I think that with Boeing, it was more of an internal decision that was made that missed things and intel was missing what was happening externally.

B (9:58)

I completely agree with your analyses of these companies. It's a little bit like the innovator's dilemma with the phone. Right, right.

A (10:06)

It's very similar.

B (10:08)

They said these margins aren't there, so why do it?

A (10:12)

Andy talked a lot about when Clay wrote the book, Andy talked a lot about it with the leadership team. And Clay talked about how people would dismiss things that come up from the bottom because they're toys and they're not really serving our customers, but because they've got a lower cost basis and as those features and functions get better, they end up serving not only new customers. But existing customers better and intel missed it. I gotta tell you, it's heartbreaking. Yeah, it's heartbreaking.

B (10:38)

I feel that way.

A (10:38)

It's such a great company. But by the way, for ge it was the same for me. Like when I went to ge, I learned a ton. Very different than Intel. But you look at what happened to GE and I got to see it through Jeff's eyes. And we'll talk more about that in a bit, which was GE had different challenges. I think Jeff today, here we are on February 6, 2026, he's feeling a little bit more vindicated. You know, he went from being the world's greatest CEO to the world's worst CEO. And yet now when we look at all of those businesses, they're thriving even though the conglomerate was broken up with products that were developed and put to market under his tenure.

B (11:21)

That's very interesting.

A (11:23)

There was an article in the Financial Times about this. And so it's like, you know, and sometimes time, you know, time is also one of these things that plays out lots of, lots of interesting things.

B (11:33)

Do you think intel should have split design and manufacturing? Because maybe that's the. Or is that the solution right now, given what GE did? Or don't you have views on that?

A (11:45)

You know, it's a hard question. So let me argue two sides of this. I'm not trained as an economist, but I'll be a two handed economist for a second. If we believe that there's good vertical integration between the two, you want to keep them together. And one thing I would say is that the competencies, you've got to be great at both in silicon. I mean Nvidia basically doesn't do the manufacturing, but they partner deeply with TSMC who's like the world's leader at manufacturing. And so you've got to have it be good for both. If intel were to split it apart, they would have been dependent upon the outside organization to do the manufacturing, whether it was their own FABS or TSMC or somebody else. And so this is kind of one of these things where it's hard to know in hindsight. What I do know is they failed and staying in the forefront of manufacturing. So like if they had spun it out, would they have been still good at it? Hard to know. It's a, you know, kind of one of those, those hypothetical things we can't test, but also kind of they were designing the wrong products. Right. They miss mobile. Yeah, missed. They missed, you know, what was required in servers and AI with GPUs and everything else. So like they just had the wrong product for the market needs. But one thing I do know is that you, you know, you do need to have great high quality manufacturing. What's interesting and which will be part of my next book is you have to look at semiconductors as a competitive advantage of a country in an Asia, you know, and, and we're seeing the reverticalization of computers, excuse me, of industry. It has to do with jobs, it has to do with a financial stack, it has to do with a technical stack. And so like the US is going to have to get this back and intel could in fact play a leading part in this if you can make it happen.

B (13:25)

But you know, TSMC tried to set up in Texas and there weren't enough engineers for them to get going. So you're absolutely right. It's a whole, it's an ecosystem and.

A (13:36)

That'S an education issue. Right. I mean that's one of the key things is education is critical. The reason TSMC has had a hard time finding personnel is just because we're not feeding enough highly educated people in the areas that are needed. And you need that whole ecosystem and a partnership between industry and education to have that talent. We see the same thing in factories. You know, factories are now very, very technical. And are we graduating the technical talent out of our high schools that are qualified to participate in factories?

B (14:06)

Actually, there was an article I think in the Wall Street Journal yesterday that said under Trump actually we're losing manufacturing jobs the last two years.

A (14:15)

Yeah, it's an issue. And then part of that is also going to be this challenge of hey, you're going to see continued automation.

B (14:21)

Right?

A (14:21)

That's, that's kind of a way that's going to be going. But the question is we've got to look at the value also of what we're prod. It's not just you want jobs that's important. You have to look at the value of the goods that are being produced and making you like, because we, we lost both. For the longest period of time, we lost both, we lost both jobs and value in what we used to manufacture. And that's now going to have to change.

B (14:46)

We have to know what we're making. I mean, I remember about Craig Barrett, you brought him up and he had this phrase throwing spaghetti against the wall. But I think most of the spaghetti thrown against the wall at intel didn't stick. And as opposed to like a company like Amazon, like, you know, if things failed, they, they just kept it going until something they got Lucky, maybe.

A (15:10)

Well, I think they're good, too, not just lucky. And they were smart enough to be able to recognize certain things that they had and did that were of value to others. So, like the whole thing of aws and how did aws, that was kind of the move to the cloud. They realized that the infrastructure they had built to run their core retail business was of value to other people. So there was an exogenous wave that they were able to write and said, wait a minute, we can be a supplier to that intel explicitly didn't figure out what people outside the four walls and any large organization, universities are the same thing. In fact, I'm going to argue the universities and the challenges of higher education in this country is because it's completely lost touch with what's happening outside of its little bubble and ecosystem.

B (15:57)

Okay, I'm going to go on, because we could discuss these companies forever. I think you talk about this as a perfect storm of disruptions. Technology pandemics, financial crises, geopolitical conflict, social change. But aren't these. If I think about my father's generation, the first 50 years of the 20th century, weren't they equally traumatic? Is it that we are hypersensitive to these disruptions rather than.

A (16:32)

Okay, so I'm going to argue.

B (16:34)

He said that maybe because I want to comfort myself.

A (16:37)

So I'm going to argue. Well, I'm going to argue. No, it's not the same. And I'll tell you a little bit where it is the same, which is the second thing. Okay, so here's where it's not the same. It's the speed and the quantity of the dislocation. Now, your father's generation in the first half of the 20th century dealt with two world wars which were huge. The Great Depression, the rise of the automotive industry, the rise of air travel, the nuclear bomb. I think what it was, though, is the speed of change was not what it is today. And so it's like things are happening so fast right now. And I think that's the thing that's different, that if you look at. So, for example, the speed with which AI is being adopted globally, and I'm sure you've seen the charts, we compare it to electricity versus the phone versus the personal computer versus the smartphone. The speed with which people are using it is staggering. I don't know about you, but 100% of my students do all their work with AI.

B (17:38)

Yes, that's true today.

A (17:42)

So as a teacher, when 100% of the people who you are with in the classroom are Doing something. And that happened in a 24 month period. So the question is like you got to figure out what are you teaching? How are you testing mastery of what you're teaching? They're not going to stop using it. That's kind of a dumbass way to try to approach it. So you got to figure out. And so now I've got to do that and you have to do that. By the way, I get hired by companies to work and help them. I have to think about what, you know, is happening on the political spectrum because that impacts business and impacts universities. So it's like I think what's different is the speed. You talked about sensitivity and I think that sensitivity, I think that is what's different. And I want to talk about. It's another thing that's different but I want to talk about the difference. There's also the sensitivity is because we are bombarded with so many more inputs, we know where we get that, you know, our information from. And it's 24, 7 like it used to be. We all used to watch news at six to see what Walter Cronkite said and a couple of other people. And now it's going all the time on a global basis. And that sensitivity comes from, I think, so much stimulation. And there was a great book called Stand out of Our Light. And this idea of the book by James Williams is that there's an inverse relationship between information and understanding. And we get so much information that we don't have time to stop and think deeply about stuff. And that's exacerbated by a world of social media. You know, we used to talk about sound bites being the thing that was on the news. Well now that it just happens so quickly and that's different. And then of course we spend all of our. I like to joke that my generation, we completely destroyed Gen Z. We gave them all, we said they were all anxious and how horrible the world was because we completely destroyed K through 12 education. And they all are anxious. And so it's kind of like that anxiety. I don't think the species changed. I think how we raised them did. And the nature of how technology activates them changed. And so to me those are the biggest changes. There have been societal level changes, cultural changes and speed changes. And that's the biggest difference. Was it the same as what your grandfather and my grandfather went through? You know, the dislocations were hard.

B (20:02)

But.

A (20:02)

In some ways, you know, also like one could argue that like, you know, as a species there's actually less war there's less war than there used to be. Doesn't feel like it by what we read. But there is less war, people are living longer, there's fewer people in poverty and yet people feel anxious.

B (20:24)

Right, right. And I think particularly young people are very anxious about their future. And AI I think is making them even more anxious. They think about, you know, it used to be saf become a computer scientist. But does that even make sense in a world of AI, like a software engineer?

A (20:43)

Well, but Alfie, that was kind of a dumbass thing. We never should have taught them that in the first place.

B (20:47)

Right. Be safe.

A (20:49)

Well, there is no safe. You know, it's just like life is hard and your job as a leader is to guide and lead people and give them confidence in, you know, in difficult times. And so, you know, this notion of everything's always going to be okay, that was again, I'm going to come back to our generation Gen X, we ruined them.

B (21:07)

And.

A (21:09)

So by the way, you remember before it was AI, it was the climate. We can't have kids because the climate's melting down. And before that we can just keep going back. We really kind of embedded in them this. Now let me give the good side though of our students which you teach Gen Z as well as I do. A lot of them are open minded and care about things in ways that.

B (21:32)

You pick that string that people weren't.

A (21:34)

Before and you got to love that. You got to love the fact that they want good things for a broad set of people and that's the joy. But I think our job as teachers is to help guide them to say, okay, so stand up and lead and you got to lead everybody. We talk about this in the book the Attributes of Great Systems Leaders. They're kind of statesmen or stateswomen or stewards and part of it is they can bring a moral guidance without hectoring and condescension. And they really are inclusive. Like you find a ways to lead everybody. People you agree with and disagree with and people who agree with you and disagree with you. Because as a leader you don't get to choose who you lead, you have to lead everybody.

B (22:16)

It's very demanding I would say though, I mean like to take, I don't know if we should get off on this too much. We're like Target Corporation today facing what's going on in Minnesota and what kind of statements it should make and should it protect its store from ice agents and so on.

A (22:34)

So this is a great example. These are highly nuanced issues and a world that has no tape for nuance. Okay, so when I was running companies, you didn't talk about stuff like that. My job was to run the business. And then all of a sudden, we were supposed to speak up on every social issue. And then it was like, okay, don't speak up on any social issues. All right? So that changed, especially with the new administration, and now with what's going on in Minnesota, okay? Now everyone expects people to speak up again, like, if you're a leader, it's a little bit of like, wtf, right? It feels like the pendulums are. You know, I actually think that. That strong leaders would be, if they choose to speak up, would do so hopefully in a nuanced and thoughtful way and not try to pass a litmus test that's being put on them. And so, like. And the way to. I think to address that is, like, if one is asked the question to speak up. You know, sometimes my students want me to speak up. I'll ask them, do you really want to know what I think, or do you want. Or is this a test and you're testing to see if I pass it or not? Because I don't care about your test. But let's talk through the hard issues here. And what does it mean for us? Like, okay, people getting shot and killed? Like, not okay. Like, not good. On the other hand, how do you make sure that you've got issues thinking about secure borders? How do you make through about issues about where should there be collaboration between federal authorities who enforce our borders and state and local authorities who have control over their jurisdiction? Like, if everyone's in it together, how do you find that way to make that happen and work? And by the way, we can hold those truths together that, like, I don't want somebody who's protesting being killed. I do want law enforcement to be able to enforce their law. I want to find a way that people can have free speech. These actually. These issues don't conflict, but they're nuanced. And I think great leaders can hold all these different perspectives and points of views in their brain and talk to their employees and their customers about them.

B (24:32)

It's really either. It's not either, or. But. And everything's.

A (24:36)

And in this world and. Alfie. Sorry, I guess I should call you Alfred since we're on the.

B (24:41)

Oh, that's all right. I appreciate that you're calling me Alfie.

A (24:48)

I think that you said it's hard and everything, but I think that's what leadership is, and I think that's the blessing and the privilege of being a leader is if we're going to sit in the chair, it's a responsibility, but it's a gift that we get. And yeah, it's hard, but that's what it means to sit in the chair.

B (25:06)

In the book, you talk about traditional command and control leadership and more recent Silicon Valley move fast and break things style, which I think is also problematic, and it's inadequate. Can you explain why? And why is systems leadership better and how's it different?

A (25:25)

Let me define what I mean by systems leadership. Systems leadership is where fundamentally leaders have to do two things. They have to internalize certain dualities that might have existed previously inside of an organization, but in separate groups. But now we as leaders need to hold them both inside. And the second thing that systems leaders, and what systems leadership is, is the ability to see action and reaction between parts of a company and a company in its ecosystem. And then systems leaders exude certain types of behaviors. So they operate at intersections, which gets to those dualities. They understand hardware and software. They understand vertical and horizontal. They understand the nature of the relationship between business and government. They understand the issue. They think about the future of work and the changing nature of an organization. They have what I like to call a product manager's mindset. For anybody who grew up as a product manager like I did, great product managers are responsible for everything and they own nothing. And you've got to be able to move an organization down a particular path when you want to get them to do something. And I think great product managers understand what customers want, know how a product or service gets built, and they understand the go to market momentum, and they have the ability to move between different parts of a company. I think great systems leaders manage context. One of the sentences I talk about in the book is this phrase, truth equals facts plus context. And in a world where there's so much new news and new stimulation, you've got to help your employees and your customers and your suppliers make sense of what's going on out there to help them get truth. And then finally, I think great systems leaders run towards disruption. They know that the world's going to change and they know they don't have a choice. We can't just sit still and hope it's going to pass by. So with that as a definition of systems leadership, and with that as an example of the behaviors of systems leaders, I looked at what I call cross pressures. Now, cross pressures, I think are unique. A cross pressure is something that is buffeting today's business leaders and that's why I think like command and control doesn't work. And I think kind of the go fast and break things don't work. You need to kind of have that. And, and let me give you an example of the cross pressures. So there's five that I highlight in the book, and these aren't the only five, but these are the five that I saw the most. Number one is priorities, execution and innovation. So execution and innovation, this notion of I need to be able to execute and innovate and I can't keep those separate groups in the company. Like I have to be able to move quickly but know how to manage, and you manage, by the way, execution and innovation differently. Secondly, people. How do I manage people? Okay, so, so how do I hold people accountable and show strength, but also how do I have empathy for the men and women in front of me? Third, how do I think about my sphere of influence, internal and external? You know, I have to, you know those old days where the CEO was external and the COO was internal, can't do that anymore in a world where everything's connected. Even if I might say in finance, I've got to understand if the numbers are changing, why, what's going on? I think that goes back to what was going on at intel that we talked about a few minutes ago. The fourth one is geography. Local and global globalization has changed. It was about labor arbitrage. But even in a world where we're seeing this re verticalization, we're still going to be crossing borders because communication and collaboration tools have not gone away. And then the last cross pressure is what I call purpose. How do we balance our personal ambitions with being a statesman, a stateswoman or a steward of our organization? And so I think what's different than in the past command and control, you could yell at people and tell them what to do. Well, have you ever tried doing that with Gen X, Gen Z? Excuse me, like that dog don't hunt. That's just not going to work with them. You've got to manage and lead them differently. Similarly, if you think about this kind of go fast and break things, there are unintended consequences to stuff. And I think leaders, you're going to have to be responsible for the thing. So you have to balance kind of that simultaneous speed, but also with making sure that things work properly. And by the way, no one's ever going to be perfect, so don't try.

B (29:34)

Right. So one way of, like in the academic literature, and I've kind of gone into this a little myself, the Managing paradoxes. These are all paradoxes going, and they're really pushing you in opposite directions simultaneously. And it's hard to find an appropriate balance. And sometimes you go too far in one direction and sometimes too far in another direction. But you. It's episodic. So you. One chance to do it. It's a very different mindset. Are there leaders that you really admire who think, who encapsulate this idea concretely that you can speak to, or don't you want to name?

A (30:21)

No, no, no. Actually, the whole book's about naming names. And so, in fact, let me kind of juxtapose this. I'm going to start first with what doesn't work, and then I'll start with what does work. So, like, one of the things I like to talk about is unserious behaviors in a serious world, right? We see a lot of behaviors that are, you know, like, we. We see them and we know they're wrong. Like when Musk and Zuckerberg were going to fight in a cage match, right? Every. We all read about it. It was on every publication all over the world. And everybody had two thoughts. Alfred, you know, the first was, okay, I'm gonna watch it, right? And secondly, this is wrong.

B (30:54)

It's childish and trivial, right?

A (30:57)

And to show, like, I kind of pick on everybody AOC or, you know, our congresswoman sent out this quote once that said, if Republicans are so sexually frustrated they can't sleep with me, they shouldn't take it out on my personal life. And I remember thinking to myself, wow, I couldn't imagine Indira Gandhi or Margaret Thatcher sending out a tweet like that. Or Sam Bankman fried, you know, dressing like a slob and playing video games while he was raising money. And we know why they do this, by the way. I call this replacing decorum with outrageousness. Because they get clicks and likes and it keeps them at the front of the news. And there's a lot of other behaviors that we talk about. They're focusing on trivial goals, ignoring changes we don't like, indulging in self righteousness. And yet I studied over 100 some odd leaders with this book, and I tried to look at how they handled some of these cross pressures. So, like Julie Sweet at Accenture, how do they balance innovation and execution, where she holds her people accountable for delivering numbers, but also they invest over a billion dollars a year in educating their labor force on artificial intelligence. And she says to her people, you need to be good at both. Adel Al Bajid, who runs a small bank in the Middle east called Bubian Bank. It's a Sharia compliant bank. And when they took over this bank that was in trouble, he and his leadership team figured out how they could basically appeal to new customers, but also serve their traditional customers. It was kind of a false choice having to choose between attracting new customers and retaining their old ones. Kathy Mazzarella, who runs Graybar, you know, she's one of these leaders, you know, Craybar is this, this 12 billion dollar year company, all, you know, 10,000 employees, all employee owned. Kathy walks into a room and we all sit up a little bit straighter, right? You know, you've probably had these people in your classrooms, right? You know, these people who are just like, wow, this is a leader with a capital L. But she was described somebody as an iron fist and a velvet glove. And so Kathy's strong and she holds people accountable, but she's also one of the most human people I've ever met. I think that Seth Bodnar, who runs the University of Montana University system and how he has to deal with a bunch of different constituencies, both inside the universities and outside, does a great job in terms of purpose. Jim Fish, who runs Waste Management, does an amazing job of being driven and ambitious, but also being very statesmanlike in how he parses hard issues. Michael Dowling, who just retired as the CEO of Northwell Health, was one of the greatest leaders I've ever had the blessing of spending time with. And funny, all the names I mentioned, people might have heard of some of them. But fundamentally, like, the first thing we have to say is they're all successful. What they've achieved, what their companies have achieved, these are successful leaders. And secondly, we don't read about them all the time. And my point to the reader of my book is these leaders are there and we can learn from them. And leaders, I believe, have free will and can choose to be the leaders who they want to be. And so we can learn about how they dealt with these cross pressures and how they deal with them. And by the way, they'll all tell you they've made huge mistakes, they've gotten stuff wrong. They don't claim to be paragons of perfection.

B (34:06)

You mention that a lot. You emphasize humility, ability to live with uncertainty, acknowledgement of inevitable failures. I think that's, that's quite important. How did you go about writing the book? I mean, did you. How did you choose who to interview? Was it serendipity or did you have a plan? I like serendipity as a research method. I know my colleagues don't, but.

A (34:30)

So I'm, you know, I'm just. I'm just a stupid lecturer. Right. I'm not as smart as my colleagues at Stanford, so I'm kind of more of a bumbler. And sometimes as I kind of like, continue to dig through things and study things, patterns appear to me over time. And so when I was teaching the class with Jeff, we were both inviting in our business contacts and our friends to come to class. And so they would come into class. And one of the joys of teaching at the grad school level is that we can teach Socratically and we can learn together. So obviously, you prepare for class, you pull together a case, you pull together readings, you come up with a list of issues that you want to unpack in front of the students. And. And then as the students talk and as the guests talk, it becomes more and more trends open up and patterns start to emerge. And I think over time, Jeff and I brought our lived experiences and him running GE for so long and me both from industry and academia and investing, and we started to fit kind of our mental models on what we were hearing from our guests. And then in terms of writing the book, you know, I wrote my first book, the Brains and Brawn Company, about blending digital and physical. And I vowed I'd never do it again. And then Jeff looked at me and says, you need to write a book. And I told him, no, Jeff. And then he basically said, I'm not coming back if you don't write the book. And so that was kind of a friend and mentor pushing me into my zone of discomfort. And so I said, okay. And the thing about writing the book was it really captured eight years of learning. And it's. I don't know about you. Like, writing a book is hard for me. I don't write like I speak. I write very in a much more drier fashion. And I had to, like, work with a collaborator who could help me write the way I talk and so I could make it approachable. And that's hard for me. Yeah, some people do it easily. It's just. It's. It's not natural for me.

B (36:30)

Right. I know exactly what you're talking about. What about, like, you know, we talked about. These are paradoxes. And probably the greatest one, I think, in any organization is the one that the great Jim March came up with. Between the tension between exploration and exploitation, which I think is when I teach strategy, I could say, that's it. That's all I'm really teaching. So what is your view on how to best manage this tension? I guess we could go back to some of the examples we talked about before, like intel and Amazon and how they manage the tension. And.

A (37:09)

Yeah, you know, if you look at the great, the great strategists in the literature.

B (37:12)

Right.

A (37:13)

So not only do we have Jim, you have Michael Tushman at Harvard, you have Charles O'Reilly at Stanford, and they're collaborators in the Ambidextrous organization. One of my mentors, Robert Bergelman, who taught me about this and taught with Andy Groh for so many years, you know, they're getting into that balance of where leaders need to be able to do two things. I think of the five cross pressures that I highlight, to me, that's what I put under priorities, execution and innovation. And I think what's different in the past, you know, you had the men and women who made the trains run on time and you also had, you had the crazy long hairs who innovated and you kind of kept them separate and it came up at the top. But that doesn't work in today's world, given the speed of technological change. And the example I would say is the following. If you're a researcher, innovator and you're working on a tech, if you're not thinking quickly about how do I get this commercialized and into the world, you're probably wasting your time because you're just tinkering and the next technology is going to come right on its heels. And if you're an operator and you're thinking only about optimization and you're thinking only about efficiency, you're going to miss, wait, what's coming and how do I know where my customers are and what the younger generation's doing? So you've got to have kind of a, a toe in the water of innovation. So you kind of have that feed coming in. So one of the things that I like to say is that, that between exploitation and exploration, we as individuals need to do both. Like, I need to know how to deliver. I, I need to know how to give what's. But also I need to be spending some of my time thinking about what's next. And by the way, it is hard. I'm not. That's the other thing. Like, I don't have kind of here's five things to do. These five things that will all be okay. Read TechCrunch for that. TechCrunch will give you kind of the recipe that say, it's easy. And I don't think life is easy. I don't think it's ever been easy. I don't think it's going to be easy. But that doesn't mean it's not fun and it doesn't mean that it's not worth living.

B (39:11)

And you should recognize what are these key tensions that you're going to face so that, and it's not like there's a formula. You spend 40% of your time on exploitation and 60% on exploration. And it varies based on the following five factors. It's not an algorithm. It's much more judgmental than that. Another one that I always have difficulty with is prudent risk taking versus reckless bets, especially for public companies that, you know, they're under pressure to increase their quarterly earnings. And so even Gelsinger, in his effort to turn around Intel, I mean, in a sense he was, I thought he was on the right track, but Wall street didn't.

A (40:02)

Well, okay, so let's talk about, I think there's, let's talk about a company before it gets into crisis mode.

B (40:08)

Yes.

A (40:08)

I think before it gets into crisis mode, individuals need to know how to, like, for example, how do you manage small. How do you manage a team of five, six, seven, eight, trying innovation. And by the way, I also know how to manage teams of 100 and 150. And how you do that differently, kind of almost in the same group. And like, even within the same things, you might have different processes and systems for each, but you as a leader need to be able to do both. And then you kind of get into the situation where prudent risk taking, prudent risk taking is, you know, think of it as, you can think of it as gates, you can think of it as, you know, by the way, venture capital is real option theory. You know, basically, if a company needs $100 million, you don't give it to them all at once. You give them a million dollars, you get more information. If they hit milestones, then you give them $10 million. If, if that works, you give them $30 million. And by the way, it's the same thing inside of a large company. And so the question is, are you doing it at speed when you're doing your innovation stuff? And then also, are you making sure that the stuff that's scaling has the right and appropriate systems and safety in place? And do you build connective tissue in a right way for both of those organizations and teams to work together? And so I think that's this notion of you could do one or the other, but once you're in Crisis mode. I think you got to blow everything up. That's when it's like you gotta blow everything up. And by the way, you might be wrong. Like you gotta blow everything and. But you know, we could talk about higher education. Like higher education is in a real crisis. And higher education, for all the good that it does in our country, put itself in this position and is a completely unsympathetic entity. And so like, the question is, how do you then change an set of organizations like that? The last thing I'll say, you talked about Target. Remember we go back to Brian Cornell. In 2016, 2017, he announced that he's going to invest $8 billion upgrading the stores. Wall street tanked the stock by a third and they had an amazing five year run because he was right. He was a genius. Suddenly Brian's now didn't go so well towards the end. They had hard times. That's life. No one's perfect. The press likes to write about something that's always up into the right. But I don't know about you, Alfred. I've always found that almost all women that I've known, they have good days and bad days and good runs and bad runs. In my career I've had good runs and bad runs. That's kind of a little bit more normal, right?

B (42:37)

It's like players in professional sports. Another example of that. What about this idea of hedging your bets too? I mean like venture capital, you're right, it's taking out options, but it's also hedging their bets because they, there's probably, you know, one, one or two things, but they, they, they spread out the risk over a variety of different investments. And, and, and is that true in large companies? And how do you, how many, how many, how many hedges do you take at one time?

A (43:13)

So you know, in, in the book I talk about Daimler and Daimler was facing tremendous issues, you know, exogenous changes to the, the market, the rise of China, the rise of EVs, the rise of autonomy, connectivity. And they understood this like the men and women who run Daimler and Mercedes are crazy smart. The thing is, if you talk about hedging, at some point you've got to say some of these are more important than others. Some of these variables have slightly larger coefficients and that's where we need to bet. And guess what? When you do that, it might be wrong. But if you, a friend of mine who's an executive at Workday, used to be the chief innovation officer of SAP, used to say that if Your strategy is to do everything. You have no strategy at all. And so you can't do everything. So I don't think of it as hedging. I think of it as keeping a pulse on the market, keeping a pulse on technology, making sure you know what's going on. And when something kind of becomes big, you're gonna have to make the choice to go all in. And if you're right, you're a genius. And if you're wrong, you lose your job. Welcome to sitting in the chair.

B (44:23)

Sometimes you do take big bets, and you can be wrong in those big bets. And when you take bets, you have to be able to evaluate them carefully over time. I mean, that may be the critical point. Is this really going in the right direction? Should we drop it or should we go further? How much patience should we have? Those are really hard decisions.

A (44:43)

So for that, again, I'm going to go back to venture capital, which I'm going to say, well, as a vc, you know, if a company hits its milestones, not what they spent the money on. Right. Did they achieve milestones that mitigated technical risk, execution risk, and market risk? If so, they raise the next round of capital. If something doesn't hit the milestones, you know, you don't throw more money at it or you keep, you know, you give it a little bit of money until you can mitigate those risk points. Now that's harder in some industries. Let's look at climate, because where you've got big capital, but then you've got to figure out, okay, what's the profile of the returns that the capital needs for the risk they're taking. And you know that. But. And that's why some of those innovations in like infrastructure industries happen to have to come from large companies who have large free cash flows who can try and take those bets. And if it works out, awesome. If it doesn't work out, the company will still survive.

B (45:44)

I forgot whether it was Microsoft or Google, they're making enormous bets now and becoming, I think it's Google, they're becoming electrical utility, essentially, you know, generation. It's outside what they usually do. They have. What's your observations about that?

A (46:00)

Okay, so that's a great point. Did you notice that all the deals that OpenAI and everybody else, they were doing with these chip companies were not measured in silicon number of chips or number of cores, it was measured in energy number of megawatts.

B (46:14)

Right, right.

A (46:16)

OpenAI is doing a deal with Microsoft or whoever, or Nvidia or CoreWeave, and it's going to generate X megawatts. And these aren't energy companies. But you just hit a key point. Energy. I talked about kind of the competitive advantage of nations earlier. Energy is tied into technology and it's tied into capital markets and companies need to have access to energy. And the funny thing is this started about two years ago, three years ago, where the conversation switched from the transition to clean energy or green energy to we just don't have enough energy for eight and a half billion people on the planet.

B (47:00)

Great. That's different. I like.

A (47:03)

And if you, by the way, the whole kind of the west got it completely wrong. If you went to India and said when are you going to stop burning coal? They'd have a two word response for you. And that was like, wait a minute. You burn cheap energy for a hundred years and raise the standard of living for your population. It's our turn. Don't tell. You know, how dare you come in and lecture us on what our responsibility is on the environment when you set everything up and now you're saying we can't have cheap energy. And so if you see the system you have to be thinking about how are eight and a half billion people going to get the energy they need to live the productive, healthy lives they want to live. We're going to need all sorts of energy and big industry now. And where technology is headed is adding to the layer of energy demands of the human species. And then it's like okay, well but can the grid even handle all this? It's a whole system wide thing. And by the way, you know, I think the people who are running the big tech companies get it. And this is going to get to the competitive advantage of countries and regions. China is going to burn a ton of coal. They're way ahead in a lot of green energy. Europe has no source of its own energy like that. Europe's got like this is like a gaping hole. Like is it? They're going to keep buying gas and oil from Russia. Like that hasn't worked out well the last four years. You know, they're going to have to buy from other parts of the world. They could frack. They choose not to. I get it. But it's a choice they make. Their ability to control their destiny if they don't control their energy is going to be a problem. The US Right, The US does some things well and some not in energy. And how is that all going to play out? So leaders today need to see these system level issues.

B (48:45)

You could actually make the argument that energy is not Only converted into transportation, heat, flight, et cetera. But now we're converting energy into intelligence. AI is really just energy where we're creating greater analytical abilities on the part of all of us to run everything that we do. And so it's playing that role as well. It's at the foundation of it. It's not actually soft in the end, it's very. A hard industry AI, it's digital and.

A (49:20)

Physical, which I strongly concur with. Is it going. But by the way, if we look in the past, we went from, you know, plows to cotton gins and steam engines, and that was also convert. You know, that was evolution where we got better at things and now we're getting better at things that we're going to be able to apply AI to. I think that this is a. It's a step function, but it's the continued evolution of our species and technology. We've seen these in the past. And when you have these step changes, both companies and countries rise and fall on their competitive advantage. And the job of leaders is to make sure that their companies are well positioned to get through these transitions.

B (49:59)

So it may be shortsighted to block the creation of solar and wind power at this point time in history and make the US dependent heavily on carbon resources as opposed to the rest of the world. Go down that trail.

A (50:18)

By the way, what I would say is we need everything it's about. And I also think it's a false. Let's come back to false choices. It's a false choice to say we can only have one type of energy and if you do the other kind, you're a bad steward of the environment. The question is, how are you a good steward of the environment? And how do we create enough energy for our species? That is the challenge for today's leaders. And the hectoring and condescension, all that does is create division and it prevents us from moving forward. And so great leaders have the ability to hold these two truths in their hands and the ability to say, look, I got to get everybody to have an energy. And by the way, we should take care of kind of our environment. Like we tell our kids to clean up their toys, we clean the kitchen when we're done cooking, like, we should make sure that we take care of things. But on the other hand, it's like if it's kind of painted as the stark good and bad, that's when I come back to no nuance. Yeah, that is simplistic thinking. And great leaders are not simply understand the difficulties of this, they see it.

B (51:23)

As a system again.

A (51:25)

Yes. And it's hard.

B (51:27)

Yeah, yeah. I don't want to get. This could be another one. We could go on. But like, is AI actually good or bad for the environment? I know the video. They're trying to argue that even though in the short term it's going to create great demands on the, our systems have more energy in the long term that we're going to overcome that and it's actually going to solve a lot of energy problems. But I mean, I don't think we're going to. That we're going to have an answer to that question quickly. Do you have any?

A (51:58)

I think that it depends on how we define good or bad. And that may sound like a cop out, but let me give you. If you think that we should never do anything that harms the environment, it's bad. But then again, everything's bad. Driving your car is bad.

B (52:11)

Absolutely.

A (52:11)

If, if you think that it's going to help our species evolve and if we are prudent and thoughtful about it, it can be quite good, maybe low demand AI can help us to figure out how to use our cars better and stuff like this, then I think it could be quite good. I think it can be both good and bad. It's going to be up to us as leaders to make sure that we do more of the good and minimize the bad. But if it's all or nothing, then we're going to have the kind of the crap discussions we've had for the last two decades where everyone's pointing fingers and no one's solving the damn problem.

B (52:46)

These are pragmatic issues and we have to keep them out of the partisanship. Are you optimistic or pessimistic? Maybe you're both. A systems thinker. Has to be a little both. You're pessimistic to avoid the worst and you're optimistic to try to achieve the best at the same time.

A (53:11)

Okay, so I'm both. I think it depends on the topic. I'm optimistic on our species. Now remember, I'm an American in Silicon Valley. Americans do two things better than everybody in the world. And I'm not going to apologize for either of these things. The first thing we do better than anybody in the world, Alfred, are ice cubes. We put ice cubes in everything. Our country is great at ice cubes. You travel all over the world. We're the best. And I'm not going to apologize for our greatness in ice cubes. And the second thing I think we do better is Optimism. There's kind of the sense of no matter how bad we got it wrong as an individual or community or country, we can fix it and make it better. And at the heart of Silicon Valley, when we're at our best, it's an optimistic future. It's an optimistic thing of we can do this, we can improve things, and we can be better. So I'm optimistic. Long run on our species. I think I'm pessimistic if people don't want to do what has to be done to deal with the hard issues and do so in a way that brings everybody along with them. And so I think some institutions and some companies are going to do a great job of transforming themselves and living up to the responsibilities and the challenges, and some are going to go away.

B (54:30)

Yes.

A (54:30)

And like, you know, humans don't live forever and plants and animals don't live forever. And there's nothing that says that companies need to live forever or that universities need to live forever. You know, it's like we have to earn it every day. And that's, that's what leadership is.

B (54:46)

We're coming to the end. But I wasn't going to go here, but I can't, I can't resist, because you've mentioned it many times, and it does. I become obsessed by quite a lot, the university system. How would you, if you, if you were the benevolent dictator and you could wave your magic wand, how would you change the universities? How do you think it has to adjust right now?

A (55:08)

Oh, gosh, I opened up for. Yeah, right. Okay. So, so, so what I hear from a lot of leaders in universities right now, as, as, especially as we're under attack from Washington, is we've got to tell people about all the good we do in research and medicine and technology and what we. All the benefits we bring to sighting, we've got to communicate that and let them know. Now, Alfred, I don't know if you have any friends from the south, but if you've got any friends from the American south, some of them at some point might have said to you, at some point, you know, the good Lord gave us two ears and two eyes and one mouth, and maybe we should use those senses in that ratio. And I think one of the biggest fundamental problems that universities face is that we have lost our ability to see and hear people who aren't in our ecosystem. And maybe we need to understand where they're at and how they got there so that we can serve them better. And I think the universities did that to themselves. And so I Think that it's funny. CN Baylock, who is the president of Dartmouth, she wrote a great piece in the Wall Street Journal last week which talked about five things to improve things. And I think the woman's very wise and she's really insightful on what she talks about. And we have to again see in the system. In the last 20 years, we have burdened our young people with four times the amount of debt. The business model of universities, there's been a loss of trust. I'm sure that your university and my university are not like other universities, but some universities have had a monoculture.

B (56:44)

Right? I think that's true.

A (56:47)

And so how do you change those things and how have we gotten away from. CN argues that our universities serve the American public. And I think there's some truth to that since so much of the federal tax dollars come to support our research. On the other hand, I teach men and women from all over the world, so I also believe there's eight and a half billion people that I'm supposed to educate and serve Curve. And so if I could fix it, a big part of it would be a mindset shift. I'd revisit the business model. I wonder, at Stanford, we have 17,000 students and 17,000 administrators. And that kind of feels off, right?

B (57:24)

I know it's definitely a problem.

A (57:26)

The sacred cow that would impact you and not me is I think tenure needs to be discussed. Tenure originally came out so that people could be, could, could study controversial things without fear of reprisal. I think the problem is now it's become, it's created massive agency conflict inside of universities. I think we get adverse selection in terms of leadership in many universities and in administrators. And that's a challenge, you know, and so like the question I think you're really driving at is, can universities be fixed incrementally or do we need frame breaking change? I mean, go back to Tushman's paper in the 80s, I'd be a fan of frame breaking change. But I come from industry and Jefferson said a little revolution every now and again is a good thing. And I make mistakes through action as opposed to inaction, but I get things wrong. I think there's, by the way, Stanford's the greatest team I've ever played. I worked at GE and Intel when they were the most valuable companies in the world. And I look at my colleagues on the faculty and they're brilliant. The men and women who sit in front of me come from all over the world and they're kind and they're Smart. But it's like, how do you build an organization that performs well at the top of its game and plays to win? How do you do that when there's no commercial pressures that we get in industry? All nonprofits face this. How do you make sure that people have both intrinsic and extrinsic motivation to be great? We can't solve this in the last two minutes of the podcast, but these are the things that I think about.

B (59:07)

Another thing that universities draw into the United States because they're great. And you see USC universities, the best people from all over the world, most of them are staying in the leadership of a lot of our companies or the starters, a lot of our companies. It's something that we can't lose. It's a national treasure measure. That's. This is my little opinion feast.

A (59:31)

Strongly agree. And then the question is again, now let's go back to what we were talking earlier about Minnesota. How do we have a rational immigration policy in the country?

B (59:40)

Yes.

A (59:42)

And not have everybody go to their corners and point fingers.

B (59:45)

Right.

A (59:46)

Having secure borders and bringing in people into our education systems and letting people immigrate here legally. Those two things don't conflict. They don't conflict. But you'd think so with the idiots we have in Washington and how they frame the discussion.

B (60:01)

Many of the unauthorized immigrants are actually in process. It's because the bureaucracy judicial system works so slowly. More than half are in that category. And they're not all the stereotypes that some politicians have portrayed them as.

A (60:20)

Well. And I think most Americans know that on both sides of the aisle. And so the question is the leaders in Washington, for crying out loud, stand up and lead. Do your job. Come up with a rational policy and get it done. Leadership is hard. Do your job. And if you're not up to the job, get out of the chair and let somebody else get in there who is qualified.

B (60:40)

Hopefully the American people. There's enough feedback and will will become aware of these things. We probably have to end this saying here. We probably could go on for hours because I think we're just beginning. So we typically ask, so what are you working on now? Where do your current passions lie? You said you have another book in mind.

A (61:02)

Right. So as we were talking about before we started recording, I'm entering the next chapter of my life, that our kids are grown and gone and my wife retired last year. I'm trying to figure out what does the next chapter look like for me. And so I don't know. I hope to continue to stay involved with Stanford. I love Consulting and working with companies all over the world. The new book that I'm working on looks at the re verticalization of countries and regions. It's what I call the stack. And the stack involves certain technical components, but also certain financial components and cultural components that make countries and regions competitive or not. And then how does that impact business leaders? How does that impact how somebody running the company needs to be thinking about what's going on in the world? And I'm really lucky that I get to travel all over the world and meet men and women from all over. And so I see kind of what's happening and this is the stuff that I'm thinking more of. Silicon Valley is great and I'm grateful for it and Stanford's great, but as I see the system, there's a lot of neat stuff going on all over. But, you know, I want to also make sure that as I, I'm not as young as I used to be and, and making sure that I take a moment to enjoy the time to, to spend time with our children while they still, you know, we're still healthy, we travel while we're still healthy. So I gave you a bit of a personal answer there, but that's actually forefront of my mind. I don't know, like, am I ever going to like, retire? Like, I don't know. I don't know what that means or feels like. But, but how do I spend time in the next chapter, still do some teaching? When the classroom's going great, that's my happy place. But how do I make sure that I'm effective in front of the classroom?

B (62:51)

Right. Very important.

A (62:53)

So that's what, that's great.

B (62:55)

Yeah. You talked about using AI in the classroom. Everybody's using AI in the classroom. That's another theory. How do we integrate it? Well, we want to help them use it effectively because they will be using it in their jobs. So this is a great conversation. Robert Siegel, thank you for joining me on the cusp between strategy and ethics. The book is the crown. The book is.

A (63:23)

The Systems Later Mastery.

B (63:25)

Of Cross Pressures that Make or Break Today's Companies. I don't know why I wrote down the Crown Currency.

A (63:36)

That's my amazing publisher. My amazing publisher.

B (63:39)

Okay. That's your publisher. Okay. The book is the Systems Mastering the Cross Pressures that Make or Break Today's Companies. It's a really excellent book for listeners who think about innovation, regulation and ethics. It offers a useful approach to dealing with the tensions they confront. Thank you for all, all of you for listening for on the cusp on the New Books Network. I'm Alfred Marcus. If you have comments or ideas for future books, you can reach me at amarcusmn. Edu.