Everyone wants to know what my leadership style is. My leadership style is to raise everyone’s stress level until they do what I say.
Not far from the truth.
So I have a lot of formal training in leadership. I had to take six one-credit classes when I was at the Coast Guard Academy. I learned about things like “transformational leadership” and “servant leadership.” Servant leadership is what was in vogue when I was in the Coast Guard, which led to absurd things like commissioned officers chipping and painting bulkheads while their enlisted subordinates watched with a cup of coffee. I wish I was making this up. The military thinks a lot about leadership, and they have to, because how do you motivate someone to do their job when there are zero financial incentives? You have a stick, but no carrot. So military officers generally resort to being inspirational, or at least trying to be. Not everyone can pull that off. I couldn’t. Generally, I resorted to leadership by example: hey, if I can shine my boots, so you can you. I set an example with my work ethic, I set an example with my physical fitness, and I set an example with my personal appearance, hoping that it would trickle down. Most of my guys would have run through a wall for me. But not all. Some were not too appreciative of me trying to raise their stress level.
Elon Musk accomplishes a lot. The guy runs something like seven different companies, so obviously he has to do a lot of delegating. What’s astonishing about Musk’s enterprises is how fast they move. He is marshaling a lot of manpower and a lot of resources to do real, tangible things: build cars, launch stuff into space, in facilities scattered across the world. He is running this empire through phone calls and email. What kind of emails is he sending? “Do what I say, or watch your tail?” And he demands complete loyalty. I had a friend who worked for Elon Musk at SpaceX a few years back. He wasn’t a direct report, but Elon was his boss’s boss. He was a bit guarded about revealing any secrets, saying only that “Elon wore me out.” But unlike the military, there are financial incentives at Tesla. You get stock, and if the stock goes up a lot, you are happy. If everyone is rowing the boat with equal intensity, they all win.
There is not much in the way of leadership on Wall Street. Dick Fuld was not one of those management-by-wandering-around types. I saw him only twice in seven years at Lehman, and one of those was at the bankruptcy. I will admit that he was an imposing figure. But nobody really needs leadership on Wall Street. You make money for the firm, you get paid—or at least, that is how it is supposed to work. So most people don’t need a lot of motivation to make money. The one thing I would add to this discussion is that when people start making $1-2 million a year, complacency sets in. So how do you get motivated to make $5, $10, or $20 million? That is a rare bird. Anyway, the head of equities or fixed income isn’t coming out on the trading floor to make motivational speeches. In fact, the head of equities isn’t thought of as a leader in a traditional sense. They’re a manager, as in managing director. I will add that there’s probably some alpha in having a manager what is well-liked and respected. I personally liked everyone I worked for at Lehman, but that wasn’t true everywhere. I know many people who thought, probably correctly, that they were working for clowns. That tends to put a damper on morale.
I saw the movie Whiplash recently. I’ll give you the synopsis: J.K. Simmons, a jazz teacher at a school that closely resembles Julliard, teaches Miles Teller how to play drums. He throws chairs at him, he hurls crude sexual insults at him, and he makes him play until his hands bleed. Spoiler alert: this behavior results in him getting dismissed from the school. There is a scene towards the end of the movie where Simmons tries to justify his behavior—he said that he wanted to push people to their limits, to get the best out of them, and he didn’t apologize for it. I’ve been told by many people that Whiplash was one of the best movies they had ever seen. I wouldn’t go that far. But it made me think about my time at the Coast Guard Academy, where I was the biggest hardass at the school. I was essentially J.K. Simmons, minus the chair-throwing. I was not winning any popularity contests. But I pushed people to their limits, and got the best out of them. Not everyone could hack it—I had more cadets quit in my platoon than any other in the battalion. Which is not altogether different from what Elon Musk does—weed out the non-hackers, and you have the hard nucleus about which the organization forms. I don’t apologize for my behavior, either. Years later, a woman under my command thanked me for being so hard on her, saying it changed her life. But it’s not popular to be unpopular. They call people like me problematic and controversial. But you can’t argue with the results.
Anyway, the yelling days are long over, and I don’t do much in the way of leadership anymore. I have an intern, and I don’t yell at the intern. Mostly, we just screw around and have a good time. And I don’t need to do the hardass act, because there are incentives: do a good job, and I will help you get a job on Wall Street. There’s no need to crack the whip. Plus, nobody yells anymore, pretty much anywhere. If you yell, you are an asshole. I haven’t raised my voice in eleven years, and I’m not kidding. I think real leadership is when you can get people to hustle without raising your voice, either through the force of your personality, or something else, and the something else can’t be the threat of consequences. I only got a talking-to once my entire seven years at Lehman. I got picked off on a very complex prospectus trade, and my boss explained to me, calmly, that we should be on the right side of those trades, not the wrong side. The admonition motivated me to do better, and within a few weeks, I put on a large rebalance trade in an obscure ETF to make it back. That’s effective leadership.
I think the academic work around leadership is a lot of crap. Trust me, I’ve read boatloads of it. And I’ve found that the people who call themselves “leaders,” or focus excessively on leadership are usually not very successful. You know, the stuff you see on LinkedIn, the people with “MBA” after their names. Leadership is nowhere on my CV. It was funny—when I arrived in San Francisco for business school, I noticed that there was a leadership class in the curriculum. I petitioned to be exempted from it, on account of my academic exposure to it in undergrad. Here is the problem: you have people, you have resources, and you have a goal. How do you get the people to use the resources to accomplish the goal? What’s interesting is that different people respond differently to different incentives. For most people, making more money is enough. Some people need psychic rewards—they’d rather have a title than the pay. Some people want time off, but Elon Musk is not going to hire those people. Some people want to be inspired, to believe that they are participating in a cause greater than themselves. And some people just want to watch the world burn. They say leadership is like herding cats, well, I have a lot of experience with that.
Whatever your thoughts on leadership are, I believe that it cannot be taught. A lot of it comes down to personal charisma. Here is what I do: I set high standards, and expect people to live up to them. And if you do, then we make some money and have some fun along the way. There, I just saved you $8,000 for a certificate program at HBS.
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I’m still on hiatus, but just figured I’d pop in. If you want to listen to some good music, go here.
I worked for a guy that didn't motivate you...he ELEVATED you! And you are right, that is a talent. He took on the stress's of his workers LD's (low down's) and of the HU's (higher ups). When behind on a project, he wouldn't yell, he'd say "I'm disappointed." EVERYONE would work hard and long to turn that disappointment around. THAT is LEADERSHIP!
I think you might be on to something. In Uni we had this lecturer who had come from Germany back to Kenya to teach. He taught us computational statistics and his assignments were hard AF. Plus he didn't give marks easily. You had to work really really hard and push yourself to the limit to get anything from his course. But after that semester I made a lot of progress in learning how to approach problems I had no idea how to solve. I also gained a lot of confidence.