How Others Feel When You're in the Room

Ben: Trust doesn't equal warmth. Trust Doesn't equal, I make you feel good every single time we hang out. I think what I've had to try to do more of is, trust means discernment. Trust means edge sometimes. Trust means giving somebody the tough message.

Spencer: Well, here, I'll tell you, the first time I met Ben Summers, and you know, if I went back in my own history, Aaron, '04, I showed up at West Point scared as all get out, and the person I was scared of was a guy like our guest today, Ben Summers, 'cause he's a flat genius, and they were asking me to teach him. I knew for sure that everybody in the classroom was way smarter than me. it was very daunting task. Now, here's worse than that. I'm the economic counselor, doing academic counseling work, and, uh, they want us all to get involved in this great scholarship program they have at West Point. these young men and women are competing to be Rhodes Scholars or Truman Scholars, Marshall Sch- There's a bunch of scholarships out there. And, uh, said, "Well, we want you to mentor one of the, scholarship candidates." I'm like, "Yeah, for sure. Ben Summers walked in my office, and, um, it changed my life, the rest of my life. Ben has been a close friend of mine. He actually may not know this, but I knew that him and Ollie and Isaac and Sean and, heck, I just remembered, Kyle, there's so many good dudes who were rolling back into West Point, that when it came down to me making a decision on the second time to go back to West Point, Ben was a big part of why I went back, because I knew those cats were gonna be on the team that I was joining. So a

Ben: great

Spencer: husband, a great father, a great friend to many, graduated West Point '06, Rhodes Scholar finalist. I told him, I'm like, "Dude, I don't know you yet, but you must be really good because they've given you to me, and I'm the worst guy here, so it must mean you're the best guy here." Ben is one of the most humble leaders I know, one of the most disciplined folks I know, and a guy that I can say, yeah, I've been on many teams with. thank you, Ben, for giving us some of your time, 'cause right now, you know, you left the Army and, you had gone to Harvard Business School, came back, taught econ at West Point, and now you're the head of Vanguard UK. Aaron and I were talking before you came on, man. It's not surprising to us that you've moved to this, tremendous leadership position so quickly in Vanguard. So thanks for giving us some of your time, man. We're gonna turn it over to you real quick for some, any opening comments, and then, we'll jump into some questions, brother. Thank you.

Ben: first off, thanks for having me and, you know, I, I call Spencer Colonel Clouatre. I'll try to call you Spencer, Spencer here. I mean, the compliment's right back at you. it's one of, one of those conversations. It was a simple conversation that, that Spencer and I had when I was a senior at West Point. We were at Grant Hall, which is the, you know, place to get snacks and meals, and we were kinda reflecting on life, on purpose and, you know, how to make sense of it. I remember you, you know, and I was trying to figure out like, "Hey, do-- would I wanna be an infantry officer or do I wanna be an aviation officer?" And like, what are the different dimensions that you'd use to think through that, that decision? Span-Spencer looked at me and said, "You know what, Ben? At the end of the day, it's about meaningful contributions." you wanna feel like you're, you're doing something that matters, have that sense of meaning and purpose in your life, It was simple, but it was clarifying and, you know, ultimately I, decided to be an aviation officer because of that conversation trying to follow a little bit in your footsteps. I think that what you did there for me in, in, helping distill a decision, that-that's part of, what drew me to economics to go back and teach is, if you can provide people with a theory and concepts to understand the world, understand relationships, you know, at the end of the day, it allows you to make better decisions and, be a better leader too. So, very happy to join you guys for a little bit to talk about, the intersection of leadership and economics.

Spencer: we say it all the time. Ben, you've probably heard me say it, like, all great leaders are good economists. They're taking this production function, these scarce resources we have, they're allocating to their highest valued use, they're aiming them towards a shared outcome that they see as their meaningful purpose. that mechanism has been, uh, true in my life, uh, the whole way through. And when I see somebody doing it well, you are doing it well already,

Aaron: I'm telling you, I wrote discipline in front of me here, and I think it's Jocko Willink, Ben, that says, "Discipline will give you freedom." Aaron, there's not a more disciplined guy I know than Ben.

Ben: maybe reflecting a little bit on, like, just leadership. what's in the thrill of leadership, right? Like,

Spencer: Yeah

Ben: You know, I think we tap into that thrill as cadets at West Point. It's why a lot of us come to West Point in the first place. one of my favorite definitions is, leadership is how others feel when you're in the room. When you're in the room, you definitely wanna create an environment where people feel heard, where they feel like they have dignity in what they do, where they feel valued. But you also, you don't want it to be too soft. that room needs some edge. That, that room needs, um, needs a sense of discipline, a sense of focus. So it's almost like you're constantly... I fi- I find myself as a leader constantly trying to thread that needle between, challenge and support, You know, and sometimes I'll even think of West Point as, the perfect metaphor for this. I think of, running up some of the hills at West Point. Like, what kind of leader did I wanna be if I'm running next to a platoon of soldiers, that are trying to run up one of those steep hills at West Point? Am I one of the leaders that, like, I'm just gonna run as quickly as I can and, leave everybody in the dust and then stand at the top of the hill and scream at people because they're not running as fast as they can? alternatively, am I one of the leaders that's gonna say, "You know what, guys? It's rainy today. It's super steep. Let's just walk this one out. We don't need to run out of the hill." And it's like, no, I wanna be the type of leader that's right next to the team and, we're sweating it out. It's tough, but we're in it together, and they feel the love, feel the support. So I think that's, that's kinda what I'm after constantly as a leader. But I've gotten it wrong probably more times than, you know, than I've gotten it right 'cause it's not a-- that balance is different for different situations, different people. I've experienced leaders that have gotten it right. I've also experienced leaders that have gotten it wrong for me, and that's, like, left a mark on me. But it's, you know, it's probably something about that that helps me. It kind of fuels me, I guess, as a leader, um, in trying to get the best out of the, the, the team.

Spencer: this comp- competitive versus cooperative exchange and knowing the environment in front of you. I love that, example, the hill and what type of leader to be, how to compete, but understand how to cooperate and then getting to that equilibrium in the right environment. this is why free markets, I think, are strong as well.

Aaron: Yeah, in Leadership economics, we do love to, think a lot about, context and how that changes your approaches. and it's one of the things that I think is hardest, currently in how we try to develop and train leaders, is that we can think of different forms of leadership, different approaches to leadership. the hard thing is really about understanding the context that you're in and what the right approach is based on the people you have and the goals you're trying to accomplish. And so that's one of the things where I think the theory actually is informative, is making sure that you can use the theory as a lens to interpret your current situation or your current context. and so the, the other part of what you said, though, that I think is really important is, people remember how you make them feel, and leadership is, influencing how they feel when you're in the room. And it's funny that you say that because economics is not necessarily a touchy-feely subject. where you're just, often treated as this just utility optimizing machine. we've worked a lot, especially in the leadership economics class that we teach at West Point, to develop a, a theoretical model that also provides some, some richer interpretations about things, regarding how people feel, how they interpret their situation around them because of your leadership. I wanted to get your sense of how, you started off with the 13 ideas from economics and, how you would, revise those based on your experiences as you've gotten, older and wiser.

Spencer: Simple but powerful ideas.

Ben: but powerful ideas. I mean, I think you actually, um And maybe a s- a story's worth a thousand words, right? So like, as you were saying that, Aaron, I was thinking a little bit about, one of the nice things about marginal analysis is it gets you out of the sunk cost trap. And in business, the sunk cost fallacy is real. you know, it, it's all around you and the reasons for that, it's understandable. It's like, first off, you know, sometimes you set a bold ambition or, or a bold goal, teams wanna drive towards that. So you want to allocate time, attention, and money towards achieving that goal, and if you don't achieve that goal, it's like your reputation's on the line. potentially jobs are on the line, it's built to potentially fall into the sunk cost, trap. So, uh, where I felt that, and actually as, I'm currently, heading up the, the UK, for Vanguard, and when I came here, it was about three years ago, to lead the retail business. So this would be the business that distributes, Vanguard products and funds directly to everyday people. It's an awesome, mission. awesome business. And, and the title was, head of personal investor for Europe, because we had two businesses. We had the, the UK business, which was, was growing, a lot of excitement. You know, needed to make some decisions to make sure it was growing in the right, sustainable kind of way, but like that was a business you could probably bet on. And then we also had a business in Germany that was not growing. We'd invested a ton of capital, a ton of energy, a ton of talent, and we needed to shut that business down. And that was like my first... and you g- you know, you kind of look at it objectively from more of an economic lens, a sunk cost fallacy lens, and it's like clear as day. Like it doesn't matter how much capital that we, invested into that business, like we need to shut that thing down. But, as I onboarded into the, you know, my, my new role and I went out to Berlin and I'm meeting the team and these are, you know, these are employees that believe in the mission. Like they dedicated their career. They see the opportunity in the Ger- in Germany. they're trying to make this thing, work. And then the interesting thing at, at that point too was like my immediate boss was also a big believer in, in that business and, and the opportunity. So for me it was like, yes, sunk cost fallacy and like the economic logic, that all makes sense for our logical side. But like it's dreams, ambitions, people's, motivations, their careers that at the end, you know, that you have to take that, that into account too and- and like the way that I ch- I reconciled that for myself was like, if that business in Germany, if it didn't have legs, if it wasn't gonna be viable, like the most clarifying, caring, kind of kind thing you could do is help the organization be very honest with that fact, and then give all those employees like the clarity they deserve about their lives and their career that "Hey, we're gonna just be shutting this thing down." there's not a reason to keep the dream alive for three more months or six more months and kick the can down the road. it is tough, because I think in any like business venture, you're trying to grow new offers. If you don't have like thoughtful off-ramps, if everything feels like a one-way door, it's gonna be really easy to fall into the sunk cost trap. that's probably a big learning that I've had just from that, that single moment of shutting down a business is like for future, business opportunities, strategic bets, like making sure there's a, there's an off-ramp. Annie Duke's done a lot of research on this point so that you can exit gracefully. Like, if the decision isn't materializing, you have that stage gate where you can turn off the decision and avoid the, the sunk cost trap. that's like one long example, Aaron, of the kind of the humanity, the human dimension of, of a decision like butting up against more of the economic logic of the decision and then how to make sense of it.

Aaron: Yeah, in our last episode, we actually had a great conversation about soft information. And so as you were telling this story, I wasn't sure how it was gonna end. I wanted to know, okay, did you end up shutting it down? Did you actually go there and meet these people and realize, no, this is gonna work? what's interesting is that when you, when you actually get to meet people face to face and see what they're hoping for and what they're dreaming for and how they're approaching it, you do get a lot more of this information that goes beyond what you can see, just in the data about the, the performance of the business. But regardless of whether you, you keep it open or shut it down, that information does inform the decision that you're gonna make. I really do like this, this sense of, i- introducing that soft information still can be fed through this lens of sunk costs when you think about, um, is this a good investment of those employees' time? If there's a better opportunity that you are, or, you know, if you're confident that this opportunity that they've been pursuing is actually not gonna work out, that's useful for them as well

Ben: Yeah, totally

Spencer: And did y'all shut it down altogether, Ben? Or like how long was the off-ramp? do you give transition time?

Ben: yeah

Spencer: the idea, like taking pl- like planning for their future. It's an unsustainable future, like giving them the information so that they can actually,

Ben: Totally

Spencer: know, uh, it's, it's a sense of care as well, as you mentioned, you

Ben: it is. It is. yeah, and it was tough. I, I'd say coming-- the, the hardest part for me was like coming to the strategic decision and then communicating that decision to a, a team of probably 70 or 80 employees. now what we did is we really cared for the transition after that, so like supporting all the employees as they were, pursuing careers, whether other opportunities at Vanguard, if they wanna move back to the UK and we could link them up with opportunities or supporting them as they pursued stuff outside of Vanguard. And we had a s- we did have a small number of clients, that were using that offer, so you had to off-board the clients in the right way.

Spencer: Right, right

Ben: thing, I think as a leader there too, it gets a little bit to your point, Aaron, on like soft information, 'cause sometimes, especially when times are difficult, I think as a leader you can... y-you almost like move away from it. So for me it was like, make this really tough decision, not... You're, you're-- People aren't, like, putting you as number one on their fan list. Like, you know? When I would-- I'd fly into Berl-Berlin, and you know, people are probably cursing under their breath. And part of me was like, "I want to avoid that." I don't wanna lean into, the relationships and the confrontation, and it's almost easier if I shield myself from the, the human dimension. you know, I can just fall back on, more of my economic, black-and-white logic, as I'm navigating. This is after we made the announcement and kinda navigating through that transition point. we had a, we had a leader on the grounds, And I remember it was like we made the announcement in November, and I was-- I'd visit the office every couple weeks. if I'm being honest with myself, kinda going through the motions, t-maintaining a degree of separation from, the people and, and what they were, dealing with. And one of the leaders on the ground who was gonna stay with Vanguard, he pulled me aside and s- and he was like, "Ben, that wasn't your best, that wasn't your best visit." "Lean into this a little bit more." I really appreciated his, his feedback. And then from there on out, we started doing town halls. Like we would... And remind-- Like these are-- this is a team that's literally shutting down a business, but every time I'd visit, we'd do a, a lunch, and everybody would join, and we'd review kind of exit metrics but also recognize people and the, the job that they were doing and, and some of the milestones as they moved on to different parts of their career. and it completely flipped the, the script for me and, how I was feeling about that transition and that exit, and then also, like, how to show up and almost leaning into those softer information gathering. so you know, that's a, a good course correction from a leader that I was working with at the time.

Aaron: Yeah, and the other part of this, that's really interesting is also trying to think about, as you mentioned before, these off-ramps as design.

Ben: Yeah

Aaron: there's a lot of information and things that you can't understand about the future, obviously. And so even though you may have a good plan or a good idea as a business, there are things that you learn along the way that make it not viable anymore. and the, the thing that I think makes that decision easier, as you said, is the off-ramp as a design. And y- we talk about seeing those decisions as experiments, and recognizing that each of these experiments, And, people say a lot that you should learn f- you should learn from failure, and if you make failure a learning experience, it's not a failure. But I think the, view from the beginning is actually a little bit more helpful, where you say, "I'm going to try this thing, and here's my backup, or here's what's gonna happen if it fails." and not being too, discouraged by that failure view, right? Like, understanding that there is a world after this if this doesn't work out, and in that world, there's still other opportunities to be successful and other ways to make the best of my life. seeing those decisions as experiments to learn what actually is going to occur, to learn the actual production function, as we

Ben: Totally.

Aaron: of how, how does this business work out? How does this industry work out? that for me is also very important from the o- outset

Ben: Yeah, that, that's been a huge learning for me, Aaron, in, in running a business, right? we could talk about this for a long time. I, I think when you're able to create off-ramps and we're able to really, embed a more experimental, learning culture, it helps with empowerment too. Je-Jeff Bezos has this great like two-by-two framework. what are the decisions that like the senior-most people in the organization need to effectively micromanage? like if you were to think of what are the things that I, I should spend like the most amount of time on? and by me spending time on, it's gonna slow up the organization, and those would not be like decisions that I'm passing down to, so people can like iterate and learn quickly. on one, one side or one, say like the y-axis, it would be decisions that are consequential. So they're like strategically consequential from a market perspective, economic perspective, regulatory perspective, like name, name the thing. that's one, one dimension. But then the other dimension is a decision a one-way door or a two-way door? And if like you're thinking of all your big decisions as one-way doors, you're gonna have to float all of them up, you know? Whereas like if you're able to create off-ramps, you can actually de-risk decisions and, and that leads to empowerment and learning so that you're able to do more and tackle more. And if you're learning more, you're, yeah, you're moving the ball forward more quickly. We actually launched an off-ramp, and that's, that's very much a mindset we try to embed in the business. one of the sites here at, Vanguard in the UK is around, um, we call it a managed service, but it's really like simplified advice. we're really passionate about helping people get started with investing, Everyday people just starting investing, starting their journey, saving regularly, like trying to reach their long-term goals. And, about three to four years ago, we saw that like a lot of people when they were onboarding, to Vanguard, when they got to the point of making a choice and like selecting their funds, that was the biggest drop-off. Like everybody was dropping off of the journey then. so the team did some research and, interviewed some of those clients and said like, "Hey, if we had something that helped you make that choice and manage the, the investment choice and the portfolio for you going forward, like would that be interesting for you?" And people are like, "Yeah, that would be interesting." So then the team built this really small prototype, tested it, started getting feedback, and then what we did is like with capital and how much we were gonna invest in that offer, we staged the capital. So like you would have quarterly... It's basically like what elements of product market fit and like- whether it's conversion rates or how many people are-- what's the uptake in the offer, what's the, reaction from clients? If we weren't hitting those marks each quarter and, learning something meaningful, then we, could turn off the capital. So it wasn't like we were deploying everything at once. we staged it and just de-risked the whole- the entire launch and iterations around that offer. t- we call it a managed service, but today that's, our fastest-growing offer. You know, it's, it was a,

Spencer: Yeah.

Ben: a big success, but it kinda took that principle that you're speaking to, Aaron, and, and ran with it

Spencer: we talked about it, Aaron, as explore and exploit. Um, like you, you-- And honestly, we jumped to marginal analysis, but I'll back it up to the first principle, which is the trade-offs, right? for framing trade-offs, we're framing trade-offs where we think we understand the marginal benefit and the marginal costs. Um, sometimes it's a fool's game in that we believe we totally understand the benefits and the cost, and if you jump in a pool cannonball and you got no ladders out, no off-ramps, you called it a thoughtful off-ramp, which I really love,

Ben: Yeah

Spencer: That's a great term, thoughtful ot ramps, off-ramps. Then you're kind of minimizing the consequences of the accepted trade-offs you're making by going in and explore first, then exploit

Ben: Exactly.

Spencer: And, um,

Ben: We used,

Spencer: just genius.

Ben: when we were telling that story, we u- like Jim Collins is, I don't know if you guys have kind of read

Spencer: Oh,

Ben: "Good to Great," like so many great leadership principles. We used one and I think the headline is like, "Fire bullets, not cannonballs." Or more specifically, like fire bullets before you fire cannonballs. And it's like you only have a certain amount of cannonballs to fire, so you, you calibrate with the bullets, And then once you know that you're onto something and you're hitting the target, then it's like, okay, now we're going cannonball mode and like this thing's worth the-- like we're not gonna waste the cannonball because we know this thing has legs. But it's exactly that, you know, that, that point.

Spencer: Yeah. We have a fire for effect call in, the US Army that is to our artillerymen. All the artillery men and women out there understand when I say fire for effect. It's, Now, they're throwing cannonballs the whole time, and we have a good budget for

Ben: yeah, exactly.

Spencer: yeah, they're sending everything they got now. I love that, though. Jim Collins is, we've, Aaron and I talk about a lot. you know, we interviewed Josh Richardson. You know

Ben: Yeah, of course. Yeah

Spencer: yeah. So Josh's point was, he said, "Hey, listen,

Ben: great

Spencer: is just good over time." And,

Ben: I love that

Spencer: one of the things that popped back to me because I don't know if you know this, but I, Mr. Jack Bogle, he probably came and talked when you were a cadet.

Ben: Yeah. Yeah.

Spencer: in that auditorium?

Ben: of course

Spencer: so, Andrew Bogle and I went to Vanderbilt together. I met Mr. Jack a few times, I'm sure everybody knows Jack Bogle. mean, he's got a whole following. he passed away, I don't know, man, is it 10, 12 years ago now?

Ben: Yep

Spencer: when he came to talk at West Point, and this was probably '05 maybe, 2005 or 2004, I don't know, I quickly got him there. it was amazing to hear the culture that he was building and how he got there, the strategy you're talking about for Vanguard. And he kind of sits in my head as a guy who, is just great. he rode economy class plane to Newburgh Airport and got off of that thing with no luggage at all. And, Our secretary, Marianne, had called his secretary to figure out what sandwich he liked, and he was really disappointed that we did that, you know? Like, th- but this is the culture, I think, that we're gonna be good, every day, 1% better every day. it doesn't have to be crazy. It, you're just minimizing your cost, so we're gonna apply it to the right spot. You're getting that scarce thing back to the right spot.

Ben: Yeah, it's interesting. I mean, that one too. I mean, that's an investment principle, right? Of like, hey, keep it simple, stay disciplined, minimize your costs. It's that 1%, compounding over time equates to a big kind of benefit. it relates to investing, but also like it's to leadership, right? And then like having

Spencer: Yes

Ben: systems in place where yeah, it's just discipline and you're like, you're chipping away at it, and you do that over time, that can turn into a nice advantage

Spencer: Let me... Aaron, let me state the other principles real quick, 'cause the audience, I wanna keep these in their head. and it's been in the newsletter. we have our BIG framework, the allocation, information, motivation, and execution. But the six, you talked about, I don't know, it was either 11 or 13 simple but powerful economic ideas. Ben was the guy. He was the head chef. I, I think Sean, what- Sean McMahon, right? Did I get Sean's

Ben: yeah. We had a couple of us, yeah

Spencer: Yeah, y'all cooked over that thing and got the, you got the roux perfectly. it's like, hey, it's seven or six, depending on how we frame this, and that's what we have in front of people now. ultimately everywhere in your life you're framing trade-offs, and I think the other four, other five are, talking about how you frame that trade-off. Well, you went to marginal analysis. That's number

Ben: Yep

Spencer: marginal benefit versus marginal cost. What I want the audience to know is that, hey, there's marginal value uncertainty. That's what the real world looks like. It's uncertain. don't fool yourself into thinking the benefit and the cost you exactly know. The third one is about motivation and incentives. The fourth one's about trade, in that we have win-wins and specialization and comparative advantage. The fifth one is about information, We talk about prices. Psychological safety is about getting good information. You went to the sound of the guns. The guy told you, "Hey, Ben, that wasn't your best showing. You need to move closer to the friction so that you have better information." That was the last class I saw him teach, I'm telling you, Aaron. The last class Ben was teaching at, at West Point was about psychological safety, the one I saw. And then the last one is about centralized and decentralized control, this principal-agent problem. and the last paragraph is about humility, which is, hey, it's a messy reality out there. So those are the playbook that you came up with as a plank holder, and, I, I think you've been applying that very well, throughout your life. I don't know how many people know this, but y- you've f- flown in combat many time. You're a pilot. You're putting your life, the trade-off that you faced, Ben, I mean, we've been telling some Vanguard stories, and those apply. The mechanisms are the same. did you use this in your aviation leadership career in the Army, these principles?

Ben: one of the stories that... And it, and a lot, sometimes the stories that are more difficult, like the, the tragic stories, are the ones that, move you the most, you know? So during my beginning of my second deployment, and I think what, what this story is a combination, it's a story about, yeah, probably motivation, incentives, alignment, but then also, what happens when there's not, an environment where, information can bubble up from different sides. so I, I deployed, uh, my second deployment in Afghanistan, I was an operations officer or the lead planner. And, we have an a- we had an aviation task force, probably 250, soldiers and we had a little bit of all the different types of airframes, and we also had a pathfinder unit that was... So an infantry, unit that was attached to us. And, like, our bread and butter mission, we're supporting the ground troops in Afghanistan, but our squadron commander, this, former baseball player, really aggressive, aggressive guy, and he wanted to, he wanted to get out in front of the, Taliban and, use those pathfinders in a disruptive kind of way that was a little bit outside the box. And he put it on me to, "Hey, come up with a campaign plan. How could this work?" There's basically a, we called it a lethal aid network, but basically these, these paths and trails that would go from Afghanistan to, into Pakistan, and there were caches of weapons and supplies, and it was just clear as day there. You could look on any maps and see it, but, like, nobody was exploiting it. Like, we weren't really doing anything to, destroy those caches. So, so we came up with this, campaign plan and we, you know, we linked the campaign plan really to get, buy-in from, all the approval authorities that we should be doing this. We linked it into, you know, the really the commander's intent at least two echelons higher than us. So at the, at the regional level with the generals, just to provide, the strategic logic to do this, and did all the intelligence and all the collaboration, um, with some of the other units. And we had Afghan partners that, that did these missions with us. So, so I was very involved in everything from, like, the strategy to the campaign plan and getting buy-in to actually, day of operations. And the first day we go out there, we're flying along the border, we got a couple, Blackhawks, other aviation assets, and it was like shooting fish in a barrel. I mean, we look down and there's these giant caches just sitting in the, the valleys and, you know, we had pathfinders in the back. We drop the pathfinders off. They go in, there's Weapons, IEDs, they blow the stuff up. I mean, huge, huge success. And we start, we keep doing it, you know? And it's like with, the more successes we had, the more confident that we felt, the more we start pushing the envelope further and further along the, along the Afghan border. Generals were interested. General Petraeus was interested. it kind of got, caught a lot of buzz. and then in late May, May of 2012, we, at this point we'd extended far, far beyond what was probably reasonable. we had continued to do these missions, and same thing. I was doing a separate mission at the time, but the guys are flying above. They see the caches. They land. Pathfinders, Afghan partners jump out the helicopter, run up to the cache. And what, what do you think happened?

Spencer: They set it up booby

Ben: Yeah. I mean, it totally played our hands. And then, I was flying back from a different place, get the emergency message on my helicopter.

Spencer: Yeah

Ben: you know, Pathfinders hit IED, run into the TOC, go t- And it's

Spencer: all set up

Ben: and then we flew to rescue these guys, but, you know, ultimately 10, 10 people lost their lives. And it was like the classic story. I mean, that, we got ahead of ourselves. there wasn't adequate challenge when we were making the decisions. We weren't, we weren't thinking of like, "Hey, what happens if this goes south?" We were almost using our success to validate our decision-making process, and there was a combination of, poor planning, poor decision-making, not enough psychological safety. So that one, like I th- I mean, that's one of those things, too. Like, you think about the, the loss and what those, you know, the, the lives that those, those soldiers left behind, and it sticks with you. But then the le- you know, the leadership lessons and how you wanna show up differently or,

Spencer: Yeah

Ben: not fall into that trap. But that's probably the most searing one for me of,

Spencer: Yeah

Ben: you know, kind of when, when things didn't go, didn't go right

Spencer: I mean, you weren't a medevac pilot. You were an

Ben: I was in Assault Pilot. We flew a lot of medevac. we did a lot of the medevac missions. Yeah,

Spencer: but yeah, yeah, you

Ben: CAS. That was CAS, that was CASEVAC, yeah.

Spencer: CASEVAC.

Ben: Yeah

Spencer: Yeah, so this same thing happened to us, probably '07, '08, where we, our success kind of masked or kind of blurs the vision a little

Ben: Totally

Spencer: uh, you start thinking that these things are happening because you're so good. and it turns out that you're being played, and, yeah, we had some young Rangers. we chased a guy, a, a few guys into a building, and they blew it, when the Rangers, came through the door, and we lost a few guys, on that target. Same kind of deal. know, Aaron and I, we talk about this margin of value uncertainty, if I were to jump us back to number two, margin analysis, where we were

Ben: Yeah

Spencer: uh, that there's, there's a lot of uncertainty in the benefits and the cost. Another good reason to have the, uh, thoughtful off-ramp, and to beware of success. But we use this acronym called DICAO we came up, but it's discord, inconsequence, complexity, absence, and the last one we talked about is overconfidence bias. these are things that arise, when we face uncertainty and ambiguity. You want to be confident. You don't want to have underconfidence, but you want to have thoughtful and well-placed confidence. and be careful when the run gets too easy,

Aaron: complexity is one of these things where the more dimensions you have involved in a decision, the harder it becomes. A very good example of this, you already brought up, Ben, when your, clients had to make the decision about where to invest and things, that by shrinking that complexity down, they were able to make those decisions better. And I think, what's hard about your situation, in Afghanistan is that you don't know what you don't know. And, and it's hard to remember that, especially when you're dealing with other people who have their own decision-making capacity, that they're also learning as well. and so being able to maintain a constant source of information of how that adaptation works, it's like when you're playing chess, and you've got this huge plan to take some other piece, and it's almost like, uh, you forget that the other person's also watching, and they can adapt their strategy. and in real life, it's very difficult to keep that in mind. And so the, the question I have

Ben: about

Aaron: this is, were there people who may have been able to, predict this or see this coming? or was it more of a, a blind spot globally across the units where it was mostly that it just kept on working and it kept on working? Do you know what I mean? So I, really what I wanna know first is that, you'd started this off by saying, this is a consequence of information not bubbling up, and so I was just curious if it was the case that people could see this coming. and if not, I'd like to know more about how you could have imagined, preventing,

Ben: Preventing it. Yeah, I think it's, the leadership lesson is I think for me, like that, that I took, and if I reflect on like what was it like within that staff at the time, I don't think there was room for, healthy like divergence, of input, information, you know, bottoms up, like questioning of like direction of travel. I, I think in any li- any-- And it's oversimplifying a decision-making process, but I think it's it's almost like a triangle, right? There's like the divergence, like you, you purposefully... And I think as a leader, like you have to set the tone. You have to hunt for it, because as soon as you converge, like then the team's gonna anchor to where that, that conversion point. And I think in this instance, like the success led to almost like a premature-- Either it was premature convergence or like as we reset and, almost look at each of these missions in isolation, we should have had more, more like healthy discourse on like what, what could go wrong. And it's, that's, it's something I st- I mean, honestly, I struggle with it. Like, I think now I've almost, I course correct too much at... Like me at my worst is like, you know, I, I'm comfortable with divergence. Like I, I almost like I seek it out. I want to hear different opinions. But if you run an organization ru- like that, that's chaos. Like people need a sense of direction. So it's like for me making that turn, like I, I really gotta f- I focus on that. Like, okay, we've heard enough. Now it's time to disagree and commit and like let's, let's go on. Like we're going through, it's, it's kind of Colonel Clouatre Spencer's point on exploitation, like we're hitting the exploitation moment. I think other leaders struggle with the opposite, where they struggle with And that's probably what we had at the time with that unit in Afghanistan, like struggled with like the environment where we could have healthy discourse and difference of opinion, and like converged too early, and then we're getting like, the success was breeding more confidence and less challenge of the, the plan that we were pursuing.

Spencer: W- what I love about this is that this is a very good example, and your triangle example actually helps illustrate this, where, Spencer brought up the, the DICAO, these problems that arise mainly because, you can't perfectly predict the marginal benefits and costs. But

Aaron: One of the solutions to reduce the effects of that ambiguity is to, essentially from, the leadership's perspective, is to expand the amount of not just information, but the dimensions of information that you're getting. And that can include, expanding who you're getting information

Ben: Yeah

Aaron: And it's a, it's a difficult task, 'cause too much information, can be overwhelming, and it can lead to poor decision-making. And so it's a matter of having this ability to hold multiple models of how the world is working at once, be able to, see what is most applicable in the context that you're working in. and then we call it pruning. this comes from my, you know, my days up in northern California pruning all sorts of different trees and grape vines and stuff. And every, different plant has a different pruning strategy. Everything requires a different level of pruning. and I think the different contexts that you find yourself in are going to require a, a, a different amount of how tightly do you narrow down the focus of the people you're leading. And so there's this first process of expanding those dimensions and obtaining that information. But you as a leader, it's a difficult task. That's, very hard to maintain all these things in your head at once, and then to narrow it down to the things that people need to focus on. And so both of those things, as you said, they can both lead to a trap for the leadership. And this is where the work of leaders is, right? It resides right here of finding that balance between- Actively seeking the information, that's a job that's easily overlooked. and so creating opportunities to get information then, narrowing it down. The, the other thing, I've, started looking a lot more into, the neuroscience of divergent thinking and how there's, this gateway. You know, there's a part of your brain that's acting as a gatekeeper for what information enters into your focus. And being able to relax that part of your brain is actually, the key to some of this divergent thinking. And people who lack a strong gatekeeper, these are the folks who are actually quite divergent in how they th- think and see the world. And of course, it comes with costs for them as well, namely focusing on a, on a task or focusing on a particular direction. the other part of this is finding ways to actually reduce that gatekeeper to be able to see the information, that may not be totally visible to everybody else.

Spencer: and the military decision-making process, which it works, this mission command philosophy, it works because it's based on economic principles. in the multiple pathways of the universe, leaders are create, trying to create a pathway. We red cell things, call it the red cell. You have the oppos- Somebody play the opposing force. Somebody in that TOC somewhere, or somebody in any organization out there needs to be testing where the failures are at. But it takes great security. You can't be insecure and expand, diverge away from, take the friction that people are gonna throw at you. If you're not a secure leader, if you're a very insecure leader, then you're gonna be faced with all kind of challenges when we diverge. but being able to make that turn, it's almost like a diamond. We diverge and then we come back. We explore and then we exploit. I love this diamond. If you can narrow those edges and go, "No, now we're exploiting this pathway, we have to commit," and that, like what Aaron just said, that is the key to the leadership, piece of this, Ben. Aaron, what the, the solutions of the DICAO? not solutions, but suggested ways to think about it. Aaron, you hit expand and you hit prune, which I don't know if there's, anything more boring than pruning something, but it's a good example. We got...

Aaron: okay?

Spencer: Although I

Ben: Thera-

Spencer: just

Ben: therapeutic probably.

Aaron: things

Spencer: It's, was just looking at bonsai trees in California. They were beautiful. They were beautiful.

Aaron: Yeah, that's right

Spencer: What is the T and the I and the C? Eptic, E-P-T-I-C. Just real quick, what's the T and the I and the C?

Aaron: so the E is the expand your view, the P is the prune. the one thing that, as I was trying to explain is as a leader it's difficult to maintain all this, these different dimensions And so the point here is that that ambiguity is a muscle, being able to tolerate that level of ambiguity. And you'll see people in your life who are very good at tolerating ambiguity, and some are very bad at it.

Spencer: That's the T, tolerate.

Aaron: that's the T,

Spencer: Yeah.

Aaron: your ability to actually tolerate

Spencer: Yes. Yes

Aaron: you may make fun of bonsai Spencer, but that is my way of tolerating ambiguity, But, but again, like, finding ways, how you go about doing that's actually, is actually difficult, but it's a muscle that you can exercise in putting yourself into ambiguous situations and seeing that you have the capacity to navigate that and to sit comfortably with it.you need to find the ability to sit in that ambiguity without being

Spencer: scared

Ben: That's, I mean, if

Aaron: that's a

Ben: if I could... I mean, I actually think I'd even say that's a duty. I think leaders, it's funny all the, all the, the, the West Point kind of leaders like Spencer that left such an impact on me. Another one is Everett Spain, and he had something like, something to the effect of like, "Leaders run towards the smoke." And I love that. Like, nothing bothers me more than like... And espec- you know, it could be any leader. It could be a new leader, it could be a senior leader. Where like shying away from the ambiguity, like the tension, the ambiguity, the uncertainty, like that is the point. that is what you're supposed to run towards. And if there's not trade-offs, if there's not something difficult, if there's... It's not... The-- You don't need a leader. I mean, like anybody can... There's no judgment required, but, if you're, you know, sharing that with cadets, it's like that is your job. Like, your job is to go into a situation, figure out what's messy, ambiguous, not right, where there's confusion, and like sprint towards that, because that's where you're gonna make your, that's where you're gonna make your mark, and that's where you can leave the biggest impact for, for your team.

Aaron: And, and like I said, there, there is... It is like a muscle. The... In fact, you have natural, neurological responses to ambiguity that are different from an uncertainty. And so again, to be clear, ambiguity is about when you don't quite yet know the connection between your choices and the

Ben: Yep

Aaron: right? Uncertainty is different. It's where the world has randomness. But the ambiguity is where that connection becomes fuzzy, and being able to sit there and, and tolerate it and accept that life has a lot of ambiguity, that's the T in EPTIC. the other part of this is, as we've hit on, is iterating on the production function

Spencer: Yeah

Aaron: and learning it, and seeing each of your choices partly as an experiment

Spencer: After action reviews and learning, iterating, learning, right?

Aaron: Yes, that's right. And, and so again, uh,

Spencer: to figure out their production function.

Aaron: That's right. Yeah And so that's actually gonna reduce the ambiguity that you're gonna be struggling with. but the point here is that you need to make it, purposeful to see each decision as an experiment. And then the last thing is that you exert some of your resources and some of your effort towards learning, and seeing your learning as an investment. It's very easy to overlook, learning as part of an investment, 'cause it sometimes takes, resources, it takes time, it takes thought. And so making that, an explicit choice as you're trying to allocate all these resources in this complex world, one of your allocation choices is to put things towards learning. so those would be those solutionswe've put together from the theory

Spencer: and Ben, the production function that I think your company faces now, you've had many production functions, many outcomes that you're supposed to get to in your life. Chrissy has a production function for you at the house, right? you have many production functions in your life, and I think When I, when I look at the leadership that's out there, ultimately you're faced with the choice trying to create enough authority and responsibility to create ownership where the information's best at the lowest level. In economics, we call it principal-agent problem. And generally, the speed of trust, trust is the thing that, can help leaders out and develop great cultures. Take policies that are written, turn it into cultures that are just everyday understanding. The relative prices that exist at many different levels. What Everett would tell you, run to-- He sets a price. Like, he's telling you his level of commitment when he runs to the friction, when he runs to the smoke. that becomes the price, you know. So what I would be interested in is how do you build trust in your organization, in this new career you're in now? Yeah.

Ben: I mean, trust building happens every single day, every single, interaction. And with that, and I don't have, a scripted kinda answer on, how do you

Spencer: Yeah

Ben: build trust. I think honesty is a huge part of it, right? it's the integrity of how you're showing up and, honesty of, of the relationships. And the other thing with trust, Trust doesn't equal warmth. You know? Like, trust doesn't equal, I make you feel good every single time we, we hang out. I think what I've had to do, or, you know, try to do more of is, like, trust means discernment. Trust means edge sometimes. Trust means giving somebody the tough, the tough message. So it's like there's, there's both, both sides of it there. and I think, coming into a new organization, I think in initially, building trust in those relationships, it's like, am I... am I credible on the one hand? ca- can you show up and deliver something of value and, would people bet on you to do that? So it's, like, more of a credibility question. Then there's the question of, It's kind of almost a humility. am I listening? Am I engaged enough? could I change my mind? can you convince me that I'm wrong? I think there's that side of trust too that sometimes people only think about the, the credibility side of trust. can he do the task? The other one is, can I rely on his perspective and, will he listen to me? will he change his mind? Like, how kind of adaptable is he, I guess, in his, in his thinking and reasoning? but then you know, that, it can't be too much of that 'cause then there's, the values and, what you stand for and, what are the things that are non-compromising. So I think, all that in day-to-day relationships, you're trying to build that out. now with a leadership team, I think it really does boil down to, transparency and it is psychological safety, right? people are willing to take interpersonal risks with that team and, share the good news, but also share the bad news. I remember when I came, when I first got here to, the UK, we had an operational challenge that real- it turned, it spiraled. It got ugly, right? Like, we had,

Spencer: Yeah

Ben: a lot of, you know, the business here in the UK growing quickly, a lot of people transferring assets into the platform and you stare and focus on like the, the MI, like the, you know, the stats and the data and all the information in your, in your operating committees and stuff. And I would describe, some of the stats we were looking at, it was like watermelons. So it was, it like on the surface it was green and it, and it was as simple as like we were looking at the average, we weren't looking at the mean, or we weren't looking at the standard deviation. Like it was very, very simple stuff. but the reason for that is the team there was so... And I wasn't even aware of it. Like I consider myself a pretty like open, like, hey, surface the brutal facts. you don't need to like position stuff for me. Like I wanna see it the way it is. But we had fa- we were staring at watermelons and then when we dug beneath the green and got into the red, the red was bad and then the red was causing like service level issues and this starts in a retail business that can really start to spiral so we had to get ahead of it. but one of the biggest things that, you know, for the leadership team it was recalibrating like, hey, the trust and the expectation for how we show up for one another, like we come forward with the bad news. Like we almost as a leadership team, we hunt for the brutal facts. Like that's our orientation as a team now. It's not like I don't care about the green, like that's wonderful but what's the, what's the red? and then trying to create an environment where people feel comfortable doing, doing that and that's, that's all has to do with trust.

Spencer: Yeah. We, our last guest, Rob Shaw, he was one of my roommates up at West Point, He's a banker. He's been in l- regional banking, for a while. What'd he say, "Eat your frogs in the morning." Like, seek out the bad things.

Ben: yeah

Spencer: And then don't let them hide, don't let them fester. Put them in the middle of the room, eat them, eat them

Ben: Total

Spencer: as soon as you can. And I, honestly, we've been talking soft data a lot, like soft information, but if you can't do the hard information, like if you can't get to the right numbers, if you don't know what the truth is in dollars or the truth is in, on your balance sheet, your operating s- I mean, you will never get to the soft data. Like, you have to do that stuff first. So there is some expertise that comes in the hard data, and understanding the rules of the game, and then I think the graduate level is the soft stuff we were talking about.

Ben: I mean, the only other thing about trust that I've, I've been thinking about too is the tax, the organizational tax when there isn't trust. So like when I don't trust a team and then like what that team's required to do to move work forward because there's not trust in the relationship or if I don't feel trusted, like that slows, like that is the

Spencer: There's a tax.

Ben: a tax, you know? And it, it slows the organization down.

Aaron: Every decision becomes friction, right? Like every, everything requires verification, the one thing I wanted to point out is, a- and again, like for me, this comes from the theory, but, trust for me is really also about alignment. when you understand that someone's goals and incentives are, not just incentives, like incentive sounds like dollars and cents, but that they're, what they're trying to achieve both professionally and in their life, when those are aligned with yours, it's very easy to trust.

Spencer: Yes

Aaron: and so developing that requires these interactions where you see their alignment, and you see what they're actually trying to pursue, and you can even influence it to be more in line with what your organization is trying to do or what you're trying to accomplish. But, in the end, for me, trust has to be about alignment. are we pursuing the same thing? And, and that immediately reduces some of that friction in terms of when I... can trust your intentions now when I say, "This is what we're trying to pursue," and I trust that you are on the same page about that's the goal, and we understand how we go about doing these goals. that, that's what I mean

Spencer: Yeah. And if it's alignment, this is what I'm secretly trying to, get out to the world, like this is my... the alignment is really, we go back to number one, the trade-offs. Where is the line where we put our feet in the ground or where we've been? Like, not in terms of dollars like Aaron was just saying, but w- what are the relative prices that this organization accepts? And it's found in the trade-offs they make, And those trade-offs are being made very small in daily interactions and in strategic ones, big ones. So the Night Stalkers, this, this aviation unit that I was a part of, the most alignment I ever felt in my life was probably there with them, and, the prices were very relevant, or very obvious, I should say. They were just very obvious. I knew what the prices were. The relative prices were very clear.

Aaron: yeah, just to close the loop on that. in a free market, the prices help align the information because there's the clear profit motive, right? everybody is aligned on the, "I wanna maximize my utility in terms of what I buy," and the seller wants to maximize how much money they're making. And so that, that immediately aligns them To that, what's like in motivating? But that, that's hard to replicate

Ben: Well, the, Yeah, it's interesting on alignment. there's a Jim Collins, it's a c- it's a strategy prin- principle around like the hedgehog, and like in business strategy, you're always trying to find where, the, the thing that you were uniquely built to do, the thing that you're most passionate about, and like your economic engine, like those three things are all like squarely aligned and then if that's where you wanna operate as a business. So I think there's certainly a translation exercise when you're, st- when you're trying to convey a strategy for a team. But then like in terms of trust and like individual alignment, I think you could boil that down to the individual. And if I can look at Aaron and say "Hey man, I know that you're most p- passionate about, this thing, this discipline, this opportunity. your talents, you are just uniquely qualified to pursue this. And then like the needs of the organization right now require you to do X, Y, and Z." And if you're operating in that sweet spot where all those things align, that is such a, that's like the most powerful motivator and it is a kind of that alignment trust, and, you know, people are gonna buy into it. And that's, that is at the end of the day, you're trying to do that as a leader to create that sense of it's, it's motivating, but it's a deeper kind of... It's not extrinsic. That's more of an intrinsic motivation.

Spencer: But it's still profit for me. If I'm in the right organization, like Ben just explained, and if I, I self-selected this right organization, my profit is my feeling. know? I have less discord in my life when I'm in this organization that represents these ideals, these values. Here's our outcome. Where you find a lot of friction in your life and discord, you may be misallocating your scarce resources, it'll be obvious to you. it should feel not great, you know? So the brewer, the baker, the butcher, however that goes, from Adam Smith, they were all doing it on their own behalf, but we're all all doing it on our own behalf.

Aaron: The final Question that we always like to end on is if you could just give one piece of advice for people out there, in terms of what they could start with tomorrow, what would it be?

Ben: if it's future leaders, I think it's, own the thrill and also the burden, the, the duty that comes with leadership. I think it's remembering that leadership is how others feel when you're in the room. when you can align people as a, as a collective, but then also individually towards something that matters, work that matters, that's the th-thrill of seeing them move from point A to point B. and so many of these economic concepts, those are first, kind of first-order principles to help you think about that, uh, that exercise. And then I think there's, there's a human aspect too. So I think it's like that combination of, the economic logic and the human logic, and you bring that together, and that's how you can, align people to, to do things, better than they would do, otherwise, and that's, that's what being a, a leader's all about.

Spencer: I wrote it down specifically 'cause I wanna keep it with me, and I've always been given the Maya Angelou quote, "They won't remember what you did. They won't remember what you said. They will remember how you made them feel." And then Ben told us today, Aaron, what you just said, "Leadership is how others feel when you're in the room."