August 2016
Here we are nearing the end of an election cycle in the US. The best candidate should exhibit qualities of good leadership. But how do you distinguish a good leader from a bad one? Lately it seems like we have more bad examples than good ones. Chris "traffic cone" Christie, Martin "Fifth Amendment" Shkreli, Ryan "beer piss" Lochte, Governor Rick "the water's fine" Snyder come to mind...
I have never claimed any leadership aspirations, I am proud that I tested-out of a middle management course at a big company, truly the Red Badge of Courage to an engineer. I'll leave the big decisions to others, but I prefer that they are good leaders. Often in management training, videos are shown to help make a point. No one asked me what video is appropriate for the topic of leadership, but in my opinion the 1981 movie Das Boot shows not only how to be a good leader, but it sets the bar for heroic engineering. In the scene below, Chief Engineer Fritz informs Captain Henrich that the sunken sub's batteries have been fixed, the pumps are running, leaks have stopped, and there is a snowball's chance in Hell that they can make it back to the surface. The Captain thanks him and then U-96 rises back to the surface. Sony pictures prevents posting the movie with English subtitles on Youtube, you should rent it. If you watch the English-dubbed version, shame on you. Here is a clip of U96 rising that has subtitles but is missing the important scene where the engineer reports to the captain. You might note that the last words of the Captain doesn't need translation, as he is yelling to the enemy ships that think U96 is sunk.
Not yet, Kameradden!
Maybe one of our bilingual readers can translate the Chief Engineers comments and send them to me! To the rest of the English speaking audience (all three of you), please note that "boot" is pronounced "boat", and U96 is does not start with the English y-sound. It's an "ooo-boat, not a "you-boat". Study Das Boot trivia on IMDB, someday there might be a quiz!
Today's critical thinking exercise. Why does the captain put on dark glasses as the boat is rising? Hint.... it is the same reason airplanes dim the cabin lights during night landings.
Let's look at two industries, with good and bad examples of leadership.
Soichiro Honda, Honda Motor Company
Honda was a man without a college degree, who by his own admission used trial and error as his path to taking a $3000 startup into the $121B company we know today. In my opinion Honda's earliest icons are the best: the Super Cub 50, now a 3D trademark (I wish I still had mine) the Dream 305 (gonna get one), and the Honda Civic CVCC automobile. Click here to see a collection of vintage Honda bikes. Speaking of CVCC, Honda's Civic was able to meet emission requirements without a catalytic converter at a time when other manufacturers were struggling to meet EPA emission guidelines while selling engines that would run on and on when you shut them off due to carbon build-up (here is an example of dieseling, but don't buy "Sea Foam" is is snake oil).
There are many things you can learn from Soichiro Honda, and several books written about him. Here's one written in 1975 back when Honda was first cracking the US market. The best story is when he had visitors drinking sake (Honda was probably a big drinker, he took off an entire year after the war to make and consume alcohol). An unlucky man was in the water closet, probably throwing up, when he lost his dentures into the muck, then returned to the party in shame. Honda went to the WC, retrieved the choppers, cleaned them and came out laughing with them in his mouth. Read more of Honda's biography on this web site.
Honda assured investors that he would NOT pass his company down to his offspring, insisting that much better leadership choices can be made by considering all of the company's talent. For a time he resisted hiring engineers with advanced degrees as he thought that dogmatic approaches would provide limited outcomes. A man after my own heart.
Here are some Honda quotes that I shamelessly cribbed from this web site:
“Many people dream of success. I believe that success can be achieved only through repeated failure and self-analysis.”
“Success is only 1% of your work, and the rest – bold overcoming of obstacles. If you are not afraid of them, success will come to you itself.”
“Looking back on my work, I feel that I was doing nothing more than mistakes, blunders and serious omissions. But I am proud of the achievements. Although I did one mistake after another, my mistakes and failures never occurred for the same reasons.”
“Enjoying your work is essential. If your work becomes an expression of your own ideas, you will surely enjoy it.”
Heather Bresch, Mylan CEO
You may have read the news lately about EpiPen, a lifesaving one-shot needle with epinephrine that saves lives during allergic attacks. Since taking the CEO seat of Mylan, Ms. Bresch has been raising the price. from $90 each to two-packs for more than $600.
Selling two-packs is another way to raise revenue, the product has a shelf life. If you used only one of them in a year, you will have to throw out the other one and buy two more.
Ms. Bresch has supplied all kinds of information on why they had to raise the price. One reason that she omits is that the stock price was pumped up and so was here salary. From 2007 to 2015 when Mylan was jacking prices of drugs such as EpiPen, Bresch's salary increased from $2.4M to $18.9M, or 670%. Under her leadership Mylan re-incorporated in the Netherlands to avoid paying higher US taxes. Mylan's stock price went from mid 20s to high 50s in that time period. Bresch started dumping Mylan stock recently, selling 100,000 shares on August 9, 2016, day the latest earnings report came out right before EpiPen became big news. Insider trading?
I had a very good friend die of anaphylaxis in 2001, he had an allergic reaction to amoxicillin. I would have gladly paid $6000 for an EpiPen to save his life, but the whole thing was quite a surprise. The point is that medicines of this nature have inelastic market behavior, like tobacco, and pricing should not be open-loop. Hey, that's practically a microwave-related reference!
EpiPen is the tip of the iceburg, Mylan has boosted prices on its entire portfiolio, many of the increases are more than 100%. This abuse is by no means just a problem with a single company. If you need insulin, a drug discovered in 1921, you might have seen the prices triple in the past decade. This is capitalism at its worst, and in the end it can only be fixed by something different.
Bresch might have made $19M per year. That's a lot of money, but it won't buy back the problem that she is universally hated by all EpiPen users for profiting from their health issues. Here's a list of Mylans products that I will never buy. Interestingly one of the "fall guys" for Mylan's greed might be Heather's Pops, who got her the job through his connections as a US senator of West Virginia. Hopefully father and daughter will soon be unemployed.
James Burke, CEO of Johnson and Johnson from 1976 to 1989
Winner of the Presidential Medal of Freedom
Johnson and Johnson owned the Tylenol Brand in 1982, when a series of murders caused by tampering set off a nation-wide scare. The reaction of James Burke is textbook leadership. Even though this was obviously a local problem (more than one lot had been poisoned, all in one city), J&J recalled 22 million bottles of Tylenol product ($100M worth) and communicated to the nation that they would do whatever it took to make it right. Advil went from 30% market share to zero overnight, but in three years they recovered. This episode is extensively studied as an shining example of corporation doing the right thing. James Burke was the CEO, and he deserves all of credit. I still own some J&J stock, even if it has not performed as well as Mylan and other drug companies.
Martin Winterkorn, CEO of Volkswagen
Martin Winterkorn was CEO of VW from 2007 up to September 2015. In 2015, college researchers in West Virginia found that emissions problems in the US, which led were caused by software that intentionally defeats emission controls when you drive on the highway, but allows the car to pass a smog check when it is standing still. I'm not telling you anything you don't know unless you have been a hostage for the past year, but in that case you probably don't have internet access so you won't be reading this.
When he resigned, Winterkorn said the problem was caused by just a few people. He said he personally knew nothing about it, like Chris Christie knew nothing about traffic cones... But at least he had the decency to resign. The problem will VW cost tens of billions of Euros to litigate and fix, and it dropped the stock price from $170 to $106 in a few days time.
The best part of the story is that in between the scandal hitting on September 18 when the US demanded that VW recall 482,000 cars, and Winterkorn's resignation on September 23, VW's US organization held a party for 400 executives that introduced the new Passat on September 22. This was the same day that VW admitted 22M vehicles had been rigged to cheat (see timeline here). The party cost $1M; Lenny Kravitz was paid $500K to sing. At the party, US CEO Micheal Horn announced that VW had messed up, but partied on, and the next day Winterkorn resigned. It took until March 2016 for Horn to resign, at which point he held all the respect of the bad joke that VW had played on the world.
Once in my career my company had a party planned for hundreds of people to celebrate a contract they were expecting to win. The day of the party, the winner was announced, and it wasn't us. The company had the decency to cancel the party, even though there was no way to get out of all of the sunk costs.
Lessons learned
1. Don't trust the leadership of anyone who simply inherited a company from his parent (Honda).
2. When a crisis occurs that was caused by events that you had no control over, you have to act quickly and in a manner that might not please your team but allows you to recover your reputation (Burke).
3. When a crisis occurs that was caused by secret, illegal dealings of your team, you should step down and disappear into the sunset (Winterkorn).
4. If you serve in the Senate and have offspring who are enriching themselves by jacking up the cost of lifesaving drugs after the Senate was lobbied to make this particular drug mandatory, you might have lost some of that good will that keeps you in office. In the end your family provides strong evidence that health care cannot be left as a purely capitalist enterprise (Bresch).
How you apply these priceless (they were free...) gifts of knowledge in the voting booth is up to you.
9G Evolution
I know almost nothing about the topic of leadership, but I went to high school with someone who is an expert in the field: Major General (three stars) Jon Treacy .
Jon served in the U.S. Marine Corps, U.S. Navy, U.S. Air Force and the Air National Guard Jon retired as a Major General. After almost 27 years in the cockpit, primarily in the F-15 Eagle and F-18 Hornet,”Tracer" led several overseas deployments and saw combat operations three times in Libya and Iraq. While under his command, the 101st Fighter Squadron was the first to launch Air Defense Fighters in response to the terrorist attacks on 9/11. Jon runs a leadership consulting firm called 9G Evolution these days. You gotta love a guy that retires after commanding 20,000 troops, and DOESN'T show up at Raytheon, Lockheed, or Northrop Grumman with a fork asking what's for lunch while collecting $400K/year for his/her connections to the DOD money tree. To use an expression from the 1960s, right on!
Check out Jon's 9G Espresso Shot for timely leadership advice, and consider signing up for his newsletter which will arrive first thing every Monday to help you with your pretend-work of reading emails while you recover from your long weekend of foolishness. What's with the name 9G Espresso? Espresso is obvious, 9G is the acceleration that leads to blackout. Put on your G-suit!
Read and/or sign up for 9G Espresso Shot
Say, you didn't think you were going to escape this month without a music video. Here's the Golden Gate Quartet singing The General Jumped at Dawn. It has a nice multi-cultural vibe to it, and so far in my thousands of hours of Youtube exposure, I have found that it contains the first use of the word "groovy" in a song.
The General Jumped at Dawn
Check out the Unknown Editor's amazing archives when you are looking for a way to screw off for a couple of hours or more!
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