Jim Collins, Legendary Author of Good to Great, on the Art of Taking Risks

“Once you have empirical validation, you’ve got to place the big bet. That’s the key.”

READ ON TO DISCOVER:

  • The importance of your “Thelma and Louise” moment
  • How to find your hedgehog (and what that means)
  • Why your “who’s” are more important than your “what’s”

Jim Collins has authored or co-authored six books that have sold a total of more than ten million copies worldwide, including the classic Good to Great and, most recently, Great by Choice, which looks at how to thrive and lead in a turbulent world. He recently joined Ryan Hawk, host of The Learning Leader Show, to discuss how to take the right risks, and, above all, how to go from good to great.

This conversation has been edited and condensed. To listen to Jim and Ryan’s full conversation, click here.

Ryan: When you first met with Peter Drucker, he said, “It seems to me that you spend a lot of time worrying if you will survive. You seem to focus a lot on a question of how to be successful, but that is actually the wrong question. The right question is how to be useful.” How did that moment shape you?

Jim: I’m really fortunate in that I have been tremendously impacted by fabulous mentors, and Peter Drucker is in the very small group that’s at the very top of that list. He’s both a mentor and a role model for me. Let me just back up and tell the story a little bit of how that conversation came about.

So, I had been teaching, and teaching happily, at the Stanford Graduate School of Business. I had a course on entrepreneurship and small business that then led to the question of, “How would you turn an entrepreneurial venture or small business into an enduring, great company?” which is a question that [really] captured my attention. If you want to figure out what makes an enduring company, you go back and look at what Sam Walton did when he had a single dime store and how that became Walmart, and what Walt Disney [did with] a single film.

A friend of mine, Tom Brown, who was an editor for Industry Week Magazine, asked me who I most admired and I said, “Peter Drucker.” He said, “Well, if I can get Peter to spend some time with you –” keep in mind I’m only 35 at the time – “Would you be up for that?” I would rearrange anything in my life to have a chance to learn from Peter. One day I get this phone call out of the blue from Peter, [inviting me] to Claremont, California [to] spend the day with him.

That day was just a marvelous experience. Peter, who was 86 at the time, the most significant management thinker probably of all time, grabs my hand in two of his and says, “Mr. Collins, I’m so very pleased to meet you. Please come inside.” Eventually, I got around to asking him some questions and the day unfolded. At the end of the day, we were sitting in a little rental car outside Peter’s house and that’s when he issued that challenge. I feel like [he] was the ultimate zen master with a bamboo stick because he really did sit there and say, “You seem to spend a lot of time worrying if you will survive, and you will probably survive,” he very kindly told me. And then this thwack moment: “It’s the wrong question! The question is how to be useful.”

That is one of those moments that has guided what I do. I think constantly about the question of how to make myself of best use, also subject to wanting to follow the idea of simplicity with whatever number of decades that I have left. I’m very inspired by Peter because he wrote two-thirds of his life’s work after the age of 65.

“‘You seem to spend a lot of time worrying if you will survive, and you will probably survive,’ he very kindly told me. And then this thwack moment: ‘It’s the wrong question! The question is how to be useful.’”

Ryan: I love that story. [Another one I love is] when you’re on a run after you finish the manuscript of Good to Great and you ask yourself, “How much would someone have to pay me to not publish Good to Great?” I believe you said you crossed the $100 million threshold because you’re a teacher at heart. What was going through your mind as you’re ready for this book to get published?

Jim: After that meeting with Peter Drucker, I did fully commit to carving my own path. Before leaving Stanford, I asked another marvelous mentor Eric Groesbeck, who was on the faculty with me, “Should I try to leave an option open to return to Stanford?” and he gave me this marvelous piece of advice, which was, “When you’re taking an entrepreneurial path, sometimes options have negative value. You should not seek an option to be able to return. You should cut off the option because it will change your behavior.”

I made sure that I had no option to return, and Joanne and I describe it as our Thelma and Louise moment. Once we made that commitment, there was no turning back. Built to Last ended up being read by a lot of CEOs, and that provided some foundation. Then I said to Joanne, “We need to keep creating,” and so, we took all the resources and the good fortune that came from Built to Last and turned around and plowed it all right back into what became Good to Great, and bet again really big. We spent five years on self-funded research with fabulous members of my research team and had stumbled upon a fantastic question: Can you actually turn an established company into a great one? Can a mediocre, average, good company make a breakthrough to become a great company, or at least have a great run?

After five years of work, I’m sitting [at] the El Dorado Canyon, and I remember looking out on the high country [with] all the late-winter snow blanketing the mountains. I think of the mountains as this giant cathedral. I’m sitting there on this giant cathedral of the mountains and I’m looking out—that question just popped into my head. Like, “Huh. How much would somebody have to pay me to not publish this?” A million dollars wouldn’t do it. 10 million dollars wouldn’t do it. 50 million wouldn’t do it. Probably even 100 million wouldn’t do it. I knew that we had something very special.

“When you’re taking an entrepreneurial path, sometimes options have negative value. You should not seek an option to be able to return. You should cut off the option because it will change your behavior.”

Ryan: Yes, it definitely is. One of the few questions that I ask most people I speak with is, what are the common characteristics or virtues of leaders that sustain excellence?

Jim: Let me share a little bit of something that’s going to be coming in the next year or so, because it sheds a little bit of light on this question. I am in the process of finishing up a project which looks at the question of producing great K-12 education in our most difficult settings and environments. I’ve been looking at leaders who took schools in our most difficult settings, whether it be the Bronx or the Mississippi Delta or Central Valley, California, South Central L.A., the places where there’s really difficult, adverse environments, and looking at how they ended up being able to produce great results for the kids, or at least take their schools to a positive inflection.

The unit leader is the key person. I went into the study thinking one of the big questions was going to be how [to] deal with burnout in these really tough settings. These leaders [principals, headmasters, superintendents] are doing heroic work to make sure these kids get a shot to get started in life. I wondered how long they would be able to sustain it. So, in my conversations with them [I asked] how do they keep themselves renewed, how do they keep themselves sustained in the game? To my surprise, this just isn’t a problem for them. Year after year after year, they’re leading at a really high level.

What allows them to keep going, to keep sustaining themselves? There are two things that jump out. The first is, somewhere along the way, you have to find your personal hedgehog. The hedgehog concept is something we wrote about in Good to Great about companies. You focus the energy of the company on the intersection of three circles: what you’re deeply passionate about, what you can be the best in the world at, and what drives your economic engine. [With] individuals, you can go to the question of, “What’s your personal hedgehog?”

The first is what you are passionate about and love to do. The second is that you’re encoded for it, and to some extent that feeling that [you] were constructed to do this. Then the third is you can make a living at it. If you have all three of those, you’re passionate and love to do it (circle one), you’re encoded for it (circle two), and you can make a living and fund your aspirations (circle three), now you have your hedgehog. What all of these great leaders have in our schools is they somehow relatively early in their life got inside those three circles.

They found their hedgehog, and then once they’re in it, they don’t leave it. They don’t want to. They renew within it, they grow within it, they evolve within it. [That] doesn’t mean you can only have one hedgehog. You could have multiple ones to discover in life. But once you find one, you can really stay in it and build with it over a long period of time and it becomes a positive reinforcement loop [throughout] your life.

“If you have all three of those, you’re passionate and love to do it (circle one), you’re encoded for it (circle two), and you can make a living and fund your aspirations (circle three), now you have your hedgehog.”

Ryan: I’ve had Adam Grant on, and he talks about measured risk. While some entrepreneurs feel like they need to leave themselves with no other option, which is what ultimately worked for you, there are a host of people who got backup jobs, who had a side hustle until it became fully sustainable, like Steve Wozniak who worked at HP for a couple of years before he left to go with Steve Jobs. How do you [square] those two different approaches?

Jim: Here’s the issue: If you’re going to pursue a low-odds games, the reality is that, at some point, the odds will go to zero if you don’t commit fully. You’re never going to get across the chasm in that Thelma and Louise moment if you’re basically just going to keep yourself tethered to one side.

But, that doesn’t mean you’re taking an unfounded leap into the wild beyond. Let’s go to Great by Choice. There’s an absolutely crucial concept that Morten Hansen and I stumbled upon—fire bullets, then fire cannonballs. Imagine having a certain amount of gunpowder and there’s a ship bearing down on you. You want to approach it, but you have to take all that gunpowder and put it in a big cannon and fire at that ship and just hope it hits. But it misses and then you’re out of gunpowder and here comes the ship and you’re in trouble.

Another approach is to say, “I’m going to fire some bullets. The first one might miss and the second one might miss, but it’s getting closer. I fire a bullet and hit the side of the ship. Now that I have an empirically founded, validated line of sight, I’m going to fire the cannonball.” If I had simply woken up at age 29 and launched out with no bullets fired, that would’ve been an uncalibrated cannonball. That’s not what I did.

Prior to betting on this future, I had fired a lot of bullets. First, I taught at Stanford and I fired bullets on [the question] “Can I teach? Am I able to make concepts make sense?” The first book that I wrote was with Bill Lazier, a dear mentor of mine, the closest thing I ever had to a father. As wonderful as that book is in certain areas, it actually didn’t become a big successful cannonball. But we learned from it, recalibrated.

All the learnings from that went into Built to Last. That one actually hits the ship. It wasn’t clear, but it looked like the cannonball was going in the right direction. So, by the time I’m leaving Stanford, a lot of bullets had been fired, a lot of classes had been taught, a lot of research had been done, and there were two books. It’s not a blind leap; there is actually empirical validation. Then, the really big cannonball was Good to Great. That cannonball hit the ship because, by then, the amount of empirical validation was very, very high.

This is the critical thing: you [can’t] look at it and say, “I’m only going to fire bullets because I never want to take a risk.” You’ve got to fire a cannonball at some point. Every one of our entrepreneurs we studied in Great by Choice made big bet commitments. That’s why they were 10x better results than others. But they were risk-averse—they fired the bullets to get calibration and then fired the cannonball.

Here’s the three mistakes you can make. One: not firing enough bullets to figure out what will actually work. Two: to fire big uncalibrated cannonballs. Or three: when you do have validation, you blink and you don’t fire the cannonball. Once you have empirical validation, you’ve got to place the big bet. That’s the key.

“Once you have empirical validation, you’ve got to place the big bet. That’s the key.”

Ryan: Empirical validation may be hard to define. How can people implement this into their daily life [when they] haven’t written Good to Great or Built to Last?

Jim: Validation is just looking at points of success and saying, “That worked and that worked and I can explain why.” In Good to Great, we write about my wife, Joanne, committing to trying to win the Iron Man, which she did eventually end up winning, and then became World Champion. She had run cross country and track in college. So, she knew she could run and had athletic talent. There’s some empirical validation. Then she started doing some triathlons and she discovered, “Wow, I am strong on the bike. I pass people uphill.” You think of it as building a body of evidence, so that it is not crazy to say, “I could probably win some triathlons,” and then, one day, to say, “I think I’m going to go off and try to win the Iron Man.” That was the commitment with the cannonball—it wasn’t out of the blue.

You’re looking for tangible pieces of evidence. Maybe it’s feedback you get from a mentor, maybe it’s some specific things that you’ve done where you say, “Well, that worked better than I thought it would.” It doesn’t matter what arena you’re in, you can basically point to it. If you were a trial attorney and had to win your case, what evidence would you point to that, “My case is I should commit. Here’s the evidence. Here’s the tangible, practical, empirical evidence from experience that would say this is not crazy.”

Ryan: Jim, I know we went over a lot, I really appreciate your time. Is there anything else that you wanted to cover that I may have missed?

“The most important question is ‘who?’ Who are you going to allow to mentor you? Who are you going to work with? Who are you going to spend your life with? Who will you let shape you?”

Jim: We’ve talked a lot about mentor moments and I just want to pass along one overall frame that I think, “If I just had three minutes with young people in the world, what would I tell them?” There’s a key concept in Good to Great about first “who,” then “what.” We live in a world that’s full of “whats” right now. “What’s your vision? What’s your strategy? What’s your direction? What’s your career?” It’s all about a bunch of “what’s.”

The thing I come away with from all of our work is to shift as many “what’s” to “who’s.” The question is not what career you’re going to have or what path you’re going to take or what company you’re going to work for. Those are important questions, but they come second. The most important question is “who?” Who are you going to allow to mentor you? Who are you going to work with? Who are you going to spend your life with? Who will you let shape you?

Take care of your people, not your career. I didn’t have to have the answers to the “what’s” if I really paid attention to finding great “who’s” that would help guide me.