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The Stockdale Paradox: Good to Great, pgs 83-87

Of course, not all good-to-great companies faced a dire crisis like Fannie Mae; fewer than half did. But every good-to-great company faced significant adversity along the way to greatness, of one sort or another-Gillette and the takeover battles, Nucor and imports, Wells Fargo and deregulation, Pitney Bowes losing its monopoly, Abbott Labs and a huge product recall, Kroger and the need to replace nearly 100 percent of its stores, and so forth. In every case, the management team responded with a powerful psychological duality. On the one hand, they stoically accepted the brutal facts of reality. On the other hand, they maintained an unwavering faith in the endgame, and a commitment to prevail as a great company despite the brutal facts. We came to call this duality the Stockdale Paradox.

The name refers to Admiral Jim Stockdale, who was the highest ranking United States military officer in the "Hanoi Hilton" prisoner-of-war camp during the height of the Vietnam War. Tortured over twenty times during his eight-year imprisonment from 1965 to 1973, Stockdale lived out the war without any prisoner's rights, no set release date, and no certainty as to whether he would even survive to see his family again. He shouldered the burden of command, doing everything he could to create conditions that would increase the number of prisoners who would surrvive unbroken, while fighting an internal war against his captors and their attempts to use the prisoners for propaganda. At one point, he beat himself with a stool and cut himself with a razor, deliberately disfiguring himself, so that he could not be put on videotape as an example of a "well-treated prisoner." He exchanged secret intelligence information with his wife through their letters, knowing that discovery would mean more torture and perhaps death. He instituted rules that would help people to deal with torture (no one can resist torture indefinitely, so he created a stepwise system - after x minutes, you can say certain things - that gave the men milestones to survive toward). He instituted an elaborate internal communications system to reduce the sense of isolation that their captors tried to create, which used a five-by-five matrix of tap codes for alpha characters. (Tap-tap equals the letter a, tap-pause-tap-tap equals the letter b, tap-tap-pause-tap equals the letter f, and so forth, for twenty-five letters, c doubling in for k.) At one point, during an imposed silence, the prisonners mopped and swept the central yard using the code, swish-swashing out "We love you" to Stockdale, on the third anniversary of his being shot down. After his release, Stockdale became the first three-star officer in the history of the navy to wear both aviator wings and the Congressional Medal of Honor.

You can understand, then, my anticipation at the prospect of spending part of an afternoon with Stockdale. One of my students had written his paper on Stockdale, who happened to be a senior research fellow studying the Stoic philosophers at the Hoover Institution right across the street from my office, and Stockdale invited the two of us for lunch. In preparation, I read In Love and War, the book Stockdale and his wife had written in alternating chapters, chronicling their experiences during those eight years.

As I moved through the book, I found myself getting depressed. It just seemed so bleak-the uncertainty of his fate, the brutality of his captors, and so forth. And then, it dawned on me: "Here I am sitting in my warm and comfortable office, looking out over the beautiful Stanford campus on a beautiful Saturday afternoon. I'm getting depressed reading this, and I know the end of the story! I know that he gets out, reunites with his family, becomes a national hero, and gets to spend the later years of his life studying philosophy on this same beautiful campus. If it feels depressing for me how on earth did he deal with it when he was actually there and did not know the end of the story?"

"I never lost faith in the end of the story," he said, when I asked him. "I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade."

I didn't say anything for many minutes, and we continued the slow walk toward the faculty club, Stockdale limping and arc-swinging his stiff leg that had never fully recovered from repeated torture. Finally, after about a hundred meters of silence, I asked, "Who didn't make it out?"

"Oh, that's easy," he said. "The optimists."

"The optimists? I don't understand," I said, now completely confused, given what he'd said a hundred meters earlier.

"The optimists. Oh, they were the ones who said, 'We're going to be out by Christmas.' And Christmas would come, and Christmas would go. Then they'd say, 'We're going to be out by Easter.' And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart."

Another long pause, and more walking. Then he turned to me and said, "This is a very important lesson. You must never confuse faith that you will prevail in the end - which you can never afford to lose - with the disscipline to confront the most brutal facts of your current reality, whatever they might be."

To this day, I carry a mental image of Stockdale admonishing the optiimists: "We're not getting out by Christmas; deal with it!"

That conversation with Admiral Stockdale stayed with me, and in fact had a profound influence on my own development. Life is unfair - sometimes to our advantage, sometimes to our disadvantage. We will all experience disappointments and crushing events somewhere along the way, setbacks for which there is no "reason," no one to blame. It might be disease; it might be injury; it might be an accident; it might be losing a loved one; it might be getting swept away in a political shake - up; it might be getting shot down over Vietnam and thrown into a POW camp for eight years. What separates people, Stockdale taught me, is not the presence or absence of difficulty, but how they deal with the inevitable difficulties of life. In wrestling with life's challenges, the Stockdale Paradox (you must retain faith that you will prevail in the end and you must also confront the most brutal facts of your current reality) has proved powerful for coming back from difficulties not weakened, but stronger - not just for me, but for all those who've learned the lesson and tried to apply it.

The Stockdale Paradox:

• Retain faith that you will prevail in the end, regardless of the difficulties.
• AND at the same time
• Confront the most brutal facts of your current reality, whatever they might be.

I never really considered my walk with Stockdale as part of my research into great companies, categorizing it more as a personal rather than corrporate lesson. But as we unraveled the research evidence, I kept coming back to it in my own mind. Finally, one day during a research-team meeting, I shared the Stockdale story. There was silence around the table when I finished, and I thought, "They must think I'm really out in left field,"

Then Duane Duffy, a quiet and thoughtful team member who had done the A&P versus Kroger analysis, said, "That's exactly what I've been struggling with. I've been trying to get my hands around the essential diffference between A&P and Kroger. And that's it. Kroger was like Stockdale, and A&P was like the optimists who always thought they'd be out by Christmas."

Then other team members began to chime in, noting the same differrence between their comparison sets - Wells Fargo versus Bank of America both facing deregulation, Kimberly-Clark versus Scott Paper both facing the terrible might of Procter & Gamble, Pitney Bowes versus Addressograph both facing the loss of their monopolies, Nucor versus Bethlehem Steel both facing imports, and so forth. They all demonstrated this paraadoxical psychological pattern, and we dubbed it the Stockdale Paradox.

The Stockdale Paradox is a signature of all those who create greatness, be it in leading their own lives or in leading others. Churchill had it durring the Second World War. Admiral Stockdale, like Viktor Frankl before him, lived it in a prison camp. And while our good-to-great companies cannot claim to have experienced either the grandeur of saving the free world or the depth of personal experience of living in a POW camp, they all embraced the Stockdale Paradox. It didn't matter how bleak the situation or how stultifying their mediocrity, they all maintained unwavering faith that they would not just survive, but prevail as a great company. And yet, at the same time, they became relentlessly disciplined at confronting the most brutal facts of their current reality.

Like much of what we found in our research, the key elements of greatness are deceptively simple and straightforward. The good-to-great leaders were able to strip away so much noise and clutter and just focus on the few things that would have the greatest impact. They were able to do so in large part because they operated from both sides of the Stockdale Paradox, never letting one side overshadow the other. If you are able to adopt this dual pattern, you will dramatically increase the odds of making a series of good decisions and ultimately discovering a simple, yet deeply insightful, concept for making the really big choices. And once you have that simple, unifying concept, you will be very close to making a sustained transition to breakthrough results.

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Trial by Fire, by James Stockdale - Video Transcription

In the time of peril, like the needle to the loadstone (magnet, as in a compass), obedience, irrespective of rank, generally flies to him who is best fitted to command. Herman Melville, 1850.

Let me tell you something about myself. In 1960, I was a U.S. Navy Lieutenant Commander, a fighter pilot just off carrier duty, when I started the most important years of study of my life - at Stanford and at the Hoover Institution. I studied the humanities in a post-graduate program paid for by the government. Within three years after I left Stanford, I had been shot down over North Vietnam. Imprisoned in an old French dungeon in Hanoi, and became one of the first heads of government, of a covertly organized colony of American prisoners of war. A colony was destined to remain autonomous for nearly eight years. During this period, I thanked God for those 24 months of history, politics and philosophy at Stanford and Hoover. And I was grateful, too, for the practical lessons in leadership at sea that I had, up to that time.

In that atmosphere of death and hopelessness, stripped of the niceties, the amenities of civilization, my ideas on life and leadership crystallized. I returned home with a simple, almost sparse concept of what qualities a leader should have. And I believe, with utmost conviction, that these traits are right, a crisis leader. I would like to share my views with you.

Let me make one point first. I think these criteria are important because our changing times demand the kind of person who can lead them in troubled times. Down the road, locating these individuals will be crucial to the welfare of all sectors of our society. I’m not talking about our nominal leaders who may look the part, who say the right things, who indeed may be the right people in calm waters. I’m talking about the leaders who, to use Melville’s phrase, “in time of peril,” come out of nowhere to control the flow of events. The businessman who rises to the top, to keep a company afloat during an oppression.  The warrior, who takes command of a decimated battalion, rallies its spirit, and makes it whole again. The mayor, who gets a bankrupt city back on its feet.

Frequently, these are not the people the public was acclaiming before the fire started. These are the natural leaders to who others instinctively turn, it times of crisis, who become the leaders, by trial by fire. What are the true qualities we’re looking for? Let me examine just five:

1. Must be a moralist. First, in order to lead under duress, one must be a moralist. By that, I don’t mean being a poser, one who exhorts his comrades to be good. I mean, he must be a thinker. He must have the wisdom, the courage, indeed the audacity to make clear his want, of under the circumstances, what good is. This requires a clear perception of right and wrong and the integrity to stand behind the assessments. The surest way for a leader to wind up in the ashcan of history is to have a reputation of indirectness or deceit. A disciplined life will encourage commitment to a personal code of conduct.
2. He must be a writer of law. Second, there are times when leaders must be jurists. When their decisions must be based solely on their own ideas of fairness. In effect, they will be writing law. When they’re on the hot seat, they’ll need the courage to withstand the inclination to duck a problem. Many of their laws will necessarily be unpopular. But they (the leaders) must never be unjust, who will glib cerebral detached guys, who get by in positions of authority, until the pressure is on. Then people ease away from them and cling to those they know they can trust.  Those, who can met out just punishment and look their charges in the eye as they do it. When the chips are down, the man with the heart, not the soft heart, not the bleeding heart, but the Old Testament heart of wisdom. The hard heart that comes into his own.
3. Must be a teacher. Third, every good leader is a good teacher. He is able to give those around him a sense of perspective, and to set the moral social, and particularly the motivational climate among his followers. This is not an easy task. It takes wisdom and self discipline. It requires the sensitivity to perceive philosophic disarray in one’s charges, and the knowledge of how to put things in order. I believe that a good starting point is the old injunction, “Know thyself.” A leader must aspire to strength, compassion and conviction several orders greater than required by society in general.
4. Must be a steward.  Fourth. A leader must remember that he is responsible for his charges. He must tend the flock – not only cracking the whip, but washing their feet when they are in need of help. Leadership takes compassion. It requires knowledge, character and heart to boost others up, to show them the way. The Civil War historian, Douglas Southall Freeman described his formula for stewardship, when he said, “You have to know your stuff to be a man, and to take care of your men.”
5. Must be a philosopher. A fifth requirement of a good leader is a philosophical outlook. At least, he should understand and be able to compassionately explain, when necessary, that there is no evidence that the way of the world assures the punishment of evil, or the reward of virtue. The leader gives forethought, the coping of undeserved reverses. As he’s expected to handle fear with courage, so also is he expected to handle calamity with emotional stability, or, as Plato might say, “with endurance of the soul.” Humans seem to have an inborn need to believe that virtue will be rewarded, and evil punished. Often, when they come face to face with the fact that this is not always so, they are crushed. The only way I know they end a failure, is to gain historical perspective. Think about people who have successfully lived with failure. A verse from the book of Ecclesiastes (9:11 KJV) perfectly describes the world to which I returned, from prison. “I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favor to men of skill; but time and chance happeneth to them all.” Ecclesiastes (9:11 NIV) “I have seen something else under the sun: The race is not to the swift or the battle to the strong, nor does food come to the wise or wealth to the brilliant or favor to the learned; but time and chance happen to them all.”

The light, at the end of the tunnel. These are my views, based on my professional and personal experiences. My own trial by fire. As we look to the leaders of the future, I believe, that the criteria that I have listed will give us leaders who do not follow public opinion, but transforming leaders, who can implant high-minded needs in place of self-interested wants in the hearts of their people. One of their tests will be the ideals they inspire in their followers. And the other will be their own fortitude and behavior. The key to our future leaders’ merit may not be hanging in there to the light at the end of the tunnel as expected. It will be their performance when it looks like the light will never show up.

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