“Hurry up!” RH said over his shoulder to his cofounder, Marc, and their new CFO, Barry. “This is going to make us or break us. We can’t be late!” The three hurried out of the Dallas/Fort Worth International Airport and flagged down a cab, which would whisk them to the gleaming Renaissance Tower—a bastion of successful national corporations in the year 2000. Marc sported a worn leather briefcase slung over his right shoulder, while a bright red box filled with palm-sized plastic squares balanced precariously on his left arm. He could feel his biceps giving way under the weight and his entire left side slipping into numbness as they hurried into the lobby. Marc slowed just long enough to gaze up at the faceted transparent glass ceiling above their heads, and RH wondered if they’d be in a much loftier place when they returned to this same lobby in just one short hour.
“Hopefully the heavens are with us,” Barry uttered under his breath, also caught, mesmerized, by the articulated dome overhead.
“No need to pray, guys,” RH shot back. “This is it. Today’s our day.”
Their nerves betrayed RH’s confidence; on the elevator ride up, Barry’s hands began to quiver ever so slightly, gathering energy as they finally reached the twenty-third floor. The elevator door snapped open, and with the collective inhale of a symphony of trumpet players about to carry their first note of the evening, the three pressed onward to the corner boardroom.
After what seemed like hours, John finally strode in like a corporate knight, with an executive assistant busily rattling off scheduling changes in his ear and a whole cadre of well-suited executives in tow. RH bolted to his feet to shake each one’s hand and hunkered down for his presentation on why his firm would be the perfect acquisition target. He had rehearsed his blocking, his phrasing, his insistence on the worthiness of the firm’s asking price: a not-too-shabby $50 million. Surely, RH reasoned, their ask was a pittance for the national industry leader in whose glass-walled, oak-tabled boardroom they sat. But Barry, always with an eye to the numbers, knew that their ask was a fortune compared to their company’s monthly net loss. Neither was it any secret that the entrepreneurial company had never made money—as these seasoned executives surely knew.
To those executives in their hard-won tower, the little start-up in question looked like a fairly indecent proposal. The start-up, bleeding cash and promising all the “innovation” in the world, posed no threat to John’s industry juggernaut. There was time, John presumed, loads of time in which to think and act strategically. There were plenty of opportunities at hand that could carry his already successful corporation forward into the new millennium. That’s precisely why John did not acquire the little start-up company that day; instead, John and his team of shrewd executives laughed poor RH, Marc, and Barry out of the room, out of Renaissance Tower, and right out of Dallas, Texas.
Retreating to their tiny start-up headquarters in California, the three might have quit right then and there. Fortunately for all of us, they didn’t. Instead, they grew to become the fastest-growing media company in the world and put John’s multibillion-dollar empire right out of business—because RH is Reed Hastings, the cofounder of Netflix, and John Antioco, the CEO of Blockbuster, had just made the biggest mistake of his life.
My dramatization of this account notwithstanding, it’s so easy for us to judge the Blockbuster vs. Netflix story in hindsight. Of course Netflix would triumph! What a fool Antioco must have been for letting Netflix slip through his fingers! The disbelief we feel can only be addressed by assuming that Antioco was inept, his team was completely ineffective, and this entire situation was due to idiocy at the highest levels.
But is that entirely true? If that’s the obvious conclusion we’re to draw from this disheartening disaster, there’s a burning question we must also answer if we’re to believe the lesson: If Antioco was just a big ol’ dummy, then how could he have possibly risen to become one of the most powerful CEOs in the media business?
It turns out that the answer to this question is the most telling of all, because, as we can all agree, it takes a tremendous amount of raw intelligence, analytical skills, and political acumen to become the chief executive officer of an $8.4 billion company.1 So if Blockbuster’s downfall wasn’t caused by idiocy, then what exactly caused it? And how can we learn from its demise for the benefit of our own business pursuits?
The Blockbuster story’s root cause analysis echoed a similar question I asked myself during the early part of my career running an international marketing agency: Why did some of our clients use our growth strategies to get a massive return on their investment, while others never even got out of the starting gate? What was it, I asked myself, that prevented otherwise well-meaning and intelligent executives from recognizing trends, innovating, dominating their industries, and crushing the competition, as in the case of Blockbuster?
The answer, you may have guessed, is buried in a lesson we all learned between birth and preschool, in that time of our lives when we assumed that everyone would obey it.
That lesson: Honesty is the best policy.
Somehow we’ve forgotten the lesson, and at our own peril. To see just how perilous, let’s look at the numbers. In 1994, just before the ill-fated John Antioco took control of Blockbuster, the home-video giant was worth about $8.4 billion.2 For those keeping track, that was even before Netflix was founded in 1997 (ironically, the year Antioco took office). By 2010—just thirteen short years later—Blockbuster was worth a paltry $24 million, losing a market cap of approximately $8.376 billion. Put into a slightly different perspective, Blockbuster’s talented executives obliterated a few billion more than the entire GDP of the wealthy nation of Monaco.
Now, what does this have to do with honesty? After all, if we’re talking about numbers and honesty, Netflix was not in great shape at the time. But there’s much more to the concept of honesty than meets the eye. Here’s what I propose: Antioco and his merry group of well-heeled executives didn’t lose $8.376 billion because they were inept. They lost their net worths and the hard-earned money of their investors because Antioco and his team were not honest with themselves about what was going on around them—the massive shift we consumers were making from physical DVDs to online streaming services.
However, this being a book about honesty, it wouldn’t be fair to end the story here, where most accounts leave off. In fact, Antioco did eventually come around to the truth about how consumers preferred to consume their in-home entertainment. By late 2006, Antioco had done away with Blockbuster’s legendary late fees and created Total Access, a DVD-by-mail program that had attracted over two million customers.3 In a harsh twist of fate, Hastings even offered to buy Blockbuster’s online operations in 2007 at a secret meeting at the Sundance Film Festival, which would have united Netflix’s online program with Blockbuster’s brick-and-mortar footprint.4
Unfortunately for Antioco, it was too little, too late. Since Total Access was hemorrhaging cash playing catch-up to Netflix, the venerable Carl Icahn stepped in as an activist investor to put a stop to the innovative program.5 Icahn removed Antioco and installed James Keyes as CEO. Keyes immediately rejected Hastings’s proposal to join forces with Netflix, raised prices, and put a stop to the fast-growing Total Access program. Even the great Icahn failed to get honest about the trends going on around him and chose to stick to the status quo. Not long after, like the tapes that once graced its whitewashed walls, Blockbuster—with Icahn and Keyes at its helm—would vanish into the pop-culture collage that was 1980s and ’90s Americana. Antioco walked away with a new moniker: the Blockbuster Buffoon.6 And Netflix? Netflix went on to be worth a staggering $151 billion by 2020, roughly eighteen times more valuable than Blockbuster ever was.
It’s extraordinary what a little dishonesty can do to your business. But for the sake of argument, let’s say Antioco sat his team down in 2001—just after meeting with the up-and-coming Netflix—and said, “OK . . . let’s make sure we aren’t missing something big here. Maybe it’s time we get honest about what’s changing in our industry, what we’ve built here at Blockbuster, and what we need to change within ourselves to make sure we keep innovating.”
What might have happened then?
It turns out that all the MBAs, cash flow analyses, marketing tactics, and complex consulting strategies in the world can’t save an organization that is fundamentally dishonest in the first place. As Blockbuster shows, it is not idiocy but a lack of honesty that causes the stagnation felt by many organizations that claim to desire innovation and growth. No matter what business you’re in, what your goals are, or what obstacles confront you, honesty must come first . . . because without it, you won’t even see your enemy staring at you from across the table in your own boardroom, high in the Renaissance Tower in Dallas, Texas.
WHAT IS HONESTY?
Usually when we label someone as dishonest, our first thought is they’re not telling the truth. They’re fudging the numbers, perhaps, or hiding something. But outright lying to people is just one intentional act—one facet of honesty. Individuals and companies are dishonest out of neglect, too, particularly when they lie to themselves.
Honesty is a broad concept. It could mean true, candid, direct, transparent, moral, or trustworthy. But as you’ll see with the incredible companies we’ll look at in this book, honest can also mean innovative, ethical, fair, open-minded, willing to be humble, able to admit wrongdoing, ready for change, and much, much more. As you read through these words and think about their meanings, you might assume something that I wrongfully assumed many years ago: Doesn’t every leader naturally exemplify these traits?
When I first started preaching about the connection between honesty and business success, an interviewer asked me if I believe everyone is naturally honest. At that point, I answered, “Yes . . . for the most part.” Now, years later, my answer is “Certainly not!” If anything, I’ve learned that honesty is a complex monster that rears its head every time you consider an action, make a decision, influence another, or even think. Like mindfulness, honesty is a practice you undertake as a lifelong pursuit of being, rather than an ad hoc criterion weighing on a certain decision.
Honesty is a practice you undertake as a lifelong pursuit of being, rather than an ad hoc criterion weighing on a certain decision.
Honest leaders are able to pivot on a dime, recruit the best talent in their industry, create innovative products and services, earn outsized profits, create raving-fan cultures, scale their revenues, and create drool-worthy market returns. By contrast, those who brush honesty aside as a nice-to-have soft skill or dandy core value are risking millions or billions of dollars, public disgrace, and even jail time, as we’ll see in some high-profile cases of dishonesty. Yes, honesty is that important and that intrinsic to your success, especially in our newly transparent world, where everything you say and do can be plastered all over social media and the global news in a matter of seconds—and then live on for generations to come.
SHORT TERM VS. LONG TERM
In the defense of leaders who haven’t yet adopted honesty as a strategic tool for greatness, the fundamental relationship between honesty and sustained business success can be especially volatile in the short term. For instance, David Crane, the former CEO of the energy corporation NRG, was unceremoniously booted from his role as top dog due in part to his big and often controversial push into renewable energy sources over traditional sources. “The thing I struggle with most in having gotten fired,” he later reflected, “is that I thought my special contribution to the [climate] cause was showing how a fossil fuel company can become a green company; but, by getting fired and not getting there, I’ve sent the opposite message: ‘If you think you can transform your company and get rewarded for it—you can’t.’”7
Honest? You bet. Effective? That depends on how you define it. Few would agree that getting fired equals success, but then again, all would laud his standing up for what he knew was right. If we’re honest with ourselves, we all know that fossil fuels are going the way of the dodo bird, and that renewable energy is unequivocally the way of the future. But as with many things in life, timing is everything. Crane’s case proves that honesty doesn’t always light the best path forward for self-preservation . . . but as we’ll see, self-preservation doesn’t lead to success, either; in fact, in most cases the pursuit of self-preservation can actually crush an organization’s chances to achieve greatness in the long run. Look around and ask yourself how long NRG will survive as a traditional energy company, and you’ll likely agree that Crane was directionally correct, though perhaps a bit early. Scores of other leaders have followed Crane’s technique and won big, including one former CEO of Sprint, Dan Hesse, who took the reins as CEO in 2007. Like Crane, Hesse insisted that his telecom company be environmentally friendly. As he recounted to me, he would get drilled on Sprint’s quarterly conference calls by analysts asking, “How can you justify spending so much time on being green, when Delaware law says that if it’s not in the shareholder’s interest this quarter, you shouldn’t be doing it?” Focused on caring for his customers over the long run instead of on short-term Wall Street metrics, Hesse took Sprint from last to first place in customer satisfaction, winning twenty J.D. Power awards in customer service. With an insane focus on what’s best for customers—environmentally or otherwise—Hesse returned 205 percent to shareholders from the bottom of the financial crisis in 2009 to his last full month as CEO in July 2014, roughly 30 percent more than the S&P 500 Index and nearly 50 percent more than Sprint’s telecom competitors.8 Hesse was honest about what mattered to his customers and to his planet, and he used it to help Sprint outperform in every sense of the word. We’ll learn more about Hesse’s approach to Sprint later in the book.
THE MODERN PHILOSOPHY OF GREATNESS
Your inclination to fear Crane’s outcome or herald Hesse’s indicates whether you can embrace honesty as a strategic tool for greatness or not. Perhaps, given enough time or a different set of boardroom politics, Crane could have swayed his board and investors to embrace renewables. Perhaps Crane wasn’t honest enough about those around him—that is, he wasn’t honest enough about what it would truly take to change minds and transform a fossil fuel company into a leading renewable energy company. In any event, he stuck to his core values and beliefs, and through his efforts at NRG, he made a lasting impact on his industry and the world by investing in residential solar projects and championing a future where we can all contribute to a sustainable power grid. In fact, if he hadn’t been metaphorically executed in such spectacular fashion, perhaps he wouldn’t have acquired the platform he has today to reinforce his message and encourage lasting change.
His story reminds me of the classic dichotomy between the way the Greek philosopher Plato defined the ideal leader and the way the fifteenth-century Italian philosopher Niccolo Machiavelli defined it. To Plato, the ideal leader must be fair, virtuous, and an upholder of truth above all in order to serve as an effective example to the public. Meanwhile, Machiavelli famously argued that a wise ruler should have two faces: the benevolent ruler who publicly preaches “peace and good faith,” and the ruthless politician who privately rules with an iron fist and a healthy dose of deceitful politics.9
Of course, Machiavelli benefitted from additional centuries of king-ships and political turmoil upon which to build a strategy. But is he right, even today? Looking around at our own current politicians and CEOs, you might be tempted to side with Machiavelli. But honesty is about time and place, and the business kingdoms of tomorrow will look very different from the fiefdoms of years past. We’ve entered the age of the consumer, with ubiquitous information transparency. Today’s level of forced transparency defines the future, particularly—though certainly not exclusively—to millennials and Generation Z, who grew up with the ability to fact-check anything by uttering, “Hey, Siri?”
Honesty is about time and place, and the business kingdoms of tomorrow will look very different from the fiefdoms of years past.
When it comes to choosing honesty, we simply won’t have a choice much longer. The climate in which our society exists right now is very different from what has ever come before, which is why we need a new set of rules in our business playbook that are fundamental to a world in which there is nowhere to hide. In the defense of corporations everywhere, it was only a mere fifty years ago that the British philosopher Bertrand Russell believed that “life is nothing but a competition to be the criminal rather than the victim.”10 Russell died in 1970, two decades before the internet took inexorable hold of our society and changed human behavior as we’ve known it since we started walking on two legs. I suspect that if Russell had seen the dot-com bubble or witnessed the rise of chat rooms, work-from-home jobs, or Glassdoor, he might have changed his stance and instead fashioned a worldview in which leaders, managers, employees, investors, suppliers, distributors, the public, the planet, and, especially, customers can—and must—win together in order to create lasting, successful, honest businesses. The businessperson who’s bully and curator of the truth, who’s selective about what the customer sees, is no longer a valid model or effective modus operandi.
Over the course of this book, we’re going to take a look at what in the world has happened to our world—why we see dishonesty everywhere, why fake news rules our airwaves and social media, and why we must not give in to the temptation to deceive in the short term if we want to achieve success in the long term. We’ll examine some obvious, scandalous cases of outright dishonesty to see whether or not dishonesty can still produce positive results in our modern society. Then we’ll zoom out to put those cautionary tales into context by studying what has changed in the twenty-first century that is steadily forcing us to be honest and transparent, lest we end up fighting the likes of review sites, social media testimonials (good and bad), and the public relations wrath of angry customers.
Then we’ll turn our attention to some of the most influential business leaders of our time to show how they have used honesty as a strategic tool for effective sales, marketing, finance, management, communication, innovation, and leadership, so you can discover how to spot opportunities to harness the power of honesty across your entire organization, whether you’re in a leadership role or still rising through the ranks. We’ll see how start-up entrepreneurs, small business owners, presidents of midsize companies, and the leaders of Sprint, Quicken Loans, Berkshire Hathaway, Domino’s Pizza, Bridgewater Associates, Tropicana, and others use honesty and transparency to win. Spoiler alert: they don’t sketch these touchy-feely values onto their conference room walls and smile at them before each meeting. Instead, they wield honesty, and all that it encompasses, as a strategic technique to thrive. In this way, honesty is a value that gets etched into the souls of their organizations.
The businessperson who’s bully and curator of the truth, who’s selective about what the customer sees, is no longer a valid model or effective modus operandi.
Along the way, we’ll consider honesty from multiple angles and with several different lenses to see if we can take that nebulous concept and usefully define it, both in terms of what it is and what it surely isn’t. Through that journey you’ll doubtless find honesty compelling as a business growth strategy, but it isn’t always easy to implement, as John Antioco proves. That’s why we’ll also discuss ways to cultivate honesty within your teams, from the C Suite to the front lines, and we’ll even discover how to gently introduce honesty into the culture of your organization so you don’t end up like NRG’s Mr. Crane. Along the way, I’ll provide you with critical frameworks that you can use to enhance your leadership skills, create a culture of innovation, and achieve industry-dominating success.
The techniques in this book transcend business size, industry, and purpose. Honesty, unsurprisingly, works universally; it creates opportunities to ask better questions, get more insightful answers, and overcome the roadblocks we face as leaders who lie—sometimes to others, but most often, egregiously, to ourselves.
Whether you’re starting a new business and looking for the next big wave, growing a company and needing a rocket-fuel additive, or transforming your organization into its next phase of success, the frameworks in this book will help you get honest on three main levels—the same three levels that Blockbuster failed to identify.
First, you’ll learn to get honest about what’s going on in your community—including what’s changing in your industry and what’s happening in our evolving world.
Second, you’ll learn to get honest about how you view the others around you, whether those others are your team, your customers, your prospects, or something else entirely.
Third, you’ll learn how to get honest with and about yourself, so that you can easily recognize whether you’re saying no to just another cold call or turning down the next Netflix-sized opportunity.
After more than a decade of working on behalf of leaders from local car dealers to Warren Buffett, I’ve discovered that honesty truly is the best policy—for your principles and your profits. Now I want to inspire you to use honesty to achieve greatness.
Let’s begin.