and american express, additional funding provided bthese funders. >> and by bloomberg, a provider of multimedia news and information services worldwide. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. jim collins is here and runs a management laboratory that develops fundamental insights about business and leadership 2001 characterized key characteristics that allowed companies to become truly great overtime. his new book, great by choice asks the question why do some companies thrive in uncertainty and chaos and others do not, i am pleased to have jim collins back at this table. welcome. >> it is a delight to be back at the table. >> let's talk about something you and i share which is this great fascination with questions. >> yes. >> you know, tell me about questions in general befo we talk about questions as an insight or as a bridge to books. >> yes. i guess if you have an addiction in life it is nice to have on like curiosity. >> rose: yes. >> i mean, questions for me are where everything begins and i always like to describe it that i don't pick questions, in many ways they pick me, they kind of rise up and grab around the throat and say, i am not going to let go, and to me, life is just a journey of question upon question and there are so many chances to learn things. one of my mentors, john gardner, who was in the johnson administration was a senior faculty at stanford. >> rose: wrote about excellence. >> truly before people were thinking about it and renewal and self renewal, and john had this wonderful way of saying, don't try to be interesting, be interested. and that stuck with me and this idea of always be interested and you never know where a question will go, you sit down with somebody, and you ask a simple question, like where are you from, so think about the power of that question, where are you from? that is not a hierarchal question, that is not a question of what you do or how important are you? it is where are you from? and somebody can choose, it is an invitation, well i am from virginia, or i am from greece or i am from -- and name their company, they can choose and the interesting thing is you never know where that will go. and then in actual work it all has to begin with questions, because if you actually know the answers, then i don' understand the point of doing the work. >> rose: all right. the book good to rate began with the question for you. >> it really did. it was interesting was the question actually came from a challenging friend of mine, and i will never forget, because my coauthor jerry portis and i, we had looked at what maiden during great companies and bill meehan said, that is great but, you know, the work is us useless, what do you mean useless. >> well these companies were always great, they had great parenting what if you didn't have great parenting what if you had 100 years of oppressive mediocrity, can you change that and i started to make a list of enterprises that had been only good that made a a breakthrougo be exceptional and it seemed like a short list, it seems you had good parenting or you didn't and from that i remember coming back on the airplane, from the dinner where bill had challenged me with this, and there is a little side point to this which is, i kept thinking after bill, i have to have another question and my wife said, no, no, it will find you. just don't grab one too soon, it will find you, be patient, you will know. and i came back on the airplane, and i went to my front porch and sitting there and just drew a little curve, sideway curve that went like this and another curve that kept going sideways and some go from good to great, others do not, why? why? why does that happen when these ones don' it was such -- and when i looked at the chart, the little diagram i thought to myself, this is such an obvious question it must have been answered. but it hadn't and that is the beauty of a question is you find something that had to have been addrsed. >> rose: what about this book? where is the question that got you to -- >> the question here, came, my coauthor and i became extremely interested in just the whole sense angst of uncertainty and feelings of chaos in and the world out of control, we started this project in 2002, and we had just come through horrific events in the united states, and also have the dot-com bubbl and going off to war, and there was, and i just had this sense that i have always been a student of history and if you look over history, how many times do people come of age in a protective cocoon of one or two lone standing superpower, in a time of almost unprecedented rising prosperit the e.r.a. you and i grew up is not normal. 500, be c greece or egyptian, old kingdom or the roman empire, england, 1,800s, tre were times in history when people h this, but they are rare, our experience was in something that my read of history was relatively rare, and maybe the natural state of history is uncertainty, chaos, turbulent disruption, and we better get used to it because we are likely not to go back to the way it felt, and that was a steed and i think for me the seed was i have always been afraid of what can happen, am i a glass half full or empty person? i thought really i am fortunate and have a full glass and aware it can shatter at think point and i think that sense of angst has been with me since i was a little kid. >> rose: so how do you go about loing at and comparing those that succeed in adversity? >> to the way i like to think of this is imagine you went for a hike with the greatest mountaineering leader, somebody who led expeditions to k 2 and everest and, but you were hiking on a nice warm trail, it was a beautiful spring day, and you try toigure out, well, what makes that leader so exceptional? you might notice that a little unusual, perhaps a little more aention social, packs a day pack difference but would you see what makes that leader exceptional, but suppose instead you were on the side of everest with a murderous storm with that leader, there in that environment, it would draw out and expose what makes that person so exceptional because the environment would bring it out. morton and i said let's pick companies that were vulnerable so they were small startups, that then went on to become giant successes inur case ten times better than their industries, but in the everest k 2 environment, semiconductors, airlines, biotechnology, software, industries that are characterized by big forces out of your control, fast-moving, unpredictable and there is definitely a lot of good luck and bad luck and things that can hurt you and you look at those that do well and those that don't in those same environments and you say, what is different? >> then do you pick who did well in adversity and al one that didn't so you have -- >> until you have. >> a contradiction. >> exactly six like two teams on the same mountain and in fact we write about after we finished the research we came across a wonderful analogy that kind of captures the essence of the stud by, but the story of 100 years ago, in 1911, when two teams of polar explers were heading to e south pole, and you had rasmussen theorwegian leader and his team and robert falcon scott who was the leader of the british team and both left for the pole within days of each other and, the other team got there first, scott and his team not their 34 days later, the other team made it back on the precise day he penned in his planning journal in norway, scott and every member of his team died 11 miles from a supply depot on the way back. and that, and so here you have two teams, in the same environment, both on a quest but with very, very different out comes in that same environment. we use that as an analogy through the book, it isn't the research, re of a teaching analogy, but in our cases of companies, it is the same thing, if you look southwest airlines and pacific southwest airlines, in 1970, they are both like almond and scott trying to become great companies heading out into that environment, one disappears and one doesn't. >> rose: let me go back to edmondson and scott. >> why did edmondson get there and scott didn't get back. >> edmondson had three things that really separated him from scott, first of all you wouldn't -- let me talk about some of the thanks that aren't different. the thout about risk taking, they were both willing to take risks to be out, there it is not being more visionary, they both need vision to be to the south pole, there is no evidence that one was more creative than the other, right? they had a lot of similarities there, so what was different? the first thing is that edmondson was a at that thatcally disciplined person and he had the discipline to do this thing that you might call a 20-mile march, where basically you sat out and say think of two people trying to walk acrosthe united states and one is going to go from san diego to maine when the weather is good, hike as far as possible and do 50 miles day and when the weather is bad they will sit in their tent and complain about the weather and the other says good weather, bad weather, i am doing. >> rose: ten miles. >> ten or 20 miles a day every single day, it terms out edmondson and scott displayed this pattern and edmundston we will do 15 to 20 miles per day and this is the interesting thing am scott would do the big days and rest on the days that were really bad conditions, you can read in the journals, horrible conditions, sat in our tent, horrible conditions, made 13 miles closer to our goal, same day. edmondson, though had this incredible discipline to get up on those days, hoo search the key to the 20-mile march you have to have the disciplineto hold back when times are good. so here is almond son 45 miles from the pole and this is just an amazing thing, 45 miles from the pole, scott is coming from a diffent angle, almond son and his team know that theyan make out e pole in one push, 45 miles. the weather clears. it is good conditions, they don't know where scott is. should they go the 45 in one day or should they stick to mare march? >> almond son went 17 miles and rested. why? because if you go to 45 and find yourself overextended and a really big storm hits, then you can can be overexposed exhausted and die, he had not just the discipline to stick with his march bad conditions and make progress but never to go too far even when the prize is within reach, and it is interesting, because if we look at our companies, they had mar chs like this. the other thing, two things that almond son had that was different from scott, almond son grew out of this idea of worrying what can happen, had productive pair know, i can't it was a pair know i can't that is very productive, he would put three times the amount of buffers in his supply depots in case they needed them coming back, scott would calculate what he needs and put wx and put bag. >> he would put one flag, so if he misses that is bad, almond son would put black pennants for ten-kilometer target, yo could get a little bit off course, so you have got to build buff buffers and contingencies, in our companies, carry three to ten times the amount of ch to assets of other companies? why, just like almond son, you might need them,and the only mistakes you can learn from are the ones you survive. then the other thing that almond son had is that his whole approach to coming up with his strategy was deeply empirical. scott, bet on motor sledges he was going to out innovate the south, south pole they had not been empirically validated in that environment in those conditions, the engine blocks cracked, leaving them to have to man haul across and of course cruz ponies which didn't work so well, almond son said i have to start with an empirical understanding of what works if i bet my life, he goes and lives with es s eskimos and they say k about the humility of that, i will go living live with e eskis and let tm teach me first what works because out re you can't afford to leave yourself exposed, he learns from the eskimos, you can ski well, go with skis, wear certain kinds of clothing, and go with the proven techniques out there, if you bet on the disruptive technology but it happens to not work in that environment, you could be very exposed so when you look at those, that discipline and the of the mash, the productive paranoia, and that empirical approach to creativity, those arthe three things that alemon son had that separated him fro scott and that our leaders and companies had that separated him -- >> rose: why isn't this book simply called this, understand your risk and be prepared? >> i mean, all you said there, in that lesson was, be able to evaluate risk. >> we live in a society that tindz to, tends to greatly revere theig, bold stroke risk takers, and. >> rose: and all the people i have known, most of them who are great risk take versus always understood what the risk was. >> exactly right. so, but let's zoom out for a moment and think about what we mean by this notion of risk. ay. risk is very interesting topic area but being, understanding risk doesn't mean being risk averse. if you are going to go to the south pole in 1911, that is not avoiding all risk, if you want to avoid risk stay by your fireplace, right? and the people that we studied that built these companies, you have spent time and had some wonderful conversations with andy grove, the only paranoid who survived but they weren't just sayingly sit and have a comfortable job, they were starting a sma company in the semiconductor industry and trying to build a great company. so the interesting thing is, think of david brashear trying to put an imax camera on the top of everest, these arewe dawshs, audacious tasks in inherently risky settings, it is not just about managing risk, it is about doing something truly exceptional in an inherently risky setting and doing it in such a way, a, that you get to the top, you summit, and, b, you get back alive, one of the analysis we did was of luck. actually all the work in 25 years i have been associated with the question that probably has tickled me the most is, how do you actually analyze luck? we figured out how to do that, but what was interesting is if you study luck, you learn that luck is symmetric, luck cannot cause a great outcome, can not cause great success, good luck. bad luck can be a cause. if y get four tails in a row or five tails in a row and you know eventually you are going to get heads againt doesn matter if you get killed at tails number 4. and so if overtime, luck tends to even out which is what we found, you have to survive the inevitable space of bad luck in order to be able to have the good luck that enables you on your quest. and so you are on this quest and dealing with a lot of luck, good and bad luck and the interesting things they do with luck and that is a fascinating journey for us to understd but you have got to survive the bad luck or it doesn't matter. >>ose: if you flipped a coin, 1,000 times. >>yep. >> rose: how many times is it going to be heads and how many times tails. >> 1,000 times, fairly close to 500 each, i it is going to be a little statistical variation. >> rose: but if you do it 5,000 times it will closer. >> somewhere along that thousand you may get ten flips of tails. >> rose: right. >> what if eight of them kill you? that's why you need to have three to ten times the cash to assets ratio because sometimes you are going to get ten tails, you may need it when you get not one tails, not two tails, not three tails, not four tails, not five tails or you get a really big bad piece of luck. >> rose: you view these books as leadership guides in is that what they are? >> how -- i view them as inquiries. >> rose: so they are an inquiry, and what is the -- wha is the wisdom that you, is asking the right question first. >> always. and it has to be a question you can address with a rig for and with data. because there are a lot of questions i couldn't do that. >> rose: and you have to accept the idea of looking backwards for the data? >> no. >> you don't? >> no, no, no. yes and no. but why don't you measure -- look for the 10 x companies they had already show you they were 10 x companies. >> can you have to look at history that applies. so look at it as sports dynasties. >> rose: right. >> okay. and you can take the 49ers of the eighties and take wooten and his great basketball dynasty and the yankees at their best, whatever and say these are our great sports dynasties let's go back and see what made those dynasties during that dynasty e.r.a. different from other teams that time, that's the essence of our method so we are looking at dine dynastic eras and you have to to back and who who actually won so many championships in ten years and study them that doesn't mean you have to rely on retrospective data, if we go into my basement yo will see boxes and boxes and boxes of materials, we go back and find all the documentation from the time of the events and so you are sitting there with gordon moore's 196 moore's law article, you are sitting there th the documents and articles and materials on intel in 1971 written in 1971. and what you try to do is you try to transportyourself back and to the best of your ability knowing of course we are all human, but you go back and you don't read articles written in 2001 abou 1971, you go pack and you read materials written in 1971. >> rose: of course. >> and try to say, what did the world look like to them. >> rose: the data has to look -- you only get the data looking backwards. >> that is correct. >> rose: and. >> rose: but the leadership factor comes in because john wooden brought something that is a reason, is that an x factor or quantify john wooden? >> i don't know how you quantify wisdom. can you quantity john wooten. >> rose: he did a lot of interesting things in term of how he explained leadership and character and performance in his own demand of players and all of that contributed to his championships. >> extraordinary championships, what you can do is you can look at the behaviors and decisions that leaders made. >> right. >> and correlate those decisions without comes and then ask, which behaviors have higher correlations without, without comes, y they made those decisions. >> rose: right. >> w somebody would be driven to go to the south pole. you can't quantify but you can quantify things like how many pieces of luck did they get? you can quantify how oen did he respond quickly to a fast-moving situation. >> rose:. >> right. >> you. >> rose: you can't quantify the x market too? >> i think, i increasingly tend to think of the people that we look at as almost like artists. >> rose: right. >> rose: and if you were to try to imagine, if you could do an interview with beethoven and you were going to ask him, why, why, why did you go through draft after draft to try to get that amazing shift from the third to the fourth movement in symphony number 5 to stop your heart? that, you can't quantify. but that why, because i can. >> rose: i would translate this to steve jobs, steve jobs is a perfection mist, we know how he was so driven because he had to satisfy himself and he was never satisfied. >> that's right. >> can i tell you a little story about a little experience i had in seeing that glimpse of that? >> rose: all right. with jobs? >> yes. if you are interested. >> rose: of course. we will bring him in later because apple is one of your subjects. >> yes. >> rose: 19 1988, 1989 i d this stroke of good fortune, a mentor who -- there was a class that needed teaching at stanford business school, entrepreneurship in small business and one of my mentors said to the dean let's have jim have ahance of doing it and i will take responsibility if he messes up and all of a sudden i had this, and i had this class in entrepreneurship in small business. >> rose: a nice phrase. >> you can think about what you do, you need the place to stand, and i remember the first day i walked into the classroom, at stanford business school and had this classroom, like, wow i have a license to ask questions. >> rose: right. >> but i was also trying to figure out how to teach this and boy, i am 29 years old or something and most of my students are older than me, i need somebody who can help me add more to this, so i called steve jobs. i called steve. >> rose: what time in his life? >> this was wilderness years. this is where the 1 comes. so i called him up, and i said, hi, you know, you don't know me, i am teaching a class in entrepreneurship in small business but i call the course building and enduring, building great companies from small businesses. i think you know something about that and i would love -- would you come talk to my students? spend the day with my students? so. >> so he says, sure, this is 1988 or maybe it is early winter, 1989 time frame. he comes in, okay, now, you have got to picture nobody knows what is going to happen, nobody knows th trajectory of his life that is goin going to happen after 1. he is in the wilderness at this time. he walks into my classroom, first of all, he gives this wonderful gift of his time,e walks into my classroom, and sits in the front, kind of kicks off his shoots and just says so what do you want to talk about? and proceeds and he says next at this time a pixar hadn't happened and a number of people didn't take him seriously and said about apple i got booted out of my company it is a good experience to go through, but what i saw in that day was the artist, you see, i -- the products are wt always impressed me, those are cool, we love them, of course. it was the absolutely relentless creative drive that was evident then in the depth of the wilderness, this person was not going to stop, and he was not going to stop trying to do something, he was not going to stop trying to create, he was not going to stop trying to learn and to grow and to get better and it was all right there on display for my students to see and like the purified version of it because it was in the depths to wilderness, there is no retrospective sense of steve jobs as we know today, it could have gone any number of ways, and what i saw that day and what years later i had a chance and talkin about a couple of other things and on the phone and i said to him, i said, i just really want to tell you what i am most impressed by, it was what i saw then and the never stopping, growing on your part. i later came away and said he is an industrial beethoven. >> rose: yes. well, walter isaac points that out, he basically makes him one part artist. >> yes. >> rose: and that was the part of the genius he had. let me take a look at this, this is now famous, we will do it in i way, this is the famous commencement speech at stanford, in which he explains how being firewas e best thing that ever happened to him, because it catapulted him into the wilderness years and when we come back, you can talk about what you think was important about the wilderness years. because you saw him in midst of it at that time. >> yep. rose: rolthe tape. >> i didn't see it then but it turned out that getting fired from apple was the begins thing that cld ever have happened to me, the heaviness of being successful was replaced by the lightness of being a beginn again, less sure about everything, it freed me to enter one of the most creative periods of my life, during the next five years, i started a company named next, another company called picks star, and fell in love with an amazing woman who became my life. pixar created the first computer animated feature film, toy story and now one of the most successful animation sued row studio in the world. apple bought next and i developed apple and next is at the heart of apple's renaissance and we have a wonderful family together. i am sure this wouldn't have happened if i got fired from apple, it was awful tasting medicine but i guess the patient needed it, sometimes life can hit you in the head with a brick. don't lose faith. i am convinced i love what i did and that helped me survive. >> rose: that is part of it. the passion for what you love what else did he learn that was am cal when he returns? take over apple as he just suggested. >> exactly, first i thing wilderness years are very hard to discount. i think that i where -- >> as a learning tool. >> as a learning tool an also stripping away, and having to find what the real motivations are, what is interesting about watching the commencement speech is he is speaking that now sort of having come back, right? b it was the same thing when he hadn't yet come back, that is where you get the sense there is like a comparison of two points in time, like meeting churchill in 18, wouldn't we have loved to do that. but. >> rose: at the time he was warning of hitler. >> actly. he is off in thiilderness and people aren't taking him seriously, that's the greatest churchill. >> i was what is interesting, though, about the journey as we came to see it in this, because we are looking at apple's trajectory, i believe steve jobs made the transition from being somebody who principally just focused on building products to having apple the company become one of his greatest products. and that he made the journey to say i am going to be more than just a bait hoven, i am actually going to try to create a company. you think about how walt disney by eventually was able to leave behind a company that is here today as disney, eve though it has his name on it was able to create an enduring great company, in the end that journey to basically say, we ve become not just a product builder but a company builder is a journey that strikes me he was on. anothething he learned is he, it, he might have been less disciplined when he was younger and able to married discipline to hisreativity and one of the things we learned in this research is creativity is natural, abundant and human, what is really rare is the ability to marry discipline to creativity in a way that the discipline apple amy guys it, when he and cook came together and rebuilt apple as a company, they were able to put that magical elixir of discipline and creativity rather than discipline destroys creativity. >> but also he knew when he came back, i know because of the book he knew not to run into making new products you can which later became the genius that catapulted apple to where it is today. >> yes. >> rose: ipod, iphone, ipad. he didn't do at he looked back at mcintosh first to see what it was about mcintosh. >> yes. >> he did decide and say early on that we are not going to have 15 products but four, four or five is what walter said in the biogray. >> yes. >> rose: so he learned and therefore he wted until he had decided exactly what he wanted to do to introduce the products so that is the discipline he had. >> what is interesting is that we now know about the ipad or the ipod, the i-pad, the iphone and all of these, the first thing he did was to get the house in order, get the balance sheet and the company back to basically functioning and the second thing was go back to the big -- instead of doing theext big thing what is the big thing we already hav the mac is a big thing, rescue the mac and make the mac work a put the next operating system in, later they did those. >> what do you mean by, you suggested that the ipod product evolution is an example of bullets then cannonball. >> yeah. so we found very interesting thing in this work, when morton and i did the analysis, maybe what you would find is more uncertain and clearly just people who do big innovative risks, we didn't find that, what we found was that imagine ships bearing down on you and uncertain about how to deal with it, and you because you are afraid or see it as an opportunity and want to go big, you turn and take all of your gunpowder and put it in a cannon and re the cannonball and misses, you turn and out of gunpowder, or instead take a series of bullets, small bullets fire it, 30 degrees off, ten degrees off, ping you hit the side of a ship and a line of sight and now you concentrate your gunpowder on the cannonball and fire if you look at the evolution of the ipod, what you find out the microprocessor at intel the same thing it started as a bullet, something in retrospect we know is a big target ball that smashed into the target, well we can say that is visionary genius, fires cannonball and hits target, but, in fact, it was mp-3 happened outside of apple, recognized the potential of that and fired bulletsof let's fire a small spot and make one for ourself and our own file sharing material together and originally described it in their, i think 10-k or annual report as a natural extension of hub stragy, that is not here is the ipod, it is a natural extension of our digital hub strategy but it was starting to hit and then they fired some more and they knew the music industry was having trouble so they did the 99 cents, bullet, bullet, bullet, the cannonball was when they said, we are doing it for windows. >> what looks in retrospect -- >> rose: what we do on a different operating system. >> exactly. what looks in retrospect like visionary genius makes big bold single strike, but actually, when you look at the process, the was a much more or panic and iterative pross leading to something that looks like that, and my thought is uncertain you are not sure what to do, if i say go for it and innovate what do you do tomorrow? >> here is what impresses me abt jobs and this i assume is in some of these other 10 x people it is the notion when you went into the retail business, you know, he reached out to mickey drexel who knew something about the retail business. >> yes. he is constantly engaging in people to ask them questions and to find out how he can tap into their experience. >> yes. yes. >> re: to do something he wants to do. >> yes. one of the things that goes all the way back to good to great, when we talked about the importance of who, right? and as i can zoom out now and almost, all of 7,000 years, combined corporate history i say what are the really, really big things that stand through all the work. i keep coming back to this principle always first about who, and then about what, and the most important kinds of luck that you get are who luck, versus what luck and we can talk about that, but when he was wanting to do retailing his first question was what shod we do? his first questionwas, who i is the best retailing executive in the world? and if i can get that person to help us figure out h to fire the right bullets and of course what as we read, drexler said is don't launch ten of these at once, build one, prototype it and test it and fire the bullets and get it working then go. so. >> rose: and we now know from walter's book as well, you know, theyuilt mockups of stores. >> yes. and kept turning and changing and figuring. >> bullet, bullet,bullet. >> rose: you know, trying to make sure they had it right before they opened it. >> exactly. >> rose: they got it right. >> exactly. and that is -- and so i think one of the things i would lov for people to walk away with is the idea that very rarely do these big successful things happen as one giant brilliant creative shot. it is the idea of discipline and preparedness outweigh boldness, right? >> y charismatic megtively correlated with greatness overtime. >> what does that mean? >> well this is something that has shown up in all of our work is that people confuse personality and learship. they are very different ideas. there are leaders that we have studied that have -- i like to describe it they have a car irs ma bypass, they weren't charismatic and we found a lot of these -- >> rose: becomes charismatic. >> it is sort of a stoic i am not saying anything is charismatic but also have charismatic leaders, at xerox who i admired for the turnaround and xerox and the leaders that are kind of odd, some of our leaders are strange, almost, the thompson, twisted, when the going gets weird, the weird becomes ceo. >> when the going gets weird, the weird becomes ceo. but. >> rose: charismatic. >> the issue is if you strip awaynd you say, fm all the work, what do i deeply believe? what do i deeply believe from having all of this inquiry? there are a few things i deeply believe. one thing you and i have talked about a number of times, but i come back to it over and over again, it gins with the question of what are you in it for, why are you doing it? >> i mean, do you really love doing it? do you really want to create a great company? >> do you really want to have an impact for is it ultimately about you? and the problem with charisma is often charismatics are self an sword and it is about them but the real leadership begins with those where the answer to the question i might be charismatic or not -- here is what i don't get, it is about them to do something, it may be -- >> but it is the do something, but it isbout them wanting to do something, i mean, i want to own this space, i want to have -- i want to possess the greatest swing in golf. >> because i want to do something with it but i wantto possess it, i mean it is i want this, i mean steve jobs wanted it because, i think ego and it is there. >> yes. the question is where is that ego directed? >> it is not about game or even fortune, it is mainly about i want -- it is wanting to do something. >> i want to do something. it is no knot i want to see this done by somebody. i want to do it. and i mean, the artist wants to. >> rose: paint the picture. >> paint the picture, to write the words. >> rose: exactly. >> to make the music. >> rose: like somebody says about writing, you people come to them and they say, you know, goll, i would love to, you know, i would love to be a writer and you say to them, you would love to be a writer because you like the idea of a writer or would you like to writ if you like to write then you are at the right place. granted, that the question is where are you directing it? are you trying to create a piece of music that the music itself, when you are done, will go down someone's spine and give them goose bumps, will the product change the way people go through life? and i -- when i stand back and i look at really, there is this sense of where is the ego, where is the ambition being channelled? i mean they do have ego and ambition, often bning, passionate, ma, maniacal ambition, these people are driven by the ambition to create something great and that might last. >> okay. or to accomplish something extraordinary. that is very different than i want to make myself rich. >> rose: or famous. >> or famous, right but. we go back to the darwin smith was your kind zero reserved, self effacing ceo, but he had to sell the mills at kimberly-clark that is not a popular decision but the decision that had to be made to makehe company great, do you have the guts, the will at that moment to sell the mills let's go back to almond son, why did he pick dismotion. >> there is one thing about dogs, dogs can eat dogs. and so part way across the plateau. >> they had to kill half the dogs. so they could be fuel for the other dogs. those dogs had names. okay. but that is what -- that is what needed to be done to make it work, to accomplish the objective and get everybody back alive. i don't know about you, but that is sounds very difficult to do. and the more extreme. >> rose: especially my dog. >> yes. exactly. i am not saying i couldo this. but i mean, you know, if you look at the hard decions andre grove made or you look at even -- bill gates moving from building microsoft now to doing the foundation, is he worried about being liked or is he worried about wiping ou out maria? rose: well i hope he is worried about wiping out malaria. >> right. exactly. and so. >> rose: it isore important to save lives than be popular. >> our people are worried about accomplishing a plate. >> rose: on the other hand the quesonwe ought to be put into this mix asell about this very subject. sometimes in the end, you have to say what is the goal her >> that's right. >> if in fact you are going around making people feel awful and therefore less productive, then that is not a productive experience for you. >> yes. >> what you have to do is sometimes understand what the goal is and i have to make this glass work with this cup because if they pull together, when they get there, but if they don't. >> that's right. >> rose: we won't get there. and so therefore the act of getting there has to do with somehow mang these two people figure out how their goals are complementary. >> yes. and in an environment where oh not only that, now we are in an uncertain chaotic world where a form can come out here and kill us. >> rose: right. >> unless work together. >> exactly. exactly. so that is also diplomacy and a lot of other things. or it is also the rigor of tough self-criticism and the rigor of self analysis and the rig for of being able to say to people this is the reality unless you face it, then we will not get here. >> that's rht. there is one of the heroes i have known for a long time, we write about him in a book named david bra shears. >> a mountain camera and got the cameras to the top of everest, "mac cameras to the top of everest, david that is an amazing quest to do and got some of the best climb in other words the world to go with him, he is enormously demanding and had to make some very difficult decisions including one member of the team he did not allow to go to the summiton summit day because it might have imperiled the pro jej and the secret that team member went along with that but it was not an easy decision but in the greater context of the overall goal and also we have to get down alive, the question is not what is going to be the lowest palatable decision, what is going to be the best decision. >> rose: okay. a couple of other things, one you are saying to people who you classified a10 x, they were not necessarily charismatic and did not necessarily make quick decisions. >> ah, yeah, this is interesting. so let me ask, just think about this for a moment. you are working on your show or you are getting help reading or something, and something unexpected comes up and it looks scary. what should be your first response? many of us in response to that are uncertain or scared, we want to do something to make that uncertainty go away. the problem is that doing something might only make our situation worse, overreacting too fast. the critical question in the face of an uxpected threat or something movg fas to ask a difrent question, i write about the idea of zooming out versus zooming in, what is zooming out you respond not by what should we do but respond by how much time do we have, how much time do we have until the risk profile changes? it is a different queson if you have minutes, decide in minutes, but if you have months you might take months. we write, there is the story actually i think youave talked about andy rove when he had cancer. >> rose: i talked to andy grove aboutverything. >> truly, actuay there is a 10 x. true 10 x. going all the way back to when he was a young chi, he did not first just jump into the operating room, he was ceo by take, cancer researcher by night. and when he realized i have more than hours, more than days, certainly weeks before my risk profile is going to change, he took that time, did his own data charts, did his own analysis, test it is p to calibrate how much variation there could be. >> rose: i mean he was -- >> going to build his own confidence interval the whole bit, he took the time he had before his risk profile changed to make the best decision. if it had been days he would have taken days but he had more than days so he took more than days. >> rose: okay. are ese 10 x leaders, of the companies, are they less innovative than some of the competitors? >> yeah. because that is what america sells, innovation. >> what if we are wrong? so innovation ought to be considered in what context? >> first, innovation is extremely important. i would not want to send any indication -- we should stop innovating and company should not innovating. that would be an inaccurate reasoning. >> rose: we need to make sure we know what made us innovative and we can't afford to lose those things. >> that's right. we found that any given industry has a threshold level of invasion innovation and once you get -- you have to get to that threshold for something like airlines, it is relatively low and for biotech it is really high but that once you meet that threshold of innovation it is not innovation alone that makes yo exceptional. it is actually the blend of being able to put the innovation plus the organizational discipline again we go back to, is apple just an innovation story, no at some point it was a ole bunch of other things around it that made it work, what was intel known for? yes, it had a lot of innovation because to be in semiconductor industry you had to have a lot of innovation but were they always the st innovativend at critical junctures they may have been a little behind but what was intel money for? intel delivers. so you are ibm, what is your worse nightmare, you don't have engh chips atn affordable time when the time comes and you have one chip more innovative and another can chip that is innovative enough but has the organized behind wit the discipline and it delivers? where are you going to do exactly right here is my thought on us for a communicate, i might be wrong about this, but here is what scares me, we amerins tend to believe our sort of almost national ideology is that innovaon by itself is the trump card that will save us and protect us in an increasingly competitive global world. what if, in fact, our real rength is our ability to scale innovation? that its real story of an intel of amgen or a southwest is that there is the ability to build great organizations, that are able to replicate innovations at great scale and be able to, whether that be organization, manufacturing, whatever, think about fo and motorcar is that an innovation story or a scaling story? what we do really well is we scale innovation, here is what is scary. what happens if we focus on the innovation? ut we lose our ability to scale? and what if ouability to scale innovation is our real distinctive advantage? where is that going to leave us? >> rose: so when you look at leadership tell me the four things that you have found? that have defined? because i believe, you know, that leadership makes a difference. it is crucial. >> yes. >> rose: in every circumstance. and you can -- i can show you company after company after company. >> yes. >> rose: and you can test these things. >> so first of all there this notion of focus and curiosity i want to briefly comment on the focus part. one of the greatest, probably the greatest rock climber of this generation as you know i have been a climber most of my life, actually right now on the side of el capitan, doing what will probably be the hardest rock climb certainly ever done in our life times, trying to free climb something called the don wall, young man named tommy caldwell who is the, he is in a category of one. and i was out climbing with tommy one day and i said to him, tommy, what makes you different he has six climbs on el cap that have never been repeated. he is just -- he is 10 x. in in extreme environments and still alive. i said tommy what is it, you are not necessarily more physically gifted and notnecessarily stronger, you are certainly physically gift all of those things but you are not this incredible athlete that is just born this way. and in fact he lost a finger in an accident, he cut a finger off and so he is doing this minus one of his fingers. >> rose: as important finger. >> an important thing and he thought a long moment and said, i can remain focused and suffer for the big thing. longer than anyone else. and i think that is what -- the curiosity keeps him going but once they get their hands on what they see as the thing, he don't let go. and they can stay wit and suffer for it. so your question about the elements of leadership, i really go to -- you asked for four. i will five you. >> rose: take as many as you want, two or seven. >> two or seven. one, have deep confidence. the most important leadership skill is clearly the ability to make great people decisions, and to put people in the right seats and to rigorously change the bus when you have to. if you look at somebody who has been a great leader and you ask them, what are your ten most important decisions? over half of them should be people decision, again going ck who is the best executive in this? not what should we do? number 2, the very, ry best leaders are exceptionally good at beginning first with an incredibly rigorous assessment of what are the facts, you were talk ago little while about about girsch never coming into imn, the last thing ibm needs is a vision, eventually he did get a vision but his first step is to say i have to get the right people which he did and thousand what i have to do is what are the absolute stark brutal facts that ibm must absolutely confront? and only once we have confronted those we have liftedd up the rocks and looked at the squiggly things underneath and fought forward what about what we mean we will turn to the question okay from that, what vision will we set? third, the leaders that we look at do have these distinctive behaviors, the discipline, the empirical creativity and productive paranoia, and productive paranoia is important in our world because if you lead your enterprise to disaster, it is not going to help anybody if you don't ultimately survive, blue is one last one that really jumpedut at us recently, i think they are really, really, really good at getting return on luck. >> rose: a return on luck? >> a return on luck. i think there is this -- this is like a different kind of mental muscle. you are going through life. you meet a remarkable person. you get a remarkable break or a bad thing happens, you are tossed out of your company, what we noticed is that there are these multiplicative moments a distortion moments when a luck event happens, and there is this ability when the luck event happens to zoom out and say, should i allow this luck event to disrunt my plans, to disrupt my life, if the answer zero to that is yes, they how do we make the very most of this luck? so you are going along and have your plan and steps and all of a sudden something intersects you, good orad, and when the question is at that moment, do you seize it, do you grab it or just let it slip and when the really critical pt, do you build and build and build so you go along, luck event, multiplicative but it is not the luck events that is multiplicative but the recognition and the return on that luck when it comes. one of the things i think i dn't understand until just a few years ago was the incredible importance of recognizing those moments and when they come, being able to say -- you say the curiosity is one way to find th luck. but with when you find it, you grab as hard as you can and then you build and you build and you build, and that is part of the difference between 2 x and 10 x. >> rose: the book is called great by choice, jim collins author of good to great, 4 million copies of good to great have been sold, fortune magazine here has him on the cover for not the issue out now but the previous issue, how to build a plate company in tough times. an excerpt from this book. thank you for copping pleasure to see you again. >> you are very welcome. it is always a pleasure. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org funding for charlie rose has been provided by the coca-cola company, supporting this program since 2002. and american express. >> additional funding provided by these funders. >> and by bloomberg, a provider of multimedia news and information services worldwide. be more.

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