#30 Margaret Heffernan: Collaboration and Competition
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Welcome to the Farnham Street Podcast called The Knowledge Project. I'm your host, Shane Parrish, the curator behind the Farnham Street blog, which is an online community focused on mastering the best of what other people have already figured out. The Knowledge Project is where we talk with interesting people to uncover frameworks you can use to learn more in less time, make better decisions, and live a happier and more meaningful life.

Margaret Heffernan is on the show today. The former CEO of Five Businesses, she's learned how human thought patterns lead us astray. She's the author of a book called Willful Blindness, which examines why businesses and the people who run them ignore the obvious and the resulting consequences, as well as a book called Beyond Measure, which looks at how tiny changes can make a ginormous impact. Enjoy the conversation. ♪

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First of all, you wrote a book called Beyond Measure, which looks at how tiny changes lead to big changes.

What one reviewer on Amazon said was, this book is filled with specific and meaningful examples of how to transform the work environment in order to improve not only performance and outcomes, but also the collective and individual experiences of all employees. Let me begin with this. I'd like to hear about the smallest change you've seen make the largest difference in a wide variety of organizations.

Well, I guess the easiest one for me to talk about is the one that I did within one of my companies. So as you probably know, I've spent most of my life in England. But in 1994, I moved to the US. My husband got a position at Harvard. After looking around a bit, I ended up running tech companies for a venture capital firm.

So the first company that I was running, I did what you would expect, which is hired all sorts of extraordinary and wonderful people and gave them all sorts of hard problems to solve. My observation was that everybody came into work and worked very diligently and went home again. And the thing I chiefly remember is it didn't sound right. It wasn't a sort of what I think of as a sort of jolly hum.

And it certainly didn't sound like companies I'd run in the UK. And I thought about this and I was trying to figure out what's wrong. Is it just that, you know, this is the US, it's not the UK and companies sound different. But I just felt it was all a little bit too tasky. It was a little bit too tactical. And I, you know, what I chiefly remembered for my companies in the UK was that

at the end of the day, and definitely on a Friday, people would go to the pub and wait for the horrible London rush hour to subside. And I thought, well, this is Boston, and about eight months of the year it's winter, and everybody drives, and there aren't any pubs. So that's definitely not an option. And so I thought, well, what the heck, I'm just on Friday and just going to tell everyone to down tools at half past four.

And and every week, three people are going to tell us who they are and why are they here? And and it was I you know, it really was beyond awkward, I have to say, because it I mean, it felt very clunky. But I honestly was at my wits end and I just didn't know what else to do. So I thought, what the heck? Let's give this a shot.

And, you know, to be honest, the engineers mostly did PowerPoint presentations and the marketing people mostly did kind of stand up comedy routines. But what it did is it stopped people looking at each other in terms of function and made them start to look at each other as human beings.

And it was absolutely transformative in the way that people started to relate to each other and talk to people and, you know, talk to people in the lunchroom and sometimes even spend, you know, go to a movie together or see each other at weekends or whatever. And it was quite interesting because many, many years later, I was talking about this at an HR conference in Boston. And unbeknownst to me, one of my former employees was actually in the conference and

And in the Q&A session, she put her hand up and said, I was there. It was absolutely transformative. And she remembered virtually every detail of these sessions. And so I think this is about as simple as they come. But it was really my rather lame but effective attempt to get people to see each other

as human beings, not as titles, not as tasks, not as experts, certainly not as rivals, but just to, you know, what I would now call build social capital. Why do you think that we're more in tune with our workplace or more productive or happier when we have a human connection to the people we're spending so much of our time with?

Well, I think the basic thing is that in any organization, you know, the whole premise of organizational life is that together you can do more than you can do in isolation. But that only works if people are connected to each other. And it only really works if they trust each other and help each other. And that isn't automatic.

And I would even argue and have argued at some length that, in fact, I think there's a lot that happens to people as they're growing up that if they did that naturally to begin with, they learn how not to do it. Instead, how to regard each other as rivals and competitors.

Um, so you're only really going to get the value out of organizational life to the degree that people begin to feel safe with each other, to trust each other, to want to help each other. And the way I think about that these days is, um, not surprisingly, I think of it as a network. And I think of all the collective knowledge of the organization flowing through that network

And what impedes the flow is distrust, rivalry, or not knowing what other people need. So to the degree that people are open and generous and information flows quickly, it'll find the problem that it is destined to solve. But all of the distances between people, all of the distrust or just ignorance as to who people are and what they care about,

slows that flow down.

Do you think a lot of organizations inadvertently create rivalry with incentive systems? Or how does that come to be when you think about an organization as a whole entity? There's very similar goals. But when you break it down into sub entities, you have maybe competing or conflicting goals. Yeah. Why is it do you think that organizations develop such rivalries? Well, I think there are a couple of things. I mean, so I think there are kind of sins of omission and sins of commission.

In other words, some of this happens organically and some of it does happen, sadly, deliberately. So the stuff that's deliberate is to do with definitely there are leaders out there who believe that the more people compete within an organization, the smarter and the better the organization will be. They pretty spectacularly misread Darwin.

And, you know, Darwin, there's no evidence that Darwin was a social Darwinist. And they've introduced systems like forced ranking. And forced ranking, in effect, pits everybody against each other. And bear in mind, certainly in the U.S., that most people, the U.S. and, to be honest, the U.K., most people are coming out of competitive education systems and

They may have had very competitive, pushy parents. The predominant metaphor for business in the US is around competitive sports. So there's an awful lot of competitive mindset that comes into a company, whether you ask for it or not. And when you add on to that systems like forced ranking and

hierarchies, you foment necessarily status contests. And what all of that does is it implies that if I help you, you might do better, which by inference means I do worse. So I'm now pretty, you know, if I'm thinking about this and if I feel threatened or anxious, then I'm not going to help you.

And I might know exactly the person who could help you solve your problem or exactly the piece of information that would, you know, help you develop your product or whatever. But I may be quite reluctant to do that because of both the kind of implicit and explicit kinds of competition that exists within the company culture. And I think that however much

you say, you know, we're all in this together, we all need to help each other. You have to think quite carefully about where are these sources of competition coming from and what can I do to make it advantageous for people to help each other rather than compete with each other. A lot of organizations in response to that seem to think that they have to make seismic shifts to make seismic impacts. Part of what you're arguing is that

You know, I'm thinking about all of these grand restructurings we see in the business news almost every week. And part of your argument is that that's not necessarily the case. Well, I mean, the data suggests that most of them won't work. The other thing people do, of course, is they think about silos. So what they do literally is knock down walls, which I think is kind of comic. So they knock down walls and they get a whole bunch of sofas and then they think they're done.

And it's really interesting. I did some work with a big multinational chemicals business some years ago, and they did exactly this. And two things happened. One is they really had one of the most viciously competitive cultures I've ever seen in my life. And so none of that changed. In fact, people were more withdrawn.

Because they no longer even had offices in which they could be safe and generous to the few people they trusted. And the other thing is the chief operating officer acknowledged to me that actually the real reason they paid lip service to collaboration, but really the reason they'd done it is it just saved them a fortune in real estate costs.

So I think there's a lot in these restructurings that isn't necessarily strategic, although it's wrapped up as that. And I think there's also a lot in these restructurings that doesn't appreciate that actually the crucial thing here are the sort of social bonds between people. And that doesn't have to take a fortune to address, but it is going to take time to

And it is going to require that people understand why it matters as a business issue. It's not that we've all just become Girl Scouts and Boy Scouts.

It does require people understand what the kind of critical behaviors are if you're really going to change a culture, which is, after all, a stupendously difficult thing to do. What are the things that people do that change the culture that lend themselves to increasing the probability? I think I read somewhere when I was doing my MBA that the probability of changing a culture is under 5%. But there must be things that people can do that correlate to improved odds. Yeah.

Well, I think it is very – I mean, obviously, it's really important who you hire. It's really important the signals you send to them as to the kinds of behaviors you want. I think that having kind of critical people who appreciate the generosity is a business characteristic. It's not something you just say for out-of-work time, you know?

I think that's really fundamental. You know, that if you really believe that the value of collaboration lies in the kind of aggregation or compounding of talent and creativity, then you have to have an environment in which people are really prepared to help each other.

And people are only really going to be prepared to help each other if they will feel that they in turn will be helped when they need it. And if you feel that not egregiously, but respectably, you might get a bit of credit for your contribution because people don't like to feel invisible, quite rightly.

So basically people don't want to feel like they'll be taken advantage of. They definitely don't. Adam Grodd, of course, is brilliant on this subject. They don't want to feel that they'll be taken advantage of. And as Adam has shown, people have quite a good sense of who the takers are. But I think they also like to feel...

that their contribution has value and the best way for them to feel that is for somebody to tell them. Now, that doesn't mean that every day you go into work and make the equivalent of an Oscars acceptance speech, you know, but it does mean that you kind of have to remember who helped you and people whom other people want to help are very good in remembering those things.

I mean, you know, for me, one of the most fun parts of writing books, actually the most fun part of writing a book is writing the acknowledgements, you know, because it's really fun to remember and to keep track of if you can all the people who helped you. But it's also it's also a way of saying thank you. Why did you start writing books in the first place? Good question. Well.

I had run five businesses and I had got to the point of thinking, I don't want to do this anymore. I had hired and fired so many people. I was fairly burnt out. And I remember going to a fast company retreat of people that, I don't know, writers and people they thought were interesting. And somebody there, and shame on me for not remembering who, said,

said to me, you know, Margaret, just because you're good at something doesn't mean you have to do it forever. And that really stuck with me. And I thought, well, I don't have to run companies forever. That's cool. And I thought, so what I want to do next is I want some sort of business that requires no employees. Now, at that point, your options are pretty limited. And also at the time, so this would be the early 2000s,

coaching was a pretty kind of Wild West arena, and it wasn't an area I wanted to go into. And a friend of mine who's a literary agent in London said, Margaret, you should write a book about the internet. And I thought about it for a long time, and I thought, actually, it's either too early or too late. I'm not sure which, but I don't have anything very interesting to say. And the world's full of books with nothing very interesting to say, so let's not add to that.

But it did get me thinking, well, what would I like to write about? And so I think, you know, those different things, the wanting a business with no employees, the encouragement by my friend, the literary agent, and the great question was, you know, what is interesting enough to you that you might have something to say?

I think that's pretty much the kind of combination of events that led to it. And it's fair to say, you know, before that I'd written a number of screenplays and radio plays and radio programs. And people had always said, wow, Margaret, you write really well. So it didn't feel like a completely bizarre concept. I want to come back to you having wrote plays. But first, are there...

You've run five businesses. Are there recurring patterns to the irrationality that you see happen in organizations you've observed from the outside and run? Do you think of it that way in terms of irrationality or the things you write about simply kind of natural outcomes of bringing groups of people together to accomplish goals? I don't really think specifically about rationality versus irrationality.

I mean, I'm pretty allergic to anything binary, which is probably strange having run a software company. But, you know, I really, I think any time I hear, well, it's either this or it's that, I know I'm being sold a pup. I think my experience is there's always more intelligence and talent in organizations than manages to get out and to surface and to be deployed.

And I've always wondered why and where does it go and why does that happen and where does it get stuck and trapped? And I think also I have always felt that it is in organizations specifically that very good people can go bad.

And I've been endlessly fascinated by why or how that happens. How does that happen? Well, you know, that is my whole book. Willful blindness is really how that happens. But I always felt that that wasn't about rationality or irrationality. It was all sorts of stuff, kind of...

distracting or sending people on detours from themselves. And I wondered why. And so I used to wonder why you'd have a huge number of creative people doing very uncreative work. I wondered how you could get

Huge numbers of perfectly decent people doing really terrible things. I think I was highly driven to run companies in a desire to try to not do that. And this is very characteristic of female entrepreneurs, which is a sort of sense that I want to prove that it's possible to be successful and not do some of the crappy things that traditional managements do routinely.

So I think, you know, I think all of those things were, you know, were kind of very, very big motivating forces, both in the companies that I ran and in the books that I've written. Of course, it's a very it's very scary, right, because I've run five companies and I've written five books. And now I think if I were a numerologist, I'd be extremely anxious and looking for a new career right now. Yeah.

I want to go back to something you said about people thinking in black and white. What do you think causes people to think that way? Well, it's much easier. It's much easier. It's much easier to think that something is either good or bad or black or white or alive or dead. And of course, there are binaries in human life, right? You either are alive or you are not. And it's much more dramatic and we like drama.

I just don't think it reflects the complexity or the richness of life very well. And I think that it oversimplifies to the degree that much that is wonderful, fun, and full of opportunity in life gets kind of run over when you simplify it that much. And it's kind of interesting because I think about this quite a bit in the sense that I think a lot of my books are probably –

more complex than the genre likes. But perversely, I don't really mind. Because I'm really trying to talk about what I see as happening rather than trying to boil it down to a couple of do these three things and everything will be okay. Because I just don't believe it's true. And I do, this is going to sound really pretentious and pompous,

But I do have a very bedrock belief that, as the writer Cyril Connolly said, a writer should be a lie detector.

And so I do care probably disproportionately about trying to get things right. And that means they're not going to be simple. When you're writing, it's really, it's probably easier to come at subjects from a place of nuance. But when you're in your day to day moment, when you catch yourself kind of thinking in black and white, how do you how do you get out of that?

Well, I quite often think to myself, well, Margaret, if you think it's that simple, you have got to be wrong. I like that. You must be missing something. You absolutely must be missing something. So what's the counter argument? And some of that is, I mean, I just, you know, I just feel there's a sort of a demon on my shoulder saying, yeah, really? Who says so? How do you know?

And it's also, of course, that, you know, in my book, Willful Blindness, there's this story about the epidemiologist Alice Stewart doing a study of childhood cancers and her terrific collaboration with the statistician George Neal. And George, who was very introverted, once said of his work with Alice, my job is to prove that she's wrong.

Because if I can't, then she knows she should persevere. And, you know, I just think that's such a phenomenal model of collaboration, which is, you know, the argument is a gift. And I think about this both in terms of, you know, business or writing or family life. You know, somebody who's prepared everything.

to listen and understand what you're saying well enough to argue with you. This is somebody who cares. And so it's just a very kind of fundamental part of the way I think. So often we see argument as a threat, not only probably to us.

Why do you think that is? Well, sometimes, of course, it is. I mean, I'm not that naive. I know there are times people have argued with me at work, you know, not because they had my best interests at heart, but because they wanted my budget. So these things definitely do happen. But I think that

You know, when you're in a really good collaborative environment, the argument is about that's not good enough. How do we make it better? Which is the crucial, the crucial kind of dialogue to have. But of course, people will argue with you because their ideologies are different, in which case maybe they see something you don't. So it behooves you to listen to them.

And it certainly sharpens your own understanding if you are prepared to take it on board and think about, well, if that were true, what would that mean for what I see? Am I missing something?

But I think, you know, obviously we're living through a phase where mostly people aren't prepared to argue with each other. They'll abuse each other in public. They'll abuse each other in social media. But they won't have what I think of as the real argument, which is let us together from different perspectives, explore this territory and figure out what's going on here. Oh.

A lot of the people I seem to talk to who've run businesses or been in senior management often come to this understanding later. At first, they see kind of argumentation or disagreement or thoughtful challenging as slowing them down. And later, only later, they come to see that as actually propelling them forward. Why do you think that is?

Well, I think, you know, often, especially when you're not wildly grown up, it's really easy to take it personally. So-and-so argues with me that means they don't like me. Right. So you need a certain maturity to think beyond that. And especially if you have a very competitive mindset, of course, you've kind of got to get over that. So it takes a certain degree of maturity and it takes a certain amount, I think, of intellectual rigor, right?

which is do you want to get it right or do you just want to win? Right. Those are two very different things. And I think it takes a long time. Maybe I'm just talking about myself. I think it takes a long time to look back and think, well, in those situations I did good work. In those situations I did less good work. What was the difference? Because obviously it's me in both places.

So what were the conditions in which it was easier for me to do better work? And it's interesting because I think that, you know, we often tend to think, well, if I did good work, that's me. And I think one of the things I'm constantly probing is, of course, it's you, but it's also the environment and the context in which you're operating. So what is the context that's really conducive?

you know, to creativity or productivity or, you know, perfectionism or whatever you're pursuing. Because I think this notion that you can do wonderful work regardless of context is romantic and naive. I would 100% agree with that. What environment was conducive for you when you were running these companies to doing wonderful work?

Well, I had an investor who argued with me quite a lot and was a brilliant guy. And I think we both understood it wasn't personal. So that was terrific.

I had a hard core of people that I worked with for quite a long time and with whom I developed very high levels of trust and respect and freedom and safety, which is we could be very open with each other. I think a certain amount of pressure. I think that when I worked at the BBC, at one point I made a documentary about

where I had a huge budget and a huge amount of time. And it's hands down the most boring thing I've ever done.

I mean, not for me, for the audience. It's just, you know, I researched it to death. Right. And what that taught me was actually I like having some pressure, you know, not insane pressure, but I do pretty well under pressure. You need a constraint. I need a constraint. And actually my biggest danger is that I'll accept insane constraints and only afterwards realize actually, Margaret, you just agreed to do something impossible afterwards.

Um, but I like constraints. Um, I like doing things I've never done before. Um, I like trying to do something that I recognize from the outset is going to be difficult. As you were running these companies, how did you make decisions? Did you have a structure for how you went about doing that? Oh, I'm pretty sure I didn't, which is to say, um,

To the degree that we had a structure, we had, you know, a good senior leadership team in which debate was pretty easy. I mean, I remember, for example, having on my senior leadership team a really lovely guy named Will Richmond. And Will was what I think of, perhaps unfairly, as a classic Harvard Business School grad, which he was.

So very, I think what you would call rational, very logical, very thorough, very careful, very different from me, in other words. And he complimented you. And he asked some really hard questions that would always stop me in my tracks. And they always made everything we did better. Hmm.

Um, and I think he found us rather baffling and I think some of us found him baffling, but there was no doubting his goodwill and serious intent. And, um, and so I think we, you know, to the degree that we had a process, we all had to feel in our different ways that the decisions that were being made were for the good of the business. And this has been a kind of, um, I guess you could say hobby horse of mine, which is, um,

I always thought as chief executive, my job was to do what was right for the business, which would not necessarily be what I wanted or what I liked or what was fun or what was easy. I just thought the only job description is what's right for this business. And I think we all felt that, that there was just a point at which when we came to discuss crucial decisions,

That was the only question on the table. I like how that frames the debate in terms of everybody might see things differently, but they're all coming at it from almost the same intent. Yeah, and everybody wanted what was best for the business. Well, that was the working assumption, and I think generally speaking it was true. But it's not about me, and it's not about sucking up to me.

And I think that, you know, this is another very kind of recurrent theme in my work, which is, you know, power is incredibly disruptive.

And you have to be very wary of it and try super hard not ever to have to use it. Let's talk a little bit more about your work and selective blindness or what you call willful blindness. Can you define what you mean by that concept? What's the difference between blindness kind of in hindsight and blindness that could or should have been seen in real time? Yeah. So willful blindness is a legal term.

And I first encountered it when I was writing two plays for the BBC about the collapse of Enron. And in the trial of Jeff Skilling and Ken Lay, the judge, Simeon Lake, referred to it in his summing up to the jury. And he described it as if there are things that you could have known and should have known and somehow managed not to know, the law deems that your ignorance has been a choice and you're responsible for the choice that you made.

And so when I was writing that book, you know, the critical determinant for the cases that I chose was there had to be ample evidence that the information that was ignored was easily and freely available. So, for example, at one point I thought of looking at the case, and I'm going to forget his name now,

There was a horrible case of a man in Austria who had kept his daughter locked up in a basement for years.

and raped her repeatedly and had a child by her and so on. And I thought, and meanwhile, his wife and the rest of his family was living upstairs. And I thought, is this a case of willful blindness? And as unpleasant as the case was, I read through everything I could find about it. And I determined that actually it wasn't knowable that this is what was going on. And there was no evidence that anybody knew what was going on.

in which case it was not willful blindness. It was just ignorance, right? So the ignorance wasn't a choice. It was just nothing to go on. Whereas if you take, for example, what I wrote about the deep water, not deep water, Texas City accident at the BP plant, there are years of consultant reports talking about how dangerous the site is.

So, you know, that were commissioned by BP and sitting in filing cabinets in BP. So that was the really crucial defining characteristic of every case I looked at, which was, was it possible to know this? Because if it wasn't possible, it's not willful blindness. Right.

What circumstances do you think lead to people being willfully blind? If something is knowable, I mean, what's the core of selective or willful blindness in organizations? Is it, it's too hard to face the reality the way it is? So we deny something instead, or is there something that leads us to it? Well, there are lots of different things. I mean, I think, so there are a whole, yeah, so there are a whole bunch of things. One is, you know, we all have

mental models of how the world works. We have to because we couldn't make sense of the world otherwise if every day we started fresh. And the problem with mental models, also business models, also economic models, is they attract confirming data and they repel marginalized or trivialized disconfirming data. So what Alan Greenspan calls our ideology is

will be very useful in bringing to us information and prioritizing information that our model suggests is important, but it will fail to highlight the stuff that the mental model says doesn't matter. We would like to think that it being the nature of organizational life that we're surrounded by

people who are different from us and will therefore might come to us with a disconfirming piece of evidence. But of course, we are individually highly attracted to people just like ourselves.

So we're most likely to choose to be surrounded by people who, roughly speaking, share the same mental models and therefore will see the same things that we see and not see the things that we don't see. So they may sort of amplify our blindness. In addition, there's this fabulous research on organizational silence by Morrison and Millikan at NYU called

That shows that people have issues and concerns at work, but they don't voice them either because they're afraid that they'll be labeled troublemakers. Or it just nobody will pay attention. So why bother? It's just more trouble than it's worth. And in addition to all that, of course, as human beings, we're very obedient. We're very conformist. We want to belong. Right.

And if we see something going wrong and nobody else is making a fuss about it, we will take cues from them and think, well, maybe maybe it's OK. Maybe everybody else knows something I don't. And it's all fine. And I think that there are characteristics of hierarchy.

that exacerbate this so i look up and see that my boss looks pretty happy so i'm not going to rock the boat because my my job description for myself is keep the boss happy um

So I think hierarchy exacerbates it. I think bureaucracy exacerbates it. So I have a job description and I have 25 KPIs and 37 targets. And none of those say if the house is on fire, call the fire department. So when the house is on fire, I don't call the fire department because I'm way too focused on my KPIs.

And I can only think about one thing at a time, and I'm already overwhelmed, and I'm probably also quite tired. So you put all those things together, and you can get Wells Fargo and Volkswagen and General Motors and the economic crash and so on and so forth. What causes some people to buck that trend?

Is it a personality trait? Is it something, a crusade? Is it, we've all, I mean, I've worked in organizations where there are some people who are, I would say, relentless. And they come from a good place, not malicious intent. But they're constantly challenging the status quo and making sure that other people can't be blind to information. What causes that to happen?

Well, it's really interesting, and it's a very, very hard question to answer because, you know, there's a lot of mythology around such people who are customarily described as whistleblowers, although that's quite a complicated term. So there's a mythology that says they're mostly women, and the research doesn't bear that out. There's mythology that says they're people of faith. The research doesn't bear that out.

The only thing I could find, and I've interviewed hundreds of such people, they tend to be a little nerdy. And I emphasize a little because, you know, not spectacularly, but they are definitely people who like detail. And as a consequence of liking detail, they may be slightly better than average pattern recognizers.

So they'll start to see things that will prompt questions. I like that. And they're very good at doing, you know, this is how Hannah Arendt defined thinking. They're very good at having a conversation with themselves along the lines of, hmm, what does that mean? Does it matter?

If it mattered, what else might I see? Oh, I've just seen that too. Oh, that's tricky. And they're doing that all the time. It's not generally speaking switched on by a problem. It's the way they experience life. So I think there's that. I think in general...

And of course, there are always exceptions to this. But in general, such people are deeply dedicated to the organization that they serve. So they want to protect it. They want they do instinctively hold it to a very high standard.

And so when they see lapses, they're quite concerned. That's incredibly counterintuitive because organizations often see those people as troublemakers or making things difficult for other people or slowing things down or a variety of other things. Right. Well, I think that's true, but it's really interesting. I was talking to the head of the British Army last week and he said, you know, we now see that these people are helpful, right?

Because they may see things before we do, and we need that. And I heard exactly the same thing from the chief executive of a big supermarket chain here in the UK that had some significant problems.

accounting issues leading to, you know, restatements of earnings and so on, and also some issues around food quality. So I think part of what has happened is that as we've come to understand that in the cases of willful blindness, there almost always are people who see it early.

That actually, if we would not rush to get them fired or silenced, but instead have the kind of poise and courage to listen to them, they might represent a really outstanding early warning system.

I think that's a good way to look at it. Can we explore Enron a bit, which is something I know you've done a lot of work on and a play on. I know it's also not current news, but nothing we talk about really on Farnham Street is current news. It's a story from business history that fascinates me, as it kind of should for anybody who's

Absolutely. What do you feel was at the core of Ken Lay's unwillingness to see and address reality there? Like, how did Enron morph from a sort of boring, steady company almost for retirees into the corrupt, aggressive machine that it ended up becoming? And why do you think it wasn't stopped earlier by someone either internally or someone externally? Yeah. I mean, I could talk about this for hours. Yeah.

I think Leigh is a very, very interesting character, partly because he's a preacher's son. He comes from a very, very poor background. He is, I think, seriously quite a religious person. I think he had a very strong sense of himself.

as morally a very fine person. Now, I know that could sound absurd, but I think, I mean, I have interviewed so many people who knew him, who aren't necessarily defending, you know, Enlon at all, but who will talk to this.

including his pastor in Houston, you know, who was rhapsodic about the effort Leigh went to to get public transportation in Houston so that poor people could get to jobs. So I think, you know, my theory about Leigh is that

that his sense of himself as a good person was so profoundly defended that he could not conceive that his company could do bad things. And I had a long conversation with Albert Bandura about this because, of course, Bandura's whole

kind of life's work. It's about the degree to which we have to think about ourselves, think of ourselves as good people. And we will bend our experience of life to keep that sense of good self intact. And so I think that's what was going on with Lay. And of course, it's also important to remember when everybody

says you're the greatest thing ever, and they surround you with praise and wealth and accolades. That's very seductive. So that, I think, I think explains why he didn't see it. It doesn't explain why it went wrong.

Why did it go wrong? I tend to believe that that's more to do with skilling than with lay, though I may really be letting him off the hook here. You know, skilling clearly did believe in social Darwinism to an extreme degree and absolutely played on the competitive instincts of people in the company and everything in the company culture.

was designed around this. Now, I think it's also true that N1 was packed full of people who were very uncomfortable with what was going on. And I remember talking to Sharon Watkins about this and her saying, you know, it was, I think it was with Skilling that they decided to do a kind of Christmas show of The Wizard of Oz.

You know, which is almost as big a clue as you could ask for, right? Yeah. That, you know, that this is all fake. So there's a kind of collective awareness there. And she also said something really interesting. She said she noticed a lot of people around her getting very overweight. And she wondered what was the emptiness they were trying to fill.

In other words, they kind of felt something was wrong and they were overly driven to comfort themselves. And she talked also about, you know, private conversation that she had with people while working there about, you know, is this what happened in Germany? And so I think, you know, I mean, Sharon's, of course, notable for having actually had the nerve to try to do something about it.

Um, but I think, I mean, there's evidence that lots and lots and lots of people knew that it was going badly wrong. Now, I think, you know, skilling was a very intimidating character, quite, you know, extraordinarily aggressive. So if people are afraid, which in a competitive environment like that, they will be, and they have huge incentives to just shut up and deliver, they will. We know this.

What can we do to avoid a similar fate? Well, it's a great question. I think we have to be very humble about how fragile our sense of good and bad is. And, you know, Stanley Milgram wrote about this brilliantly. He talked about how when we go into an organization, right,

Our moral focus shifts essentially from wanting to be a good person to wanting to do a good job. And we implicitly assume that doing a good job is doing what we're told. And there is much in our organizational life that creates, if you like, a sort of special identity for us. The person you are at work is not identical to the person that you are at home.

which also is probably not entirely consonant with the person you are on the golf course or, you know, on the baseball pitch. You know, identities are not as absolute and fixed as we used once to imagine. And so we have to be very alert to how we change in different environments.

and pay attention to what we leave behind and what gets amplified. And it's, I mean, I think it's a very hard problem. I work on a thing here in England called the Responsible Leadership Program where, you know, we work very hard with senior executives to try to alert them to the dangers of

That exists in organizational life not because the organizations are bad, but just because there are organizations And obviously some are more dangerous places to work than others But the assumption that you're just you know that that the assumption that can lay made if you like I'm a good person and therefore nothing I do can be bad

That's just not safe. I think that's a good place to end the discussion on Enron. And we'll have to have an Enron. I think so. Yeah, we should definitely do an episode. We could just dissect that case. I know, but it's really funny because I remember talking to Frank Partnoy and he said, you know,

It was when he was teaching corporate finance at University of San Diego. And he said, you know, most of his students have never even heard of it. Oh, that's so sad. And we were joking. He said, you know, what we need is we need a desk calendar of business catastrophes. Because otherwise everybody forgets. Yeah, and you're doomed to repeat this stuff. Yeah. Yeah.

I want to hit on maybe a bit of a touchy subject and switch a little bit more to some personal questions. The intersection of a couple of things that you've written about a lot is seemingly coming into the forefront now. So women in the workplace and this concept of willful blindness that we've been talking about.

Do you think that the massive list of kind of previously unreported sexual harassment coming to the forefront is sort of a prime example of people having turned a blind eye for all of these years? And what is watching this unfold meant to you personally? Well, it's interesting. Absolutely. It's an epic example of willful blindness. And in fact, off the back of that, my publishers have just commissioned an updated edition of the book.

Um, you know, and not only because of that, because obviously there are many cases that have occurred, you know, high profile cases that have occurred since the book came out. But obviously this is really just an epidemic, right? So why? Um, also I became very uncomfortable at one point a couple of weeks ago where, you know, people were just quitting left, right and center. And I,

I felt like it was watching a production of The Crucible. And I talked to a friend of mine who's a lawyer and just said, you know, what's going on here? You know, it makes me uncomfortable that this is getting such a head of steam. And she said, well, Margaret, these individuals are being fired now because the companies have been keeping dossiers. They all knew.

But as long as they could get away with it, these high profile people are delivering real business value. And they're able to fire these people very quickly because they have the information. Oh, that's interesting. I hadn't thought of that. I hadn't either. And it made me feel a little more comfortable, although, you know, there's nothing about this that should really make anybody terribly happy, except that maybe now it'll stop or at least reduce people.

So the first, you know, the first chapter in Willful Blindness is about bias. And of course, you know, we inhabit a business environment that is was built by men for men in their own image and not surprisingly favors men. And I think that concentration of power is always dangerous. And I think everybody's biased. You know, the biology suggests that everybody's biased.

And so when you have one group that basically holds power with bias in all of them, you are going to get what economists call perverse outcomes. Now, you can look at it a different way, too. When I wrote my first book about women's corporate careers, I thought a lot about power. And the reason I thought about it was because

So many women said to me they didn't really like the idea of power. And I always thought, really? How are we going to get anything done without it? And I think what I concluded was that it isn't that women don't like power at all, but that we think of it differently.

So many of the very, very successful women I interviewed for that book and for my second book, which is about the rise of female entrepreneurship, Women on Top, thought of power as orchestration. The power to bring people together to do collectively what they couldn't do alone. I think there is another concept of power, which is about domination.

And I think that's specifically the kind of power which women were saying they rejected. And I think there are certainly many organizations, many corporate cultures where power is about domination. And in those environments, the kind of harassment and intimidation that we've seen is possible.

And, you know, harassment is an abuse of power. It happens because people have power over others. Do you think we're about to see a lasting change? I don't know. I think, I guess I have two questions. One is, will it all blow over and everybody think, oh, thank God that's over. We can go back to business as normal, whatever that is. And I have a second question, which is,

will it trickle down? Which is, I remember interviewing a young woman who worked in a car showroom talking about sexual harassment. So this is not a famous young woman working in not a famous place for not a famous boss. And my question is, will her life, her working life get better?

Because if it doesn't, then this isn't good enough. Right. And I really don't know. I mean, it certainly feels and I know everybody's saying it feels like a real sea change. And I would really love to think that it is. But I think for the for it to have lasting impact.

requires more than heads rolling. It requires a, you know, as well as the kind of negative, let's get rid of this, it requires a positive, which is what is the concept of power that replaces it? And whether that will take root, I don't know. And how far this is actually displacement activity,

Because some people in power can't be removed. I don't know. I really hope it marks the beginning of something quite different, but it's way too early to tell. I share your hope. Yeah. I mean, it's, you know, it just beggars belief that women go into work and get underpaid and physically intimidated, you know?

And people are saying, well, it really makes a difference to guys if they have daughters. Then they take this stuff seriously. And I find myself thinking, well, don't any of them remember that they all had mothers? I mean, really, the notion that, well, we didn't really get it until we had daughters, it just feels very lame to me. But clearly...

It's clearly we are very, very, very trapped in our biases. I remember hearing Satya Nadella talking about, you know, the terrible gaffe he made at the Grace Hopper Conference for Women in Computing when asked about the gender pay gap. And a year later, he was still talking about what an eye opener the blowback had been.

And how his mother and his wife had talked to him about had he not seen how hard it had been for them. You know, Nadella is a very thoughtful, sensitive human being. And he'd somehow missed this, which suggests that, you know, we are very, very trapped in our own biases.

Hopefully we can help people step back and get a little more perspective and context in the sense that we can learn about some of these things with an enduring progression. I certainly hope so. I certainly hope so. What are the most important things you've learned over your career that are perhaps not well appreciated by others? Oh, golly. What have I learned? Have I learned anything? Yeah.

Sure, I have somewhere. I mean, the difficulty with learning, if it's any good, is it just becomes part of who you are and then you forgot that you didn't always have it. Right. It's like it's hard for us to remember what life was like before we knew how to read. I think certainly the thing of not taking argument opposition personally, really fundamental.

I think carrying with me this sense that I could always be wrong is really fundamental. You know, there's just this great question, you know, if I were wrong, what would I see? That really is kind of in my bloodstream now. And some of that's, you know, because there have been times when I have been wrong.

I think something that I have really toyed with a lot, and I think many people do, which is when do I really dig my heels in and when do I let things go? So to take that out of the abstract, there was a time I produced a monster global co-production for the BBC. And it was for all kinds of reasons, you know, logistically, ridiculously complex.

And among other things, it involved a number of live broadcasts from Paris. And I'd never done a live broadcast before in my life. And I'm generally really up for things that are hard and that I've never done before. But on top of all the other programs I was producing, this was just kind of way, way too much.

And I remember going to my boss at the time and saying, I have no expertise. I have no experience. I don't think it plays to my strengths. I'm absolutely drowning in the 10 other programs I'm responsible for. I need help. And he put his arms around my shoulder and said, Margaret,

The only problem you have is you're just not confident enough. And I thought, well, I guess he's right. I mean, I'm not that confident. So maybe I can do it. And I mean, to cut to the chase, this is some of the worst programming ever seen on BBC television. It was a catastrophe. And I look back on that and think, wow.

He was wrong to say that and not to hear what I was saying. But I was wrong to let him do that. I should have said, no, actually, I cannot do this. I just, I'm at my limit. No. And so that's, you know, I think that those are very hard calls to make. At what point is this a stretch goal? And at what point is this madness?

So I think that's something I've learned the hard way. I mean, we always learn things the hard way. Do you have a process for reflecting on your failures that enables you to learn from them? Well, I don't think I have a process. I think I'm very, very interested in mistakes. And I'm very ready to acknowledge them when they occur.

partly because I want people who work with me to feel that it's completely safe to do so and they won't unless they see me do it too right um so I think because I've all I've felt that for quite a long time I'm very comfortable acknowledging to myself wow you really screwed up there Margaret and I will then pretty quickly sit down and try to think about okay how did this happen

So let's not say it was a fluke. It might have been a fluke, but let's assume it wasn't a fluke. What were the things leading up to it that caused this to happen? And can some of those things be changed? And sometimes, you know, the answer is no, actually, everything went right. You just blew it.

But mostly you can see that there was no margin for error. There wasn't enough margin for error. Or I was working too hard to please. Or I didn't spot some early warning signs. Or a classic mistake I made more than once was I thought I could do it for less money than I could. Or I could do it with fewer resources than I could. So I...

I guess, you know, I don't tend to think this is a judgment on me. This is Margaret. Are you a good person or not? I tend to think, what could you learn from this? I think that's a good way to look at it. And, you know, and I was very lucky because my chief investor once said to me, you know, Margaret, I don't mind you making mistakes. I'm just going to be seriously pissed off if you make the same mistake twice, because that's going to show you weren't paying attention.

And I thought that was terrific. So I said, okay, my promise to you is I will make different mistakes every time. That's a good promise. What sort of things do you read? Like what's on your nightstand right now? Oh, wow. All sorts of things. I read fiction in the summer or when I'm not writing. I mean, I read fiction mostly in the summer because I think it's just good for me and good for my brain. Yeah.

I'm trying to think. I'm looking around my office. What am I reading? I'm reading a book called The Curse of History at the moment. Analogies at War is another book I'm reading. So I'm reading quite a lot of history at the moment. And I always read a lot of history. That's fair to say. There's a book across my desk on Thomas Beckett.

So I read a lot of history. I read a lot of fiction. I read quite a lot of poetry. I read quite a lot of history of art. I read very, very few business books. Has it always been that way or is that just as you've grown in life? I think it's always been this that way. I read a lot of biography.

I'm looking across my office at a fantastic double biography of Mary Wollstonecraft and Mary Shelley, the mother and daughter. Yeah, I mean, I do read some business books, but I read very few. What's your process for reading a book? Are you somebody who picks it up and goes cover to cover nonstop? Do you flip around? Do you look at the outline? How do you actually consume the book?

Well, it depends. If I'm reading it as I think of for work, I'll read it quite fast. I'll generally read it on my iPad and I'll annotate it quite carefully. If I'm not reading it with a specific purpose in mind, I'll read in a much more leisurely fashion and I'll quit if I don't like it.

I care a lot about how things are written. I mean, a couple months ago, I was reading Lionel Shriver's book, The Mandibles, and it stopped me in my tracks because there was just a wonderful sentence in it. And I thought, oh, wow. Wow, this is really good writing. So I'm somehow subliminally paying attention to that kind of thing. I read quite a lot of books.

stuff by dead writers. So I read a lot of 19th century fiction, early 20th century fiction. I read a lot of old books. I mean, you know, a couple months ago I was reading Kennedy's Profiles in Courage, which was not at all what I thought it was going to be. I'm very interested by, you know, how much great stuff there is that we think we know what it is, but we're wrong. Yeah.

The same happened when I read When Prophecy Fails, which is Festinger's wonderful book in which he comes up with the theory of cognitive dissonance. And it's I mean, I think it's kind of a hilarious read because it's clearly a scholarly piece. But, you know, the whole situation is so absurd that the contrast between academic writing and this insane situation is just kind of.

accidentally hilarious. Yeah. And I definitely read what I think of as car crash business books. You know, so books about businesses that go wrong. And I read some books about, you know, kind of happy ending business books. So American Icon, I really enjoyed about the turnaround at Ford. Yeah, I thought it was a really good book. And it was fascinating because I was at Ford last week and

And so talking to people there and thinking about what's happened in between times, you know, it's really helpful. And the conversation I was having with Frank Partnoy about, you know, the business catastrophe death calendar was very much because we both lamented the degree to which business people often have very little sense of history. And history is almost never taught in business schools. It's all the live case studies.

or the case studies, you know, where the ending is known and therefore implicitly, structurally looks predetermined.

And I just think that having a sense of what the longer story is is really important. I agree with that. You've led a varied life. You've been involved with so much over time. Was there any grand design behind it, or were you just putting one foot in front of the other? What would you say to a young person who wants to follow in your footsteps? Well, definitely, no, absolutely no grand design. Absolutely none.

I mean, I've definitely experimented with lots of things. I think so. My advice, you know, to my kids is try stuff, try stuff. And whatever you're going to try to do, try to do it with the with people who do it at a really high level. So just try to work with people who you think are really serious about what they're doing.

So don't mess around. If you're going to do it, do it with the very best people you can find. Because even if you then decide, actually, this is not my thing, you will have been exposed to high quality thinking or high quality doing. And that's just always more interesting. I mean, it's interesting because both of my kids went to a school here in England, which

is notable for being a really outstanding music school, but they didn't specialize in music. And what was interesting, and they said this to me, is that

The music in the school is so outstanding. It just gives you a sense of what excellence is. Right. And I thought that was a really good way of putting it. Super insightful, yeah. Yeah. So I would say, you know, try stuff, but try stuff done as well as you can find it. And contribute as much as you can. So be generous.

Be curious. Be reliable. I think reliability is the most undervalued characteristic.

If you say you're going to do something, do it no matter what. Yeah. And be, you know, be interested in other people because they are all interesting. No matter who they are, they're interesting. It's up to you to find what's interesting in them, but it's in there somewhere. That's what I tell my kids. You can learn something from everybody. Your job is to be a detective and kind of like find out or uncover what that is.

Yeah, that must be the fun thing of what you're doing now, which is being able to have wonderful conversations with people. Yeah, and you're definitely facilitating that.

But you're facilitating that too, you know. Thank you. Yeah. Where can people find out more about you? My website, which is just www.mheffernan.com. And that's the best place to look. Awesome. Thank you, Margaret, so much. They'll find out very much about me for the next nine months because I'm not doing any more speaking engagements because I can get my head down and write something different.

Well, I look forward to when that comes out. So do I. Thank you so much for agreeing to come on the Knowledge Project. This has just been an absolutely wonderful conversation. Well, I've enjoyed it. And Adam said I would. So I appreciate you making the time for it and asking such great questions because I

I do often think it takes a lot more to come up with a good question than to come up with a good answer. I don't know if that's true, but we definitely try to come up with interesting questions that we can ask people that we haven't heard before on their interviews. And the process that we use for the podcast is very labor intensive and time consuming in the amount of work that we put into a show. But preparation is everything, isn't it?

Right. It's not necessarily that it will go the way that you think. But if you're prepared, more interesting stuff will happen. I 100 percent agree with that. So that's why we do kind of what we do. I don't know how people put out shows like every two weeks where we struggle to kind of do one a month at this point. But it depends on what you care about, doesn't it? Do you want to do a huge amount of stuff or do you want to do something really well? Oh, exactly. Yeah.

Hey guys, this is Shane again. Just a few more things before we wrap up. You can find show notes from today's show at fs.blog slash podcast. You can also find out information on how to get a transcript there. And if you'd like to receive a weekly email from me filled with all sorts of brain food, go to fs.blog slash newsletter. The newsletter is all the good stuff I found on the internet this week that I've read and shared with close friends, books I'm reading, and so much more.

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