How can you leverage the Stockdale Paradox in this economy?

During these turbulent times, with major events that are out of your control which could impact your company, how can you maintain composure and results?

The Stockdale Paradox from Jim Collins can be defined as – you must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties, and at the same time, have the discipline to confront the most brutal facts of your current reality, whatever they might be.

This week we’re talking about the Stockdale Padarox, how it applies to the current economic environment, and how you can use this principle to survive and thrive through these uncertain times.

SUBSCRIBE TO THE GROWTH WHISPERERS:

    

EPISODE TRANSCRIPT

Please note that this episode was transcribed using an AI application and may not be 100% grammatically correct – but it will still allow you to scan the episode for key content.

 

Kevin Lawrence  00:13

Hey, and welcome to the growth whispers podcast where everything we talk about relates to building enduring great companies, not good companies, not mediocre companies, but great companies that you’re proud of, and continue if you want them for want them to for generations and generations. I’m Kevin Lawrence, and I’m here with my awesome co host, Brad Giles. Brad, how’s it going?

 

Brad Giles  00:35

It’s going Excellent. Thank you. Lovely to see you on this fine day, where it’s autumn or fall in the northern hemisphere and spring in the southern hemisphere. So we’re both good.

 

Kevin Lawrence  00:47

Yes, it was a beautiful day today. Absolutely beautiful. So what’s the phrase of the word on your mind today, Brad?

 

Brad Giles  00:55

Security. Okay, so

 

Kevin Lawrence  00:58

the slick Old Age Security? Are you hoping to be getting your pension soon? No, that’s not what you mean. Okay.

 

Brad Giles  01:04

No. So, you know, AT & T is a telecommunications provider, right? They provide mobile services, etcetera. So the second largest provider in Australia is called Optus. And all of their user data was hacked. So driver’s license, all of the private information, every single thing beautiful. millions, millions, 10s of millions of records have been hacked and stolen. So yeah, what’s on my mind security? How tight is your company security? Because if a massive telco can get hacked like that, yeah, it’s always an ongoing job. What about yourself if

 

Kevin Lawrence  01:50

it is, and I know a few companies that have been seriously hacked, and it’s devastating, and afterwards, they find that the security wasn’t as good as they thought it was, once they pressure tested, which is unfortunate, um, mine is retreat, just came off my team retreat, we had just about three days up in Whistler, the whole team came in. Like there was 13 of us. And, you know, just the idea of being together with a bunch of brilliant minds. And as I was sharing with you, one of those, the major side benefits I didn’t realize is everyone facilitates part of the meeting, and all kinds of different ways. And everyone’s kind of showing their best skills. I’ve been doing this for 28 years, and I learned some amazing things. One guy Brett on my team did this basic facilitation technique that was so basic, but it was like double mastery. And I mean, the whole team did awesome stuff. And then, you know, Dean did this other technique about bringing the customer into the strategic planning in a way I’ve never seen and, and we’ve got a new guy, Tim, and this exercise he had the team due for team building an engagement in three minutes just blew my mind, like, if I can go on and on and on, but just getting together in a house for three days learning, growing, sharing, building relationships, laughing, it’s just, you know, it’s, it’s, you know, it’s a polar opposite to the Security is about the both of us sharing information widely. Just to a different end, or with a different motivation anyway, so, so security retreat or retreat to security, I don’t know. But anyways, good times. All right. Well, let’s jump right into today. Today, we’re talking about something that’s really important in these turbulent times, we’re still in the state of not really sure what’s going on, but interest rates are going up. Inflation is creeping down in some areas in some ways. You know, what are we in for? And, you know, it’s looking like it’s going to be challenging in many sectors. And that’s fine. That’s part of a, you know, transition and cycle of an economy. But we’re talking about this thing called the Stockdale paradox, Brad, you want to kind of walk us through what we’re talking about here?

 

Brad Giles  04:09

Sure thing. So Stockdale paradox comes from a good friend, Jim Collins. And it comes from Jim Stockdale who was a prisoner of war in Vietnam. Prisoner of War came obviously during the Vietnam War. And he observed the people who would survive and the people who would die and of course Jim uses this as an analogy for companies that works quite effectively that he calls this Stockdale paradox. So how Jim describes it on his website, you must maintain unwavering FAITH that you can and will prevail in the end, regardless of the difficulties, and at the same time, have the discipline to confront the most brutal facts of your current reality, whatever they might be. And so this tells us that during turbulent times, we must, I believe, and maintain belief that we will prevail, and yet at the same time confront the brutal facts of the situation. Because here’s the problem. Many leaders just will stick their head in the sand or they’ll get caught up in other things, or they won’t. They won’t confront the brutal facts, they’ll just let them kind of glide along.

 

Kevin Lawrence  05:29

Or they’ll just be too positive. Yeah. And it’s interesting, the similar story, I was just searching it up here, as you were talking is Viktor Frankl in his awesome book, Man’s Search for Meaning, which I read 20 years ago, it was recommended, highly, highly recommend it. And, you know, this is, you know, as a prisoner, and in that see constant Nazi concentration camps in World War Two. And he and he just described the method that he noticed that the people that they thought they were going to be out, you know, by the end of the year or Christmas is somebody has said, Well, again, muscles, people, there weren’t, you know, Christians, but are people not necessarily I could be wrong on that. I’ll take that back. I don’t know that. But I believe many of them were. But the fact is, the people that thought they built by the end of the year, often died. The because psychologically, they were attached and fixated on a certain timeline. And when the timeline moved, it destroyed their mindset. Yeah. And in No Man’s Search for Meaning, as they you know, and he talks about a very similar principle. And it’s about being able to endure challenging things. And having the right mindset, which is not just completely positive, it’s, you know, it’s acknowledging what’s going on. It’s almost like patient and positive at the same time.

 

Brad Giles  06:41

You know, my favourite part of that book, Man’s Search for Meaning is the way that he described humanity. And he said, there is a, there is a gap between stimulus and response. And that gap, that pause is humanity. And so if a stem if you are, there was a stimulation, and he was using it in the example, for example of being whipped by a Nazi guard or being, you know, assaulted, or whatever it might be the pause before you react, that’s where humanity is because for example, a dog might just turn around and bite or snap or growl or whatever, that’s not humanity. So humanity is pausing and contemplating. Yeah,

 

Kevin Lawrence  07:29

lead that’s leader, that’s also the best leaders have mastered that aspect of humanity. It’s contemplating your actions instead of reaction. So the root of both of those is that the optimists don’t survive. The pessimists don’t prevail. It’s generally the optimists who acknowledge the irrelevant brutal facts who prevail, and that that those are the people but in these times as their becomes more brutal facts, we got to be careful not to get lost in it, because some people slip to being too negative, or too conservative. And people often go into different camps, people become super blindly optimistic, and they lose the the trust and faith of their people, because the people like Well, that’s not relevant, then as the people who become really are negative, and really protected, they’ll go to a protectionist kind of mode and become very conservative, or overly conservative. And that often doesn’t work. either. It’s about playing both of those things at once, dealing with the brutal facts, and still retaining the optimism that you’re going to thrive going forward. It just might be a little bit bumpy for a little bit.

 

Brad Giles  08:45

I’ve run so many sessions with teams where we’ve needed to confront the brutal facts. And one of the cases are you confronting the brutal facts or opinions, because a lot of people come to the brutal hidden. A lot of people come to these situations, these meetings with their opinions, and you’ll be able to distill or strip that down and say, is that really affect for example, a fact is how much cash we’ve got in the bank. That’s definitely not an opinion. Our accounts receivable days, they might be closer to an opinion. Now the data, the data might tell us something, but sometimes those customers tend to not pay.

 

Kevin Lawrence  09:28

And our cash projections based on the best information we have is close to a fact although there’s still some tolerance and uh, but a lot of people bring brutal opinions. And you know, one of the things Jim taught us and one of the sessions is you make a list your brutal facts, and then with your top brutal facts, you list the facts, then you debate them, because sometimes those brutal facts aren’t actually brutal facts. They’re actually way off, but you want to you want to dig in. So I’ll give an example. So one of the CEOs I work with Recently, we had one of our start planning sessions, and he was talking about, you know, the three year vision of the of the company was kind of funny, because the three year vision is tremendous growth. But so we started talking about the interest rates, the impact on their local economy, their industry, specific economy, and all the things that are kind of at play with the best facts he had. He had some awesome facts. And then he talked about the growth plans. And at one point, it was funny, because, you know, I said to him, Well, you know, this goal to more than double in three years is aggressive. And it might take four or five, but we are going to get there and it goes, Hmm. Maybe we need a new coach. So the coach isn’t believing in our plan, we got ourselves a problem. And he and I get along great. We drove white, right? Yeah, let’s bring in the fresh guy, get me out of here. And we kind of we laughed about it and joked about it. But the point of it is, he knows it’s going to be a three to five year plan. He likes to think three because he wants to have the right thinking in the company. But the point is, he was reviewing all of the other brutal facts in process, as he was setting the table for this discussion about the awesome opportunities at the same time. So it’s, it’s both together, which has a lot more credibility. And I’ll give you one more though, different situation, it was really challenging. It was a father son team, in a business. And the father always had challenges with the sun. Because the sun was so optimistic, because the sun had considered every possible brutal fact. And every deal they did, he’d already thought it forward, backward, upside up, backwards, upside down and sideways. And he would be so positive about all of the outcomes, it would freak the dad out, the dads going, he’s just being blindly optimistic. And that’s lethal in business. So we had a deep conversation one night, the three of us helping them to work some stuff out. And I said to the Son, it seems like you are blindly optimistic us? Oh, my gosh, no, let me tell you my plan. So and he goes through 14 different variables, and his plan B and C for every single variable that he has mitigated. So he had thought of every brutal fact. And optimistically pushing ahead, he just didn’t communicate it. So he didn’t have credibility, in this case with his own father. So then, when he learned is to share, here’s the brutal facts. And here’s the plans I have. Now we can be optimistic on top of that base of truth and reality. It was really so he did it brilliantly. He just didn’t articulate it any and he didn’t, he didn’t get the credibility he needed to be able to get buy in to go ahead.

 

Brad Giles  12:48

Yeah, yeah, I remember another. Another story with a team that I work with, their market had dropped. And I it was the worst market drop in living memory. And all the old guys in industry said never seen anything as bad as this. And so we needed to make some changes, as is often the case, it was definitely external factors. Everyone in the industry felt it. And we needed, we needed to basically trim up the profit and loss, make some cuts. And it was the fact that it was the perspective of the owner that got us through, I guess, in fact, there’s, there’s been a couple of these examples. But it’s this perspective, and the ability to, even though they’re so emotional through those things to say, and this is where a coach comes in handy, to be able to say, Okay, this is what’s going on, and we just kind of without that emotion, okay, what are the facts? What’s happening, we will endure, but we can’t endure unless we make these cuts, or we can’t endure unless we do these changes. And so, yeah, knowing that, that we’re in turbulent times, knowing that, you know, we may need to make some changes, but we’re not going to know that unless we confront those brutal facts. Yeah. And it’s

 

Kevin Lawrence  14:13

just credibility and, and versus just the raw optimism, which doesn’t work. You know, the other thing to really think about are nice times too. And I remember when I was in the Middle East, and oh, 708 and I’m heading back there again this week. I’m really excited to hear back. But oh, 708 and you know, and like real estate, real estate values fell 50% In three weeks, it was brutal, absolutely brutal. And people were freaked over all kinds of things. Thankfully, our clients were we had good strategy, execution, good budgeting and financial. We had all the right things in place to do well, and we did very well through it. But the one thing we kept talking about and you know, that the chairman will talk about the CEOs would talk about is the B hag. We stood resolute and strong wheat that our behaviour is still our behaviour. And yes, we’re going through this, and we’re still going to get there were just a little bit turbulent times and it gave people something to hold on to. Yeah, knowing that that division does not change. Yeah, the path might change a little bit timeline might change a little bit or might not. But the vision that our purpose, our values, our B hag that we’re driving towards, it’s all there. And in many ways, the three to five year plan. Again, it’s like, the principles don’t change, short term tactics might. But like, for most of these companies, it’s rock solid. So that gives people confidence that there’s a lot of change, you know, in the short term, and you know, what kind of near and close. But in the medium to long term, nothing, nothing changes at all, nothing major changes unless we have to tweak our strategy.

 

Brad Giles  15:46

There’s no industry, as far as I can tell, that consistently grows at the same rate, everything is kind of its surges up, and then it appears back. It’s, it’s semi cyclical. I’ve spoken to you before about this, I live in a cyclical economy, because it’s based around mining and mining is is fed off the commodity price. So So here, we just have to sort of say the words, look, if we zoom out, we know we’re in a cycle, and we know that things are gonna go up and things are gonna go down. So we’ve just got to confront the brutal facts of our point in the cycle, what’s going to happen, and where are we going to go, we will prevail, but we’ve got to be ready for what’s coming.

 

Kevin Lawrence  16:30

Yeah. And just make sure that you still get people rallied up towards what you can do. So here’s kind of like, just to kind of a handful of points that we made, like, admit that as challenging times, remind people long term vision, like we just talked about and reconnect them with a don’t get lost in the short term that is dangerous. Remind people of all our strengths and opportunities that we have. Take a look at those specific challenges and brutal facts, like acknowledge the ones and pick the ones we need to address that are relevant to us right now. And make sure people have tangible actions to take like in most of the companies we work with, we cascade it. So people have, you know, their individual top three to five goals to accomplish every quarter. But make sure people have tangible goals that they can use to help the company march towards it. And just be really careful with stretch targets. Stretch targets are generally juvenile. And, you know, well, you can have your base target that you commit to and you’ve set your budget to, and that you could say that we could have a, you just don’t want your base target to be a crazy stretch. Because then you’re generally demotivated, you’re also going to screw up the financials of the company, because investments are made on budgets. But if you want to rally your team about hey, it’d be fun to us over achievable, that’s one thing. Just be careful about overstretching people because people can get demotivated even though some people love it. So that’s a whole other conversation. But this stuff is not basic. It’s just really remind yourself that this and acknowledge that that is challenging, and there’s a bit of a storm, and that’s fine. We’re set up for it. And let’s deal with the ugly issues we got to deal with, let’s plug the holes in our boat. And let’s draw, let’s put those sails up and power through this thing and get stronger and better on the other side.

 

Brad Giles  18:22

But you can only do that if you’re slightly optimistic, and you’re confronting the brutal facts, that you’re, you know that and those brutal facts are covering off what needs to be done. Awesome.

 

Kevin Lawrence  18:36

Exactly. You know, what’s funny, I was at the racetrack recently I mentioned before and it’s like, you know, when you’re on the racetrack, you’re optimistic that you can be fast, and pass your opponents that are in front of you to advance towards the front of the pack. But we still go out with a lot of productive paranoia and who you know, we are other people double check things on our cars before we go on to track and you’re still running both systems. I’m optimistic I can pass them. And I’m being a little bit pessimistic or careful that I don’t crash while I’m passing. I’m like, You’re sick. You’re managing the gas pedal and the brake always at the same time. That’s what driving a race car Streetcar is about. Yeah. You know, when if you’re all gas, you’re in trouble. And if you’re all brake, you might as well pull over on the side of the road and step out of the race or the game or the or the business. You got to be managing the gas and the brake continually, ideally without overheating the system.

 

Brad Giles  19:34

Yeah. Yeah, you’ve got to be able to deal with the situation and not hope that something is going to happen because hope will lead you to disaster. All right. Well, sir, very good chat. Yeah, it’s turbulent times. There’s a lot of things outside of our control. Come back to analyzing understanding the brutal facts, the Domestic, not a pessimist, not an optimist, an optimist who confronts the brutal facts. Very good. Thanks for listening. This has been the growth whispers Podcast. I’m Brad Giles and you can find me at evolution partners.com dot A you and our producing weekly newsletter as does Kevin, produce a weekly newsletter at Lawrence and co.com. For the video version, go to youtube.com hope that you’ve enjoyed this episode and have yourself a great week.