TIP079: THE EFFECTIVE EXECUTIVE BY PETER DRUCKER

W/ PRESTON & STIG

19 March 2016

In this episode, Preston and Stig discuss one of billionaire Jeff Bezos’ favorite books, “The Effective Executive” by Peter Drucker. While the best leaders in the world have a very different personality, according to Drucker, the common denominator is that they have honed the learnable skill of being effective.

Subscribe through iTunes
Subscribe through Castbox
Subscribe through Spotify
Subscribe through Youtube

SUBSCRIBE

Subscribe through iTunes
Subscribe through Castbox
Subscribe through Spotify
Subscribe through Youtube

IN THIS EPISODE, YOU’LL LEARN:

  • Why leadership is learned and talent is highly overrated.
  • Why the most effective executives audit their time once every quarter.
  • Why the best leader doesn’t make quick decisions.
  • Why Preston and Stig think shouldn’t work more than 40 hours per week.
  • Why meetings are often a vast of time, and what to do about it.

HELP US OUT!

Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it!

BOOKS AND RESOURCES

NEW TO THE SHOW?

P.S The Investor’s Podcast Network is excited to launch a subreddit devoted to our fans in discussing financial markets, stock picks, questions for our hosts, and much more! Join our subreddit r/TheInvestorsPodcast today!

SPONSORS

  • Support our free podcast by supporting our sponsors.

Disclosure: The Investor’s Podcast Network is an Amazon Associate. We may earn commission from qualifying purchases made through our affiliate links.

CONNECT WITH STIG

CONNECT WITH PRESTON

TRANSCRIPT

Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Intro  00:06

Broadcasting from Bel Air, Maryland, this is The Investor’s Podcast. They’ll read the books and summarize the lessons. They’ll test the waters and tell you when it’s cold. They’ll give you actionable investing strategies. Your hosts, Preston Pysh and Stig Brodersen!

Preston Pysh  00:28

Hey, how’s everybody doing out there? This is Preston Pysh. I’m your host for The Investor’s Podcast. And as usual, I’m accompanied by my co-host Stig Brodersen out in Denmark.

Today, we’ve got another book for you. And this book is called “The Effective Executive,” and we picked this one up because it was recommended by Jeff Bezos. I’m sure most people know who Jeff Bezos is. He’s the founder of Amazon. His net worth is around $29 billion and this is one of the books that he highly recommends for executive management and leadership within his organization. So that’s why we picked this one up. I was really, excited to read this book because I know Bezos puts a lot of emphasis on it. And it’s one of his top reads for the company. But I did not enjoy this book. I didn’t. Let me start off with this. The information that is in this book that you’re going to read is absolutely 100% great information. It is information that is going to lead decision-makers down the right path inside of an organization. But my issue with the book was that it was boring.

01:38

I did not have fun reading this. This was it was bad. You know, I think of it like this. When we are reading the book, “How to Win Friends and Influence People.” I love that book. And I think the reason that that book is so good, is because you learn and you also have stories that go with it at the same time. And the writing style in Carnegie’s “How to Win Friends” is just fantastic because he starts off with the story and he walks you down this interesting story where you don’t know where it’s gonna go. And then in the end, you hear the conclusion of the story. And then he wraps it up nicely with like the learning lesson.

This book here, “The Effective Executive,” was just like, they were just telling you, “Hey, you got to do this, you got to do that.” And it’s all boring, like leadership executive stuff. So I don’t want to say that the book was bad because the book was very, very good. The information is excellent. And we’re going to discuss that hopefully in a more enjoyable manner. But the information is good. The issue is just the style. It is definitely the issue I had with this book. The writing style was not fun. And you know, I have a hard time even recommending this for people. But let’s get to the book.

Stig, I’m assuming you have a similar opinion. I don’t know how you could have had fun reading this, but maybe you did. I don’t know. Let’s hear your opinion.

Stig Brodersen  02:56

No, I definitely didn’t like it. I’m not even sure I like the content, to be honest. But you know, it might not be fair. It’s kind of like, if I was told to review “Sex and the City,” I would probably say it’s a horrible chick flick. And then someone would say, “Well, Stig, you are probably not the target group.” And that would be right. I kind of feel like the same way with this book. I probably can’t find a job I would rather not have than being a CEO. Let alone an effective CEO. So it’s probably not fair.

Preston Pysh  03:25

Yeah, I thought the same thing at first was about the content like the style is horrible. I don’t even know if I agree with the content. But you know what, when I was going back, and I was kind of looking at my notes for recording the episode… I was looking back through and I was like, “You know what, this content is very good.” What he’s recommending is good information. It’s just the style in which it was presented was horrible. So we’ll try our best to maybe provide real-life examples of our own when we’re talking some of these… I don’t know, but we’ll see how it goes.

So let’s go ahead and dive into the book. So chapter one of the book is titled “Effectiveness can be learned” and you know, there’s a lot of people out there that say leaders are born, versus leaders are created. And for Peter Drucker, he’s of the opinion that they are created. I would have to agree with this. I’ve seen some guys. And I’ve had kind of a unique background. I’ve mentioned a couple of times on the show that I went to the United States Military Academy at West Point. And if there’s one thing that the school does, its essence is trying to teach people how to become leaders.

So for four years, you sit around, and what you do is you’re just learning the elements of leadership. It’s all about leadership, that whole school, the whole time you’re there. And so with this point here, I completely agree with Drucker just because of my personal experience and seeing this happen firsthand with people that a decade earlier, you would think there’s no way that guy could ever lead an organization and here you go. He’s like the CEO of a company, 10 or 20 years later and you’re just amazed at the progression that does take place. So I agree with him at that point. And I think he probably starts off the book with that just so that he can maybe motivate people, because if you’re reading this and you’re like, “Oh, I don’t have one ounce of leadership experience, you’ll read that and you’ll kind of get motivated to think, ‘Hey, you know, I can become the leader that I strive to become.’”

05:16

The thing that he says that separates the effective executive from not being effective or being loved by their organization, and you don’t have to be loved, you could be hated and still be pretty effective. I mean, look at Steve Jobs, I would say most people did not like him. But that guy got results. And that’s his point. That’s what Drucker is getting to is, at the end of the day, the thing that matters for these executives is do they get the desired results that they’re after? And that’s what sets them apart from being an effective executive to not being one.

Now you get into a whole different discussion. If you’re somebody that your organization looks up to and aspires to be and that you motivate for years to come to the people below them, that’s a whole another discussion. And that’s something that I think probably should not be removed from the discussion. I kind of wish that that was something else that was discussed in the book, which was not because, for me, I think about the compounding impact that that has for not only the organization but for every other organization that person goes to later in life. I feel like as a mentor, that’s something that’s just vitally important that you think about not just getting the result, but also getting the result and doing it in a manner that motivates and inspires the other people who are around you. And I think that that’s a huge mark that he missed in this book.

I’m curious to hear Stig’s thoughts on the first chapter.

Read More

Stig Brodersen  06:42

Yeah, I think what Drucker wants for the first chapter is just to tell us that effectiveness is a skill like anything else in life. And while he’s saying that we can have talents, we can’t do that much about the talent that we have. It’s just the way it is. You might compare this to say, a basketball player. You’re just built a certain way. And you just, that’s how tall you are. You can’t do anything about that. But you can still work on your fitness and acquire technical skills. Look at Michael Jordan. He wasn’t the tallest player, but he was the best.

So separating what is talent and skill, I think that was his main takeaway. But really, that it’s an easy skill to acquire. There’s no way saying that it’s harder to be an effective CEO than to learn a new language or learn how to fly fish. I don’t know why I came up with those two examples, but that’s the way he’s looking at it. It’s just a skill and the CEO is basically, for any organization, the CEO is just paid to be effective.

Preston Pysh  07:46

I would like to stress I think that if you’re effective first, and then you work on your inspirational type skills if you will. I think that the ladder kind of comes along with the former And if you focus on that thing to make your organization successful and effective, people are going to be happy because they’re going to know that they’re contributing to a good cause and something that’s producing value for the world. And I just think that if you’re a leader, you got to focus there first. You got to focus on how can I be the most effective and create the most value within the people that I lead and the things that I do? That’s all I have for the first chapter. It looks like Stig is good, too. So we’re gonna move on to the second one.

08:30

So the title of the second chapter is “Know Thy Time.” So here’s a chapter that Peter Drucker and I completely agree on. What are you doing with your time? Because that’s your most valuable commodity. And I’ll tell you what, you get around effective executives or you get around people that operate at a very high level that are key decision-makers within an organization, you’re going to find the thing that they value the most is their time, and there’s just not enough of it.

So one of the ways that Drucker talks about how you can kind of benefit from understanding this is you got to audit your time. You got to think and you don’t do this all the time, you obviously do this, you know, once a month, once a quarter, whatever it might be. I think he, if I remember, right, I think he recommended once a quarter or something like that? But you audit your time you look back and you say, “Okay, for this day…” And you typically do this, let’s say you have an executive assistant at this level. You’d have an executive assistant that would kind of look at your calendar for the day and then compare that with the results that you got and what you were doing. But this audit is important for you to understand, “Hey, I just spent an hour not doing anything other than roaming around and talking to people that weren’t adding to their value or their work ethic that they were doing.” You were just interrupting them and wasting their time. You have to audit that time and understand what value you’re creating and more importantly have to understand what those habits are that are developed on a daily pattern.

Like, what does the pattern look like? I start the day at seven o’clock. And for the first hour, I read email, was that value-added? Maybe it was, maybe it wasn’t. That’s where you have to make that determination. And you have to look at what’s becoming a habit. What is consuming my time, if I have eight hours in a day, or I have 12 hours in the day or whatever, how am I consuming that time? Am I doing it most effectively? Because when you figure that question out, you’re going to see your productivity of not just yourself, but the subordinates that you lead is going to go through the roof.

Stig Brodersen  10:38

I think that what we will probably all find not only in CEOs is that we spend too much time on meetings. And this is something I’d like to discuss because in all the books we have been reading, and I’d say whenever I’m sitting down with a friend and we discuss this concept, it seems like everyone agrees that we’ve spent too much time on meetings. I can’t wrap my head around why we still do it? It’s kind of like we all agree that we must sleep every night, otherwise we will be exhausted the next day. But still, we wouldn’t sleep. It’s so illogical for me why we spend so much time in meetings. And Peter Drucker, he even mentioned the meeting that the CEO went to and he thought it was horrible. He didn’t think it was creating any value. And what he later found was all the subordinates that were at the meeting, they had the same impression. But there was just this culture that everyone who participates in the meeting has to ask one question to signal that they’re interested in coming to that meeting. So basically, this was just a game that everyone lost in.

Preston Pysh  11:38

So I love this point. And I think it’s so important for people when you set up a meeting, A) you need to make sure that you have the right audience and not one single solitary person more. B) you have to know if it is important information that you didn’t want everybody to be there. What is your distribution plan to distribute the notes and the important information that was gained out of the meeting?

12:03

The third thing is, what is the end state of the meeting? What is the desired outcome or decision point that needs to be reached at the end of the meeting? If you can’t answer those three things before the start of any meeting, just cancel it. I mean, just cancel it as fast as you can, because you’re wasting time. I’ve been known that you know if I’m sitting in a room and I’m running a meeting of calling it 30 people, I will look up and count the number of heads in there. I’ll look at the time that was spent doing it, then I’ll look at the average salary, call it 100,000 of each person in the room. And I’ll say “Okay, so this was a $10,000 meeting, or whatever it might be.” It’s something you have to think about. And so then you’re saying, “Well, what kind of value was created for that dollar figure for us to sit here and talk about just it was an information update?” Some are very important, don’t get me wrong, some are vital. Some are absolutely vital, and there’s nothing more infuriating than not communicating effectively with everyone on your team or your organization.

But at the same time, you have to be very careful that these things don’t turn into monsters and devour all the time within your organization. So Stig, fantastic point. Sorry to drag that one out until I have some scar tissue in that one.

Stig Brodersen  13:20

Yeah, well Preston, that’s probably why in our organization, we don’t have any meetings. I was surprised because we spoke like just an hour or something yesterday and that was probably the first meeting in the whole organization for I don’t know how long? It’s probably because we don’t like meetings in our organization.

Preston Pysh  13:35

That is so true.

Stig Brodersen  13:36

What scarred me is… It’s my first job upon graduation. And that was the time I learned about the concept of “face time.” So for all of you out there doesn’t know what FaceTime is. It’s the concept of you can’t leave the office before the boss does it and you have to pretend to do something even though it’s like five or six o’clock and everyone is exhausted and wants to go home to their families. But you can do it before your boss leaves and then he leaves, and everyone else leaves.

And it’s just so inefficient and was just so frustrating for me. Also, from an ideological point of view, you can probably see why I have this rant towards corporate Denmark or corporate America. So basically, I just don’t believe in working more hours. I believe in working effective hours, which is also one of the takeaways from this chapter. And I think that you should set up your own organization towards, say, 40 hours? I personally don’t believe in working more than 40 hours per week. And even that, for me would be a busy week for me. I think that if I work more, it’s probably because I haven’t been good enough to outsource or prioritize. I wouldn’t get enough rest of wouldn’t have enough time with my family, if I spend say 60 hours. I know that that might tick up a lot of people because we see this differently, but I think that you should be able to do your job in 40 hours or less.

Preston Pysh  14:52

So I liked your point, Stig, and I think that if you’re a leader out there and you’re listening to this, I’ve got a challenge for you because I think that the mindset of people staying till seven o’clock at night. After all, that’s how late the boss is there before they leave is crazy and ludicrous. When I think that leaders within an organization don’t realize is that when a person goes home and spends time with their family, they’re happy. And when they come back to work the next day and they’re happy, they’re going to work more effectively. So when people don’t appreciate that fact, that you give people their free time, or that you’re pushing them out the door, that in my opinion, either you lose your talent within your organization, or you have people that just aren’t productive because they’re not in the mental mindset to do things successfully. So this is what I would challenge leaders to do is walk down the hall and say, “Hey, what is it that you’re working on right now that’s that important that you’re here at 7 pm or 6 pm, or whatever it might be?” And just listen to the response and maybe it is something that’s important and if it is just, you know, you got to thank them. unconditionally, just as much as you can for their hard work.

But most likely, they’re going to say they’re working on something that’s due in a week from now, which means they’re there because you’re there. And that’s when you need to say, “Hey, get out of here, I want you to go back and spend time with your family. Your family time is very important to me.” That is so important as a leader, to value other people’s free time, and to push them out the door. And I’ll tell you, you’re gonna get so much more work out of that person when you treat them that way.

16:29

Chapter Three, “What can I contribute?” The problem with a lot of organizations is that the executives tend to focus downwards and concentrate more on the efforts instead of the results. And so let me give you an example of that. Have you ever heard of a boss that, he’s kind of defending his team’s work? Let’s say that they worked hard on something for a month or two or whatever. And you can hear the leader of that team saying something to his boss, and he’s saying, “You know, we work this many hours, they did all these great things, they work so hard on this and blah, blah, blah, blah, blah.” And they never get to what value the team created with the product or service that they were working on.

And this is where Peter Drucker, you know, is kind of bringing home this point of, what can I contribute? Like, what is the result opposed to what was the activity that occurred get the result? And so he’s telling the leadership within an organization to focus on what is the result. And this kind of goes to the idea that Stig and I have talked about in other episodes of the “Act versus the Intent.” What is the intent of what you’re building? Like, what’s the so what? What is it doing for society? What is the value that’s being created? That’s what you need to focus on. When you focus on that you’re gonna find that you’re focusing your time in the right areas.

Stig Brodersen  17:54

I think my key takeaway from this chapter is when Peter Drucker’s talking about listening to what the CEO is saying. Is he saying that it’s my job to provide my managers with the right information? Because that is what you should be saying. Or is he saying I have 800 employees or my turnover is $3 billion? What is this saying? What kind of value is he creating? And the thing if we circle back to the point about results and providing value. I think a concept that you will see more and more in the corporate world is you get paid by the result. So you will probably be moving away from the nine to five-way of working and more into what results from you produce. So you have companies…

This is mainly in some start-up companies, but you’re seeing a trend here where people are not required to come and sit in the booth, or you know, come at least to the workplace from this hour to that hour. But they were told that this is what I expect from you to have done in say six weeks. How many hours you should do it, how you spend your time where you’re sitting, that’s not important. It’s a question of what can I contribute? What are my results? And then he rounds up the chapter by saying, we should just remember that the CEO is just the ultimate helper for the organization.

Preston Pysh  19:16

His main job at the end of the day is to be the resource allocation manager. He holds all these resources at a very high level make the company and it could be capital resources. It could be human labor, it could be whatever. But he’s that resource manager. He needs to know where he needs to plug those resources down to maybe the lowest level knock out that critical path event so that he can achieve the bigger objective of the business.

19:46

So let’s move on to chapter four. This one’s called “Making strength positive.” And I didn’t like this chapter. I agree with what he’s saying. But I also disagree because I think he is overlooking something. So in this chapter, he focuses on this idea that a leader, instead of focusing on minimizing the weaknesses that are present within employees, the executives should focus on maximizing the strengths.

And so he gets into this conversation of, you’ve got to find what somebody’s good at, put them in that job. And that’s what you focus on and just ignore the weaknesses. Maybe that’s not what he meant. But that’s kind of how it came across to me in the book. And I don’t like that. And the reason I don’t like that is that I think that whenever you hire somebody or you are a leader within an organization, you have people below you and they have skills. And let’s look at it this way. They have assets and they have liabilities. If you don’t understand both of those pieces, the assets and the liabilities of each one of your subordinates, you’re missing the boat completely.

Now let me give you an example. So billionaire Warren Buffett, he has a quote, he says that the most dangerous person in your organization is the person who’s the smartest, and the person who has bad ethics. When you have that person in your organization, you need to get rid of them as fast as you can. And I totally agree with that.

So there’s an example of a person who has a huge positive, they’re very smart, they can intellectually solve problems for you. But their weakness, their dark side of this is that you can’t trust them. And on top of that, they might take your proprietary information and sell it to somebody else or take the idea. They might do something underhanded. And that liability, this goes back to asymmetrical risk and upside-downside calculations. That person poses an enormous threat to you. So if you don’t understand what those weaknesses are, man, you’re totally missing the boat. And for him to talk in the book here in chapter four about just focusing on the positive and put them in a job that maximizes their strengths. To me, that’s a bad recommendation.

Stig Brodersen  21:58

You know, I think I read this chapter a bit differently. I don’t know if it has something to do with the way I was educated, because like, the way I’m taught to think about weaknesses is that if we have weaknesses, we need to fix that. That’s kind of the way that I’ve been taught how to look at that. And what he’s doing is that he’s comparing this to the Japanese labor market. I think that was an interesting cultural study.

Apparently, on the Japanese labor market, when you have employment, it’s for life or close to life, which to me as a capitalist seems like a horrible way of structuring a labor market. But apparently, both the employer and the employees look at this relationship and say, “Okay, so this is for life.” And so what the Japanese are saying is that they can’t afford to focus on weaknesses. They can only afford to focus on strength. They’re not thinking in terms of how they could fix weaknesses, which was the way I was reading the chapter. It was just saying, “If you aren’t good at this, then we need to make you a specialist in that field and then grow our organization like that.”

But that doesn’t mean that disagree with you, Preston. I completely agree that if an employee or manager or CEO for that matter, if they don’t have integrity, it doesn’t matter what they can do, you should just get rid of that person as soon as possible.

Preston Pysh  23:14

You have to have a good audit of what the strengths are and the weaknesses, and you have to be aware of what potential risks are associated with that string. That’s what I’m saying. Now, I agree with Drucker on the fact that when you find that person with, let’s just say that the weakness is attached to the strength. And you’re willing to assume the risk associated with that weakness, and you’ve made the decision that you’re going to have this person. Now, you’ve got to focus on maximizing their strength. I agree with that wholeheartedly. And I think what Drucker’s also saying in the book is that if you focus on the weakness, and you’re talking about the weakness and you’re trying to correct the weakness, you’re kind of wasting a lot of time that could be used and maximized by focusing on their strength and being more productive. I agree with that.

24:01

Okay, so chapter five “First things first.” In this chapter, what Drucker’s trying to get to is just this understanding that the secret to being effective is concentration. And this is something that I completely agree with. All the different billionaires that we study, always talk about how important focus is. And something else that I think kind of goes hand in hand with this is just the ability to prioritize and know what’s important.

I think to know what’s important, you got to kind of ask your workforce, you got to talk to your people, as an executive, you got to say if there’s one thing, and this would just be going down the hall and just talking to different people, “If there’s one thing that we need to do well, what is it? What is going to add the most value or what opportunity out there are we not capitalizing on that would create enormous value for us?”

And then the hard part for the executive after they capture all this information is then making the assessment of, “Okay what sits at the top of that priority, and why does it sit at the top of the priority?” There’s a lot of the times the executive will look at it and be like, “Well, this is going to increase our bottom line. Period.” And they’re not thinking about maybe the brand that they’re paying for or the goodwill that they’re paying for the increase that bottom line. There’s always a give and take. And as a smart executive, you have to be thinking, in my personal opinion, you got to be thinking long term well before you’re thinking short term because the person who’s thinking short term is totally robbing from their future whenever they make those decisions.

Stig Brodersen  25:30

I think the best example I can come up with from this chapter is not from this chapter, because I really, didn’t like the chapter. But in another book that we read, I think it was “The ONE Thing.” There was this great example with Steve Jobs when he returned to Apple. Apparently, Apple’s apparent time had 350 products, and the first thing Jobs did was to throw out 340 of those products only focused on 10 products. This goes back to what Preston is saying about quality.

This is the time of information overload. There’s so much content out. There are so many products out there. You should focus on one thing or perhaps 10 things, but you should concentrate. You should focus on what is it that creates the most value.

And let me just give me a down to earth example here. So we have a weekly podcast and at some point in time, Preston and I, we discussed or I think I suggested that we might want to do like a daily show or twice a week or something like that. And luckily, because Preston is a lot smarter than me, he’s saying that we probably shouldn’t be doing that. We should just be focusing on the quality of having one show and today, I completely agree with that. If anything, you would rather see us do like two shows per month, instead of two shows per week. So many podcasts out there. Why do you want to listen twice as many as half the quality? It just doesn’t make any sense to me as a business owner.

Preston Pysh  26:56

All right, so let’s go ahead. There are only two chapters left. So we’ll finish this up. So chapter six “The elements of decision making.” So I love talking about decision making, because at the end of the day, that’s what we are, as a human being or as a leader or anything. It all comes down to decision making.

Right now, you’re making a conscious decision. You’re making a decision to listen to this show. You also might be making a decision that you’re driving your car and making a left-hand turn right now, I don’t know what you’re doing. But you are, no matter where you take a stop in time, you can stop right now. You could go back in the last 10 years. If you stop time, at any given point, you are consciously making a decision.

So inherently, that’s what we are. We’re decision-makers. And when you see people that rise way up to a very high level, and it might be in business, it might be in sports, it might be in whatever, you have to kind of make the leap of faith that that person has just made very good decisions along that array of time to bring that person to that point where they got.

28:02

So whenever we talk about the elements of decision making, I think that this is such a key topic and something that’s important for people to fully understand and know that each decision that they make is a culminating experience, which leads to right now where you’re at. So an effective executive, according to the book, knows that his decisions will have an enormous impact on the entire company.

And so in the book, when we talk about the elements of decision making in chapter six, what Drucker gets at is he says, “Many executives also make the mistake of confusing a generic situation with a unique situation.” And so he’s saying that most of the things that happen within a business are kind of generic situations and generic decisions. And they’re not something that the leader needs to take much time thinking about because there’s a precedent set. There’s a scope in which typical decisions come in and they go right out and the leader can quickly make those decisions.

But what he’s saying that the person needs to focus their attention on are the unique decisions, the ones that he’s never had to make before. And those are the ones that the first thing you got to do is you got to ask yourself, “How much time do I have to make this decision? Does this decision need to be made right now? Or do I have an hour or a day or a week make it?” And if you have more time, and there’s going to be no impact, you need to dig, as a leader, as deep as you possibly can figure out all the facts, assumptions, opinions, that go along with that decision. And that’s what separates, you know, great decision-makers versus poor decision-makers.

Stig Brodersen  29:41

One thing I liked about this chapter is when he’s talking about an executive decision is not a decision unless it’s backed up by action. And a CEO might say, “We should start selling a product in Europe,” or something very, not as concrete, but say something like we should change our focus, and this is what you should do now. But Drucker is saying that unless you are very specific in your decision making, it’s not a decision because then it’s not your decision and it won’t be implemented.

Preston Pysh  29:41

We had Mike *inaudible on our show, and that was one of the main things that I remember from our interview with Mike. He wrote one of the books that we were talking about with leadership. The name of his book is “Think Outside the Box.” But we asked Mike, we said what’s the common thread because you were an executive consultant, what’s the one thread that you see amongst all these people? And Mike said, “You know, when you’re around somebody who’s just a great decision maker and has been there for a long time, they’ve just got this pause about them. And they think. They don’t just immediately start pontificating about what they know and what they don’t know, and then make a decision. They’re just very thoughtful. And they don’t make a decision right out of the gate. They think about it, they know that they have time on their side to make an informed decision.” And I love that point, and I totally agree with him. And I think that that’s one of the key elements to great decision making.

Stig Brodersen  31:00

So whenever you are making a decision and executive decision, you must make sure that all the responsibilities are determined. So who should do what? And do they have the right skills and the right information to do that in the first place? And if they don’t, how will they acquire the skills? It is also the notion of the CEO not just saying we should do something, and then he would have like 1000 employees that can just read his mind and just carry out the decision. No, it has to start from the top.

Preston Pysh  31:29

So the seventh chapter kind of goes hand in hand with the sixth chapter. The sixth chapter is “The elements of decision making.” And then in the seventh chapter, it’s called “Effective decisions.” So in this chapter, Drucker says that executives, instead of running behind facts, executives should focus on opinions more than the facts. I guess I kind of agree with this. I think that it’s a good point. I don’t know if I would go as far as saying that they should focus more on that versus more on the other because I think it’s situational dependent.

But I do agree with this idea that I think a lot of leaders, and I think this is more of what he was trying to say in the chapters, most leaders just look at the facts. And they say, “We’ll lay it out for me in a PowerPoint presentation and show me the facts, and then I’ll make my decision.” And they completely ignore the opinions of the 20 other people sitting in the room as that decision is made, who probably disagree with what he just made.

32:24

So I like the fact that he’s bringing this up. I just think that you need to be balanced as a leader, you have to go around that room. You have to gain those insights and those opinions and then when somebody does disagree with you, I think when you’re around a great leader, they kind of go to that person more often. They say, “Well, why do you have that opinion? Quantify that for me, why do you think that we should do the opposite of this?” And a lot of the times, you’ll find that that person down at the lower level has better information than you do as a leader at the top. And so that’s what Drucker, I think, is trying to get at with this.

But here’s what I’ll challenge him. You might go around the room and get the opinions of, let’s say, 10 people in the boardroom, and they all want to do one thing. And it might be the easier thing to do. It might not be the thing that’s harder for them to implement, and go about doing. And here’s the thing about being a leader, you know facts that they don’t know. Maybe you know that you have an additional $10 million to make a mistake. And try to pursue something big, that would be a 10X gain within the business. And you’ve been instructed by your superior to take a little bit of risk and go out on a limb and try to create something that’s going to add enormous value for the business. And so the subordinates might not know that piece of it. And so I think the more that you can disclose, and the more that you can just be upfront and honest with everybody in the room and disclose the facts, assumptions, and opinions, with everybody involved.

33:50

And this is the key point, at the end of all that after you’ve made that assessment of all those different things, you as the leader make the decision because if you don’t, you’re just dead in the water. You make the decision. And you know what if it’s an unpopular decision, you make that decision, you stand by and you execute and you move in that direction. And you got to have that positive mindset that even though that there are people out there that disagree with you, you know what you’re doing, and you’re going down that path and you move out on it.

Stig Brodersen  34:20

I think what Drucker does well in this chapter is to come up with an example of a good law firm. And what he’s saying is that the beginner fresh out of law school is first assigned to draft the strongest case for the other lawyer’s client. And he’s not only doing that because this is the most intelligent thing to do to win the case. But the more important reason is that it discourages the new lawyer to think that he knows that his case is right. And it forces him to see the two cases as alternative because when you have two alternatives, you can make the effective decision yourself. Just as a jury will have like two cases and they should decide which one they believe in. It’s the same for a CEO.

Preston Pysh  35:00

All right. This was a very good book. I think with the content and the ideas that it forces you to think about as a leader. I did not like the style as I said upfront, but the name of the book is “The Effective Executive” by Peter Drucker. A very, very famous book. Drucker’s written, I want to say over 40 books. So he is one accomplished author, which you would think his style would be good after writing all those books, but evidently not. this one was written back in 1967.

Jeff Bezos, a net worth of $29 billion dollars, founder of Amazon, is the one who recommended this book. And that’s why we were reading it. So all in all interesting read, if you do want to read this book, via audiobook, go to our website and click on our link for Audible. And that’s a service through Amazon. You can listen to this book completely for free if you click on the link and go to Audibles from our website. So that could be a free gift from Stig and I to you to read this book if you’re wanting to dive into it.

I don’t necessarily recommend this book because it was dry. But if you were one of these people that are trying to emerge within your organization as a key leader and manager, I think that this would be a good read for you. I think this would be very beneficial.

So that’s all we have for you guys this week. We just appreciate everyone out there, leaving us reviews and doing all these amazing things, commenting on our forum and posts. We just thoroughly enjoy the interaction with our audience. And we owe it all to you to be able to do this, and kind of have this discussion each week. So thank you for what you guys do. And that’s all we have for you. So we’ll see you guys next week. Thanks!

Outro  36:37

Thanks for listening to The Investor’s Podcast. To listen to more shows or access to the tools discussed on the show, be sure to visit www.theinvestorspodcast.com. Submit your questions or request a guest’s appearance to The Investor’s Podcast by going to www.asktheinvestors.com. If your question is answered during the show, you will receive a free autographed copy of The Warren Buffett Accounting Book. This podcast is for entertainment purposes only. This material is copyrighted by the TIP Network and must have written approval before commercial application.

PROMOTIONS

Check out our latest offer for all The Investor’s Podcast Network listeners!

WSB Promotions

We Study Markets