The 6 Principles of the Economic Leader

Aaron: I can promise you, I can promise you in every single case, in every part of your life, always and everywhere, the best way to allocate the next dollar is not based on where you were or how you spent the last dollar. on what are you going to get out of the next one.

Spencer: All right, Aaron. Well, we're back, man. We're back in a good conversation, which I totally appreciate, uh, this time with you, and I hope our audience does as well. This is episode two, man. And, um, you know, looking backwards, we've covered in episode one some really high hover, and you, you, you know, you even used high hover once in that episode, I think, which I appreciate.

Aaron: what happens when you spend too much time with military guys.

Spencer: yeah, yeah. So I... Before, I'm gonna turn it back over to youto talk maybe some framework. We talked big bucket items, in episode one. Please hit for us and just review quickly the big bucket, framework that we set out, in episode one.

Aaron: Yeah, so I think the idea is that, we want to be able to help people think about their leadership and their lives through a lot of the core principles of economics. But it's a big science that's been around for a long time,And, what's difficult is helping people to focus on basic, like I said, buckets for, for guiding their thought. And I've, I've learned this through it a few years, as a course itself. So, so the buckets that we've landed on that sort of encapsulate the core areas of economics that help inform this, inform leadership very well, those are going to be, again, the AIME stuff. So it's gonna be the allocation, information, motivation, and execution. And when we say allocation, what's hard is, it's a word that fits very naturally within economics, but It's just all of the who's doing what, when, and for how long.I mean, you can think about your budget. How do you allocate your budget? How do you allocate your, your resources? Just, just keep in mind that the resources go well beyond just the finances. The resources particularly, your time and energy. So allocation. Information, we speak about this sort of broadly. we don't mean just, surveys of, of employees or surveys of customers, but also information encompasses all of the signals coming that you're receiving and trying to interpret. So that comes from a lot of different sources, and it's not just what people tell you. So that's one of the big things. The next, motivation. the easiest place to think about this, as we talked about last time, is financial motivation, but recognizing that people are driven by a lot of things and, and in fact, lot of things outside of just finances. And so motivation, in my mind, most thoroughly captured by what it is that people are seeking in their lives and, how they're trying to be fulfilled. And so when we think about motivating people, it has to be a lot more than just paying them to do something that's sort of drudgery. It's creating a clear connection between what they're doing on a daily basis how it helps them achieve that they're looking for. And then lastly, execution. how you implement certain things, how do you manage command and control, how do you manage who's, who's in charge of what,and sort of I, I would put this in the bucket of organizational economics, of understanding how do you design teams, what's the right size, but it's also a lot more about how do you manage where people are coming up short when you have this plan? How do you understand the actual execution? but those are the big buckets. and once you see your problems, things aren't or even when, when they are and you wanna do better, those are always going to be the four different areas that you should look to. All four of them are going to be important. And so that can help direct you towards the solutions or the diagnoses that we, we want to expand on And we do that through the economic

Spencer: Yeah.

Aaron: And I, I love

Spencer: Yeah.

Aaron: this term, because it really captures how you are going to approach different, different problems. So AIME gives you the framework for understanding the problems, playbook is actually going to help you understand some principles and solutions.

Spencer: I feel like AIME, allocation, information, motivation, execution, as a diagnostic framework,is really, pretty clean. And, and we're gonna stick withthose buckets, those big buckets. But this playbook, and I love the idea, uh, I just, I don't know how it popped in my head, but I always called it a playbook. And in my head, when I've explained this to folks before, Aaron, I've talked about the college or the pro football coach that has, um, you know, maybe you're the offensive coordinator, maybe defense coordinator, but you got this big laminated like page of paper with small writing, and I'm sure there's some big titles up there. because there's always an opponent, right? There's an, a thinking opponent on the other side, you don't know what part of that playbook you're gonna be using. So, these six core economic principles that we're calling the playbook, to me are the laminated pieces of the big headings up there, right? And, um, that's what I think we want today. We wanna unravel that a little bit. We wanna introduce it to you, and then what we're gonna hopefully show you is that most great leaders out there are using this, and you're using this. I mean, they'll... If you're listening right now, I think you're using this already. You understand more about economics than you possibly can believe, 'cause it's about you. It's a study of you. So even when I... When you were just talking, Aaron, about the execution piece, I was like, like, like physics is so critical to mechanical engineering, economics is the core of a lot of most social sciences. I'm like,

Aaron: it... Well, I was gonna

Spencer: I, I think s- Like when I think systems engineering, I'm thinking econ. Like Lean Six Sigma, the Lean Six Sigma, the Black Belt or whatever, like move the tools closer to the work. Man, well, that's just a marginal cost, marginal benefit thing. So anyway, I think econ is the, the physics of the social sciences, and it empowers a lot of things. So go ahead. You had something

Aaron: little careful here. Like, the

Spencer: to say.

Aaron: sciences do a lot of

Spencer: Well,

Aaron: lot of great work, so

Spencer: no, no, absolutely. I mean, I'm tipping my cap to every one of them, you know. Definitely not spitting in the wind, Like, this is, we, the, the, the answer, the real truth, we seek truth. psychology, sociology, anthropology, uh, systems engineering, all this stuff matters, right? And, um, and at least for me it does. And I, without any hesitation, if you're really interested in the overall mission of figuring out how does the world work, how we're making sense of our interactions, then we should accept all these. So yeah. But I, I do believe economics, was the first of these, I think. Uh, but, and I think it's a good framework. That's all. It's a good framework. It's a good skeleton. The four buckets and the playbook we're gonna introduce here are very good, frameworks to hang a lot of stuff on. But by itself, it's just a skeleton that has no muscles, no sinew, no, like, that's, it's, it needs everything else.

Aaron: o-one of the ways I think that's helpful, maybe as a, an analogy that we've talked about in the past is you can think of, you know, we have, we have this production function, and, and all we mean by this is that you, you are taking inputs as a leader, and then you're producing outputs, and this helps organize our thinking about where, the AIME And, and I think of it as these are, these are large components of that function. They're the, they're the main components of what drives that machine that you as a leader are in charge of. I think of it in terms of, y-you have a transmission, you have an engine, you know, you

Spencer: Yeah.

Aaron: other, these other components of the car, and it helps you to focus on identifying what's wrong with your car. And, and so again, once you get through that diagnostic framework, you know, sometimes it's more than one component that's broken.

Spencer: Yeah. Yeah, absolutely. The canvas we're painting on, involves a production function, inputs, scarce inputs, how you use them, leadership decides how to use these things, and then goals or outputs, outcomes. You're happy with it or you're not happy with it. I mean, now what are you gonna change? you know, I've asked this to a lot of audiences out there. Is every decision an allocation decision? And that's a question I think people should wrestle with. Like, and then whatever answer you come up with, is every decision an allocation decision? If your answer is no, I'd like to have a conversation with you. If-- I'm gonna go with most people are saying yes, every decision is an allocation decision. The second question I would ask you is, what are you allocating? when you start down that pathway, you start to realize, we're all dealing in scarcity. Like this is, this is where we're operating. and then I wanna offer this idea to you that I think we're gonna talk about more and more, is that I think as human beings, we're allocating commitment, and I'm trying to pull you over the dollar wall. most people think economics is just dollar signs, rates of return, I'm telling you that, honor, integrity, standards, cultures, all those things are at play and, economic thought can put you in the right position as a great leader, as a, as a great teammate, as a great individual trying to get the most out of your life. So I call it the currency of commitment. Um, I think that's the mechanisms that work in free markets, those same mechanisms are working in my relationship with my wife, and it's also working in my relationship with teammates I have in other organizations. So these mechanisms are alive and well in all our relations. So that's me trying to get you over the dollar wall. Yeah.

Aaron: Well, one of the problems I think we've, in discussions we've had with people in the past is that, uh, when, when we say that it makes it sound like our relationships are all transactional or,

Spencer: Mm-hmm.

Aaron: we're kind of robots operating in this marketplace of individuals. And I guess the answer is, well, yes and no. You know, we don't mean it in a mechanical sense that your leadership has to be transactional, that it's always, you know, I do this for you, you do that for me.if you've ever been in a, a professional relationship with somebody who never gives back, it, it, doesn't last. Like I don't, you

Spencer: No.

Aaron: so,

Spencer: Mm-hmm.

Aaron: whether, you wanna call it transactional or not, it is, it is just how we operate. you're the parent of a child,

Spencer: b-but outside of these sort of unconditional relationships, Mm.

Aaron: otherwise we always have a choice, and, an opportunity to decide if that relationship is fulfilling. And so again, I just wanna get past this idea that we're not saying that you should see everything as a, a strict transaction per se, recognize that in the end, is. L- It, it really is a transaction of my time, your time, my effort, your effort. So see this in a lot of different places, and it's not strictly transactional, um, in a sort of sterile way.

Spencer: Honestly, for me, what are we trying to explain? Okay, are we trying to explain unconditional love? And my answer is a big loud no. I am not trying to explain to you unconditional love. From, the love from a parent to a child, the love spiritually maybe you've got, the love of a, of, you know, Lord, everybody always brings up a dog. I always ask, "Where do you find unconditional love," right? right behind that is, uh, expectations, and that's what I'm telling you we're... what we're here to explain, what I think we're trying to explain, is the conditional loves in your life, where there are expectations and you're trying to meet and exceed those expectations on average over the time of a relationship with yourself, with your teammates, with your organizations. Those are economic decisions. And listen, there's nothing more romantic in my head than the hard work of meeting and exceeding expectations every day. what you're leaning towards is, like, this free rider idea. Like, there are friends you've lost, and there are marriages that have been broken. There are relationships that have ended, normally it's because you haven't met those expectations, whatever they are, right? Your best friends that you have in your life, they meet and exceed expectations. But those two ideas, expected versus what actually happens, and the romance, the romantic act of that happening every day, and the trust that's built over this, this person in your life or this always doing it, or an organization in your life, they're always meeting or exceeding expectations, that's tremendously important. And then this idea of conditional relationships versus unconditional relationships. I'm here to, we're here to talk about conditional relationships where you have free will, and we're talking about the allocation of the scarce resources in your life.

Aaron: I agree that relationships are always, conditional, some I think are a little more or less conditional, I guess. You know, I think about relationships with the people you choose to be with for the rest of your life. You've made a commitment upfront for that. if you're not getting your end of the bargain, you think out of this, then maybe it's your expectations that are off. Um, and so that's a different question, but it's related.

Spencer: absolutely. we are not, in any way, uh, marriage counselors I do believe a lot of my life, at least personally, is explained through the ideas that we're gonna, we're gonna talk about here.

Aaron: it's, it's about understanding that there are these expectations, right? They exist, and that

Spencer: Mm-hmm.

Aaron: understand that if you're not doing your part, you're going to be pushing that relationship out of a healthy equilibrium. And, and that's

Spencer: Yes.

Aaron: is that you need

Spencer: Yes.

Aaron: the expectations are, and

Spencer: Yeah.

Aaron: should always try to meet or exceed the expectations the other person has for you should also look for ways to adjust your expectations of the other person conditional on their ability or their circumstances. And so that's what I mean is that these are transactional. These expectations matter a lot.

Spencer: There's not many relationships in my life that are, um, where there are no conditions. I mean, Jill and I have been together since 1988. There are conditions. I'm just saying. There are still conditions, okay? And the, the pressure of those conditions, I totally appreciate, 'cause she has them of me, and I have them of her And we're at a good equilibrium. and the other one is, is conditional versus unconditional, and there are things in this world, that are unconditional, totally believe it. but I think most of our lives are, are conditional stuff and, and that's good. Seeking equilibrium is a, is a very, noble endeavor. A coordinated soul. That's where you ended last time, and I love that idea. that's, I think, in equilibrium. Okay. the Canvas we're painting on, The playbook that I keep talking about is really kinda some core principles that, you would consistently see in any kind of core economics class. and just because it's in the core course doesn't make it less powerful. To me, it kinda makes it more powerful. this is where the theory really matters. The entry paragraph in The Economic Leader, are the things we just talked about. a few other words that are important in, in that introductory paragraph, Aaron, and we don't wanna lecture this thing, one of them we hadn't really talked about is optimization, and that's important. the word efficiency means something in economics, and, and I think we are all believe in human beings are built to love efficiency, like getting something to its highest valued use. Optimization matters, okay? So I'm gonna leave that there. Just as... That's one of the things we didn't mention. And then I'm gonna hit real quick just the six what they are. These six big principles that are the big levers in our life. The first one, trade-offs and opportunity costs. The second one, marginal analysis. The third one, that incentives matter, and that's most economists lean on this one hardest, and this is where you've studied a lot, incentives matters. Most people tell you, "Hey, all the rest is window dressing. Go check the incentives." And that's the power of economics, by the way. This is the invisible hand, the incentives. Number four, trade is a win-win. That it, there is beauty. The action that's in the transaction, the win-win, trade, you gotta have two different people to create a win-win, right? Trade requires trust as well, but that fourth one's very important to me. It's one that I lean on a lot. The fifth one, information clears the market. And when I say that, I... What, what most books are talking about, they're talking about prices and the pricing mechanism which we were just referencing, that information clears the market, in a pure econ sense. But we'll see it everywhere. The sixth one, the sixth one in most econ books talk about government has a place in setting up free markets and the rules of the game. For us, whether or not you're gonna have a centralized or decentralized, whatever your oversight's gonna be, is gonna be driven by the environment that you're in, the type of team you're leading. So the rules matter. Your standard operating procedures, um, the power, uh, that you're pushing downthat's really important in number six. So those are the six big ideas in the, playbook. That's the laminated sheet That I'm going to, when I'm, you know, when the blitz happens on the football field or when, you know, the offense is doing something different, these are the things that I'm going to first. And then the last paragraph, we'll end it with, some bit of humility and a tip of our cap to the other disciplines in the world out there. Also, a recognition that there's y- we need to go into things with humility because the reality's really messy, and we all have assumptions we make, and we all have biases, biases that we're, kind of subject to. So that's the whole thing.

Aaron: Yeah, I, I just wanna frame this a little bit what, what economics provides, it offers a very disciplined way of thinking. And so that's what we want to provide, that when

Spencer: Mm-hmm.

Aaron: that you can have some, some discipline in assessing and analyzing your problems or, or creating a better plan for the future. So it's, it's about discipline in your thinking. And I think, in the same way that math provides a lot of discipline, and, you know, game theory I think is another example that people fall on, is that provides discipline in how you analyze and think about scenarios. economics broadly is about that sort of discipline. So let's jump into it,I wanna get some of your basic, the ideas that you, you've generated in learning economics and in experiences throughout your career that help the audience understand what that first principle is.

Spencer: I, so the first one, just to remind everybody again, is trade-offs and opportunity costs, and this is at the heart of decisions. Like, you have multiple pathways in front of you. if you don't have pathways in front of you, then that's a pretty, that's a terrible existence. honestly, I have been so blessed in that I've had great teammates and I've had pathways put in front of me. so I've had the hard decisions, and God bless, I'm grateful for the hard decisions in my life. but every time you make a hard decision I'm choosing one path, there's no secrets out there. Everybody sees what you're doing, right? It signals that you value this pathway versus another pathway. So it's the, it's the first nod to, "Hey, I know what you want." So we can survey y'all we want, but the reality is, if we can see what you did, that's the most important thing. And this is why we, we talk about that so, you know, talk is cheap. When I left LSU, now listen, I did five semesters, Aaron, at LSU as a young man trying to, uh, make my way and to get a college degree, right? and this gentleman, one of my great mentors, came into my life and said, "Hey, you ought to apply to West Point." and I just thought that was crazy, first of all. But the question, when I go back and unravel that question in my head, I was giving up five semesters of work, right?I didn't even know what sunk cost meant in my life at this point. I'd never even heard it probably. But to me, the benefit of going to West Point and being a West Point graduate was, obviously greater than the five semesters I'd already spent. So I had about 70 hours at LSU, and I took off and went to West Point, and it is the best decision I've ever made in my life. I wish I could unravel my thinking back to then. So the trade-off I was facing was this opportunity to, to go to West Point. Then, and the opportunity cost is this pathway down. I mean, I could be selling used cars right here on Airline Highway in south Louisiana. not that I, I don't know where my future would have been. I don't know where is my future gonna be if I stay at LSU, right? maybe I got a lot more money. maybe there's a whole different way. I was with Jill at the time. That's, that matters, right? and she was gonna have to suffer this cost too, 'cause I would be leaving. Four years of a long-distance relationship. So when, like that decision alone, when I talk about trade-offs, we really had to believe in a few things, that West Point was worth it, and that I could freaking make it, and that was a big question mark. Like, it wasn't like I was knocking balls out the park already, you know? So- Every day in my head we face these trade-offs, right? And every day when you make a decision, you're signaling to the rest of the world what's valuable, what's not valuable to you. That's how kind of my biggest thing. And I would g- I could go very small for you. You know what I mean? like, you know, nowadays when you call somebody y- and you're driving in your car, you never know who else is in the car. That's always the case. So, like, Jill's brother calls her, and I'm in the car with her, and, uh, he, he's asking like, "Hey, are y'all coming to my son's birthday party?" And she was like, "Oh, no, we can't make it." And his question is, "Well, what else do you have? Like, how are you not making this?" Right? And it just kinda showered upon me. I'm like, you know what? He's trying to value... Like, he wants to know what's more important than his son's birthday party that we're not going to. And all this came into my head, right? He wants to know what the signal is, what's more important. And, and I think this is a big part of the exchanges that we face and the decisions that we, we make.

Aaron: the opportunity-- Well, that, like, that really does bring up this opportunity cost issue, where The, the cost of what you were going to do instead, the real cost was that you were giving up going to this birthday party,

Spencer: Mm-hmm.

Aaron: that's the cost. It was that what you're giving up, the next best option, the next best thing you could have done with that time, the cost of what you're doing. And

Spencer: Yeah.

Aaron: your decisions that way helps you to clarify that each allocation, each decision you make about your time comes with a very important hidden cost, and that's what you gave up instead.

Spencer: Yeah. And I think, I... It's a, it's apparent everywhere, you know? Even the big decision, like changing a whole lifestyle and going to West Point, that was a big decision for me. The mechanism has always remained the same for me, if you've got good reason, then people accept it, right? So, like, for the longest, I mean, my dad was passing away with cancer 2000, 2001, Aaron. And when I would leave, Jill and I would come home, we'd see everybody, and we'd go back to the Army, right? We've always had in our career that we're defending the nation. Even my kids, I'd have to give them the Patton speech when we drove away from south Louisiana. They wanted to be in south Louisiana. I'd be like, "Listen, we got a nation to defend. We gotta get back to Fort Bragg 'cause we have a nation to defend." Now, these are my five, six, whatever. These are young kids. But the point is this, we had very important things to do, and my dad, who was passing away with cancer, says, "You go do those important things," right? But every time I left, it really hurt my soul a little bit, but we always had good excuse, right? Our good excuse was something where the moral high, we're defending the nation. Thank you for your service, right? Here's another-- here's the, here's the other pathway. We bought a boat when I retired from the Army, right? And we failed at that in about eight months. How good of a excuse is, "Hey, why can't y'all be here?" "Oh, we bought a boat. We-we-we're actually leaving you guys to go on this boat," right? That thing, that excuse doesn't hold as much weight, and I may be crazy in thinking about it in this fashion, but don't you agree? Like, whatever that other thing is, it's a signal to the world as to what the value of the path you're not choosing is. So,

Aaron: Well, those, those are the opportunity costs there that you're giving up.

Spencer: Mm-hmm.

Aaron: move towards now is also what you were saying about moving from LSU to West Point, where you'd already

Spencer: Yeah.

Aaron: you know, five semesters it was

Spencer: Yeah.

Aaron: and how, your decision to go to West Point was made not so much on the fact that you'd already committed this time to LSU. thinking about is the additional cost that I'm going to pay, and what's the additional value I'm going to get out of that decision? And that's, that's what we call thinking on the margin or marginal analysis, where it's the

Spencer: Yeah.

Aaron: increase. So if I-- the next four years of my life, what am I gonna get out of them? Well, the next four years of my life at LSU will lead down one path and have a certain level of benefits. The next four years at West Point has a different set of benefits. And so the decision down to which of those two paths is going to be most valuable for me in terms of the cost and the benefit, not what was the value of the previous five semesters. And so

Spencer: Yeah.

Aaron: that's the other important thing about this story, is that that marginal cost and marginal benefit,

Spencer: Mm-hmm.

Aaron: That's how

Spencer: Yeah.

Aaron: your next decision, is by thinking about what's the best use of this next moment or this next dollar. thinking on the margin.

Spencer: I think framing the trade-offs, number one, is like the hardest thing to do. but we'll see this in all the leaders and how they make decisions. I also wanna pick up that all my friends in the LSU world, go Tigers. I'm back there teaching right now. I loved my experience at LSU, but the environment at the time when I was a young man, in the, uh, Louisiana Army National Guard, the military was really attractive to me, and that's why the West Point thing was so attractive. If I would've stayed at LSU, I think it would've been wonderful. So I'm just picking up the pieces of... It's not that West Point was better or LSU was better, it's that like for me, envi- it fit me, my decision right there, and Jill and I would both tell you this and, and we're back there now. So marginal analysis, that's number two, folks. Uh, trade-offs and opportunity costs, number one. Marginal analysis, I think we all fall to this whether we like it or not. We're constantly... You know, I think I used- I walked away from my rotation teaching at West Point. I'm like, "Hey, it's all economics and calculus." And, if you don't know any calculus, what you do need to know is that generally we're talking about rates of change, and when you're talking about margins, I'm talking about the rate of change, uh, benefit and cost in your life. It's very natural, I think, Aaron. When you, when you are looking at a menu, you're looking at how you feel maybe at that point, but you're just comparing the, uh, the menu items, right? You're always comparing things once you frame what things are within the realm of choice, right? I don't know. There may be one... Two things, maybe about 10 things. The bigger the number of things, though, it's hard to get the marginal analysis done. It sounds like very, um, in-depth marginal analysis, calculus, but I think it's probably one of the most natural things we all do. What do you think?

Aaron: I mean, when I learned this way back

Spencer: Yeah.

Aaron: we, we would talk about the, my kids already do this when we're at McDonald's, right?

Spencer: Yeah.

Aaron: it's a, you know, an additional dollar gets you some fries, you know? And you're like:

Spencer: Mm-hmm.

Aaron: to spend another dollar on this, on this food. but so on the one hand, especially when it comes to prices, we're, we're usually pretty good about this. the sunk cost fallacy is called a fallacy for, for a reason, because there are cases where we don't want to think on the margin.

Spencer: Mm-hmm.

Aaron: world, they call it, uh, throwing good money after bad. Another really good example that I like to bring up with my students is the the Cold War and how, in a sense you can think about Russia trying to continue to throw money at a problem a way because they'd already invested so much.

Spencer: Yeah.

Aaron: you can see this tendency to feel like, "Well, we've already invested so much in this thing. We've already

Spencer: Mm-hmm.

Aaron: into it." And that's a very easy way to slip out of the, the, the optimal choice, will always do best by thinking about what is the best use of the next dollar. That's always going to be right. And this is one of those things that I love about economics, is that I get-- I can promise you, I can promise you in every single case, in every part of your life, always and everywhere, the best way to allocate the next dollar is not based on where you were or how you spent the last dollar. on what are you going to get out of the next one. That's always

Spencer: Yeah.

Aaron: You can't, you

Spencer: Yeah.

Aaron: it.

Spencer: Yeah. And we, we are-- human beings are, um, wrought with all kinds of problems, and this is where psychology and anthropology and sociology, we are very s- we are subject to the sunk, sunk cost fallacy. Like, like when we bought that boat, the boat's a really good example of this, right? I can tell you the day when we stopped at Perdido Key, and we'd just been about 800 miles, on this boat, Aaron, and we stopped, and we went into a condominium and, you know, Jill had a chance to, you know, be in a real house again. They had running water and a bathtub and everything else, you know? And, and I mean, I've been watching her. She's so tough. She would never give up on anything. Uh, but when she, when she came out of getting ready, she had a chance to be in a real bathtub again, it hit me, and I was like, "Oh, this boat's a sunk cost." I'm like, "This thing's over." Like spending another... The water pump needs to be fixed, but me putting another $1,200 into that boat, not worth it. It's not worth it because it would be taking 1,200 good dollars that could be applied toward what other, what our future pathway's gonna be. But this pathway and this boat is not it, so the boat in itself is a sunk cost, and I had to embrace that. I really had to embrace it.

Aaron: Yeah. Well, I mean, to you like that. I, I also think of this in terms of, um, people's career changes, especially if you've dedicated years and years and hundreds of thousands of

Spencer: Mm-hmm.

Aaron: in one field. And, and it takes a lot of courage to recognize that maybe it's not the right fit for you.

Spencer: Right.

Aaron: to be able to say, I've already put so much into this, but it's time, it's time to recognize that the next-" uh, the next years of my life,

Spencer: Yeah.

Aaron: value that I'm gonna get out of them is probably in a different thing. I, I often think about, you know, what, what, uh, Rudyard Kipling says, you know, "If you can watch the things you gave your life for broken, and then stoop and build them up," right? Like, uh, like when I,

Spencer: Yes.

Aaron: people who are able to do that, they, they dedicated years and years and years to something

Spencer: Mm-hmm.

Aaron: that turns out not to be a good choice or a good, a good direction, to be able to watch it break and then, and then start over at the beginning and as he says, "Never breathe a word about your loss." It's like this is just, this is just how you, how you live your life best, is that you

Spencer: Yeah.

Aaron: when it's time to switch, courses.

Spencer: Yeah. Before we go on to the next one, there's a motto, "Night Stalkers don't quit." You've heard this before, right? So it seems, it alludes to, and I would never say this, and if you were giving a speech before a mission or a speech, if you're trying to fire up the troops for a big mission, this is not the thing you wanna talk about, a sunk cost. because in the don't quit, you, there is none, right? You're not changing. Like, I'm count- you can count on me to be there. but sometimes you have to rally and change, um, sending another light-skinned helicopter into an urban environment during the daytime is bad, okay? So it doesn't mean Night Stalkers don't quit, doesn't mean we're not coming to get you,and we're, we're gonna keep doing the, the wrong thing over and over. It means we're gonna find a way, in the future, right? So I'm always, whatever that edge is, like, "Hey, we can't, that's, that's a bad decision. Let's wait and set conditions for tonight. Hey, let's wait and reinforce with these heavy armored vehicles." Like, I'm talking in a military sense, in real life and death scenarios, that, the power built and, and, and that you always understand that I'm coming to get you and the confidence, it really matters. But then also the reality of, uh, the sunk cost of the wrong pathway. One other thing before we move on, marginal value uncertainty. I just wanna tee it up there, Aaron. Like, we a lot of times think that we understand what the marginal benefits are. We understand what the marginal costs are. The reality is our information's bad. So that boat trip, we saw margaritas, rainbows, dolphins, and the reality was broken water pump, Mobile Bay, or broken generator, Mobile Bay. You know, like, there are problems at night, you know? So, like, what you expect and what actually happens is probably, there's gonna be some difference there. Number three is incentives matter. And this may be very obvious, but, I always use this that, hey, life is one big coordination problem. When I drive on that interstate, everybody's got their own incentives,Now, ultimately, we're all trying to move in the same direction and get there safely. When we start to interact on each other, it's a coordination problem. So I think when I talk about this one, we all have our own motivations, andWhen we don't meet our own identity, that's a problem. But one of the things you can do for yourself as a young leader, as a young person, is figure out what you want, like who you are and what you seek. Can you figure out your own motivations? That's a big challenge, right? and the other one is then knowing other people's motivation, and that's a big challenge. but this one, incentives How do I pull out motivation versus, and incentives at a personal level or an organizational level versus like information overall?

Aaron: Yeah, It's a little tricky because your, your motivations are going to be driven by what you understand about the world

Spencer: Mm-hmm. We

Aaron: conversation with a philosophy professor in college about this because he was convinced economists were a bunch of hedonists. the-- Incentives matter because, our choices are driven entirely by seeking something. Like the way your brain is optimizing your choices is, is always about seeking something. and the question is, what is that thing that you're seeking? And the people you're trying to work with, what is it that they are seeking? And this, this goes-- beyond the financial incentives. It goes into what is the lifestyle or the vision people have of themselves. And in order to truly be motivated yourself and to motivate other people, the incentives are always going to be what is it that you're trying to pursue? And the more clarity you have on that, the more motivated you will be. And so the

Spencer: Yeah

Aaron: you provide to the people you're leading about what it is you as a team are trying to achieve, what the culture is, what's the identity you've given everybody else, it helps influence the way they see the things that provide value in their lives. there are certain units within the Army that do, do this very well. They have an ethos and a culture. They have a reputation. And being part of that in itself is, is hugely fulfilling where, where people seek it out. And, within those teams, I've seen that it is also motivating for the people in there to uphold that standard and that culture. so when we say that incentives matter, we're talking about a lot of these things. We're talking about creating,the environment where people feel that they are pursuing something of value.

Spencer: I mean, some of the, like, know yourself, know your teammates. You gotta find and align all these personal motivations towards some shared outcome, and I think that's what great leaders are doing. That's what we're all seeking out there, you know? Like, and we all become better when we have each other, you know, pushing each other, you know? And it's hard to tell sometimes what, what someone's incentives are, but I think consistency,can help. And, I think hypocrisy, which leadership abhors hypocrisy in my head, can ruin this. Like, it then it becomes uncertain and very turbulent. and almost without laminar flow of consistent, portrayal of your incentives, what motivates you, then, it's gonna be harder for you. You can't be a hypocrite. setting these prices, you're setting the, the standards of an organization over and over again, and ultimately, we're trying to coordinate our actions to, uh, some outcome. So,

Aaron: Yeah. So I think just to connect this back to the AIME framework, right? Like we said that one

Spencer: yeah.

Aaron: motivation. And so this is the core part of the playbook where it says incentives matter.

Spencer: Mm-hmm. Mm-hmm.

Aaron: this is always going to be part of your role is generating the context and the environment that promotes the right incentives. When we think about markets, markets in their, ideal form, they have the right incentives as, Adam Smith would say that the, the baker's going to bake the bread because he knows that he'll be able to sell it. And,

Spencer: Yeah

Aaron: and so coordinating those incentives is, is the goal. economists fall back on the market a lot because in its ideal form, it does a very good job of coordinating those incentives to be working in the same direction. So your job as a leader,is to help promote that process. one of the, know, one of the big things that I, I think we've sort of skirted around this, but when economists talk about a free market, again, we are often talking about it in its ideal form. But most of the

Spencer: Yeah.

Aaron: these, these perfect markets. And in fact, within an organization, you don't have all the conditions of a perfect free market. And in fact, leaders and, and middle managers, it is their job to create these

Spencer: Mm-hmm.

Aaron: And that's why it becomes extremely important because you don't always have-- There are some market-like elements within organizations, you're lacking a lot of the, the truly

Spencer: Yeah.

Aaron: And so your job is going to be creating those incentives in the way that coordinates everybody's efforts in the same direction.

Spencer: That's right. And then I've got... I, I know something I always mention about this is you think you got the perfect plan, but then there's always unintended consequences that come from the perfect incentive plan, right? You see that sometimes. You can't underestimate this, is knowing the intent, the motive. Like every court case in the world is all about intent and motive, Understanding someone's true intent, that's this, their incentive, their motivation.

Aaron: we kinda wanna move away from let's just focus on the individual's motivations and, and try to

Spencer: Yeah.

Aaron: now a-as a team. what is it that makes the,gears between members of a team actually o-operate?

Spencer: this right here, number four, trade is a win-win. I believe, what you were talking about earlier is a quid pro quo of sorts I believe the action is in the transaction, and I'm not mad at the transaction. You know, I, I teach this organization behavior class, and, uh, transformational leadership is all the-- all in vogue, but you can't get to be transformational if you're not doing the, the trade correctly. So the actions, the individual actions over and over and over again, is really important.the biggest idea, I think, here in trade is that we can make the size of the pie bigger. And if you can make the size of the pie bigger by providing a win-win, then that's beneficial. And we get things to their highest valued use, we decrease the opportunity costs of, of both of our allocations, and we increase the comparative advantage. So with diversity in teams and specialization, we facilitate, more than is possible on our own.

Aaron: the, the other part of this, though, is that it's easy to think of trade in terms of I do this, you do that. but it's also trade in terms of, forgiveness in a way. You know, in,

Spencer: Yeah.

Aaron: relationships, it's where, I can be empathetic towards your situation, and, and in the future, maybe you'll be more empathetic towards me as well. I, I remember I was in this, sort of mini conference at West Point. They'd, they'd brought in, a lot of entrepreneurs from South Africa. And, you know, they were-- they had come all the way out here to listen to different leaders in, in West Point talk, and I was on this panel, and somebody asked, you know, "What is, what, what is the core thing that might prevent people in our country from being able to succeed? why is it different? Why is it difficult?" And, you know, I'm not a, I'm not an expert on South African markets. you have to establish the groundwork for being able to have a, a trade. And, and a lot of this comes down to what is the, uh, trust in the system? What are

Spencer: Mm-hmm.

Aaron: in the system that enforce some of these contracts? And how often do we actually have to go to court over these contracts? for example, for buying a home. In New York, you're required to have a lawyer if you buy a home. And I, uh-- when I first heard about this, I thought that was crazy.

Spencer: Yeah. Mm-hmm. Yeah.

Aaron: there's a much longer history in New York, for whatever reason, of, of different, ways of getting out of or skirting around different commitments. And again, this isn't like, you know, New Yorkers are bad or anything. I, I think it has more to do with just it's, it's bigger than where I used to live. but that, that creates more friction in this system where

Spencer: Absolutely.

Aaron: is facilitated. If we, if we believe that trade is a win-win, then to encourage and facilitate trade, you also need to have developed trust that,removes the need for this enforcing mechanism constantly to interject and force this trade to occur. when trade is most successful, is that it can occur naturally, and it has

Spencer: Yeah.

Aaron: a lot of these frictions. And so that's the sort of the, the secret quiet part when we're talking about leadership,

Spencer: Mm-hmm.

Aaron: are always trading. that the, the trades that you're making are encouraged by having this trust that's developed over time.

Spencer: That's well said. Trade requires trust, yeah. And this cons- consistent commitment over some extended timeframe, you, you, you get the benefit of the doubt, I call it, you know? The benefit of the doubt hill. Like, surely I've been working with Aaron for a long time, you know, he didn't do his part. I'm like, ah, something more there. Let's check that out. Yeah. Okay, Aaron's fighting 20 different things, right? and if you consistently can believe in this person, then you devi- you, you develop this trust that comes with a dividend. Also, the lack of trust comes with a real tax. You know, Stephen Covey, I think it's his son, right? That wrote that Speed of Trust book, is really good. Definitely worth reading. and, you know, the thing about trade, and even inter- in an international sense, like, you gotta trust your trading partner because you may not be producing in that vein, if you, uh, if you're always importing, right? So on a small team, if Aaron always does this piece and then Aaron's not there, I may lose that capability To do that for the team. So, it, it comes with this real capital T in trust, that you, you have to trust your teammates, We're all better with each other. Socially, if you wanna really hurt somebody, I mean, go to any one of the survival evasion resistance escape schools. When they put your butt into a, uh, isolation, it hurts. Human beings like to be with each other. We like to be in a trade. And we have now, yes, entered into this idea of including two different people. So, all right, number f- number five, information clears the market. Most econ books, when they're talking about this, they're talking about prices. Uh, prices as a signal and prices, as an incentive. And, my Idea is that, hey, this is all public. Like public, we can see what that thing costs. When it's common knowledge, like what does it cost, It informs how we act. in our relationships, I believe we're exchanging the currency of commitment. And, for those of us that seek high commitment groups, we can find it by their reputations, those, those groups or those relationships.

Aaron: for those who seek low commitment, you can find it. And, um, this idea of exchanging prices, exchanging commitments to get to an equilibrium tremendously important. So information Is very difficult to come by. what's helpful is the ideal version of this, and that's in a

Spencer: Yeah.

Aaron: marketplace. And, and so everything you need to know about a commodity, its value, and how much it costs to produce it, all that information, everything is contained in its price. And

Spencer: Yeah.

Aaron: back a little bit more towards what's actually happening in your organization or in your own personal life. And suddenly you don't have the exact same types of, of information, or at least it's not as clear or perfect. And so the leader's job is to find reliable ways of getting information, and that can be information about the environment, it can be information about what your

Spencer: Mm-hmm.

Aaron: or what they value. And

Spencer: Mm-hmm.

Aaron: so when you run into problems where, where you're finding something's not working out right, or you haven't really anticipated correctly what should've been obvious, then you can look towards your sources of information. They can be data, they can be surveys. But again, are lots of sources, and your job is to be able to read the information that's already there. Your job is to be able to generate information. You can set up appropriate structures or appropriate, incentives to where people are encouraged to reveal truthful information. People, um...

Spencer: Yeah.

Aaron: There, there are classic examples of organizations that failed because there were very clear and obvious problems, but they weren't really brought up to the level of the decision-makers, and that's

Spencer: Mm-hmm.

Aaron: were all completely screwed up, where people just feared for their own jobs to report some sort of a problem. And I, I also think that Ray Dalio does a good job of talking about this in his book "Principles," where, they talk about radical honesty, and this was sort of his way of embedding the culture an obsession over telling the truth, regardless of how good or bad it made you look or how much it might hurt, say, your boss's feelings. And so that was his solution to this, is that, is that to ensure that good information was rising to the top, is that you encourage and enforce and praise that radical honesty. So I don't know if

Spencer: Mm-hmm.

Aaron: I'm inclined to believe maybe it's not. But I would say that the, the most important thing is for you to recognize that if your information is bad, it's your job to establish the incentives or to establish the environment where the people who are working with you that sense of obligation to provide that information. I just would reiterate that it's about reading the information that's already available to you in terms of what people are choosing to do. It's about creating structures that encourage and help bring up the right information. And then it's also creating experiments where you can get better information by purposefully designing something, that provides you information, whether it succeeds or fails. That experiment is, is, uh, i-is hugely beneficial and, and if you are conscientious about making choices in an experimental way, if you tell yourself, "This is going to be an experiment. I want to see if this works, and I'm going to pay attention to it," and you design it in a way to where it functions like a real experiment. one of the best examples of this I have, and it's one of the moments I was very proud of the Army, is that they wanted to know if they could improve recruitment through, financial incentives. And so they asked us to actually put together a legitimate a randomized controlled trial where we would roll out these incentives at, uh, in different units across the Army. And so we, we actually how this was going to occur, and the whole, the whole pitch was that by doing it this way, you really would be able to know if the financial incentives for recruitment were going to work. And they didn't have the effect that they had wanted. There were some other beneficial effects of these incentives that we'd helped them design, but the experiment itself, the information it gave, saved tens of millions of dollars in what would have been a normal process of just saying, "Hey, we think this is a good idea. Let's just do it, roll it out across the whole organization," and spend tens of millions of dollars trying to do this and recognizing later, I don't know, did it work? I don't know. Recruitment went up, it went down, but it could have gone up for all sorts of different reasons. But because they had made this choice beforehand to actually do this so that they could get the information, it was very clear whether or not this would work across the whole Army writ large. And so that's what the playbook is about. Reading the information that's available, creating structures that bring information before you, and looking for ways to actually experiment on and create information.

Spencer: Yeah. Yeah. Yeah. Yeah, and the best teams I've ever been in, I feel like I've always had good information. And every action, uh, is a signal. I mean, there, there... Everything you do is a signal, it's hard to be in a really good unit. The expectations are high and, and you have to seek that out. But, I think in most of the-- in, in the best leaders I've seen speak loudly in the middle of the room, not dark, not in the dark shadows, right? So that we're looking for transparency because we're looking for the best information to make the best decisions out there. I can even tell you like, even if I were to get in an argument with somebody... Here, my wife and I. When Jill and I get in an argument, we generally go to quiet, right? And when there's a lack of information, what fills my brain, again, is Texas Chainsaw Massacre. She's thinking this, she's thinking that. So right when we need better information, generally human beings create less information, and it's poor information, 'cause we start filling gaps with our imagination is terrible, So you see it everywhere. I see it everywhere in my life, right? I used to have these cadets would ask, you know, "Hey, sir, no dumb questions, right?" I'm like, "Listen, every question's a signal, man. Everything you do is a signal." That-- So if it was in the reading first paragraph and you didn't do the reading and you asked that question, it's fine. It's just a signal. You need to know that. So everything you do, everything you say is a signal. It's all information. How are you transmitted? How are you receiving it? How are you shaping it? how are you reacting to it when you're wrong? we got plenty to talk about there.

Aaron: Well,

Spencer: ahead. Anything last? Yeah.

Aaron: only other thing about this is,

Spencer: That's

Aaron: you know, there's-- If you've ever been to lunch with an economist with a group of economists. Uh, i-it's very weird because they'll say things like, "Well, I strictly prefer, you know, Indian food to Italian food," or, "I, I only weakly prefer, you know, this or that." And, and so the way

Spencer: Yeah.

Aaron: they're conveying is very clear information about not just what they want, but the degree to which they want it. And I drive my wife crazy with this all the time because I'll say like, "Look, I, I, I like this more than that, but my-- the strength of my preference is like, you know, small. And so I just need to know, you know, how much more do you want, this restaurant over that restaurant?" And she's like,

Spencer: Mm-hmm.

Aaron: stupid question." But, you know, o-o-over the years she's gotten comfortable with it because it, it really is for me, it's like, "Listen, if I tell you that I like this more than that, and you interpret that to mean like I really like this more than, you know, then, then you're gonna go with my decision, where like actually we would be better off if we just..." You know. So, so this is why all over the place conveying good information

Spencer: Yeah.

Aaron: saying what I prefer. It's about the degree to which I prefer it. Like, you know, the information we're trying to use for our decisions is actually quite complicated.

Spencer: Yeah.

Aaron: you know, maybe that's not the best way to actually convey Uh, hanging out with economists is also never really a fun, proposition. You know, just don't, just don't have more than, more than one at a time. Uh, anyway, so the last principle that we need to talk about is going to be centralized versus decentralized decision-making. And this is actually a very big one in,

Spencer: Yeah.

Aaron: organizational economics because it, it, it comes back to how do you actually execute, plans? Um,

Spencer: Mm-hmm.

Aaron: calling the balls and strikes when, the rubber meets the road

Spencer: Yeah.

Aaron: and suddenly the plan, it hasn't covered this contingency. I, I-- this is why it's really fun, to read about, military history. You know, the, the Germans before World War II had come

Spencer: Yeah. Yeah.

Aaron: elaborate contingency plans. They had these

Spencer: Mm-hmm. Mm-hmm.

Aaron: complex structures for their plans, seems, great, and it also, is also counterintuitive when you realize that their, their culture within the military, slightly different approach, where once they

Spencer: Mm-hmm.

Aaron: off a task to a subordinate to complete, that transaction where the subordinate and the leader would just decide clearly what it was that they were, expected to accomplish. And once that was established, leader could, rely on that subordinate to make the appropriate decisions to accomplish that goal. And so that part of a, of a culture,allows the subordinate then to deal with the complications that are inevitably going to arise as it turns out the circumstances are different than what they expected. And so that trade-off there of being able to establish that contract between you and, and, and your teammate, and being able to rely on them, um, deal with the new information that's coming in, that's a complicated trade-off. there's a tendency to wanna be able to make all decisions yourself if you, if you feel like you're more of the expert or you have more experience. but dealing with that trade-off is the biggest, component of this execution question. And, and it

Spencer: Yeah.

Aaron: how do you distribute those responsibilities? How do you create, the, environment that's going to enable people to make those decisions on the fly when they need to? What kind of insurance are you providing them as a leader where if something goes wrong, you'll still have their back because you conveyed to them that you trusted them to accomplish this? and understanding that even if they made a decision that you wouldn't have in that moment, your ability to, stand up for them and sort of take on the responsibility of the fact that they may have made a mistake, part of this, how do you establish that, that environment people feel confident to make the bold, correct choice?how you make that trade-off depends a lot on the kinds of problems you're dealing with and how much, how much is gonna have to change later on down the road as, as, um, problems arise, and how much-- how difficult it's going to be for information to travel up, a decision to made, uh, to be made, and then to be trav-- you know, sent back down, right? Like, that

Spencer: Mm-hmm.

Aaron: in some, in some contexts isn't very high, but in others it is very high. And so you need to be

Spencer: Yeah.

Aaron: assess, what that context is and, and how important that transmission and that, that lag, how costly that is. so again, that is the, the principle is that there is a, an equilibrium or, or an ideal version of this distribution of responsibilities. when things feel off in your execution, this is where you should look. You should look at how are you actually distributing, those decision-making capabilities and who has what information when. a- and so like I said before, th- this is a distributional issue. It's, it's

Spencer: Yeah.

Aaron: it's about how, how much, independence are you going to be giving to your subordinates?

Spencer: Yeah. Man, you crushed that. That, that was really good. Yeah, you killed it. Well, I mean, this is what economics would call a principal-agent problem, right? Like, we have principals. I mean, when you and I were at West- when I was at West Point with you, you know, we always did this mission command philosophy, conference, We were reading that book, Black Hearts. You remember this book? the cadets were reading it in our MX400, whatever, the military leadership class. Really good that these kids get a chance to kinda talk about... This is really a horrifying event in Iraq. But, um, they brought the, um, some of the, the folks at the user level. I'm talking about young, enlisted soldiers that were privy to some pretty tough conditions in Iraq, and brought all the way up to the brigade commander there, too. The brigade commander being the most senior person in charge as the principal, and then the agents, the young privates sitting at checkpoints out there, in Iraq. And, boy, you can see it break down whe- when, when it doesn't go right. How much control do you give? And it changes with every environment. You're so right, that it was the Germans that first started this mission command type philosophy. Under meeting the commander's intent, understanding two levels up what the commander's intent was or is, and then, having the, we call it, it's, disciplined initiative,

Aaron: I love

Spencer: I think is the...

Aaron: yeah.

Spencer: That it's, yeah.

Aaron: that's the

Spencer: It,

Aaron: yeah.

Spencer: yeah. And it's, it's a great idea, but you gotta know where you're at. If you, if you're in a group where you can't trust the agents You either gotta build it to give them trust to act freely, or you need to control it. but you gotta know that as a leader, as, as to what, where, where you sit in this team, right? is it a group of fresh basic trainees that just came out of the Army, or is this a group of, you know, tier one operators? The level of trust is a lot different in those two teams. how you set up the rules, how you set up the strike zone, the culture will come from this. Your, your written policies matter. You need to have them, but your culture is gonna come from this last number six here. I, I

Aaron: I don't wanna be like armchair military expert here on, uh, on the Blackheart story. It's a,

Spencer: Well, yeah.

Aaron: What I will say, though, is one of the things that always struck me about this story as you read the book is, it, it often feels like the information coming up reaching,

Spencer: Yeah.

Aaron: uh, or, or it wasn't being ingested higher up.

Spencer: Mm-hmm.

Aaron: And, and again, like I, I, I don't know, the ins and outs of sort of like the strategy, the broader strategy of what was going on, but, but that seems to be an important crux in that situation where it was a bad... It was genuinely a bad situation for these young men to be in, and, that information should have been conveyed up and understood. And if the situation required this to be unchanged,

Spencer: Yeah.

Aaron: then it seems reasonable to say that that should have been conveyed back down in

Spencer: Mm-hmm.

Aaron: proper motivation and incentives for these privates. if it still wasn't going to work, the information still kept coming up and,

Spencer: Yeah.

Aaron: change in the circumstance was probably And like I said, I'm not, I'm not here to call,

Spencer: Definitely.

Aaron: But what I'm saying is that that strikes me as the, as the-- that's where I would look for the failure first in that circumstance, is that,

Spencer: Yeah.

Aaron: th- there wasn't a clear set of who's in charge of what part of this decision.

Spencer: Yeah.

Aaron: and, and given the facts on the ground, the people who are actually in it have any control over the,

Spencer: Yeah.

Aaron: levers to change what was going to happen. that's where this, this centralized versus decentralized control comes into play,

Spencer: Mm-hmm.

Aaron: a circumstance where, there was a lot of centralized control, but, where possible, the information on the ground was quite different, and it, and it probably needed to be more decentralized in some sense, even if it

Spencer: Yeah.

Aaron: the lower level of the, you know, like the captains on the ground. So,

Spencer: Right.

Aaron: know,

Spencer: Yeah

Aaron: that's an interesting read.

Spencer: Well, the courage of those folks that came back to West Point, and I don't know if they're still using that same, um, I don't know. But the courage of those folks, top down, from the brigade commander down to the privates, the courage they showed to try to implement in these young leaders, you got 1,000 young soon-to-be lieutenants coming out, I just thought was tremendous. And,

Aaron: that's what I loved about, about

Spencer: yeah.

Aaron: this story is like, okay,

Spencer: Mm-hmm.

Aaron: took it seriously

Spencer: Yeah.

Aaron: that there needed to be some sort of a change. So

Spencer: Yeah. But these, all six of these, what we just went through, th- like, what's acceptable action, what's not acceptable action, and if you haven't been in this kind of environment, I, I mean, I'm flying helicopters. Most of my combat time is in, in a helicopter. I, I can't tell you I walked a day in these guys' moccasins, man. I went to Ranger School, but that's not this. This thing, what they were living through, is, uh, so hard. There's no way I have a value... I, I just don't have a credible opinion on what was happening, you know what I mean? So I, I, like you, I'm for going to the experts out there. But the six principles we went through and the defining of what's accepted, what's not accepted, and the control of it at the end, and centralized versus decentralized, um, I think the six principles do a very good job of outlining, leadership, organizational leadership, decision-making, for everybody. So that's a pretty tough one to end on. And there's really good news stories about this as well. That, that's not by carts, or, or the German army, success. I mean, our army has done a tremendous job. I think most big organizations out there that have a strong culture have that strong culture because they know what the strike zone is. They know what the rules of the game are. They understand the cost of violating. And if you're going to your documents all the time, if you have to go to your rule book every time, you're, you're probably, you got a pretty bad culture. You know what I mean? 'Cause, like, these things have to hap- happen on the fly, so you need a strong culture, but you gotta have a rule book too. You know? And everybody needs to know that thing. You gotta update that thing. So

Aaron: what we will be doing as we interview people working on extracting some of these principles from, from their good choices or their bad choices and helping,

Spencer: Yeah.

Aaron: people see those leaders through that, through this lens. and one of the... W-what's difficult is that, we don't wanna live too long in the realm of theory, because it feels disconnected. People feel as though it's like, "Okay, this is a great idea, but, I've got an actual problem in front of me and, and

Spencer: Mm-hmm.

Aaron: to be able to work through that, that problem." And as we develop in the podcast and, and in these conversations, those will come to light. Like, those ideas and those applications will come out. but one of the things, in fact, you know, in, in some of the notes that you've taken over time Uh, Spencer, there, there was a quote, I believe it was from, John Lewis Gaddis,

Spencer: Mm-hmm.

Aaron: strategy. and

Spencer: Mm-hmm.

Aaron: that theories allow us to extract lessons from infinite variety. As such, they serve as sketches informed by what you need to know without trying to tell you too much.

Spencer: Mm-hmm.

Aaron: that is a lot of our goal here, is that we want you to be able to extract lessons from infinite variety. And by infinite variety, I mean literally everybody's lives are, are different. And so it's impossible, to be able to rally that all together in some perfect framework, but it allows you to extract the lessons out of it.

Spencer: Mm-hmm.

Aaron: so if You feel like, you wanna know more, you need to see more, what I want to, start with is just recognizing that this is about giving you the language and the vocabulary to start to extract the lessons from your own life and see these things developing more and more as you understand those, key principles.

Spencer: Yeah. That's awesome, man. The Gaddis quote is so dead on. And I, I'll say this too. We, we end this on The Economic Leader with we understand it's a messy reality. Um, these six principles, our playbook, I think we're not gonna run out of stuff to talk about, Aaron. I mean, we're not the first to apply economicsthe discipline remains because it is not run out of ways to think about how human beings interact. It is the discipline, ultimately, we're all seeking some kind of equilibrium we're happy with, and the people around us, organizations are seeking some kind of equilibrium they're happy with, and, uh, that is empowered by all the things we're talking about.