Want to know how companies like Stryker, Southwest Airlines, Progressive Insurance and Genentech outperformed their competitors even in times of chaos and uncertainty? Ever wondered how the principles of the 20 Mile March can generate long-term success? Curious about how leaders like John Brown, Arthur Levinson, and Bill Gates leveraged their Return on Luck for outstanding results? Join us as we unravel the secrets behind the remarkable success of these 10Xers and their unique approach to thriving in uncertainty.

Great by Choice: Uncertainty, Chaos, and Luck - Why Some Thrive Despite Them All

Peter Bernstein, an American financial historian, once said, "We simply do not know what the future holds". This quote captures the essence of life’s unpredictability. Think back 15 years and consider the unexpected events that have reshaped the world, markets, and our personal lives. Despite this uncertainty, some companies manage not just to survive but thrive. Why do some succeed where others fail?

In 2002, amid global turmoil post-9/11, technological upheavals, and economic instability, researchers embarked on a nine-year research project to answer this. They sought to understand why certain companies flourish in chaos while others crumble. This study wasn't just academically intriguing; it was personally relevant, reflecting our own vulnerabilities in an increasingly disordered world.

This research identified companies that achieved spectacular performance despite starting from vulnerable positions in unstable environments. These high-performing companies were called "10Xers" because they outperformed their industry by at least ten times. For example, investing $10,000 in Southwest Airlines in 1972 would have grown to nearly $12 million by 2002, despite numerous industry crises. Southwest’s success starkly contrasts with Pacific Southwest Airlines, which failed despite similar opportunities.

They used a comparative historical analysis, focusing on companies that thrived in extreme conditions. This approach revealed that the best leaders weren't bold visionaries but were disciplined, empirical, and often paranoid. They did not necessarily innovate more but excelled at scaling innovation and blending creativity with discipline. They didn’t rush decisions but knew when to act quickly and when to be deliberate. They adapted less to external changes than their less successful counterparts.

This research extends a journey that began with books "Built to Last" and "Good to Great," exploring what makes companies great. It’s about understanding principles that can help any organization excel despite chaos. Whether a school, hospital, sports team, or business, the quest for greatness is universal.

How Do Some Companies Excel in Chaos While Others Crumble?

In October 1911, two explorers, Roald Amundsen and Robert Falcon Scott, embarked on a quest to reach the South Pole. Amundsen's team achieved victory and returned safely, while Scott's team perished in harsh conditions. Both faced similar challenges, yet Amundsen's meticulous preparation and systematic approach led to success, contrasting sharply with Scott’s less rigorous planning.

Amundsen's triumph was not due to luck but to his "fanatic discipline," "empirical creativity," and "productive paranoia." He trained intensely, learned from Eskimos, and created extensive buffers for unforeseen events. In contrast, Scott’s lack of thorough preparation, reliance on untested methods, and failure to anticipate potential problems led to disaster.

This tale mirrors the behaviors of "10Xers" in business, leaders who outperform their industry averages by at least tenfold. These leaders, like Amundsen, display an unwavering commitment to their goals, grounding their decisions in empirical evidence, and maintaining a hypervigilant awareness of potential threats.

For instance, Peter Lewis of Progressive Insurance refused to play Wall Street games, instead opting for transparency by publishing monthly financial statements. Herb Kelleher of Southwest Airlines fostered a high-spirit culture, while remaining fiercely competitive. Bill Gates of Microsoft constantly anticipated threats, never resting on his laurels, and maintained substantial cash reserves to weather any storm.

These leaders share a common trait: Level 5 ambition, where their ego is channeled into their company’s success rather than personal gain. They are driven by a purpose larger than themselves, aiming to build enduring and impactful organizations.

The lessons from these 10Xers suggest that true discipline involves consistency and independence of mind, empirical creativity combines boldness with risk management, and productive paranoia ensures thorough preparation for any eventuality. By embodying these behaviors, organizations can achieve extraordinary results in uncertain environments.

Mastering the 10X Code: Lessons from Amundsen, Gates, Lewis and Kelleher

Imagine you're standing at the edge of the Pacific Ocean in San Diego, about to embark on a 3,000-mile journey to Maine. Each day, you commit to walking 20 miles, regardless of weather or terrain. This disciplined approach ensures you eventually reach your destination, unlike a fellow traveler who starts with a burst of enthusiasm but soon flounders due to inconsistent effort. This story embodies the philosophy of the "20 Mile March."

Consider two companies, Stryker and USSC, in a fast-growing industry. Despite USSC's occasional explosive growth rates, Stryker's consistent 20% annual growth made it a far better long-term investment. Every dollar invested in Stryker in 1979 grew more than 350 times by 2002, while USSC's erratic growth led to its acquisition and disappearance from the market.

John Brown, CEO of Stryker, drove this consistency by setting a "law" of 20% net income growth every year. Employees who lagged behind received a "Snorkel Award," symbolizing they were metaphorically drowning. Brown's relentless focus on steady growth ensured Stryker weathered industry storms better than its competitors.

Southwest Airlines also exemplified the 20 Mile March by demanding profitability every year, even when the airline industry as a whole struggled. From 1990 to 2003, while many airlines faced bankruptcies and losses, Southwest remained profitable every single year, demonstrating the power of holding back in good times to ensure stability during downturns.

Another company, Progressive Insurance, maintained a combined ratio target of 96%, meaning it aimed to pay out no more than $96 in losses and overhead for every $100 of insurance sold. Even when competitors slashed prices to gain market share, Progressive stuck to its disciplined approach, resulting in consistent profitability over decades.

Similarly, Genentech offers a fascinating case of transformation under Arthur Levinson, who instilled 20 Mile March discipline. Previously known for its breakthrough innovations but inconsistent performance, Genentech thrived under Levinson's regime of incremental progress, leading to significant financial success and stock market outperformance.

The 20 Mile March principle proves that consistent, disciplined effort, even in the face of volatility, builds confidence, reduces the risk of catastrophe, and ensures long-term success. Whether in business, education, or personal goals, the 20 Mile March helps you stay on track and achieve sustained, remarkable results.

Can the '20 Mile March' Strategy Guarantee Long-Term Success in Business?

Imagine you're at an airline gate, and you see a pilot with dark glasses and a white cane. It’s just one of Pacific Southwest Airlines (PSA)'s playful tricks. PSA became a beloved airline thanks to its fun culture, low fares, and efficient model. When Southwest Airlines was founded, they simply copied PSA's model in Texas.

Surprisingly, PSA, the true innovator, no longer exists, while Southwest thrives. This pattern repeats in other industries, like biotechnology. Genentech outpaced Amgen in patents, but Amgen outperformed financially. Similarly, Stryker outperformed USSC despite being "one fad behind."

The key takeaway? Innovation alone doesn't guarantee success. Companies like Intel succeeded by meeting a "threshold innovation" level and focusing on execution. Intel's 1103 memory chip became a bestseller because of their delivery ability, not just innovation.

The principle of "fire bullets, then cannonballs" emerged. First, test ideas with low-cost, low-risk "bullets." Once you find what works, concentrate resources and fire a "cannonball." For instance, Amgen tested multiple biotech ideas before hitting big with EPO.

Firing uncalibrated cannonballs, like PSA's ill-fated hotel and rental car ventures, can be disastrous. Successful companies, like Progressive Insurance, learned from mistakes and returned to testing small-scale ideas before committing fully.

Steve Jobs exemplified this at Apple. He prototyped retail stores before rolling them out and focused on improving existing products like the Macintosh before introducing the iPod, which evolved through iterative testing.

Great companies blend creativity with relentless discipline, validating ideas through empirical testing. This approach, rather than relying on visionary genius, explains the success of companies like Apple, Intel, and Southwest Airlines.

Fire Bullets, Then Cannonballs: The Success Mantra of Companies like Apple, Intel, and Southwest Airlines

On May 8, 1996, high on Mount Everest, filmmaker David Breashears stood at 24,500 feet, eyeing the climb to the South Col where he intended to lug a 42-pound IMAX camera to the summit. But what he saw below—a throng of over fifty climbers led by esteemed guides Rob Hall and Scott Fischer—raised alarms. 

Exhausted from a night of hurricane-force winds, Breashears and his team decided to descend and wait for better conditions, a decision that would save their lives. Two weeks later, he successfully filmed at the summit, while Hall and Fischer tragically perished in a devastating storm that claimed eight lives.

Breashears’ prudent call epitomized "productive paranoia," a concept of always preparing for the worst. Unlike Hall’s team, which brought limited oxygen for a single summit bid, Breashears carried enough supplies for multiple attempts. This foresight allowed him to remain flexible, descend when necessary, and avoid the deadly risks that caught others.

This principle of "productive paranoia" is crucial not only in mountaineering but also in business. Companies like Intel and Southwest Airlines exemplify this mindset. Intel’s vast cash reserves, likened to Breashears’ extra oxygen canisters, prepared it for industry shocks. Southwest’s conservative balance sheet enabled it to weather the 9/11 crisis without layoffs, unlike its competitors.

Roald Amundsen’s pivot from the North to the South Pole after learning of other explorers’ successes is another testament to this adaptability. His ability to "zoom out" to reassess his plans and "zoom in" to execute them with precision led to his historic triumph at the South Pole.

Ultimately, the lesson is clear: success hinges on meticulous preparation, risk management, and the agility to adapt to changing conditions. Whether on Everest, in the boardroom, or navigating crises, the 10Xers—those who achieve exceptional success—are those who prepare obsessively for the unpredictable, ensuring they can seize defining moments with unequal intensity.

Can 'Productive Paranoia' Be the Secret Key to Unprecedented Success?

In the late '70s, Southwest Airlines faced a pivotal moment under CEO Howard Putnam. With the Airline Deregulation Act stirring chaos in the industry, many wondered if Southwest needed a radical overhaul. Putnam’s answer was a firm "no." 

He championed a "cookie-cutter" approach, sticking to what Southwest did best with a clear, simple, and concrete 10-point plan. This plan included short-haul flights, using only 737s, and avoiding food services and interlining. His strategy, rooted in consistency, helped Southwest thrive amid industry turmoil.

This concept is known as the SMaC recipe: Specific, Methodical, and Consistent practices that form a durable success formula. Southwest's adherence to its SMaC recipe with fanatic discipline allowed it to weather industry shocks, from fuel crises to 9/11, while evolving only incrementally.

David Breashears, a filmmaker who conquered Everest with an IMAX camera, also embodied SMaC principles. He developed meticulous protocols for extreme conditions, ensuring methodical consistency on the mountain. His preparation paid off when he captured stunning footage at Everest’s summit without a hitch.

Intel’s shift from memory chips to microprocessors in 1985, led by Andy Grove and Gordon Moore, illustrates another key aspect: knowing when to amend a SMaC recipe. Though Intel exited the memory chip market, it retained other core practices, ensuring continuity while embracing necessary change.

Microsoft's pivot to the Internet in the 1990s under Bill Gates further underscores this balance. Gates, seeing the Internet’s potential, led a strategic shift without discarding Microsoft’s foundational practices.

The fall and subsequent rise of Apple also highlight the importance of a coherent SMaC recipe. Steve Jobs didn’t revolutionize Apple upon his return in 1997; he reinstated the original principles that had once made Apple great, bringing disciplined consistency back to the forefront.

Legendary UCLA basketball coach John Wooden exemplified SMaC in sports. His meticulously planned drills and unwavering practice routines led to an unprecedented string of NCAA championships, proving the power of consistency.

The U.S. Constitution, with its rare amendments, offers a parallel to SMaC. It provides a stable framework while allowing for necessary changes, ensuring both durability and adaptability.

In a world of rapid change and uncertainty, the 10X companies showed that adhering to a well-crafted SMaC recipe with discipline and making thoughtful amendments when needed is a pathway to enduring success. The lesson? Figure out what works, understand why it works, and know when to stick to it and when to evolve.

SMaC Recipe for Success: From Southwest Airlines to Apple, the Power of Consistency in Turbulent Times

In May 1999, Malcolm Daly and Jim Donini were close to conquering Thunder Mountain in Alaska when Daly fell, shattering his legs. Despite the dire situation, Daly's survival was marked by a series of fortunate events and his relentless spirit. 

Daly had prepared extensively through physical training and mental readiness, learning to focus on survival rather than despair. His partner, Donini, who was highly skilled and experienced, managed a solo descent to get help just as a friend, Paul Roderick, happened to fly by, enabling a timely rescue. Years of preparation and strong relationships played crucial roles in Daly's survival, highlighting that luck alone wasn't enough—actions and readiness were pivotal.

The concept of "Return on Luck" (ROL) suggests that while luck—both good and bad—occurs frequently, what truly matters is how one capitalizes on it. For example, Bill Gates, often perceived as lucky for being in the right place at the right time, distinguished himself by seizing opportunities with relentless drive and strategic action. Gates wasn’t unique in his initial circumstances; many peers had similar backgrounds and access to resources. However, Gates' exceptional ability to act decisively and persistently on his good fortune set him apart.

In the business realm, companies like Amgen and Genentech experienced comparable amounts of luck. However, Amgen's success was significantly influenced by the recruitment of the brilliant scientist Fu-Kuen Lin, who responded to a simple help-wanted ad. Lin's dedication and relentless work ethic were crucial in achieving groundbreaking scientific breakthroughs.

Conversely, companies like AMD squandered their good luck. Despite several favorable events, AMD failed to capitalize on them due to execution issues and missed opportunities, demonstrating that luck alone doesn't guarantee success.

Progressive Insurance, under Peter Lewis, exemplified a great return on bad luck. After a significant setback from Proposition 103, which mandated price reductions in California, Lewis used this challenge to innovate and strengthen the company, ultimately propelling Progressive to new heights.

The analysis of luck in business underscores that while luck is an uncontrollable force, its impact is determined by how it's leveraged. Successful leaders and companies are those who maximize their return on luck through preparation, strategic action, and resilience. They recognize luck, both good and bad, and use it to their advantage, turning potential setbacks into opportunities for growth and success.

Can You Harness Luck for Success Like Bill Gates and Progressive Insurance Did?

Life is unpredictable, but some companies manage to thrive despite this uncertainty. Companies that outperform their industry by at least ten times, dubbed "10Xers", succeed due to disciplined, empirical, and often paranoid leadership. They excel at scaling innovation and blending creativity with discipline, rather than merely innovating more. They don't rush decisions but know when to act quickly and deliberately. They adapt less to external changes than their less successful counterparts.

The key attributes of 10Xers include true discipline, empirical creativity, and productive paranoia. Discipline involves consistency and independence of mind, empirical creativity combines boldness with risk management, and productive paranoia ensures thorough preparation for any eventuality. By embodying these behaviors, organizations can achieve extraordinary results in uncertain environments.

The principle of "fire bullets, then cannonballs" is crucial to success. Businesses should first test ideas with low-cost, low-risk "bullets." Once a bullet hits the target, they can then concentrate resources and fire a "cannonball." This approach prevents disastrous uncalibrated cannonballs and enhances success by blending creativity with relentless discipline and validating ideas through empirical testing.

Productive paranoia, or always preparing for the worst, is an important business principle. Meticulous preparation, risk management, and agility to adapt to changing conditions are key to success. 

The concept of a Specific, Methodical, and Consistent (SMaC) recipe forms a durable success formula. Adherence to this recipe allows businesses to weather industry shocks while evolving only incrementally. 

The "Return on Luck" (ROL) concept suggests that while luck—both good and bad—occurs frequently, what truly matters is how one capitalizes on it. Successful leaders and companies are those who maximize their ROL through preparation, strategic action, and resilience. They recognize luck, both good and bad, and use it to their advantage, turning potential setbacks into opportunities for growth and success.

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Great by Choice: Uncertainty, Chaos, and Luck - Why Some Thrive Despite Them All

James C. Collins

8 Key ideas

19 MINS

4.7 (1.9k)

Want to know how companies like Stryker, Southwest Airlines, Progressive Insurance and Genentech outperformed their competitors even in times of chaos and uncertainty?

Ever wondered how the principles of the 20 Mile March can generate long-term success?

Curious about how leaders like John Brown, Arthur Levinson, and Bill Gates leveraged their Return on Luck for outstanding results?

Join us as we unravel the secrets behind the remarkable success of these 10Xers and their unique approach to thriving in uncertainty.

Key Ideas

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