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- [00:18]
A
Today's show is sponsored by Public, the investing platform for those who take it seriously. On Public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index with AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year. You can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index, lets you back test and then you can invest in a few clicks. Generated assets are like ETFs with infinite possibilities, customizable based on your thesis, not someone else's. Go to public.com compound and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com compound paid for by Public Investing. Full disclosure in Podcast Description welcome to Live from the Compound. My guest today is a returning champion, Professor Jeffrey Sonnenfeld of Yale, founder of the Chief Executive Leadership Institute and one of the world's leading scholars on corporate and political leadership. Jeff is a Senior Associate Dean for Leadership Studies and the Lester Crown professor in Management Practice at the Yale School of Management, as well as the founder and President of of the Chief Executive Leadership Institute. Hi Jeff, thanks. So thanks so much for coming back, Josh.
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B
It's a huge honor to return. Thank you very much. I must say that I hope I don't trip any potholes today because last time we had such great feedback from appearing on this show that I think I'm still responding to texts and emails from you. So thank you from your viewers. So thanks a lot.
- [02:12]
A
Oh that's so great to hear. Jeff just launched a new book. It's called Trump's Ten Commandments Strategic Lessons from the Trump Leadership Toolbox, which peels back the curtain on the 10 guiding principles that define how Donald Trump thinks, how he leads, and importantly, how his leadership playbook works in practice across business, politics and media. Put that back on screen one more time. This cover is great. It's evocative, it's hilarious. I absolutely love it. Can we start with how you and Stephen came up with the concept for the book itself, and then we'll dive into what's in it.
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B
No, thanks a lot. Yes, Stephen. Stephen Tehan is our research director here and was the number one political science student at Yale and he hates when I reveal him that way as he went off to Rockefeller to become a quant. But we lured him back to the world of poverty to work with me on all kinds of Fronts. And this particular research goes back about a quarter of a century, believe it or not. And this is not overstating things. I actually have known Donald Trump longer than anybody in the current Trump 2.0 administration and longer than anybody in 1.0, other than family members that were working with them, obviously, you know, is Ivanka and Jared and some others. But I've, I was originally asked to be the first critic, actually the supposed positive reviewer of the Apprentice. Back when Jeff Zucker was running NBC Universal. They had gotten the same producer who had produced Survivor at Jack Welch insistence. So they got Mark Burnett to take the throw him off the island elimination game device and put that into the business world. And then they thought, could I critique each episode and printed in the Wall Street Journal each week, which is what I did for season one. I'll tell you about that if you want to hear how it unfolded. But it got a little scary at times. But we ultimately, Trump and I became pretty good friends, if you can believe it at all. But it got pretty nasty and a little bit of litigation if you. But that's how we got to know each other. The genesis of the book then is having known him so long is his son in law, of course, Jared Kushner, who I'm in touch with almost daily, even though we have different points of view on a lot of fronts, is he said, look, you know him so well, you should do something like this. He said that people don't understand if they want to criticize my father in law or support him, they need to first understand them. And he's different. He said, he's. In fact, Jared said at one of our CEO summits, he's unorthodox. He's different than all of you people as a leader. And he is. And what occurred to us is that if you look at what he's doing, every day's headlines, we get surprised again, and we shouldn't because they are predictable patterns of what he does well.
- [05:11]
A
So let's start there. You have this thesis that Trump's behavior is not chaotic, it's patterned. So I wanted you to summarize one of your commandments that you think is most misunderstood by critics, by markets. Like, give us an example of one of the things where you explain, no, no, no, no, no. This isn't as crazy as it looks from the outside.
- [05:34]
B
You know, I will do that. That's a perfect lead into it, because people friends of ours and adversaries of ours like to say that he's uninformed. So they presume he's ignorant. And then they say that means he's stupid. He may not know the geography all that well and world history magnificently well. I don't know how good a student he was at Wharton. They won't release the grades. He doesn't want them out there. But he is not stupid. He is as dumb as a fox. And that doesn't mean he can't be out foxed from time to time. But for an example is the second commandment just in the way we list them. I don't know if there's any particular order like maybe there is is basically it's a divide and conquer. We have some cutesy title around it. But the basic idea is he, he wants to. He hates coalitions and alliances. So when people don't understand why he's attacking not just NAFTA but usmca, that was his creation. Why would he go to war with that? Or why would he go to war? All these trade agreements or the EU or of course having, you know, NATO itself or, or the Business Roundtable or the organized Republican Party is. He doesn't like there to be any power bases that can be a threat to him. And any bully knows this, that you, your greatest threat aren't the individual players, but the collective action. So only because you asked for this gives you one example that I'll keep you here until dinner time on this one because it's a really good one. On collective is that when as we've seen in recent weeks and in recent months, he's gone after off and on, Jamie Dimon and JP Morgan. He's gone after Brian Moynihan of Bank of America. He's gone after Coca Cola, he's gone after Walmart, he's gone after US Steel, he's gone after the intel through this last year, on and on and on. Harley Davidson, these companies are American icons. They are pillars of the American economy. But also their, their very symbolism is so important. The mascot for Harley Davidson is. That is their logo is, is the bald eagle.
- [07:57]
A
It's a bald eagle, right?
- [07:58]
B
And yet when Harley Davidson on their own had trouble getting bikes that were 100% made in North America into the EU because of retaliatory trade barriers based on Trump tariff issues. He couldn't get them in there, so he had to circuitously build a plant in Thailand. That meant he had to shut one down in Kansas City. President Trump took that as a personal offense and told everybody to stop buying Harleys. Now they. This is a guy who is a very centrist non political CEO Matt Levitic. I'll have him in class next week again. And he just wants to pilot his place down his company down the center of the road. His customers, the riders lean somewhat MAGA and his employees lean somewhat anti maga. He's not a politician. He just wants to run a company for the shareholders and the employees and everybody else. So Trump says don't buy his bikes because his, and that's, that's, well, his competition. He's only 3% of the global market. His major competitors are Japanese, Korean and German. So this is not a pro American campaign from the president attacking his company. His stock plummeted, he got fired. And that's a cautionary tale that all the others here. When Delta and Coca Cola spoke out on against the Georgia voting rights law, President Trump or Trump said to, you know, stop, have a, have a consumer boycott against those companies. So happily I, I got together 100 CEOs including PepsiCo and other consumer goods companies, but also American Airlines, Doug Parker and American Airlines. I said could you, would you be interested in running air cover for Delta and Ed Bastian? They did. And Scott Kirby, who I didn't really know at that point at United, was willing to jump on board too. So if you're going to boycott beverages or airplanes, you better have your own beverage machine and your, and your private, own private jet. But that's how they similarly as he was attacking universities last spring. Now there was some justification for bloat, for bias, for some of the woke excesses of the universities that we don't deny. However they're getting their act together and the attacks on freedom of expression, attacks on staffing and all the rest was getting a little crazy and the endowment hits and things. So we pulled together, yes, 700 college and university presidents late April last year. And you know what happened after those 60 universities were hit? All those edicts out of the White House stopped immediately. So that's an overly long answer to how collective action can work, how it can backfire on him then because he would try to subvert, that is by attacking our allies. And I'm not sure you know, where things will be by the time this is shown before the public. But we have seen that, that the UK was reluctant to let us use bases that they had oversight over to help for staging for the attack on Iran. We've seen that Macron is thinking it's unjustified in terms of France's enthusiasm and that it sure would be nice to have allies support us when we're going after countries like China or Iran and certainly Russia. So that has a downside to it. But his goal is he doesn't have to adjust to their preferences if he can take them down one at a time.
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A
Well, he seems to prefer a bilateral behind closed doors conversation as opposed to here's a group of 12 nations or five power brokers, and here I am in public playing this game with them.
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Here.
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He doesn't seem to want to do that. He seems to want to pick up the phone or sit in an office one on one, make a deal with that entity and then come out and say, this is our new best friend. And he does, absolutely. In many cases, that does break the sort of diplomatic logjams that have existed for decades in this world.
- [11:56]
B
It does. And he doesn't have to deal with countervailing power. He feels he has the upper hand because dealing with any one of them, he's usually in a stronger bargaining position rather than to have to bargain with them collectively. So that's right. He comes out with a deal and a deal that he thinks is more favorable. But it's not just bullying. He's actually very, as you know, when he wants to be very charming backstage. I actually thought as he was calling me in 2015 and much of 2016, almost every day through his campaign, that he was going to pivot to the center because he, he could have surprised a lot of people. In fact, just between us, I have him on video with a left of center political scientist I took with me into Trump Tower at that point and he explained why he was going to go to the left of Bernie Sanders. Yes, I can show you the video because he wanted to tap into a lot of populist unrest. But it was a point after that, as the Ted Cruz campaign imploded, that Steve Bannon showed him that a faster route was to go to the right. But it was, that's where all his impulses, all of his moves are not impulsive, they're strategically chosen. It sometimes because it's delivered in an emotional way, he packages that way. It doesn't mean that it wasn't thought out. It isn't strategic. They are strategic.
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A
You, you, you argue that Trump's strategy bends arenas to his will. And I'm curious, from a CEO or an investor risk standpoint, what's the read through to a strategy like that where it's not enough in many cases for him to win an argument, he almost like will force the opposing party to completely change itself just to survive him or to come to a detente Can a corporate leader do that? Can an investor do that with markets? Or is that something that's unique to the political realm and nothing to do with business?
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B
It's such a good question because in some ways we're still dealing with just that one divide and conquer point. As you're basically asking me. Okay, let's presume that's accurate. Jeff, what's the so what question? As a CEO, as a business leader, how would I deal with that one commandment? And that's working it through as you have, Josh. You just take a look at how the BRT has been mia, the business Roundtable, which had been very effective in Trump 1.0 after the killing, the murder in Charlottesville by white nationalists of a peaceful demonstrator on a Friday night. On Saturday, he came out with a statement that wasn't so great but wasn't so awful. Just let it go. But somebody got to him and said to double down on it on Sunday and said that good people on both sides. And that's when Ken Fraser of Merck said, look, I can't stay on here anymore. I'm one of four black CEOs of major Fortune 500 firm. I, I'm, I'm stepping out. And told the Merck board, I don't speak for Merck, I'm speaking for myself. The Merck board said, no, you are. And that set off an exodus, a stampede that all three of the business advisory councils collapsed. Well, that's an example, sort of. You know how it works that way as a single person, where they back them. But often a better way to do it is, is not to throw your fingers into his face, but because humiliation rarely works with him. And I think you're getting at that. Is that. But if you can get to him, it doesn't put him in a corner. So he's not like a caged animal or a wounded animal slashing away in a corner. Is that not the public humiliation? I mean, he's still mad at Barack Obama, of course, because of that National Gridiron dinner, Washington Press Club dinner, where he was being teased for even thinking he'd be a credible candidate for president. He's still upset and mad about that. Is there anything Trump hates worse than losing money? It's losing face. So what you don't do is grandstand and embarrass him. But when the BRT's fallen apart, what has happened? Well, people like Michael Dell and Arvind Krishna of IBM and tech titans would meet with him in small groups. It was extremely Effective. A company like IBM. Arvind Krishna, this is no secret, but people don't know this. He's not giving any gold tributes. He hasn't given any ownership over to the IBM in their entire history of 120 years. They've never paid a penny in lobbying fees. But they get their message across and this is how. So they meet in small group. The Pharma Kings did this too. They weren't as successful because RFK Jr is a pernicious problem for them, but they did get some messaging across. And the Trump RX messaging is. It's not as great as advertised, but it's way better than the critics say. And the Trump RX plan, of course, is developed by these private meetings with the pharma types, with them largely led by Pfizer. And the others followed very well, especially Merck and Eli Lilly. And J and J have been very effective at that. Similarly, you could take a look at the retailers they after a Liberation Day, they were pretty upset about what this going to do. So the CEOs of Walmart, home Depot and Costco went and met with Trump privately. The Business Roundtable should have done this for them, but they dropped the ball. They're a little cowardly. So but they, so they do it as a splinter, splinter groups. And that's been another way to deal with it. But not to go in there alone. If Target just went in there alone or Home Depot went in there alone, it wouldn't be an effective. And even, even Walmart, as we've seen, he's taken them on when they've gone in a loan, but they go in collectively. But privately, you can get the win win that way. And Trump doesn't necessarily have the upper hand. He recognizes the national interest might be something different than what he had in mind.
- [17:41]
A
One of the things that I've noticed is that Trump seems to be very pragmatic. And yes, I agree with you. Like if somebody has humiliated them on a big stage, that's probably a death sentence for that person. But in the lesser cases, we've seen him say somebody is an enemy of the American people and then a week later they're at the White House. This is my very good friend. We see him able to get over differences with people like Mayor Mandani. Recently we've seen the Elon Musk thing go from we're gonna kill each other to hey, we're friends again. There is an underlying pragmatism there, and I do think it's sort of admirable, even if like on the surface it seems chaotic. Like how much of that is is just stagecraft versus how much of that really is emotional. Where he can go from this is the worst person ever to you know what actually this person and I can work together.
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B
People are wondering if he's going to sacrifice one or two, maybe three Cabinet secretaries right now because they're not bringing him positive acclaim. And we've seen in Trump 1.0 he didn't mind tossing out a ton of people no matter how loyal to them they were. Does anybody remember who Senator Jeff Sessions was anymore? And he was the attorney general is what happened. But he became a liability to him and they became history. Sarah Pal and I well he, I
- [19:20]
A
was going to say he would love to do that with Jerome Powell.
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B
He later with J. Pal but Jerome Powell was never a supporter of his but to your revolving door idea is is that Pete Heth has obviously gotten on thin ice. But, but right now it he's quite center spotlight. I think the secretary of of of Homeland Security, she's in, in on thin ice right now. And it's hard to see how Kristi Noem is any less of a problem for him than Sarah Palin would have been.
- [19:51]
A
But he you think there'll be some sacrifices leading into the midterms?
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B
There could be, yeah. Is that he wants to go with who's a winner. You have a major constituency. He loves Mandami. Now one of the reasons he and Manami get along so well is because the populace are on the left and the right. And Trump has, as I said, migrated from the left populace. He wouldn't be the left of Bernie Sanders. Bernie Sanders in his office now still has a plaque as a tribute to Eugene V. Debs, who was the populist on the left. He created the national the American Socialist Party. The guy who had an office next to him was Tom Watson, the agrarian rebel back in 1896. And he had the agrarian. He had the populace on the right and that is the MAGA movement's progenitor. So is Trump's gone from one to the other. But they're both people that are kind of anti institution. They don't like Wall street, they don't like immigration. They have a lot of similar concerns. So that is so Trump finds though that if a person has a major constituency, he likes them and he wants to relate to them. He can be extraordinarily charming again backstage when he wants to.
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He looks at it like an audience. Right. He looks at it like this guy's hot. He's got a big audience, therefore he's got a hit show, therefore he's on my level.
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And.
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And we don't have to agree on the issues, but he respects people that
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B
have an audience and no tolerance for losers. Exactly right. And so he can dispense with them pretty easily. Another one of his great strengths. Although this upsets people. Yale had a school of mass communications in the 1940s and 1950s that studied what Germany did frighteningly well in the 1930s, which has to do with a term that they coined here called the sleeper effect, is that you take a message and you just keep repeating it. The part that was controversial, that why perhaps the Yale school was shut down because they discovered in their research, if you tell a sophisticated audience that has the time and attention to want to look at both sides of the issue, you plant some fatal flaws in one side and you pump that to the sophisticates, and the sophisticates say, hey, I heard both sides. This is the way to go. They don't realize they're manipulated like somebody with a street shell game, you know, that's manipulating you to place bets. And on the other audience, they just tell them one side and keep pounding it. So if you just keep pounding this kind of a message, you can convince 25% of the country that Haitian refugees are eating their neighbor's pets, even though it's completely false. So, but, but there are messages where Trump feels he has the truth and he'll keep pounding and pounding on that. And, and sometimes it's accurate, sometimes it's false, but it he gets the message lingers surprisingly well. Something else that he does. He also has this wall of sound, if you remember the Phil Spector term, where people are wondering if the convenient timing going into the weekend when there's been either affordability news or news about health care issues or the Epstein files or whatever it is, when it looks like it'd be especially bad weekend of news, he manages to get the slate wiped completely clean. Now, I think the Iranian invasion is a calculus all in itself. Nobody could argue that Khomeini and the rest of that regime was a positive for world global society. And the timing has some good arguments that were going in there because they're especially weak and they're starting to rearm, and that's what Israel wanted too. However, you got to admit that the timing of it as the Greenland deal has run its course and that nothing was out in the news that we can, other than Greenland, when he was threatening to possibly take it by force, whether or not military or economic force. Similarly, the Venezuela deal, there was no justification for that. Some people still think there's an oil industry justification. There wasn't. He first said it was Russian and Chinese ships, and there weren't that were setting up affiliations with Venezuela. Venezuela did have some affection for Russia and China and sending them oil, but there wasn't any military links there that anybody has suggested. And the drug trafficking and drug interdiction, that seemed persuasive until we saw that very little of that was even remotely entering the US that mainly we have a big problem coming in from China and Mexico with drugs, and then also having pardoned a major drug dealer who is Roger Stone's client, his former advisor, Roger Stone's client, the President Hernandez, former President Hernandez of Honduras, that was not only extradited to the US and and found guilty, tried and found guilty by a jury and given 45 years in prison and then pardoned, sort of the idea of drug interdiction fell apart because that guy was a major drug trafficker in the US So then he said it was at the behest of the oil industry. As soon as he said that, I immediately went to the heads of the oil industry. I put out a fortune piece, and I didn't name them, but I just said, you know, I didn't name you guys out of courtesy, but do you really want to get mixed up into this kind of ugly American imagery that was so damaging to Dole and in a past generation, two generations back in Dole and Chiquita and W.R. grace and Sullivan Cromwell, some of these other companies that got soiled by being caught up with insurrections and bringing down sovereign governments. And they said, no, no, no, we have no interest in that. That heavy, sour crude, for the most part, can't be refined into fuel oil. It's basically for lubricants and asphalt and things. And we get it more cheaply and reliably from Canada, and we have plenty of it from there. Plus the extraction is so expensive from Venezuela, it's almost twice what it is to extract oil from anywhere else because of the anachronistic, corroded, uninvested system there, of the infrastructure so bad. And it's a scary, unreliable place to do business. We have no interest in it. So. So I said, well, you should say that. And sure enough, there was collective action again when President Trump wanted them to make that the excuse, because there was no clear explanation for the timing. That was the oil industry. They all told him so. So much so, as you know, the CEO of Exxon who said right outright Venezuela's uninvestable. President Trump was pretty bad.
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A
That was off message, that Exxon comment.
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It was. But Harold Ham, his friend, said the same thing. And every one of them, the only one who didn't take as strong a stand was perhaps Mike Wirth, who's already there, is that Chevron's there, but they're not expanding. They just were trapped there from before and have some limited success there, but they have no interest in expanding. Nobody wants to spend the hundreds of billions of dollars it takes to redo. So that's where again, the collective action challenged the sleeper effect that he wanted to, to try to create the myth that that's what was going on there. But something which worked well for him is the ad hoc. Often is the ad hocracy is that the, the first commandment we have there is just like to say that we have, you know, one and only Almighty is the hub and spoke system. It's almost like a tribal thing where he is at the center. We've never seen this in the, the book, the Agenda that Bob Woodward wrote about the Clinton presidency. Woodward meant it in a critical way that it's like a bunch of kids chasing a soccer ball down the field. And Bill Clinton told me, I don't see that as negative. That's what you need in government. Well, Trump has taken that to the hundredth degree, is he doesn't care about Senate confirmations. He puts people in a lot of interim roles and things like that. Now, sometimes it backfires when he had two different US Attorneys whose efforts were thrown out of court because they weren't considered legitimate officers to exist. But other times he just, he has people who are beholden to him rather than part of a civil service system. And he's managed to break up the bureaucracy in ways that nobody would have ever imagined was possible. Now, Doge didn't work, but Trump's approach is working for him, as he. Most times you don't have the expertise sometimes, one, he doesn't get the independent expertise that he had in Trump 1.0 to sometimes give him helpful challenges.
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A
Yes, I think he's done at this stage in the game. I think he's done with the helpful challenges. I think he's on to a new. He's onto a new concept which is I know better than most of the experts and, you know, if I don't, I'll figure it out faster than they will.
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B
He does. It's when it gets in his way, though, when he'll listen say in Trump 1.0, the, the H1B visa restrictions were so severe it was essentially going to zero at Stephen Miller's insistence. And the Business Roundtable didn't know what to do about them. So the then chair of the Business Roundtable asked if I would help them on that. And I did. And we, I know should be candid about this. We went to Jared and explained what was going on and even he felt he was hitting a wall there. But he understood that it wasn't just on agriculture, on the, a lot of the front lines of harvesting crops and things where you needed. We needed the migrant labor, legal migrant labor, but high end tech jobs. It was critical, but so Jared basically said, look, I can, if you bring me something factual that would be of great significance and make us look bad if it didn't happen. So two of the tech companies you talk about all the time told me that they, as a result of the ban on H1B visas, they weren't outsourcing this back to India or China or, or many time zones away. They already had leased space in Vancouver. I've never told this publicly before. They'd already leased space in Toronto and in Vancouver and they had not yet laid down all the infrastructure support, but they leased the space. These companies are so wealthy, they could, they could break up the lease and pay the penalty, it wouldn't matter. But they did have that. And they, and, and then President Trump saw, well, that's a big problem. And he overrode Stephen Miller. But that was, but there's, it's hard. So he needs that kind of expertise sometimes. If he gets just the prejudices of some of the people around him, he might know better, but he might sometimes just let them make a choice that's not an ideal choice. And he likes, you know, usually he likes to hear all sides. And when he encourages a cabinet that has fights as, as, as we saw with the Secretary of Commerce Lutnick and the secretary, the team of rivals. That's the Abraham Lincoln kind of team of rivals. That was pretty helpful to the interests of a lot of the business community so far. Scott Besson has prevailed on a lot of fronts.
- [30:23]
A
Yes, I know. Wall street is relieved about that. I want to just close by asking you about the book itself and what you think people will get out of it, who should get it, who should buy it and give it as a gift. Tell us what you think the opportunity for readers is.
- [30:40]
B
What? Well, if, if you like Donald Trump, then you try to figure out how to Help him. You have to get this book to understand what it is he's trying to accomplish. Instead of making excuses for when something looks wild, crazy, impulsive, defiant is to understand why he did what he did. Then you can help him better. And if you're a critic of his, instead of just, you know, reading the Atlantic or turning on Ms. Now and throwing things at the screen, that's not going to make a difference either. You need to understand what is your counter messaging that you want to get out there. It's when he is the, the idea of the grandiosity, for example, that people need to understand what that is all about. That nobody ever called Alexander III of Macedonia Alexander the Great until he called himself that. He and his mother created this whole false lineage to Odysseus and Achilles. You're not going to puncture the myth making that Trump was. So you know, why take that on? You got to pick and choose your battles to see what's really critical to him.
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A
I love it and I want to congratulate you on that. Is that out now? Is that out this week?
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B
It comes out in two weeks. And thank you for flashing the, flashing the COVID But we have, you know, the endorsements are everything from the Larry Tribe, Lawrence Tribe, sort of the dean of Constitutional law at Harvard, to Anthony Scaramucci, our friend, to Michael Cohen, his former advisor who went through quite a Bunch, to many CEOs from Procter and Gamble to Xerox to whomever and Thomson Reuters that they recognize that there are predictable patterns and why get surprised by them? So you would have thought somebody would have done this before. It draws on political science and it draws on psychology, draws on economics, but it mainly is not just a bunch of whispers that people are just gossiping their inside story from the White House and turning on a kiss and tell book or, or it isn't a bunch of journalists that are just clapping their hands together and twisting their pearls in alarm, but rather what is here that's useful knowledge to understand how does this guy work differently than everybody else and what do we do as a response to it? You can't counter him if you don't understand them.
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A
Jeff. I think it's a great concept. I want to thank you again for coming back on the compound. The book is called Trump's Ten Commandments. You will be able to buy it in March. And thank you guys so much for watching and listening. We'll talk to you soon.
- [33:02]
B
Thank you, Josh.