Note: I reviewed this book when it was first published and recently re-read it, curious to see how relevant its material has remained. My conclusion? If anything, even more now than it was in 2010. Better yet, Amazon has a limited number of hardbound copies for sale at only $10.78. That’s not a bargain, it’s a steal.
The “unconscious calculus” of “protective stupidity”
By now, Richard Tedlow has gained and fully deserves his reputation for writing books and articles that are of the very highest quality. In Giants of Enterprise, he examines the lives and careers of seven entrepreneurial CEOs: U.S. Steel’s Andrew Carnegie, Kodak’s George Eastman, Ford Motor Company’s Henry Ford, IBM’s Thomas Watson Sr., Revlon’s Charles Revson, Intel’s Robert Noyce, and Walmart’s Sam Walton. Then he wrote The Watson Dynasty in which he explains the causes and effects of what he characterizes as “the fiery reign and troubled legacy of IBM’s founding father and son.” More recently, he wrote Andy Grove: The Life and Times of an American. In my opinion, it one of the two most important business biographies published in recent years, with the other being T.J. Stiles’s The First Tycoon: The Epic Life of Cornelius Vanderbilt.
Note: I now add Walter Isaacson’s biography of Steve Jobs to my short list.
Denial is his latest book and, in my opinion, his most important and most valuable…thus far. As he explains in the Introduction, “Denial is the unconscious calculus that if an unpleasant reality were true, it would be too terrible, so therefore it cannot be true. It is what Sigmund Freud described as a combination of `knowing with not knowing.’ It is, in George Orwell’s blunt formulation, `protective stupidity.'” Tedlow acknowledges that there are several short-term benefits of denial (e.g. it is soothing, convenient, allows us to live in a world we have created and thus control…”while it lasts”) and that is why it is so seductive. “Denial sometimes actually works,” as with entrepreneurs who refuse to be discouraged despite the fact that the overwhelming majority of new businesses fail. Also, “the inevitability of catastrophe does not mean that we personally will suffer the consequences.” In most circumstances, denial does work in the short-term.
What we have in this extraordinarily informative as well as eloquent book is a comprehensive explanation of what the subtitle correctly indicates: “why business leaders fail to look facts in the face – and what to do about it.” Tedlow carefully organizes his material within two Parts. In the first, he examines those who “got it wrong” (i.e. refused to face realities). They include Henry Ford and his denial of what consumers wanted, five major tire manufacturers (i.e. Goodyear, Firestone, Uniroyal, BFGoodrich, and GenCorp) who denied the significance of the “radial revolution” initiated in Europe, and A&P’s denial of emerging demographics and consumer preferences. In Part II, Tedlow shifts his attention to several examples of those business leaders who “got it right” at DuPont, Intel, and Johnson & Johnson.
Here are a few brief excerpts from Part I:
Whereas Alfred P. Sloan at General Motors realized that the desires and expectations of consumers were changing in the 1920s and they wanted more and better choices, Henry Ford observed that “any customer can have a car painted any color that he wants as long as its black…He needed people to buy black cars because the only finish available was a black enamel that could be quickly baked on.”
In the 1970s and 1980s, the five major tire manufacturers’ denial of a new technology “took place in two distinct phases. At first, they refused to believe that radial tires would succeed in the American market the way they had in Europe. Second, after it became clear that radials would indeed make it in America, the tire manufacturers denied that their world would change forever. Denial, however, does nit change reality. It simply makes reality tougher to deal with.”
“What the A&P executives denied is that there are, in Disraeli’s famous phrase, ‘lies, damn lies, and statistics.’ A&P executives celebrated the statistics they liked. They ignored the statistics they did not like…Sales were growing, but at less than half the industry average. . But the lion’s share of the increases were taking place by opening new stores…What was denied in this instance is that a policy that had worked well in one context [i.e. signing only short-term leases for inner-city locations] might not work well in another [i.e. suburban markets with rapidly increasing populations where developers required long-term leases].” A&P’s “slow collapse” at a “grinding steady pace” was the inevitable result of “relentless denial.”
In Part II, Tedlow shifts his attention to business leaders who “got it right.” For example, those at DuPont who recognized that the company “had suddenly and unexpectedly become far more difficult to manage.” They completed an immensely difficult process of restructuring the entire company but only when it was “on the brink of disaster, in the midst of a crisis produced by one of the worst years in its history.” Only then “was it able to reconcile itself to the fact that yesterday’s structure was acting as a barrier against rather than an avenue toward tomorrow’s strategy.” And Tedlow then makes an especially key point: “Most remarkable is the absence of denial, the omnipresence of an engineering quest for facts, and the willingness to look those facts in the face even when they weren’t pleasant.” He then examines leaders at Intel (i.e. Gordon Moore and Andrew Grove) and Johnson & Johnson (especially James Burke) who also refused to “push aside hard truths in favor of more palatable or convenient” options and made decisions that required courage as well as candor.
Tedlow devotes the final chapter to providing what he characterizes as a “new point of view,” one that is guided and informed by eight “lessons” to be learned, from those business leaders who, in ways and to an extent best revealed in context, overcame the “unconscious calculus” of “protective stupidity.” Throughout his lively narrative, Tedlow’s focus is on helping his reader understand to (a) what denial is, (b) why it is so “seductive,” and (c) how to resist its appeal. The eight lessons discussed in the final chapter help to achieve that worthy objective and should be reviewed from time to time. Why? Because denial is not an all-or-nothing proposition. “It is a continuum. Individuals and organizations have the power to determine where on that continuum they fall…human brings and companies are capable of positioning themselves further toward the `facing facts’ end of the spectrum than the `denial’ end.” Resisting denial requires a continuous “battle” that must be fought every day on many fronts.
Thanks to Richard Tedlow, those who read this book will be well-armed.