With special guests David Neal and Jonathan Clark from The Eighth Mile Consulting, we break down Sun Tzu’s famous book on strategy and leadership. Given that paintball is as close to combat as Frank and Ian have come, we brought in heavy hitters for this episode.
In this episode:
- “It’s not about a fair fight, it’s about winning.”
- Why picking your battles is everything in business and war
- Lessons from Afghanistan for small companies
- Why context matters when evaluating risk
- Why do companies who stay on the offensive tend to last?
- How to link the goals of leadership with the team
The Eighth Mile Consulting: https://eighthmile.com.au/
Follow David Neal and Jonathan Clark on LinkedIn where they write daily about leadership lessons from the battlefield to corporate board rooms.
The Eighth Mile Consulting is built on a mantra of ‘good people, helping good people.’ Our Mission is to collaborate with organizations to improve their people, processes, product, and profile.
In particular, we provide services in:
Individual and Team Coaching,
Risk Management, and
We are different from other organizations because:
- Our team is drawn from hands-on practitioners who have actually delivered what they preach, each with a reputation for delivering positive change to organizational cultures, and delivering complicated projects/tasks.
- Our team consists of leaders with hands-on experience.
- We are proud of our high-performing team, and we can help other teams perform to their absolute best.
- We simplify the complex.
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The Art Of War With Special Guests David Neal And Jonathan Clark From The Eighth Mile Consulting
Up until this episode, the most Australian thing about this show has been Frank’s weekly insistence on sharing leadership lessons from working the fryers at Outback Steakhouse in Florida for five years of his life. All that changes now. We bring on David Neal and Jonathan Clark, the Cofounders of The Eighth Mile Consulting Group. We talk about The Art of War. We found it silly to talk about The Art of War with me and Frank who don’t know shit about the actual war. We brought in a couple of Australian military leaders who spent time in the field in Afghanistan and around the world working with the Australian Army and American Forces.
I’m super excited to have these guys on. Their company is growing. It’s exciting to see what they’re doing out there. They’re my two best friends and also my only friends in Australia. Sit back, get your popcorn, and get excited about this episode. If you’re not a subscriber, hit the subscribe button. Turn on the notifications wherever you listen to the show. If you are a subscriber and you liked this episode, scroll down on Apple Podcasts and give us a five-star review. That would be cool of you.
We got a real special episode. I cannot wait to do this. We are hanging out with two cool guys from Australia. We have Jonathan Clark and David Neal from The Eighth Mile Consulting group. Welcome.
It’s good to be here. It’s been a long time coming.
This is a true story. You are the third guests that we’ve ever done. Usually, it’s just Frank and I talking. Out of our three guests, only one is from America.
Besides being good with geography like Australia, Ian is good with Math. You’re our 3rd and 4th guests.
Thanks for picking that up, Frank. We invited David and Jonathan to this episode. Frank and I were planning to do an episode on The Art of War. The more we talked about it, we realized that the closest thing we’ve been to war is a high school football game and that’s lame. We wanted some people that have been in a war, which is why we’ve invited these boys here. David, Jonathan, maybe introduce yourselves a little bit. Talk about your background a little, what you’re doing here, and how you even know me. Why are you here from Australia?
The long story short is Ian and I crossed paths some years ago tinkering on LinkedIn. We hit it off and became mates that way. We ended up doing some pretty funky videos and stuff about Napoleon Dynamite and God knows what. Jonathan and my story go back for years. We first met when I first joined the Army. Jonathan had been in for four years prior to that as a soldier. We met in officer training. We hated each other’s guts when we first met. We ended up nearly going toe to toe in either back of a bar brawl fight. We sorted our differences out and became best mates ever since.
We did some pretty cool funky stuff together in the Army. We worked together on a whole bunch of different things. Finally, we left the Army. We went and rolled into doing some big IT projects. Towards the end of that, we launched The Eighth Mile. We’ve been playing around in the leadership and personal development space amongst strategy and a couple of other things as well. People are probably bored talking about that. We’re here to talk smack about Sun Tzu and make some loose linkages to business and have a bit of a chat and see where it takes us.
Jon, do you got anything to add to that or did he do a good job?
If you know David’s history, you know more pretty much. We’re exactly the same. We speak to each other for about six hours every day. Usually, if you get hit by one, you get hit by the other one as well. That’s how close we are. Since you guys have been talking, I’ve been excited about meeting you and Frank. This is an absolute honor to be on here with you guys.
I don’t know how you guys do it. Frank and I spend three hours in one day together and maybe an hour a day other than that. Usually, we’re completely on each other’s nerves knowing each other that much. Six hours a day, I don’t know if I can do that, Frankie.
I want to make sure everyone understands why I’m uniquely qualified to be on this call. I did a seven-year stint at the Outback Steakhouse. I feel like I am a legitimate contender with my incredible knowledge of everything in Australia. We can go blooming onion, Alice Springs, Kookaburra, I got them all.
I was in Texas once in El Paso and we went to the steak house. One of the rangers who I was doing a whole bunch of stuff with over there was like, “We’ll get a blooming onion.” I was like, “I have no idea what you’re talking about. I’ve never heard that term in Australia other than being in the outback.”
When I was in Australia, we went to all the stuff in the red country in the middle. There’s a place called Frank’s Outback. Clearly, I’m Frank. I’m like, “I got to go there.” There was no blooming onion on the menu. They had kangaroo and crocodile. They had all kinds of shit like that.
Whatever they could get within a 100-meter radius.
I’ll tell one other funny story. We’re in Sydney, Australia. My sister and I are in line and we’re going to climb the Sydney Bridge. There’s all these Aussies around us. My sister and I are talking back and forth. This was in 2004 or 2005. She’s 13, 14 years old. I’m trying to cave her in, I’m like, “Katelyn, I wish I had a cool accent.” Katelyn is like, “Yes.” Some guy behind us goes, “You do.” While you guys put in your time in the military, I was slinging blooming onions and being harassed by your countrymen climbing a bridge with a harness.
It also sounds like we have something in common. When Frank and I first met, we both couldn’t stand each other. It sounds like we got that going forward. Frank wanted to be my friend. I was a little too high up in the organization and too important for him at the time. Is that how you recall it, Frank?
We had our bonding moment when we realized we are the exact kind of assholes.
You cancel each other out.
We did some in-depth research on Sun Tzu before this in our preparation in talking about it. From what we know, he lived around 500 BC. Most people think he’s a conglomeration of 3 or 4 different people that a lot of this stuff gets credited to. Around that time, there were nine factions in China that were always at war with each other. He’s a little bit like Shakespeare. People aren’t exactly sure who he was or which wars he was involved in or which battles he won.Military principles of warfare are still the most tested principles when it comes to high stakes environment. Click To Tweet
Most historians will argue over it. Even the book says, “We’re not quite sure who wrote this.” What’s probably undeniable is that within a couple of hundred years of it, most military in China were following his writing. It’s become what it is now where I would say most military have at least some bit of his doctrine involved. I’ll throw it to the two of you. How many concepts from The Art of War were even talked about in the military as you were growing?
This book forms a bit of a center stage. It’s one of those required readings for military strategy. As a nation of people, when you join the military and you learn about fighting, battle and combat, the one thing you’ve got to leave by the wayside is the idea of fighting fair, or you got beaten. You don’t want a fair fight, you want to win.
This isn’t boxing in the ring. We have a governing set of rules. We have rules of armed conflict, rules of engagement and those things. It’s not a boxing match. You don’t want to go toe to toe with anyone. You want to win with an overwhelming force so that you don’t take as many casualties, so you don’t lose. The only way to do that is to focus on winning and not fighting. If you have to fight, do it with overwhelming force.
This book is about winning and not fighting. If you have to fight, do it with overwhelming force. It’s a complete mental shift as you’re growing up playing sports. If you do any type of sports style martial arts or fighting styles, if you’re going to fight fair, you got to fight with all the rules. In the military and combat, you have to win and not fight. That’s why this book forms a core study for those in the military.
The subtle spin on that is winning, not fighting. The thing about this particular book is it’s geared towards trying to trigger decision-making. It’s understanding that you can clash things together but if you do that you blunt two swords, to use a metaphor. It’s about moving force on weak points and trying to trigger the decision-making of the other general. It’s trying to empathize with your enemy and trying to force their hand as it were.
There’s a lot of psychology in this. It isn’t just about 1s and 0s, three times Air Force will crush their Air Force and all that stuff. That’s 101 stuff. This is how to get inside the mind of someone else and pull them apart and force their hand so people don’t have to die. That’s part of the thing. The book I have is the Ralph Sawyer version. This was given to me by one of my commanding officers as a gift. That explains how much this is ingrained even in a contemporary military. This was a compulsory read. It is a bit abstract. It takes a bit of imagination. Things probably did get a bit distorted in translation, but there’s still a lot to get out of it. Whoever wrote it had a lot of experience.
Jonathan said something that I want to stay on, the concept of fighting fair and how you’re raised. Both of you guys are involved in sports as kids just like Frank and I were. Everything is about sportsmanship. Everything is about fairness. There are referees. You play by certain rules. It’s frowned upon to play dirty. It’s frowned upon to play head games. Play the game, show up and do it right.
You’ve got eighteen years of that in your mind and you show up to the military. How does the military help reprogram? There’s a lot of programming to undo there about what we’re here to do. Both of you rose up within a leadership program within the military in the leadership ranks. Your leaders definitely need to be thinking about winning and not fighting fair.
To answer the question, there is a sense of reprogramming. Referring back to the source that we’re talking about, Sun Tzu’s book, there is still a rulebook. There are still rules of the game. The balance is trying to find where are the opportunities and gaps, and where are the restrictive rules or the constraints. Each war is different, each rule set is different. It is a hard one.
One of the ways that they reprogram is by going down the path of trying to teach leaders how to think and not what to think. Most of the methodologies are geared towards providing a structure to pulling a problem apart as opposed to going, “If you have this problem, this is the solution.” It is a lot of how and pressure testing ideas.
A lot of the planning and the concepts that are developed are unique to the context of each scenario. There’s a lot of justification behind why you’ve chosen to do A instead of B. Have you assessed the risks of doing D instead of E? There’s a lot of interplay in the conversation in the professional development space.
As I went through and reread this book in getting ready for this episode, the last time that I had read this book, I worked for a big company. It triggered one set of thinking. I can remember reading it and thinking a lot of it didn’t apply to me within a big company. As I went back and I reread a lot of this, it feels so much more applicable to a startup, to someone who has no choices.
You mentioned 3 to 1 and you go for it. That’s a big company. I was used to winning by blunt force, put resources to work, overwhelming force, overwhelm the opponent. Big companies can do that. You can undercut price long enough where you know you’re going to bleed someone out. You can throw resources. You can throw more salespeople at a problem. You can waste a lot of money just like a big military can waste a lot of people to win. Whereas with startups, Frank talks about it a lot. I’m involved in them. You just have to be so much more creative in how you go about attacking problems. I found this book much more applicable to me now than even years ago when I first read it.
You bang on it there. When we looked at Sun Tzu in the military, we try to make it applicable to both the situation. We’re testing. Every day you’re assessed by subordinates, peers and superiors. You are assessed on this stuff. You critique or bashing them. You critiqued them into section plans. You’re always being assessed.
Going back and looking through this thing, as a startup, you realize, “If you think about this and you apply these principles, it’s a Wild West out here as a startup.” It’s a matter of what you can do and what opportunities you can create. You’re now looking at your guerrilla warfare as a battle plan as a startup. What strength do I have? What capabilities do I have?
In our case, David and I look at it and go, “Where are you not going to find 100 kilos ex-infantry? Let’s be there because there’s less competition for what we offer. There are fewer people with our backgrounds, knowledge and skillset. Let’s put our strengths in that area because no one else is there doing what we do.”
You can use the principles of war, The Art of War, computers, and all these different things. They have applications in a corporate context. We don’t need to be talking about a fight. It can translate it. Sometimes when it’s a startup, it is required. You’re running on bare-bones resources, trying to change things ten times your size, and loving it every second of your life.
One of the things that you said initially, Jonathan, that is critical is it’s not about kind of winning, it’s really winning. I have no experience in the military nor do I pretend to but I would point out two things. By the time I read this book 25 centuries after it was written, most of this stuff has permeated its way into the broader context. People don’t even know they’re quoting Sun Tzu, football coaches and all those things. It’s part of the culture.
The other thing as a startup, if you look at it from this perspective, it’s not kind of winning, it’s winning by a large margin. That’s what’s unique about startups. Ian is working with a technology company. I’m in a real estate company. I picked the space where I knew I could win. I knew that I could avoid a lot of fights. I knew I was going to be the bully in the ring because that’s what business is. I don’t want to get bullied. I want to figure out how I can fight as little as possible and dominate. Those are some of the strategies that you guys have talked about.
What’s the alternative? If they are to duke it out, you treat yourself, and then you end up with a Rocky Balboa fight. He walks away mentally handicapped at the end of it. You won but what about the next fight? There’s always another one coming. It’s that extended or protracted effort.
That’s what leads businesses to what’s called the USP, Unique Selling Proposition. A unique selling proposition makes you somewhat different so you’re not getting smashed in the face every single time you come up for air. It’s how do you find that positioning so you don’t look like Rocky in all 62 movies.If you don't adapt and shift and adjust to the environmental changes and be on point, you're going to miss the mark. Click To Tweet
You have to lose a few fights to understand what the impact is if you get this thing wrong. In a military context, if you lose, the stakes are high. If anyone’s been in a boxing ring or something like that, you’ve got to know what it’s like to take a punch every now and again to know you don’t want that. As a startup, early on, in the first couple of months with David and I starting The Eighth Mile, we made some critical mistakes with some clients.
I don’t think we were as dedicated to the mantra of good people. We didn’t acknowledge that there are, in fact, bad people out there. It cost us pretty big in the first couple of months with some potential clients that we had and we gave up more than we should. We don’t want to do that again. What are the things that we can leverage? We’re going to put filters in place to make sure we only work with good people.
Let’s bring some more military strategies out and go, “What are our strengths? What are our weaknesses?” Let’s try and cover those gaps and weaknesses with other strengths. Let’s leverage the strategic connections that we’ve got and put our strengths forward. One of those is being able to understand and filter good people and find out who they are.
A quick point on strategy in general. The military strategy, the reason why we are still passionate about it and why we lean on it heavily is that still, the principles of military or principles of warfare are the most tested principles out there when it comes to high stakes environments. Why wouldn’t you leverage that?
As you all are talking, I’m thinking a little bit about why it is hard for someone who has been in a large organization for a long time to go start something. Let’s take an American general. For whatever reason, he found himself in charge of a military of a small country that didn’t have anything like America’s resources. How well would he do? His advantage would be knowing his enemy and knowing the overwhelming strengths they had. Would he be able to quickly figure out and completely change the way he operates and gets into?
A lot of people that leave a big company want to go keep using the same playbook they had at a big company. You run out of money real fast as a small military will run out of money, resources, people, and will to fight it. Jonathan, you’re talking about making mistakes and that’s good. It is if you learn from them quickly. For most startups, you can’t keep making the same mistakes. You can only raise so much money from friends and family to where they’re like, “We’re burning money here. You’re a waste of our time.” If I were to invest in you, I would expect that you learn quickly from those mistakes and change quickly or you’re not getting another check.
The extension of that is if you are borrowing money, that’s also now a debt you owe that’ll get in the way of the next endeavor. It’s quite reasonably a case where you’re two steps behind now. It is a case of if you lose, you lose hard in certain contexts. It’s a big deal. It’s not an insignificant point.
I have an uncle who’s a restaurateur. He built lots of restaurants. It turns out that the real estate he owned was probably the most valuable asset in most of these instances. One of the things that he talked about is people would work at Red Lobster, which is a chain seafood place, and they wanted to quit and be Red Lobster. If you do that, you are going to get smashed because Red Lobster dominated the market for three decades. That’s where it comes down to the unique selling proposition.
What’s done properly, if you transition from a big company to a smaller company like Ian and I have, you have to learn the strengths of that company that can be replicated by a smaller company. Avoid the things that they have an advantage over you. What I would imagine is in the military, you guys think the same way. Afghanistan is once again front and center in the news.
Somehow, with the military might of the USSR and of America over a 42–year period of time, a band of startups are winning. Trillions of dollars have been thrown at the problem. We still didn’t get it right. If you look at that from a business perspective, thankfully, the US government seems to not be able to run out of money. As a startup, you can.
In the beginning, I didn’t borrow money. Ian and I are now doing deals. I’m over twelve years into the business. I know he’s going to get paid back. I have the resources to make sure if something goes wrong, he gets paid back. I’d never wanted to borrow money from friends in the beginning because it’s hard enough to start a business. You don’t want to also lose a friend or family person’s money. You then have less support that’s keeping you up in the first place. It’s booing you. You have to be strategic with that.
Leaning on that point about how to think and not what to think concept, using the Afghanistan scenario as a real case. When we first arrived in Afghanistan, the intel brief that I received from day one in theater is the only thing I remember from the whole day with the brief. The Taliban subscribed to the concept that, “The US holds the watches but we hold the time.” It took me a couple of years to redefine it and make sense of what that meant.
They had redefined what their resources were. They had a limitless account or a limitless hold on a valuable resource, which is time. While you’re predisposed in another country, every minute is money. It’s like consulting time. You’re burning trillions of dollars. All they had to ever do was wait us out. They had an unlimited hold of a finite resource for everyone else. When you look at what the resources were, the whole strategy change. How do you beat someone who has an unlimited valuable resource? It’s difficult, nigh on impossible.
You’re right about what you were saying. How can such things happen? Twenty years of force on these small startups is a good metaphor. That’s how. They redefine what their resources are. They redefine what their value is and then stick to their strategy. What can you do against that? I hope that affords people a lot of confidence who are in that startup phase.
Maybe if we go back to the drawing board and redefine where our strengths and resources are, and what we do have, then you’ll start realizing you might be able to move faster than big companies. You might be able to hold relationships better than big companies. You might be able to operate under the radar so they don’t even detect you’re there. All these things become emerging opportunities when you go back to the drawing board and you go, “What are we and what can we be?” That’s food for thought.
I’m somewhat fascinated by the war in Afghanistan and everything that’s happened in the Middle East. To put context on this, when the US went to war in the first Persian Gulf War, I was fifteen years old. It was the first time I went to my parents and I said, “I’d like a subscription to a newspaper.” I wanted to be up to speed on what was happening in the world. This is coming from a composite of different sources of information. I’ve never fought in a war, but what is fascinating to your point, David, about changing perspective is these Middle Eastern countries kicked the shit out of Iraq in a number of days and bombing the crap out of us.
What they looked at, going back to Sun Tzu, we can’t fight them in that traditional type of war. Think of the things that led us to get into Afghanistan, it was the bombing of the USS Cole and 9/11. Those are sneak attacks but coordinated smart attacks that are not the battlefield where we dominate. They retreated to a place that’s covered in mountains. We’re not great at that. It neutralizes Air Force. If you think about it, the architects that have put this all together have thought through every element. It’s incredible.
They made us fight on different battlegrounds that they didn’t even need to combat us on. If you take Sun Tzu for example, they made us fought political wars. Why are we here in the first place? They made us fought moral wars. Is what we’re doing just? Not only are we doing force-on-force conflict in the country, but we’re now forced to fight back in our own country to justify the reasons we’re over there. It was easy at the start. No one heard a bang, “We’re going to go over there. We’re going to neutralize a base of terrorists.”
As that conflict draws out and the resource expenditure starts to increase, “Why are we still fighting then?” It’s only when we withdraw that people are like, “That’s why they are fighting.” We may even go back in. Now you’re going to support the people in Afghanistan. A few weeks ago, you were telling us we can’t stay there anymore. It’s been too long. The war is not just anymore. It’s not moral. There’s now a political battlefield that people are fighting where supporting a war in Afghanistan is hard.
Using Sun Tzu, if you were to look at those initial estimates, the coalition forces that went in there, NATO, time was a finite resource when they went in that are the same before. Whereas the Taliban are going, “Here’s our advantage, for us, time is not finite.” In their estimates, “We have this resource. As time extends, we’re going to force them to fight the battlefield at home.” That’s going to make it a war that can’t be fought in a long-term period. In America, we first broke away from the British. You made it hard for the British to justify war in America because you burn their resources. It’s the same thing.
What’s fascinating is one of the concepts that Sun Tzu touches on a lot is when he talks about knowing your enemy and knowing yourself. There are three components. One of the prime tenets of this is the one who knows the enemy and knows himself will not be endangered in 100 engagements. Two, the one who does not know the enemy but knows himself will sometimes be victorious and sometimes defeated. The one who knows neither will be defeated in every engagement.Planning is everything. Click To Tweet
As you’re speaking there, Jonathan, and I’m thinking about it, all you have to do is to look at history. One hundred years of history is enough with the US to know that our people will get antsy when we have our military outside of our country for long. We had to be dragged into World War I. We didn’t show up. We came in late because we had a depression. We had an economic problem. People didn’t want to be involved.
In World War II, we had to be dragged in. We probably wouldn’t have been in if the Japanese wouldn’t have bombed Pearl Harbor. We were giving lip service to Churchill. If you look at Vietnam, how long were we going to be there before people were losing their minds over Korea? Over and over, there’s a pattern of, “If you wait long enough, America will leave.”
It’s hard for them to get their people to stay excited unless they feel directly threatened. They knew their enemy. They knew the United States. Twenty years is probably the longest war we’ve ever been in. We lasted a lot longer than they probably anticipated. That’s about as good of an example of that tenet as you’ll find what just happened. They knew us. They knew what would happen.
I’ll spin it to something significantly different. In the 20th century, China was not the biggest GDP producer in the world. China realized around the 1960s, late-1950s, early-1970s, somewhere in that fifteen-year stretch of time, that they could become the largest GDP again into the 21st century if they figured out how to sell us shit.
To me, that’s another short-sighted approach that we’ve put ourselves in as a large economy. They’re going to surpass us with a sheer number of people in GDP. They’re way ahead of us in people. With GDP that’s going to come in the next 10 to 15 years. To me, this is another losing strategy. What Ian talked about was hunkering down. The Americans, we only are going to battle for so long or we’re going to give up and go to another shiny object. The others have that long-term strategy that we didn’t.
You got to look at the cause. David mentioned it before, you got to empathize with your enemy. We’re going into another country to fight. There’s only so much energy, time and resources we can put into that country. Switch it. If you had a country come and fight you on your home soil, you’re like, “There is nothing I’m not willing to give up to get rid of this threat.” You will hunker it down. You will be the one who’s going, “You might have the watches but we have the time because there’s nothing I’m not willing to do to get you out of my country.”
We’re talking about motivation here. This is why the Taliban hunkered down and go, “We have the Russians. We’re going to have you too because this is our country. We want this more than you do.” If someone was to attack America, I guarantee everyone would pull out their weapons and they’d gather together. A lot of the internal frictions would go away because now you’ve got a common enemy.
It’d be the same with Australia, everyone would bind together and be like, “That’s it. We’re all moving to Tully and we’re going to a stage of resistance out there because that’s the most horrible place in the world. It rains whenever. It’s got a jungle. Everything is evolved to hurt you, so we’re going to stage a resistance over there. It’s great.” The reasons for war are different. If you empathize with your enemy and why they would choose to fight in the first place, you start to understand the limits of the resources. If you did that with the Taliban, you go, “There’s nothing they’re not willing to do to win this fight.”
You’re getting into something, which The Art of War is big on. To me, The Art of War is much a psychology book as it is a tactic and strategy book. You’re talking about psychology there of knowing the mindset of who you’re up against and knowing how dangerous someone is. You believe that they are on the brink, which is what makes startups dangerous. I feel the sense of urgency in the startups I’m involved in, whether I’m raising money on a deal that Frank and I are doing.
If I were doing a deal in a corporate structure and I was going to go invest $5 million in something, I would want it to work because I have some brand equity in the company. I don’t want to look bad. I want to get a promotion. You go do a $5 million deal with other people’s money and you’ve raised capital, and Frank and I are now putting our name on this deal, that it’s going to go well. Frank can tell you, I was a nervous, stressed-out wreck asking him about every contingency possible. We cannot lose. I need to know five things that we can do if this goes wrong.
The level of intensity is different. When you look at your monthly cash burn, when it’s your cash and you are burning cash on salaries or on payroll, there is no room for someone who’s not performing or has a bad attitude. They’re gone fast when it’s your money, or investor’s money that you had to raise, or money that you borrowed to run that business versus a big company where it’s like, “He’s been here twenty years, a good guy. He doesn’t produce much anymore but he’s not hurting anything.” There’s that attitude in a bigger company. Whereas in the psychology of someone who’s up against the wall who knows that they could be gone any day, they’ll fight harder and make more desperate moves. It’s a whole different mindset.
Context is everything when you think about it. One of the catchphrases that Jonathan and I have latched on to over the years is, “Who’s got skin in the game?” My dad was a risk-averse guy. He had a good phrase, “Who holds the risk?” He was an auditor and an accountant. There’s that old saying, “When something’s gone awry, go chase the money.” The other way to look at it is, “Go chase the risk.”
Were the first to stand in front of all the organizations to try and provide a bit of a balanced view on this. When we talk about leadership, culture and team dynamics, people are quick to critique their leaders, founders and business owners. Rarely do those people have skin in the game. They might lose their job but they’re not going to lose their house. This might not be the make-or-break moment of their life. They might hold some risk but they hold a fraction of what is the risk of the entire venture.
If you ever want to figure out why people do what they do, start looking at who holds the risk. Who’s got the skin in the game? You’ll then start seeing why some people resort to micromanagement, why some people are over-controlling or overbearing. It’s because they’re freaking out, drowning and panicking. It’s easy to make assertions about those people. If you’re holding the ruins at the end of this, that’s a big deal. That’s a part of the empathize with your enemy bit. Before you start demonizing, try and put yourself in their shoes, and you’ll start feeling the burn yourself.
When I asked David if he was interested in coming on this episode, he sent me the first blog post he ever wrote, which was a Sun Tzu principle, Flow Like Water. It permeates throughout the book, being malleable, pliable and flexible as an Army. Dave, I’ll let you talk about that in general and how that applied when you were in the military and how you brought it to business.
I wrote this while I was in the military. This was in the last couple of years while I was in the military. This is in the early days of my LinkedIn journey. I don’t think many people have ever seen this but so be it. The snapshot from Sun Tzu that I brought out and I’ll quote it, “Military tactics are likened unto water, for water in its natural course runs away from high places and hastens downwards. Water shapes its course according to the nature of the ground over which it flows. The soldier works out his victory in relation to the foe whom he is facing. Therefore, just as water retains no constant shape, so in warfare, there are no constant conditions.”
What I was referring to by gathering that particular part are two things. One, the business world and the project world, if we choose our boundaries carefully, it is the Wild West. There are a lot of opportunities and malleability in terms of what you can do and what your opportunities are. More specifically, that article was about obstructionists. We’ll call him Bill, the guy you were talking about that has been in the organization for twenty years. He’s part of the furniture.
What this article was specifically talking to were those obstructionists that you hit in the organization. The person that you could give them any problems, it doesn’t matter what it is, and the first thing they’ll say, “We’ve done it before. It couldn’t be done. It’s unachievable.” Those people sometimes sit in decision-making roles or part decision-making roles. They can slow a project down. Someone in that particular link in the chain can stop millions of dollars of projects or initiatives from being developed. It’s a big deal.
The article expanded on, how do you be like water and flow around these obstructionists? How do you discern who’s an obstructionist and who’s someone doing an accurate assessment of risk? How do you try and navigate that? It’s easy to put everyone in the obstructionist category when you don’t like them and they’re telling you things you don’t want to hear. Sometimes they’re telling you things you do need to hear.
Talking about what you were saying before, Ian, when you wanted five levels of contingency, “If this goes wrong, what do we do? What are our options?” In one context, you might be the obstructionist. In another context, you might also be the savior of the damn company. That’s an important piece to get right. The article is opening up that topic to delve a little bit deeper.
I love what you said there in two different contexts. In a big company, if I were panicking that much on a deal that fits in with hundreds of other deals you do like in the year and I was delaying it that much, another big competitor would have snatched up that deal and we lost it. You get caught in that analysis paralysis.Knowing the environment and how it shifts is key to being able to not only adapt to it but use it to your advantage. Click To Tweet
In a smaller business, you have to think about it. One bad deal in a big company, you write it off. It’s okay. One bad deal for Frank and me when we’re trying to build a fund in the first deal we ever had that went tits up is not a good situation for us. You’re not going to go raise money for a second deal. If you’re a big company that’s done thousands of these deals and the deal went bad, no one even thinks about it. It’s like, “That’s a price of doing business.” I like the way you think about being like water, you have to change the way you think in different contexts.
The other thing is if you’re a big company, you may say no to a deal that Ian and I would say yes to. What’s unique is we’re not a big behemoth like a big company. We’re more of a jet ski than a tanker. We can move and do things in a slightly different way. Sometimes, part of the argument is navigating in a way that allows you to find opportunities that others have passed. A lot of it is, do you have the right tactics?
It’s when we can adapt and shift. As a small startup, you can alter, change and shape your resource. You’ve got more flexibility and mobility in that space. You can run as lean as you need to run when it comes to systems, processes, procedures to achieve your purpose. Bigger companies don’t have that adaptability. That’s why sometimes you see them acquire smaller businesses who managed to make a break-in, where they couldn’t get in because their resource burn was too high. Their overheads were too high. They maintained these massive office blocks.
Whereas the startup is like, “We don’t need an office now. We need to run lean. We can work from home and be more mobile and adaptable in areas where no one can afford to be.” That’s where the planning part comes in. We’re talking about Sun Tzu. We’re talking about estimates. It’s like, “How lean can we run?”
When COVID hit, we lost all the big projects because they’re all face-to-face engagements. We’re locked down South and we couldn’t do face-to-face. It was like, “All right. Cool.” We’ve managed to build up a reserve. We’ve managed to build up this cash in the bank and go, “How lean can we run for how long to build a different type of ability that people are looking for now?”
At that stage, we were three weeks away from moving into our office. We shut that down. We’re like, “Do you know what would make the difference here? We bring on a COO. We need this revolution. We need to build another capability. We need someone to take all this responsibility off so that Dave and I can run in that creative and gap-finding mindset for a second.” We’re able to do that as a startup because we knew we could scale down our resources.
When we’re talking about the Wild West, it’s all about what you can do. It’s like, “What can you give up and still be functional? What can you survive on to gain an edge or an opportunity?” Whereas in the bigger organizations, sometimes that doesn’t exist because you have this bulk of staff, overheads and expenses that you can’t trim down.
There are two things there that are interesting. When I worked at a big company, we had a 3, 5 and 10-year plan. A 3, 5 and 10-year plan at my company is a fucking waste of time. I don’t know what I’m going to be doing in 3, 5 or 10 years. I know I’m not going to be building widgets. I know I’m going to be doing real estate deals that make a lot of sense. This is where it comes down to leadership in a big company or a small company.
Within one week of COVID happening, I had fired 27% of my staff. Proactive managers looked at it quickly. People incorporated this too. That comes down to you know where you are. A ten-year plan for me doesn’t make a lot of sense. Using and synthesizing data quickly as you did, you closed the office, “Instead of having this expense for an office, we’re going to use it towards a staff person who’s going to make us better.” That’s good battlefield management. No matter what size you are, if you don’t have good battlefield management, you’re going to go extinct.
COVID is a great example of being like water. Take the restaurant industry, even in my small town, the restaurants that quickly got involved in takeout delivery and partnered with delivery services that had good apps and technology are all still around. The ones who didn’t or the ones that when I would look on my DoorDash app and they wouldn’t be on it, I would keep scrolling. I’m not using them because I need delivery to my house. The ones that stubbornly kept doing the things they were doing, they’re not around. The restaurants are gone. There’s a whole bunch that shut down that tried to start.
There are some that started right in the middle of COVID. There’s a good Mexican restaurant that started in February of 2020. It’s still around because they aggressively got into delivery. People liked them at first and they kept using them. In fact, they’re thriving. They were flexible. They did what you did, Jonathan. They didn’t keep trying to do face-to-face engagements. They went to digital platforms. They created different things. The companies that quickly pivoted, whether you are big or small, in that 4 to 6-month window in 2020 are all winning. Every one of them looked at it and said, “The reality is over. Let’s face it as it is now. What do we need to do to be successful now?” They’re all winning now.
We have a saying in the military. Dave and I lean on it pretty heavily in a lot of the things that we do around strategy development and planning. It is, “Wishful thinking doesn’t win wars and hope is not a long-term strategy for success.” Burying our heads in the sand and pretending everything’s going to be all right is not something as a startup you can use as a strategy. It doesn’t work. If you don’t adapt, shift and adjust to the environmental changes and be on point, you’re going to miss the mark. You’re going to miss the opportunities. You’re going to be left with your head in the sand while everyone else saw a gap and saw an opportunity and then they move forward.
There was something that happened in the first instance. When the writing was on the wall and we started seeing early signs of COVID, we started pressure testing what that might mean. Going back to decisions, what decisions might our government make and how can we be ahead of the curve on that? One of the things that Jano and I made with a deliberate discernment was Jano would adopt a defensive strategy in the business and I would adopt the offensive role.
My role was to seek out and close with new clients, start developing the new content, the new product in combination with the COO. What systems could we start relying on more heavily to spread out our reach? I was always out looking. Jano took up the risk mitigation. He showed up. He was like, “What government grants are out there? What job seeker payments can we leverage on? How can we reduce our overheads? How can turn off the move into the new office?” All of those things. He was all about reduction and all about advancement.
What we were trying to do was bridge a gap. We’re trying to extend the margin between him and me. I’m running ahead and throwing money over my shoulders trying to scramble as much as possible to build up that capital. It speaks to an important point and Sun Tzu touches on it on many occasions in his book. It’s about this distinction between offensive versus defensive strategy. We were into playing this intuitively. This is a big part of the game. The purpose of a defensive posture is to buy you time to build resources to assert an offensive campaign. You don’t just stay on the defensive. If your strategy is to hold the defense, inevitably, you will lose. Sun Tzu mentions that many times in various ways in the book.
Ian, when COVID first kicked off, you and I talked about Napoleon Dynamite. We were talking about it from a leadership and business context. The whole purpose of the defense was to hold the defense for as long as it required to allow the decision-making to move back onto the offense. It is about the offense. Some people forget that and they hold the defense too long. They run out of supplies and then it’s the end of days.
I’m going to use an event as an example to solidify your point, the US Civil War, which was hundreds of years ago. They had the best generals but they didn’t have the resources. They had time. They were the clock and held the time but they did not have the resources. I’ve never seen a heavyweight fight or a lightweight fight with someone winning who doesn’t throw a punch.
My way of looking at it is, how do you take your business and put it into a defensive posture that allows you still to punch, that allows you to still capitalize? What we did in my business is we went right to the immediate posture, “Where is the cash hiding? Let’s get our hands on it. Let’s cut spending, let’s cut burn, and then let’s rework comp packages with people that we’re bringing in like it’s a recession. Let’s go low base, high commission. Let’s attract people who want to win in a time where everybody’s losing.” That’s a cultural uplifter that has all those little things to it that give you an ability to punch.
We should stay on approach here because this is where a lot of new companies fail. They have an idea and they under–resourced the good idea. The Sun Tzu quote is, “One who cannot be victorious assumes a defensive posture. One who is victorious attacks.” Frank, this is worth even digging in with your business a little bit because I got to watch the genesis of it. Frank, you were defensive for 4 or 5 years. You had built a little bit of an egg. You were playing not to screw up.
When your business changed is when you started hiring people before you had the revenue. When you started adding staff, you were trying to go get projects without full capabilities to do it. You then made a shift where you started spending money in advance. To me, that’s playing offense. It’s making those first hires, adding capabilities, adding people and trusting, “If I have those capabilities, I’m good enough where I will go get the business. If I play the offense and I have the staff, I will go get the business.” When I read that quote, I thought about your business directly, Frank, because I watched how you played defense for a long time and muddled. It was when you said, “Screw it. I’m adding payroll, talent and people.” That’s when you took off.
It was a sacrifice. I remember it was the end of 2016 when I started to add significant payroll. The first half of 2016 was a good year. I started looking like, “We’re going to lose some of these winnings but it’s going to give us a fortification position where we can leap ahead.” A couple of things happened. We had proof of concept that we’ve been in business for over six years. We were starting to make money and attract talent.If you ever want to figure out why people do what they do, start looking at who holds the risk, who’s got the skin in the game. Click To Tweet
When you start to attract talent, it gives you an ability to shift your mindset around, “I don’t have to be as defensive anymore.” If you don’t think you can afford it, and then you get through that period and you go, “How did I ever not have this? How did I ever not think I can afford this?” It’s a huge talent upgrade. It takes you in a different direction.
Dave, you speak about a big one. Eisenhower said, “Plans are nothing. Planning is everything.” Frank, you acknowledge the risk. It was a calculated risk. You had over six years’ worth of experience in there. You knew the left and right boundaries. You’re like, “This is a calculated risk. It’s a risk but it’s calculated. I can mitigate some of the impacts. Because of all the calculations and all the estimates I’ve done, I know that this has a high chance of success.” It’s still a risk but it was calculated. That’s the difference between success and failure.
The young startups are like, “Screw it.” They take risks but they haven’t done the planning. Whereas you got the other organizations that do the risk analysis, they understand the numbers, they have the experience, they make a calculated risk. Everyone else goes, “How is that person doing that? That’s too risky.” They think it’s not a calculated risk on the outside but it is, and that’s the difference. Planning is everything. Knowledge and understanding of the terrain, knowing the environment and how it’s shaped is key to being able to not only adapt to it but use it to your advantage.
I was good at real estate when I started this business. Around 2016, I saw things differently and it’s because I was down there in the weeds, in the mud. I was fighting. I knew what I was and what I wasn’t. When you start to stack up enough wins, you start to believe in yourself a little bit. That’s when your posture changes. Your defensive posture goes, “I don’t have to be defensive anymore. I’ve been taken punches. I can start to swing.”
It’s different in different businesses and different things are going to get you to that fulcrum. For me, it was working, making sure I didn’t go out of business, making the right moves, and then had enough knowledge and enough wins. I started getting the right people. Now, you hire that one big person and it costs a ton of money. You sit back and you let the dust settle and 90 to 180 days go by and you’re like, “That was a good decision. Let’s go find the second one.” It starts to build. What happens is it almost snowballs and it starts to take off. If you look deep enough at a lot of different anatomies of businesses, wars, whatever, you start to see those points where things started to get something.
Your risk threshold changed. You are able to operate at a certain risk level. You’re able to accept, tolerate, treat a certain level of risk. As the experience, skills and knowledge grow, you’re able to accept another level of risk. In a military context like David and I, if we’re operating as a platoon on a battlefield, we can accept a certain enemy force before we have to request higher assets or before we have to call over to a larger force, those sort of things.
As you bolt on extra assets that make you more survivable or that give you a different capability, you can accept a higher threshold of risk. That allows you freedom of maneuver or freedom of movement to attack different opportunities and forces in different ways. It opens up a lot more courses of action that you previously didn’t have. Without the knowledge, skills and experience, you weren’t able to achieve those opportunities because you couldn’t accept the higher level of risk.
There’s a subtle nuance to what you said, Jano. Let’s say you have a platoon, 40 dudes running around with rifles. What you do is start bolting on additional assets, engineers, someone who can call in jets and bombs, a medic that can draw around your operation so little injuries don’t become big injuries, all those things. You bolt them on and then you might have a crew of 48 people on the battlefield. That 48 is not the equivalent of 48 infantry soldiers. It’s a whole new beast.
What it speaks to is an important point about discerning who does what roles. One of the things I would hope we would agree on is when you start out, you’re like a Jack of all trades but a master of none. You’re trying to do everything. You’re doing the website. You’re dealing with the freaking emails, admin, account name and God knows what. You’re scrambling.
Maybe you don’t even have investor funds. You don’t even have capital. You’re building it from the ground up, which is incidentally what Eighth Mile did. We ground up built this thing. I know what that feels like. You also learn a lot about those roles. What that does is it helps you tune in for who you hire and in what sequence of priority to start filling those capability gaps so you can get back to what is the primary role that you need to do.
In our role, Jano and I are the two directors. We try and bring in the big projects. We have people now who do what we call below-the-line work. They’re doing the courses and organizing the coaching. We’ve got an admin team. We have an accountant. We have all these people that cover those capabilities so that we can focus on doing one thing well. That makes a big difference. That’s how you have 30 infantry versus 30 infantry. One team wipes the floor with the other because they’re not focusing on calling bombs. They’re not being the medic. They’re not looking for bombs on the ground. They’re not doing all these things. They’re shooting and doing that well.
From an entrepreneurial perspective, there are some people who are at that tipping point where they can start looking at offloading those particular roles and responsibilities to start leaning back on what was the winning element of their personality, their product success or something like that. What are your thoughts on that?
What I’m hearing you talk about is exactly why 25 centuries later, we’re still talking about this book. If you look at our outline, it’s our approach, low hanging fruit, and team building. You have your approach. You attack the low-hanging fruit and get wins. You build momentum, psychology, and a lot of good things happening, then it comes down to the team.
You’ve proved the concept, and then it comes down to finding people that help you reprove your concept. If you bring in the right people, you may morph or adapt your product or service because you’ve got new talented people who are helping you find avenues that you couldn’t find on your own. That is absolutely what you guys are talking about both business and military culture, and what I saw and felt in my business over the years.
We talked a little bit about planning. I’m going to throw out another quote here from the book, “The victorious Army first realizes the conditions for victory and then seeks to engage in battle. The vanquished Army fights first and then seek victory.” I’ll give a personal example. After twenty years of being in corporations, I left without a plan. I left because I could a little bit but because I wanted to do something different.
Frank helped me in making this decision. I knew that working twelve hours a day and having all the demands of a senior executive in my mind, I couldn’t think clearly. The fog of war was in front of me. I couldn’t think about what I wanted to do next. All I could think of was the mission I was in. I knew I had to step away. Even if it took 6 or 12 months to figure out what I wanted to do, I had to go clear my mind and plan a lot better.
In those first months, the hardest challenge for me was not fighting all of the fights. People asked me to join their companies and invest in their companies. I had someone asked me to come and be on the board of their company and be their vice president of sales. I had all of these inputs coming. I was used to fighting. A big corporation is always a new battle. I had a big army always behind me.
The hardest thing for me to do was not fight. I knew I wanted to do a certain real estate deal. I looked at 50 and said no to them all. I knew I shouldn’t dive in right away. I needed to see more and look at more until finally, I felt like I knew the conditions for winning and what I wanted to go focus on. The hardest thing for me to do was say no to as much as I said no to because I was so damn bored. I’ll call Frank and be like, “I’m bored. I’m underutilized. Goddamn, I’m walking around in my neighborhood. I can only drink so much coffee in coffee shops.”
Frank was great and he’d be like, “Keep being bored. It’s better than taking on something and being busy doing something you can’t stand. You know what that feels like. You did that for the last five years. You were busy doing something you didn’t like. Be bored for a while, know the conditions for victory, then go spend your time on something.” That was great advice Frank gave me. I knew it a little bit of my gut, “Don’t dive into something else.” The best thing I ever did was go slow in my first six months and not dive in and start spending money in a whole bunch of areas and pour my time into something else.
That’s the difference between a new commander, a good commander and a great commander. It’s this whole idea around picking your battles. We’re going to use military terminology. We had a great leader. She wasn’t military but she understood the concept. She’d go, “Is this the hill you want to die in? Is this where you want to expand your resources to achieve an outcome? Is that outcome linked to an overarching strategy?”
In the military, when we say, “Pick your battles,” you get a lot of people that just want to fight. Every hill is a fight. Every issue is a fight. We talked about not seeing the forest for the trees in 5-meter targets. You get so absorbed in the tactical fight that you can’t step back and look at the strategy, purpose or everything that’s going to align your decision-making moving forward.The difference between a commander and a great commander is this idea around picking your battles. Click To Tweet
Dave said something relevant. He goes, “If you don’t have the strategy and you’re looking at somebody else’s strategy, you’re already three steps behind.” You’re so buried in the tactical that you can’t cope with somebody else. You don’t have the time to step back and pick your battles. Look ten steps ahead and go, “Where do we need to be in ten steps?”
Because you’re so busy at this 5-meter target range, you don’t know what’s coming next. You can’t see the shifts in the environment. You don’t have the information or the senses out in the environment that will let you know triggers for change or triggers to move, identify the good conditions that set opportunities or identify opportunities that you can capitalize on. When we’re talking about picking your battles, it’s about understanding the environment, understanding your capabilities, and being able to use that effectively.
Going back to specific responsibilities and knowing what your strengths are and what you do, I can use another example. Frank has his business. I’m involved in some business. There are some areas where he and I overlap in business. We’ve done a few real estate projects. We do this show if you could call this business, most would not.
When it comes to real estate, when we work on projects, I have a very specific role that I filled for him and that is raising capital. I take that off of him. I say, “You go focus on operations. I’m going to go get you money.” That’s my job to do a good job of that and not make him worry about, “Will I have the money?” He’s going and finding the projects and executing on them. My job is to go make sure that it’s funded. He’s leaning on me for a strength that I have, a network or an ability to go raise capital. When I’m raising capital, I wouldn’t have the same confidence if I didn’t know Frank was good at operations.
The two work well together. When I’m talking to them, it’s not just, “Do it because Ian says.” A lot of times, I’m selling Frank and his ability to operate. I also take that off of Frank’s mind because a stressful part of real estate is where’s the money coming from. I fill my role. He fills his role on those projects we work on. It works well for the two of us. In the show, I do everything.
One of the things that’s a goal and we’re skirting around it, that makes a lot of sense, is that a discretionary choice is critical. If you’re using it from the standpoint of which hill do you climb and battle, Ian built a war chest of cash where he had the ability not to scale every hill when he first resigned because he had that.
My war chest was smaller, I quit a decade earlier, but it was big enough where it gave me time to not have pressure. Because I didn’t have pressure, I got to sit back and see, what are my skillsets? Which ones do I want to utilize? Where do I want to point this, and then how do I go forward? That’s a twelve-year-old story. Working with Ian, he can find money, I can find the money. He’s good at it. He’s in a network that I’m not as tied into, which helps.
The other thing Ian is great at and way better than me is how to put all these ideas into an eight-page deck. How do you take all this stuff and make it consumable so people want to get behind it? How do you communicate to people that are witty, impactful, and keeps them involved? Ian’s great at that. If you look at it as our society, you have different heroes than we do, quarterbacks get paid the most in our society. Basketball players, if you look at it, probably make a little bit more but by and large, quarterbacks are the most well-paid group and so are surgeons.
Quarterbacks don’t snap the ball through their legs. They don’t punt. They just throw the ball. They have a good and specific skillset that is incredibly well compensated for. That comes down to discretion. They’ve worked and practiced on something good. If you have a skillset that is valuable, you don’t have to do a ton of things. You can just do one thing really well. You can do that as a business and as a person. There’s value in that.
I love his five factors that determine victory. These five would be fun to unpack. We already started with one. I talked a little bit about it. His number one is knowing when to fight and when not to fight. Kenny Rogers, “Know when to hold them, know when to fold them.” We’ve hammered that one home. Number two, knowing how to employ small and large numbers. I’ll put this out to you, when you hear that, everyone on this conversation has done both, what do you think about when you hear him say, “Know how to employ small and large numbers?”
For me, my brain immediately goes into the fact that large numbers are made up of lots of small numbers added together. What you’re talking about are sub-elements that look like a big element. It’s similar to the breakdown of complex problems, which are a whole bunch of simple problems that have all been blobbed together to look like one problem.
It’s like the metaphor that you look at the mountain and it looks too big. It’s insurmountable in its first instance and too terrifying. To climb a mountain like that is maybe 10,000 individual steps. The part that he’s trying to draw out by that statement is if you have a small force and you can isolate lots of elements individually into individual contexts and individual scenarios, and you can isolate them from the broader group because they will. They’re not going to be a big blob walking around all the time, then you see opportunities to pull apart what looks like an insurmountable problem but break it down into bite-sized chunks.
The perfect example of that comes from a historical standpoint. It’s when Japan tried to invade Korea back 500 or 600 years ago. What they did was they brought their entire Japanese Army across into Korea, and then began to try and advance north towards China. Obviously, China didn’t want to be invaded and was supporting Korea. The way Korea pushed back was by creating a guerrilla war and was attacking what was a stretched-out Army of Japanese soldiers in the hundreds of thousands, which is a huge army at the time. It’s absolutely gigantic when you consider the populations.
They started picking off little isolated groups, the satellite peripheries of what looked like the big blob, hitting their logistics. Anytime they crossed a river and they were vulnerable, they would hit them and take out 20 or 30 of them. The next time they’d move on to a different river location, they do it again and again. The Japanese had a protracted war as well. What they essentially did was forced the decision-maker, which was the Japanese Emperor. Eventually, he pulled back. He tried to do a rebuild of his army and go back in for another crack and he lost again, and that was it. That was the end of days for that battle for another couple of hundred years.
The point of the matter is, it was a bunch of ragtag villages that pushed back onto the Japanese army from Korea, supported by elements of the Chinese dynasty, and were able to rip apart bit by bit a much bigger fish. It’s like the piranha versus the marlin thing. Piranhas ripping apart the marlin, if that was a metaphor. That analogy applies in a business context.
There’s utility in it in the sense that you talked about low-hanging fruit, Frank. Having the ability to identify what the low-hanging fruits are, pick them and start picking the little bits and bobs of the bigger targets. In doing so, you draw opportunities that otherwise would look like an insurmountable task. It’s a kind of piranha beating a marlin. Lots of piranhas can if they run around and find little gaps. You see that in nature everywhere. The little things attacking the big things. That’s where my mind goes when you raise that point about size and scale.
When I think about employing small and large numbers, the best company on the planet at this is Amazon. Their scale puts them everywhere so it lets them deliver and make their core money. That’s using their network, distribution and everything else. They build these small little teams that act like startups. Within Amazon, they have a cloud business that if it was pulled out would be a top 30 company in the world. If you pulled them out, their revenue, their AWS is a top 30 company in the world. It’s absolutely massive. It’s half the size of Amazon and no one even knows about it that doesn’t own their stock because all we see is the delivery trucks coming.
That started with one guy who went and built a little small team and they started practicing it, and they built it. That’s a good example of Jeff Bezos had this huge company but he knew how to build these little small teams that would go and build great things that when you added the sum up, it turned into something very big. Do you think Amazon could probably beat half of the military in the world if they wanted to? They got enough money. If we armed them, Amazon could probably win if they wanted to. I’m half-joking. Don’t take that personally.
My mind actually went to it. I was like, “Maybe.”
They have a lot of money.Complex problems are a whole bunch of simple problems that have all been blocked together to look like one problem. Click To Tweet
The strategy works. If you think about inkspot. The idea when we talk about an inkspot methodology is you got a map. Think about an old paper map where if you drop a bit of ink on it and it expands. That’s the idea. When you’re talking about taking an area and expanding your influence. You drop a small team in there and gradually, it expands its influence in the area. You drop enough small teams all over the map, and then their influence gradually spreads like ink on a page, and then they connect.
When we’re talking about guerrilla warfare of very small, agile teams out in the environment, the power in that is that you’ve got multiple senses in the environment that can identify opportunities. Not only that, it’s because they can move fast, they can scale rapidly in order to achieve a break-in or delve deep into an opportunity. Just as quickly, once they’ve achieved that, they can spread back out and dissipate into those small groups and small senses again.
If you can move so fast and you’re so adaptable, these smaller companies, we’re talking about the value of strategic partnerships. Take yourself and Frank, for example, working in different environments, different senses, different skillsets. There’s a point in time where you identify an opportunity, you can merge together and bring a groundswell of force in order to achieve and prosecute this opportunity. Just as quick, once the opportunity is gone, you can break back down into smaller teams and keep searching for those opportunities. That’s the essence of guerrilla warfare.
Number three on the five factors that determine victory is upper and lower ranks having the same desires. Frank, you’ve started something on this that I want you to dive into more. COVID hits, you look at your staff, you and I were talking. That might be the only time where I was talking to Frank six hours a day but we were both a little nervous about a number of things we were working on.
Frank identified very quickly, “We’re up against it. I’m going into a dark alley. I need to determine what staff comes with me and who doesn’t.” He also determined that he had too many people that were all salary from an income standpoint. He needed more skin in the game. Frank, you talked about how you hired more people with a lower base but higher upside. To me, that’s alignment right there. It’s trying to align people. At that moment you knew, “I’m taking more risk as a business owner but I still want to grow in an uncertain market. I need to hire people that think like me and want to go that same direction.”
I did a presentation in December of 2019 at the mastermind groups I’m a part of by prepping for a recession. Nobody knew it was four months around the corner. I thought we had some time. One of the things I’ve learned from Corporate America, Ian, and Jack Welch, you always want to identify your top and your bottom percentages. What I called it was having my life raft. Back then I had twenty employees. I had 5 or 6 people that were on the life raft. If we got whittled away and we can only say a couple of people on the boat. These were the people that were coming in with us because they were the people I wanted on the boat and had unique skillsets. They were the ones who all had oars on that boat. It was about six people.
The first thing that we did is I talked to those people first and said, “Here’s what I’m thinking. Do you agree, disagree? Number one, you’re safe. Number two, do you agree with the plan? Number three, who do we want to bring with us? Who do we want to do this along with?” I had different conversations and it happened over a 48-hour period because I knew who my leaders were. We had a good conversation. We were all in the same boat, and then we started to row in unison with one another.
It didn’t take very long because we’d already done a lot of the work before the moment hit us where we had to make decisions. For me, it wasn’t easy. It was a real pain in the ass to live through but we were prepared. It was a lot easier than it could have been had we not been thinking 3 or 4 months ahead about, “If this does happen.” The question is, “How to employ large and small numbers.” If everybody’s on the same page, it’s easy to employ large numbers because it all breaks down to small. If you have a lot of splinter cells that are underneath large management, then it becomes problematic. That comes from communication, goal setting, and the vision that you must settle with.
From a business perspective, my experience in having a highly variable pay structure for your most important people is critical. You have to pay market and it has to be a realistic pay structure, but having worked in both organizations that paid too high of a base and not enough variable and others. Frank and I worked in a construction company where 50% of almost every manager’s pay was variable.
Talk about alignment. At the end of the year, when you look back at the income that you made, 50% of it came from your personal performance and it was all relatively tied together with net profits, sales and revenue. Everyone in the company, if you went from Cincinnati to Orlando to Washington, DC or Philadelphia, it didn’t matter. Everyone’s pay was pretty much aligned with our CEO’s goals and what he wanted. The top 200 executives were all also compensated based on the stock moving higher.
When you talk about the lower and upper ranks having the same desires, I felt that the company got it right. By getting that right, that company got away with a lot of other ways that they treated people that probably weren’t the best and weren’t industry-leading, but because the pay was so strong, the retention was pretty good in that company. Everyone pulled in the same direction. That’s where the stock went all the time.
There’s an interesting dynamic that emerges when you talk about these running of small teams and then their subset of a bigger team. There’s this paradox that emerges in terms of when you want initiative, freedom, creativity, and you want to set these leaders loose. The only way that you can set the precursors or the preconditions for that to happen is, ironically, by providing them with boundaries. It’s almost like a counterintuitive play here. It’s the more boundaries you add, not tasks. I’m not talking about tasks but boundaries. They are very different things. It’s explaining the rules of the game. This is very much in tune with having people running in the same direction.
This is how you manage a battlefield. This is how you have 37,000 troops on an island. You subdivide it into smaller and smaller problems. The subdivisions are done by boundaries. By going, “You’re not to go in this box before this time. You’re not to leave the box before this time. Don’t go further left than here. Don’t go further right than here. These are the things that are going to be happening on either side of you over the next couple of days. These are your resources. This is your budget. These are your assets. These are the rules of the game and this is how it works.” Anything inside that box is fair game. Be reactive, adaptive or dynamic. You do what you got to do to win the battles. These are the effects we’re after and these are the boundaries that are the rules of the game.
Frank, the people who are rowing in the same direction after you start scaling and you start getting bigger again, I have no doubt that those people intuitively understand the boundaries that they can and can’t do. That is the precursor for people to jump on the opportunity, to move fast and do decisive things. That’s a commonly missed attribute in the discussion. Everyone wants to provide freedom and creativity for their leaders but they don’t set the conditions for it to actually happen, then they wonder why their leaders are freezing.
The answer is their leaders are doing exactly the right thing with intent. Their intent is pure. They didn’t want to blow up everyone else’s projects. They don’t want to take four steps forward and blow someone else’s thing up. They don’t want to step into their lane and ruin something else that’s happening. Without the context, they will freeze up and shell up. People need to understand the value of boundaries and the linkage to that is communication. It’s a wonky buzzword but boundaries under that construct are how you get creativity. It’s also how you manage complexity.
Ian, you spoke about analysis paralysis. The way that analysis paralysis occurs is in uncertainty. If we don’t provide a box and the rules of the game to people, then there are too many options. There are too many ways to go, too many decisions to make, too much information that they can’t filter adequately, and they freeze. People don’t wake up in the morning and go, “I want to do a bad job. I want to blow the company up. I want to ruin things.”
They don’t do that, so they rather freeze. They don’t do anything to not blow something up and make a bad decision that’s outside their boundaries that they don’t know about with all the uncertainty and all the information, so they freeze. As leaders, we must place boundaries. What you can do and what you can’t do, and then give them that freedom of maneuver so that they can make decisions. You’re on the mind when you’re talking about analysis paralysis and the reasons behind it.
It’s worth staying on analysis paralysis. I see two things that normally create that. One is how an organization deals with failure. If you are overly critical of people who go out, it’s one thing to say, “We give our people some leash and we let them go make decisions.” That’s nice, but if you give them that leash and they make a decision, then it turns out poorly, you destroy them, you go scorched Earth and replace a whole bunch of managers, and everyone sees that happen, then you end up with a bunch of bureaucrats that just study things and don’t make decisions. That’s the number one thing. Cultures in general are based on how the leader responds to failure, good or bad. That supports teams through organizations.
The second thing is an overly complex organizational chart. David was talking about his team of 40 soldiers and then it grew to 47. If it grows to 53 and you added six managers in the middle of it all, all of those six managers could change the whole dynamic. You think, “We’ve got some different structure,” but what happens is all six of those people want to feel important. They also want to justify the fact that you’re spending money on them as a manager, as a bureaucrat in the middle. They all need to get their opinion and they all start arguing. A team of 48 that was highly productive is now a team of 56 and you think it’s going to be better because you added “leadership.” All that it really is doing is stalling because you’ve added a bunch of people that aren’t exactly producing anything. In my experience, those are two of the main reasons why organizations just stall and stop.
Number four of the five factors for determining victory is being fully prepared and facing the unprepared. I’m going to go back to Amazon. I’m thinking about Barnes & Noble that had all the cash it ever needed to build a website that could sell books and didn’t think it was that important. They stuck to it as Amazon grew and grew. They had every indication that this is where things were going and Barnes & Noble did not believe that was the future. They thought it was a niche market of people that would want to buy books. People would always still want to come and walk around in a store, look and peruse before they got there. Amazon and Bezos were fully prepared for how people’s spending habits were changing. Barnes & Noble was completely unprepared for what was happening.Boundaries is how you get creativity, and it’s also how you manage complexity. Click To Tweet
The same thing happened with Kodak.
One of my favorite things about Amazon is they clearly changed the brick-and-mortar structure completely. I’ve been going to the same spot in California just outside of LAX for many years and there was a huge Barnes & Noble there and it was shuttered. Some years ago, there was an Amazon brick-and-mortar. It came out in The Journal that they’re going into brick-and-mortar. They completely and totally neutralize them. Not only did they neutralize them, but they bled them out.
Let’s end with this fifth factor because I love the fact that someone, 2,500 years ago, is talking about something that is still a massive problem now, which is micromanagement. That’s what he’s talking about here. Someone who is too far separated from the front line, pulling too many strings, and not giving flexibility and autonomy to the people who know what it takes to win. This is the fifth factor that he’s listed that could probably be number one when I see how most organizations stall.
It’s the quest to be everything to everyone, which is like ladies. Sometimes they’re self-conscious or they’re not confident. They feel like they need to be the best at everything for everyone. In doing that, they’re not good enough at the thing they should be doing. In the military example, if the politician is trying to tell a general how to do warfare, then that separation is going to end up creating a lot of friction, uncertainty, and complexity in that relationship, which is going to translate to analysis paralysis.
You talked about knowing your roles, responsibilities, and the lane in which you operate in which you’re the subject matter expert because that is where you’re going to gain opportunities. That is where you’re going to win. Whereas, if you’re not the subject matter expert, if you’re the headline subject matter expert where it means you’ve read an article one time and now, you’re a surgeon general because it was on Facebook once. You’re not going to be able to execute the intent with the most amount of broad momentum to be able to achieve the end.
Frank and I have had our share of micromanagers and it can be a frustrating business. I’m curious, in the military or in a skirmish or in a real situation where you are alive on the floor and you’re trying to run a team, Dave, did you run into situations where you felt micromanaged? You knew that the decisions from the higher up were coming from someone that wasn’t close to the action and were bad for your team. How did you respond in situations like that?
David, I’m sure you accidentally turned the radio off or the radio has had issues in the middle of an engagement.
All bullshit aside, I’ve been that commander. I have done that to other people. Here’s my catch-all. Sometimes there’s a time and place for micromanagement but it can’t be the norm. I’ll give you an example. Let’s say you come up to a car accident and we have a scenario called the bystander effect. Everyone is standing there watching. Someone runs up and they start pulling people out of the car and then they go, “Get over here. You, go call 911. You, help me get this body. You, start doing CPR.” That’s micromanagement. That is literally the definition of it. You are guiding every single task to cause-effect. Micromanagement is going to save someone’s life in that context. It’s important in that scenario.
Conversely, if you’re doing extended operations, repeated work or whatever it is, then you need to start asking yourself if you’re doing that day in day out, what is going wrong with the communication and with the trust relationship. I’ll give you a good scenario and it speaks more of a broader issue about trust and probably having hard conversations. When we first were training to go to Afghanistan, I had a corporal. We were talking about how you manage 40 troops on the ground. You have four corporals and a sergeant to help you manage that. They’re your managers for all intents and purposes.
I knew this guy wasn’t up to speed and I didn’t have the chat that needed to happen. I kept rationalizing it, giving excuses, and all that stuff. Months and months passed, we went through lots of training cycles until the time we’re on the battlefield. We go in and we have our first big gunfight. The moment that happened, he froze. You link back to the lineage of why that happened, it was because I didn’t have a hard discussion early on when I should have.
The only way to manage it at the time was to micromanage. I’m sitting there trying to manage a broader operation, trying to call in choppers and armored vehicles. I’m also trying to manage individual soldiers because they need direction, they needed somebody. I inadvertently put myself in this awkward position where I had to micromanage. I’ve always regretted that particular scenario but I look back and I go, “It had to be done at the time,” but I also put myself in that shit position by not having that tough decision. That’s looking at the timeline over a longer period.
I’ve said this many times to people, “If I’m micromanaging it, you’re earning it. I’m busy, stressed and I hate micromanaging. I hate having to do it but if you feel like I’m all over you and I’m micromanaging you, you’re probably earning it by not making decisions and by not moving fast enough. I’m only going to do it so long before I replace you.”
In your situation, the right move would be to replace that person. Instead of having to feel like you had to micromanage, replace that person. Put someone in who was capable of doing that job, either demote that person or move them out to a different unit to save lives, but you felt like you had to micromanage because you had the wrong person. When I find myself working at a pay grade much lower than where I should be, it’s because I have the wrong people in place. At least of my age now, when I was younger, sometimes it’s because I didn’t know better. At this point, it’s because I have the wrong people in place.
The exact quote is, “Having a general who has not interfered with by the ruler.” I’m going to use two examples quickly of the ruler. We’ve been to that as mid-level managers or lower where we’re in the grind. I watched a ten-part documentary on World War II. Hitler was sleeping in, getting drunk and was slow to make decisions. His generals lost because they weren’t allowed to make decisions unless he weighed in on them. He was weighing on eight hours too late. That is what Sun Tzu is talking about. Having someone who is literally imparting themselves in the middle of it.
A different example, in America the NFL rules all sports. The team that was great 30 years ago was the Dallas Cowboys and they were run by the owner and the coach. They both have huge egos. The owner goes, “Screw you. I’ll do it without you. Anybody could win a Super Bowl.” He was right, they won one more. They probably should have won 3 or 4 more. That coach got inducted into the Hall of Fame. As a 49-year-old versus a 79-year-old, the emperor or the owner of that sports team said, “We would have been better had I left him there.” It was real regret from someone who didn’t show that because he tinkered and he let his ego get in the way.
If you do like where I am now with my staff, I have to let people make decisions or I’ll turn them over. I’ve got good people. We’ve been through the battles. We’ve gotten through COVID. We’ve survived it. We’re on the other side of it. They’re not who they were many months ago. If I treat them that way, they’ll leave, but if I empower them to do more like how I want to be empowered, they’ll grow.
There’s an important analogy now that we’re talking about teams in general where they sit from the forming, storming, norming, performing cycle. Dave and I are notoriously methodology agnostic but every now and again, you need to go back to some of the theory because the leadership skills that are required for a team that’s just formed or in the storm is more details focused. You instinctively have to build communication pathways, reinforced purpose, vision, everyday behaviors and values.
You used to do that at the grass level, but when you get to norm and perform, if you try and push that leadership style there, you’ll put them away and you’re micromanaging. The competent, good and great leaders understand what leadership style is required at each part of those points in a team. I don’t care if it’s a 4-person team or a 100-person team. You must know what leadership style and what characteristics are required of the team and where it’s at in order to gain the best performance or to transition through those different parts of the high-performing team cycle.
That’s a good way to wrap this whole episode. We started by talking about how in the military doctrine, you have to reprogram people to think about war in a different way, and to not think about it, fairness and think about those things. That’s in the forming stage, forming and storming, because at first, what you’re talking about there is the military is trying to help you make better decisions for the greater good. They’re reprogramming the way you think.
It’s the same in a business in that early on, with a new direct report, a new manager that you’ve hired, you’re going to be more involved because you want them to think about how you make decisions and how good decisions are made. At some point, you have to start separating yourself and trusting like, “You’ve now shown a nice little track record of good decisions that you’re making. I trust you. Here are the outcomes I need. I think that you’re going to make good decisions moving forward.”
You’re right in all of this that we’re talking about here. Early on, timing matters in how involved you are in decision making because if Frank has a new manager, he’s going to be involved a lot early. It’s Frank’s capital and money. He wants that person who’s coming from a different culture, working from a different manager, and doesn’t know how Frank thinks to think like, “If this was your money, you’d be making the same decisions.” That comes back to everything we talked about with alignment.
I couldn’t have said a bit.
I don’t think this episode sucked as much as it could have. That’s good. You salvaged the crappy outline that I put together and I appreciate you for doing that. It was a lot better than if Frank and I would have tried this ourselves. Thank you for carrying at least one of our episodes to maybe a couple of dozen followers.
I still haven’t seen the outline.
That’s why I love you, Jano. It’s fantastic. He didn’t even know there was an outline for this, neither did Frank. He didn’t read it either. He never does.
You are going to be overwhelmed with the dozens of followers that are going to start following you on the internet.
We’re sorry for the influx of web traffic you’re about to get. If I were you, I would pay Amazon for extra cloud services because you’re going to get bombarded by all of our followers that come to your website to purchase services from Eighth Mile.
We’re all for it. Let’s do it.
If you’re a company and you are looking for consulting support for leadership training, development, project support, where can they find you?
Type in The Eighth Mile Consulting in Google and we’ll pop up. We’re like cancer there. Hit us up on LinkedIn. We’ve got a big presence there. Come and join the company and the team. We try and push out what we think is valuable.
Both of these guys are fantastic follows on LinkedIn. They post they post daily. They post a lot of their experience in the military, their experience in working with corporations, which has so much overlap. If you’re not following both of these guys, you should be. I love reading all of their stuff. If you’re not following Frank, he posts at least once every three weeks. Normally it’s something I wrote that I told him to post.
Cheers for the invite. I really appreciate it. From us to you, thanks so much and in your underselling your content, I’ve said it before and I’ll say it again, it’s definitely in the top five, at least in my circle on LinkedIn. It’s unique, original and no bullshit, which is a rarity nowadays. Frank, thanks for sharing Ian’s stuff every third week, we appreciate it.
Frank, it’s good that you have new friends from Australia.
There’s no doubt. Gentlemen, it’s a pleasure to meet you. Thank you all very much.
See you, guys.
- The Eighth Mile Consulting
- The Art of War
- Apple Podcasts – Let Me Speak To A Manager
- Flow Like Water – David Neal blog
- LinkedIn – David Neal
- Frank Cava – LinkedIn
- LinkedIn – The Eighth Mile Consulting
About David Neal
David Neal is a leader, strategist, founder, project and change manager, as well as a practical consultant for clients such as the ADA NSW, University of Sydney, Australian Defence Force, Prescare, RSL Queensland, MedReleaf, and KPMG. He is one of the authors of ‘Growing Good Leaders’ which focuses on developing high-performing teams and running projects. He travels throughout Australia and overseas helping others to simplify the complex. His time serving in the military has provided him with vast experience in leadership, complex problem solving, project and risk management. He has chosen mateship, family, and helping good people as his path.
About Jonathan Clark
Jonathan Clark is the director and co-founder of The Eighth Mile Consulting based in Sunshine Coast, Australia. Working with organizations, we facilitate change management, strategy development, and risk management initiatives. We are good people, helping good people. We support positive projects and positive people.