TEAM 4: PETER HOGUE, BREANN FLORES, JONATHON JORDAN, MATTHEW HORD,

CAMERON LLOYD

Leading Above the Death Line

“As soon as there id life there is Danger”- Ralph Waldo Emerson

David Breshears

Productive Paranoia

Conditions can, and often do, unexpectedly change

The only mistakes you can learn from are the ones you survive

!0X Journey and the Death Line

3 Types of Productive Paranoia

1: Build Cash Reserves and buffers to prepare for bad unexpected events and bad luck before they happen

2: Bound risk–Death Line risk, asymmetric risk, and uncontrollable risk--and manage time based risk

3: Zoom out, then zoom in, remaining hyper vigilant to sense changing conditions and respond effectively

Productive Paranoia 1

Extra oxygen canisters- Its what you do before the storm comes

10Xers Cash Reserves and Buffers

3 to 10 times the ratio of cash asset80% of of the 10x carried higher cash to asset

ratios and a higher cash to liability ratioPreparing for a Black Swan

Black Swan

A low-probability disruption, an event almost no one can foresee

You can however predict there will be some black swans.

Particular black swan probability less then 1% but the probability some black swan even will happen 100%

Southwest Airlines

1991 Her Kelleher – “As long as we never forget the strengths that enable us to endure and grow in the midst of economic catastrophe; as long as we remember that such economic catastrophes recur with regularity; and as long as we never foolishly dissipate our basic strengths through shortsightedness, selfishness, or pettiness, we will continue to endure; we will continue to grow and we will continue to prosper”

September 11th

Southwest cash reserves equal to 1 billionAfter, they cut no jobs nor any flightsThey turned a profit in 2001 and were the

only airline to turn a profit in 2002End of 2002 had greater market

capitalization than all other major US airlines combined

If you come at the world with the practices of building a great enterprise and you apply them with rigor all the time- good times and bad, stable times and unstable- you'll have an enterprise that can pull ahead of others when turbulent times hit

Productive Paranoia 2: Bounding Risk

10X companies lead with a more conservative approach.

Did the 10X cases take more risk or less risk than the comparison cases?

1. Death Line Risk2. Asymmetric Risk3. Uncontrollable Risk

Not mutually exclusive.

Risk Comparison: 10X Companies vs. Comparison Companies

Type of Decisions Made

10X Companies Comparison Companies

Number of Decisions Analyzed

59 55

Decisions Involving Death Line Risk

10% of decisions 36% of decisions

Decisions Involving Asymmetric Risk

15% of decisions 36% of decisions

Decisions Involving Uncontrollable Risk

42% of decisions 73% of decisions

Decisions Classified as Low Risk

56% of decisions 22% of decisions

Decisions Classified as Medium Risk

22% of decisions 35% of decisions

Decisions Classified as High Risk

22% of decisions 43% of decisions

Time-Based Risk

When the degree of risk is tied to the pace of events, and the speed of decision and action.

Maybe the comparison cases acted too slowlyMaybe the 10X cases reduced risk through

sheer speedExamined correlation between good and bad

outcomes relative to Speed of recognition Speed of decision Speed of execution

Outcome of Time-Sensitive Analysis

Recognize change or threat earlyTake the time available to make a rigorous

and deliberate decisionSometimes acting too fast increases risksSometimes acting too slow increases riskKey question: “How much time before our

risk profile changes?”

As a productive paranoid…

Want to be cognizant of lurking dangersVigilant about possible disruptionsDoes not mean taking quick, immediate

action False beliefs:

Faster is always better The fast always beat the slow You’re either the quick or the dead

Productive Paranoia 3:

Basketball experiment 50% of subjects noticed the gorilla10X leaders don’t miss the gorilla or threats

in front of them

Zoom Out, Then Zoom In

Zoom Out Sense a change in conditions Asses the time frame: how much time before the risk

profile changes? Asses with rigor: do the conditions call for disrupting

plans?Zoom In

Focus on supreme execution of plans and objectives

Intel

In 1979 Motorola was rapidly pulling ahead of Intel in position

Intel managers met and discussed/ analyzed the weakening problem of Intel

Intel zoomed outDeveloped a plan called operation CRUSHThen Intel zoomed in

Amundsen’s Change

Expedition was originally to North Pole

Amundsen zooms out

Amundsen zooms in

Key Points

Build cash reserves and buffers

Bound risk

Zoom out, then zoom in

Questions?