Unknown

I'm Adi Ignatius. I'm Alison Beard, and this is the HBR IdeaCast. So, Alison, today we're going to be tackling an age-old question. Are successful leaders people who are uniquely qualified to handle their opportunity, or do the context and circumstances they're in largely dictate how they'll perform? We're essentially renewing the great man theory versus the idea that history rises from below. Yes, great man or great woman. I do like that topic, especially in an era when boards are rewarding CEOs with astronomically large contracts. You can't help but wonder whether these leaders actually are bringing differentiated talent that they're not actually bringing. And while the debate is in many ways unanswerable, Jared Diamond has tried to apply the rigor of research to look at the extent to which an individual leader can truly and deeply influence their institution's success. And he even has advice for leaders who want to increase their chances of doing well. I imagine it has a lot to do with being in the right place at the right time? Absolutely. Look, it's an interesting topic. Diamond is perhaps best known for his 1997 book, Guns, Germs, and Steel, The Fates of Human Societies, and his new book on leadership is called Profits, Profits, Coaches, and Kings, When Do Leaders Matter? He spoke with me about the secret sauce that makes political, business, and sports leaders succeed and what can and can't be attributed to the individuals in charge. Here's our conversation. So in this new book of yours, you've reopened the debate about how critical individual leaders are in the unfolding events, right? So there's the great man theory of history, where we craft. I write at individual leaders in business, in politics, in religion, in sports for uniquely affecting historical developments. And then there's an opposing view, which is that leaders are constrained by the context and the circumstances they're in and have little influence on events. My first question is, why dig that up again? Because the debate still remains unresolved. The traditional way in which historians and biographers have tried to settle the role of the leaders is by writing biographies. Biographies, but biographies don't settle things. So I reopened, quotes the debate, because there are now two new powerful methods, methods of natural experiments that social scientists have pioneered for a vast few decades, and then a method that I introduced called the Hamlet test. All right, so let's talk about the Hamlet test. So as I understand it, if you're going to assess a leader's greatness, you need to identify, you need to evaluate all the plausible alternatives. I call it the Hamlet test because— Of course, you could ask, was Shakespeare the only person who could have written that great play, Hamlet? Well, in that case, we know who were all the other Elizabethan playwrights at the time. There are about 25 of them. We've got their plays. We can judge their plays. Some of them are slightly good, but none of them remotely approach Hamlet. And in addition, Hamlet was Shakespeare's 22nd play. He had already written Romeo and Juliet and Julius Caesar. He had established himself as a good player. In the case of, say, Jeff Bezos, was Jeff Bezos uniquely qualified to found Amazon? Well, the population of the United States is about 340 million, and it's impossible to make an argument that out of those 340 million, the only one who could found Amazon was Jeff Bezos. So Shakespeare passes the Hamlet test, but Jeff Bezos does not pass the Hamlet test. But in other cases, you can identify a uniquely qualifying person. The founding president of Botswana, Tsaretsi Kama, was uniquely qualified. He was uniquely qualified because upon independence, Botswana had only 22 university graduates, and Tsaretsi Kama was the chief of the largest tribe, the one on whose land diamonds were found. All right. So in the business world, who does pass the Hamlet test? Few people pass the Hamlet test in the business world. One of the few is the founder of the pomegranate juice industry in the United States and the world. Until 2002, pomegranates have been domesticated for 4,000 years. And in. in some Middle Eastern supermarkets, the markets, you can get someone to squeeze one glass of juice. But there was no industrial production of pomegranate juice because pomegranate juice comes in this hard object, which is very difficult to squeeze. As of 2002, there were 22 people in the United States who grew pomegranates. And 21 of them didn't have much money, and they had no motivation to make industrial-scale pomegranate juice. There was one couple. They had 50% of the pomegranate production in the United States, and they were interested in the medical benefits of pomegranates, and they didn't care about the money from it. Those were the Resnicks. They, like Shakespeare with Hamlet, were uniquely qualified to set up the pomegranate juice industry in the U.S. and the world. Okay, so there's a distinction between someone, the Resnick family and pomegranates, who created something, an outcome that probably would not have happened without them, as opposed to leaders like Bezos or other tech titans like Steve Jobs, Bill Gates, where. the innovation would have happened, but they shaped the outcome, right? And that we have to recognize that. That may not pass the Hamlet test, but that is one of the definitions of great leadership, which is to seize the moment and shape its outcome. That's exactly the point. Leaders can make a difference in several ways. If they pass the Hamlet test, they can make a difference because they're the only person who could have done it at all. More often in the business world, there are multiple people who could have done it. But they would have done it in different ways. For example, social media. Was Mark Zuckerberg uniquely qualified to found social media? No, there was social media before him and there was social media after him, but he did it in a distinctive way. And similarly, Jeff Bezos. He made the decision that Amazon should be online and should sell everything. Well, Walmart also has an everything store, but it's not online. It's a brick-and-mortar store. And then eBay. Preceded Jeff Bezos and operated in a different way. So to use your elegant formulation, there are leaders who make a difference by putting their stamp on how it's done. But without them, it would have been done, but in a different way. Now, corporate boards tell us that the individuals they select as CEOs, you know, must be uniquely qualified to lead their companies because they pay them, you know, astronomical salaries and bonuses. Does your research support that approach or does it challenge it? On the average, my research does not support that approach. On the average, studies show, using the statistical technique of ANOVA analysis of variation. On the average, there are four things that affect the profits of companies. One is the year. 1930 was a bad year for business in general, the Depression. On the average, the year accounts for only about 2% of variation. The other three factors are the CEO, and the industry. There are profitable industries like the teenage t-shirt industry, and there are unprofitable industries like public utilities that is highly regulated by government. And then the third thing is the individual company. Procter & Gamble has been very well managed for the last 150 years. The soap industry is a profitable industry, but Procter & Gamble is particularly profitable. On the average, individual leaders account for between 15% and 30% of the variation. Therefore, if a leader says, "Pay me $10 billion because your company made $100 billion," the fact is that in most cases, there are other leaders who could have made that $100 billion, but there are some leaders who really do make a difference. On the average, though, the answer is no. I think it's fair to say management literature also tends to assume that leaders matter enormously. I like your skeptical question. You know, can you say anything about when leaders actually matter? It sounds like we systematically overestimate them. We overestimate the importance of CEOs, but can you say anything about when solid leadership really makes a difference? One case is the Haveleth test in those uncommon situations where only one person is qualified to do it. A second consideration is time and place. There are situations where there's only a time where anybody can do it. For example, Bill Gates. Bill Gates and Paul Allen had been discussing microcomputers, and Bill Gates kept telling Paul Allen, "The time isn't right." And then Bill Gates saw the January, I think it was 1976, cover of Popular Electronics, which showed that Intel had come up with a new chip, and Bill said to Paul Allen, "With this new chip, we can finally do it. We got to do it fast because other people will do it." Steve Jobs saw that same cover. So another thing that makes a difference is you got to get the right time. A third thing that makes the difference is that some people recognize the right time and seize it, as did Bill Gates. Other people recognize that it's the right time, but there was nothing they could do to seize it. Winston Churchill was at the perfect time to fulfill his life dream of being British prime minister in a war situation. Winston Churchill did not manufacture World War II. And then finally, Genghis Khan, the largest empire in world history. Genghis Khan had no idea that he was born at the best time in the last 2,000 years to found a land empire in Central Asia because he was born at the wettest time of the last 2,000 years, If Genghis Khan had been born 10 years earlier or 200 miles further away, we wouldn't know anything about Genghis Khan. Genghis Khan didn't know that he was born at the perfect time. He didn't engineer it. Only within the last 10 years, then chronologists figure it out. I will mention two other things. A leader can make a difference if the leader does not have followers almost equally qualified to do it. Clement Attlee made perhaps the biggest changes in Britain's British society in the 20th century. But we don't think much of Clement Attlee because he had four or five associates who were equally qualified to do it. And then finally, a leader can make a difference if a leader can get a country to do something that they do not want to do. Franklin Roosevelt got the United States to prepare for World War II when Americans did not want to prepare for World War II. And Charles de Gaulle. Charles de Gaulle got the French to accept the independence of Algeria when the French did not want to do it. So those are five things that affect when a leader can make a difference. So a lot of this is obviously done with a historian's perspective in hindsight. But if you were advising a board on choosing between two CEO candidates, what would you want them to ask these candidates, you know, again, to improve the odds that you're going to bring in a successful leader? I'm going to frustrate you by saying. There is no one thing to look for in a leader. There are different ways that a leader can be successful. In business schools, it's commonly taught that a leader needs to be charismatic. And yes, there are leaders who are or were charismatic. Hitler, unfortunately, was very charismatic. But there are other ways to be an effective leader. You can be an effective leader by terrorizing your subordinates. Augusto Pinochet, the dictator of Chile. Nobody has ever said that Pinochet was charismatic. He wasn't. He was successful at terrorizing his supporters. You can also be successful not at being charismatic, but being a good discussion leader. John Kennedy, who was charismatic, but he was a great discussion leader during the Cuban Missile Crisis. You can be an effective leader by expressing yourself well, as Winston Churchill did. So short answer is there is no magic formula, despite what business schools do. So a lot of what you've talked about is about timing, you know, which sort of seems like it's about luck. But I want to push you on that a little bit. How much of what we call visionary leadership is really the ability to recognize the moment has arrived? And, you know, you mentioned Bill Gates, you mentioned Jeff Bezos doing that to an extent, you know, as opposed to the ability to invent something no one else could do, the Hamlet test. Is that it? I mean, yes, I'm always looking for a nice, neat, well-wrapped up Malcolm Gladwell-esque explanation of the world. But is that it? Is visionary leadership about, you know, maybe it's about luck, but it's about the about seizing that to do interesting, innovative things? Welcome to interviewing Jared Diamond. There is a simple answer. In some cases, business leadership is luck. Mark Zuckerberg was lucky that he was a sophomore at Harvard in what was a 2002, the perfect time to found a social media. In the previous year or two, the technology just wasn't adequate. Mark Zuckerberg didn't know this. Bill Gates did recognize the perfect time. And Jeff Bezos. Jeff Bezos recognized the perfect time. Jeff Bezos saw that the use of the internet had increased by, what, a factor of 2.3 in the last 12 months. So he said, we got to do it now. Elon Musk. Elon Musk was debating going to graduate school at Stanford. And then someone told Elon Musk, no, this is just the right time to do what you want to do. You better do it now. So in some cases, people recognize that the time is right. In other cases, the time is right, but they don't recognize it. And in other cases, they managed to do it, although the time may not have been so critical. Business founders seem to occupy a special category in your book, in part because they have extraordinary freedom to establish institutions, norms, paths that persist long after they're gone. Founders are not necessarily successful managers, leaders. Sometimes those skills don't translate. But talk about founders as leaders and how that. Differs from, you know, leaders of more mature companies. This gets quadruply interesting because my book is not only about business leaders, but it's also about political leaders and sports leaders and religious leaders in religion and in politics, as well as in business. Founders are important. Founders create institutions that then are likely to carry on. They may create either good institutions or. They may create bad institutions in the political world. We can think of Sreti Kama and other examples. Lee Kuan Yew of Singapore set up the institutions that have carried on with Singapore, made Singapore disproportionately accessible. But there are other founding leaders. The founding leader of Algeria set up bad institutions that have hampered Algeria to today. So founders can make a difference either for the good or for the bad. We've been focusing mainly on business leaders. You've looked at the business leaders. You've looked at leadership across all these disciplines. What were some of the connective threads that you found among those leaders who really did rise to a significant level of success and maybe unique success? We've talked about some of them, the importance of timing, being at the right place at the right time, whether you choose it, whether you recognize it or not. Another connective thread is that there are surprising, to me, surprising generalities cutting across fields. I didn't realize. I didn't realize that much of the studies on outcomes of sports coaches or football coaches, much of the work has been done by business school professors. Sports are a particularly good area to study effective leaders. In the business world, business CEOs, they're often invisible. They don't take this. They don't jump up and down on the sidelines. You may see the result in five years or 10 years, or you never see the result. Whereas sports coaches jump up and down on the sidelines. There's a basketball game. Several of them. They play several times a week. The Boston Red Sox, my beloved Red Sox, play several times a week. There's a league of several dozen teams, and all the teams are organized the same way. That's not the way in the business world. And so some of the best papers on sports leaders, sports coaches, have been done by business school professors who debug their methods in sports because the database in sports is so neat. And then they applied those methods to the business world. So what do you think? One of the problems with evaluating leaders is that things change. Is there such a thing as enduring success? And can you put that in a bottle? Are there people who have the sort of Hamlet effect over and over again, or are these just moments in time? Good question. Is there enduring success? In the business world, Procter & Gamble has been successful for 150 years. That's a somewhat rare case. In the political world, Winston. Churchill was outstandingly successful as a wartime leader. He was then defeated, and he became reelected as a peacetime prime minister. He was considered undistinguished. Then he came back for another term as peacetime prime minister. He was terrible, and his associates were eager to get him out, and they finally got him out. So there's a case of a leader who was good in certain circumstances and not in other circumstances. In the sports world, again, as an expert. Bill Belichick, great record in Super Bowls. Does that mean that Bill Belichick is a great coach? Well, Tom Brady goes away to another team, and Tom Brady is very successful with his other team, and Bill Belichick is no longer successful, making one uncertain whether Bill Belichick's great record goes to the credit of Bill Belichick or how much of it goes to the credit of Tom Brady. If I'm an executive and I'm listening to this podcast and I'm thinking, you know, I would like to be. I would like to be a consequential leader. I would like to pass the Hamlet test. This is probably the type of question you hate, but anyway, is there something that, you know, an individual can do to kind of increase their possibility for this kind of once-in-a-generation success? Yes, yes, and yes. In my book, there's a short section which lists fields in which a CEO can have a big effect and fields in which a CEO cannot have a big effect, but you have your choice. If what you want to do is to have a chance of becoming very rich and being influential, but you're willing to run the risk of being fired, you pick an industry in which the CEO has what's called high discretion, not discretion in the sense of being polite and careful, but discretion in the sense of having a lot of decision-making power. A friend of mine runs a company that makes t-shirts for teenagers. A pattern is, my friend is good at recognizing what's going to be good for the next two weeks, so he's very successful, but when I had lunch with him the day before yesterday, he's now in his 60s, and he was afraid that he's going to run out of money for the rest of his life. So if you pick a business like that, like the t-shirt business, or the computer business, or the soap business, or the perfume business, if you get the right perfume, you may be very successful and rich, but if you get the wrong perfume, you may get fired. Alternatively, if you don't care about being very rich, but you want to be moderately rich, and you don't want to be rich, you may get fired. to get fired. Then you go into a business where the CEO has low discretion. For example, blast furnaces. I had never thought much about blast furnaces until I read that CEOs are blast furnaces. They don't get fired, but they're not famous and not widely sell because there's only one way to make a blast furnace. Again, a railroad. Once you have a railroad, the tracks are there for the next 75 years. So CEOs of railroads, nowadays you don't hear about them. Or to be the CEO of public utility company, to be the CEO of the Los Angeles Department of Water and Power. Who knows who the head of the DWP is? Why? Because public utilities are tightly regulated. You're not going to be able to make a killing, but you're not going to get fired. So I would say to someone who wants to pick a career, if you're willing to gamble and you want to hope to be rich, but you are willing to risk being fired, become a perfume or t-shirt manufacturer, and you want to have a good living, but you don't want to get fired, go into public utilities or blast furnaces. Well, and I think the management literature might say, if you want to have extraordinary success, differentiated success, you have to have courage. And courage can result in failure, and courage can result in great accomplishment if everything works out. Elon Musk is a good example. There was an occasion in Elon Musk's business development where, in the morning, he thought that he was likely to go bankrupt by the evening. And between morning and the evening, he got more investors, so he did not go bankrupt, and he now has his trillion dollars. But yes, it's risky, and you've got to have a strong stomach if you want to enter a risky business. We talked about success, but I think, you know, boards often assume that if the company is struggling, that replacing the CEO is the answer. Your book suggests it's more complicated than that. Why is that? Why is it more complicated than that? The business is struggling. Maybe it's struggling because the CEO is bad and should be fired. But there are many other things that make a business struggle. It may be that it's a downtime for the industry. It may be that other people in the business made bad decisions. The CEO is not the only reason for a business struggling. And this is a case where business school. have learned so much from sports. The Red Sox. If a sports team has a losing record, the instant of the owner is to fire the coach. At UCLA, we had the greatest basketball coach in the 20th century, John Wooden. And following John Wooden, we've had a series of, I think, eight basketball coaches. We fired every single one of them. They've had winning records, but not as good winning records as John Wooden. And when we fired them, we had to buy out their contracts. The result is that. My athletic department at UCLA is $150 million in debt. Well, with $150 million, you could hire an awful lot of classics professors and German professors, but UCLA's chancellors, in their wisdom, had not consulted Jared Diamond about firing the coach. And I would have told them, business school professors have shown that firing the coach is usually followed by the next coach doing better for random reasons, for throwing the dice reasons, but that. Usually, firing the coach is a bad decision and just does not result in a permanent improvement, but it results in $150 million of debt. So, any final words for those who are intrigued in this topic of, you know, to what extent it's the great individual, to what extent is the context and how you think about the role of leadership, again, especially in business? My summary would be, in this respect, as in other respects, as in happy marriages, if you would ask. Ask me, what is the one thing most important for a happy marriage? I would say, you're asking that question shows that you're going to get divorced in the next year, because a happy marriage requires 37 things. You got to agree about sex. And similarly, in the business world, in the world of politics, there are multiple factors, but at least I boil them down to five factors rather than 37 factors. All right. Jared Diamond, thank you for being my guest on the HBR IdeaCast. Thank you. It's been a pleasure to talk with you. That was Jared Diamond, historian and author of the book, Profits, Profits, Coaches and Kings, When Do Leaders Matter? Next week, Alison will speak with acclaimed restaurateur Danny Meyer about creating and sustaining a great customer service culture. If you found this episode helpful, share it with a colleague and be sure to subscribe and rate IdeaCast in Apple Podcasts, Spotify, or wherever you listen. If you want to help leaders move the world forward, please consider subscribing to Harvard Business School. Business Review. You'll get access to the HBR mobile app, the weekly exclusive Insider newsletter, and unlimited access to HBR online. Just head to hbr.org slash subscribe. Thanks to senior producer Mary Du and senior production editor Kristen Murphy Romano. And thanks to you for listening to the HBR IdeaCast. We'll be back with a new episode on Tuesday. I'm Adi Ignatius.