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Join Derek Hudson as he explores Essential Dynamics, a framework for approaching the challenges facing people and organizations. Consider your Quest!
One more time. It's been a long time since I've been able to play that solo. I am so glad to be back in the offices of Essential Dynamics. This I I'd forgotten what it was called. I thought it was crucial actions, Derek.
Reed:I wasn't sure it was what it was called. I knew it was something important. Now Well,
Derek:it's essential dynamics and if you if you go back a few episodes, you can hear that our AI personality is called Eddie.
Reed:Eddie. Right.
Derek:How
Reed:cool. Like EDDI.
Derek:Essential Dynamics. EDY. EDY, Eddie. Yeah.
Reed:Oh, cool.
Derek:He's a great guy. You're this is it's it's today and you're here at Essential Dynamics Reads.
Reed:Thank you. I am and I'm very happy to follow-up on our last conversation where you said some very interesting things that I want to hear again, and I want I think we should get into applications now since we're talking about business. But last time we discussed at length the difference between crux and climax, and I found the conversation very inspiring.
Derek:And one of the things you said that really struck me, Derek, was that we live all, we all live in unresolved tension. Let's start there, and then I'm going to ask you to to go the distance with me, and and let's apply it to business. Okay. So tell me, we all live in unresolved tension, how do you mean that?
Derek:Well, know, tension sounds like it's a bad thing.
Reed:Yeah, it does.
Derek:And and so here here's an example of why it's not a bad thing. So a couple episodes ago, talked about my backpacking trip.
Reed:Just a couple of episodes ago? I thought you've been doing for years.
Derek:Yeah, yeah, yeah. There's stories come out. So here's the thing. It's quite nice when you're in the back country to have a tent. And I know people say, oh, well, you know, you're rough and you sleep in a tent.
Derek:Well, I've also slept not in a tent. Yes. Or I've laid on the ground and camped under the stars. Let me tell you, a tent is much How more do tents work? And then we have to watch the play on words here, but tents work with tension, which are not the same word, not the same root.
Derek:But you put a pole up to prop up the the fabric, and then you tie a line out to a stake which you pound into the ground. And you do it the same on the other side, and all that stuff is in tension and it holds it up.
Reed:I see.
Derek:And if you were trying to trying to do that with stretchy fabric and using spaghetti noodles instead of cord to tie your like if if there's no tension, it falls apart. So That
Reed:sounds like the hikes I've been on.
Derek:So tension we we create things with tension. If you design a bridge, you design it for tension.
Reed:Okay. So tension can be a necessary factor.
Derek:Tension is a Why necessary
Reed:is it unresolved?
Derek:Why is it unresolved? Because in our model, because you're trying to accomplish different things that you can't accomplish at the same time. For example, let's say you are a young person and the tension that you're feeling right now is like a financial crutch. You make some money on your paycheck and the tension is, do I go out and party and spend this money? Or do I save it so that I can, for example, make a down payment on a house?
Derek:And saving for a down payment on a house is no fun. Going out with your friends is fun. Mhmm. But if you if you turn away some short term gains, at some point, you can accomplish something that's, you know, more valuable to you. And so there's, you know, there's that kind of tension.
Derek:Or is there there might be the tension where you're working with someone and if they knew something they would be able to have a better life, but they would have to confront a hard truth.
Reed:Yeah. That's true. Back to that things are being that you you admire the difficult is what you're what I've heard you say, not you say, but that's what I've taken away from some of your conversations is is your previous episodes have said embrace the hard.
Derek:Well well, here's here's the thing, is it's gonna be hard.
Reed:Life is going to be hard.
Derek:Life is going to be hard, so let's figure out the most productive way to get through hard things. So we're talking about type one and type two fun. Type one fun is no effort, it's just fun. Type two fun is it's hard work. In the moment, you're not even sure if you're having fun.
Derek:And then afterwards, you're like, wow, that was great. Let's do it again. And so there's that there's that kind of tension. There's the tension of trying to figure out if this important thing is more important than that important thing.
Reed:Oh, when two important things come into conflict.
Derek:Yeah. And sometimes that's, you know, for the greater good or your own sort of, you know, personal advantage. Sometimes it actually is between right and wrong.
Reed:Mhmm.
Derek:I just find the whole area fascinating. I don't think we need to go out and look for hard things. But I think if we understand the real tensions involved, that we can be more intentional, we can make better decisions. And when you think about organizations that are a bunch of people together trying to accomplish something, just full attentions, and we don't really have good ways of talking about it. And so all kinds of potential gets left behind when we don't figure out what to do with
Reed:Well, let's talk about that. Let's talk about where does a crux happen in business?
Derek:So so if you think about the the conversations that we had, you know, from literature and film and stuff like that last time, sometimes they're forced upon the protagonist and they things just close in and then they they have to make a decision. And that happens in business too. But a lot of times in business it's perfectly acceptable and fine for us to kind of limp along or to carry along oblivious to the potential that we have and not do something because it's a little bit out there and hard. Or maybe we're not even paying attention. So I have one really good example of this.
Derek:I've read about it. I read Andy Grove's book, Only the Paranoid Survive. Andy Grove was at Intel. Okay. The computer chip company.
Derek:And I've heard
Reed:I think I've heard something about that.
Derek:Yeah, yeah. It's inside. And I've heard other people talk about it, read about it. So anyway, this is a situation and I probably will have the years wrong, but it's probably the late 70s and Intel was making memory chips. So memory chips is what we store files on.
Derek:And these memory chips were going into mini computers, not laptops and stuff back then. So they were making memory chips. And they were noticing that they were dealing with competition from Japan. And so they were winning less contracts and they were the pricing was less. They were still making money, but they could see if they looked out that they were not gonna be able to protect their position making memory chips.
Derek:And so there's a conversation between Gordon Moore and Andy Grove and they they, you know, talked to each other and said, you know, if the board really knew what was going on, they would fire us. And they would bring in somebody new to take this company in a new direction because even though we're fine now, we can see how this is gonna end.
Reed:It's gonna collapse.
Derek:So the Crux conversation was what if we were the new guys? Why don't we fire ourselves in the sense that we have to get out of this business? So that means we have to admit that we're in a business with a failing business model. We have to basically invest all of our earnings in unproven technology so that we can learn how to make integrated circuits instead of memory chips. And so they bet the farm on this new business model.
Derek:That the crux of that was that one conversation in the office which they recount so many times because they remember it because that and and the climax was when Intel started selling microprocessors, integrated circuits and it took years before they were back in the position that they had been before in terms of dominating memory chips.
Reed:So did they get fired by the board? No. Went board respond? They went They went to the board
Derek:and said that we have to we have to stop this business. We have to start this one. And the board, you know, they convinced the board.
Reed:That's astonishing, isn't it?
Derek:Right. And so many times when that opportunity presents itself to business leaders, at the executive level or the board level, the realization doesn't come or it gets pushed away and we update the strategic plan and we carry on. And I'll give you an example of that, that it's maybe a little closer to home, which I think I've described on the podcast. And that is Kodak.
Reed:Oh, yes. We've talked about Kodak before.
Derek:We've talked about Kodak. Yeah. So the reason that I know about Kodak is Kodak, when I was at Micralyne, Kodak bought one of our customers. And they bought one of our customers to try and solve the problem which they created for themselves when they invented digital photography. When they were in the photographic film and photographic paper business and invented digital photography and then sort of put the signed death warrant for for the photographic film business and then didn't accept it, you know, where that would go.
Derek:And so they fought to hang on to photographic film. And the company actually, I wasn't sure, I looked it up. The company actually failed. Yeah. And was wound up.
Reed:Yeah.
Derek:So Intel was facing the same kind of technological obsolescence. And they said, we're gonna get ourselves out of this and get into something new. Kodak said, we're gonna hang on.
Reed:Well, I to not to defend. Well, I guess I am defending, but you have to understand that at that time Kodak's ultimate failure for folding the shop, it was unthinkable. It was such a big company, and it was so its brand name was so
Derek:Oh, yeah.
Reed:Ubiquitous. Everybody in the world knew what Kodak was, and Paul Simon wrote a song That's right. Called Kodachrome and everybody got it.
Derek:When when I lived in Seoul, Korea in 1980, there were small photography shops everywhere. Really? And they all had a big Kodak cutout. Might have been a girl in a swimsuit. I don't really remember.
Reed:No. No. That wouldn't be paramount in your thoughts.
Derek:No. But there was Kodak everywhere, you know, and I'm halfway around the world. So they were too big to fail. But the other thing, and this evokes Clayton Christensen and the innovator's dilemma, was they were making too much money. Oh, interesting.
Derek:And so here's the thing. You have a business line that makes money and one that doesn't make money and things get tough, you double down on the one that makes money. Yeah, true. And to close a business line that makes money or to take resources away to one that's risky is a very, very hard decision to make. That's the innovator's dilemma.
Derek:And they were a classic example of not being able to break through that. So they rode that cash cow like right into the grave.
Reed:Yeah. Isn't that amazing? That's a that's that's an important story. I like that. So not it's not that I I cheer for any
Derek:No. No. No. But you got we gotta learn from these things. Right?
Derek:So in the Intel example, the crux moment we actually have recorded, right, with that that single conversation. Whereas at Kodak, there's a 100 conversations, a thousand conversations because it never really happened.
Reed:Yeah.
Derek:Now I do wanna I do wanna talk about a crux moment that that goes that's also documented, that kind of goes the other way. And I think I've talked about this a little bit on the podcast and that's the very public example of a blood testing company called Theranos
Reed:Yes. Yes.
Derek:Which about ten, twelve years ago, probably like 2009 to 2014 or something like that. Yeah. Elizabeth Elizabeth Holmes.
Reed:Yeah. Right.
Derek:Right? So here's the crux for them. They have a demo coming up with it it might have been Walmart. And it's this is there's a Netflix series. There's a podcast.
Derek:There's books. There's all kinds of stuff. It's documented. But but they have a demo coming up and the machine doesn't work.
Reed:When did they know?
Derek:Well, they knew before the demo.
Reed:They knew before the demo it wasn't working.
Derek:The the machine didn't work. And so they decided to fake it. And then they got caught in that lie. And then they got so this got so crazy that they did sell the contract to Walmart for the walk in blood testing clinic and they would pick the samples up, run them back to their office, process them on the competitor's machine, get the results and then run them back and make the charade that the machine that they were showing at their demos was actually working when it wasn't.
Reed:Okay. That's fraud.
Derek:It is. And and that one moment okay. So this is where Jean Valjean says, I don't know who that guy is.
Reed:Right.
Derek:Then we don't have a story anymore. And an innocent man's punished. In this case, the crux came. It was very obvious. There's one thing to do, which is to say we're not ready.
Derek:It doesn't work.
Reed:But they were afraid of losing their company, which ultimately they did anyway.
Derek:Yeah. Yeah. Alright. So the so the crux is the decision and then the climax, in this case, there was five more episodes in the Netflix series. And then, you know, the last scene, they're they're sweeping out the empty office kind of thing.
Reed:Yeah. What a shame. But it makes you wonder how many other times a fraud has been chosen as a solution.
Derek:Well, actually, I have I have another example, but I don't have I don't have the video and that was Enron.
Reed:Right. I'm thinking Enron myself. Yeah.
Derek:And and Enron, the challenge was they had these all these projections of all these awesome business results as the company grew by energy contracts.
Reed:Right.
Derek:Okay. So it's not tangible stuff, but they're buying and selling energy and it's growing and growing and growing. And then they reached the limit of that, but they projected to continue growing and growing. The crux
Reed:Keep telling everybody that we're growing and growing and growing.
Derek:That's right. And that's where the chief financial officer got creative and decided figured out a way to make it look like they were growing and growing when they absolutely were not. And so there's crux moments where the ones in literature, hopefully, you know, where we want a good result. In real life, a lot of ones, yeah, we don't know about.
Reed:Right.
Derek:And most of the time - the moment doesn't realize. The tension is unresolved.
Reed:So we all live in unresolved tension.
Derek:Yeah. But there's there's a time, for example, Andy Grove and Gordon Moore, they say, well, we can see where this is gonna go. We can we can, you know, fight it and be part of it or we can completely change all the rules.
Reed:Which is a very big decision in of itself when you just when business decides to take a risk. That's business almost by definition is at its beginning a risk. However, the rest of its existence is risk averse.
Derek:Well, and there's there's one more example I have on that and we're all familiar with this one and we all kind of watched it happen and that was Netflix.
Reed:Yeah.
Derek:And and the original Netflix it's not the original next Netflix model. It's the when they went to streaming because they were still making money
Reed:Mhmm.
Derek:Mailing DVDs.
Reed:Right. Right. I was one of them. I I used to get them in the mail.
Derek:So so they had to figure out, you know, if they were gonna put enough time and money into streaming despite the fact that they were losing money at it and they were making money mailing DVDs.
Reed:And that is the at this time of of that we're discussing things, that in this at this point in time, streaming is still a very dubious moneymaker for many companies. And even if it's making money, a little bit of money, it's not enough for the big businesses. And so it's absolutely it becomes a war of how much how much of the pie is there or is yeah. There
Derek:And we have to we have to go back in time to understand it because now, like, I'm sure I'm not the only person that won't walk across the room and find the Blu ray if it's on Netflix. Right?
Reed:I I agree with you, Derek. I as somebody who took out of all his savings and invested them in the DeLorean and Betamax. Yep. And then took them out and said, I'm gonna take all my savings out again and invest them in Enron. I just wanna say how how wonderful it is to be to be sub seduced by good advertising.
Reed:And it's hard to know out there what is a lasting breakthrough and what is a fraud.
Derek:Well, yeah. So as as consumers, yes, it's I mean, it's very hard. But if you think about as management, somebody knows. Somewhere in there, they know. And so we've talked about a few different examples.
Derek:One is, it looks fine. It's gonna look fine for a long time, but ultimately this is a very bad business to be in. Moore and Grove said we're gonna get out.
Reed:We're gonna change this entire model.
Derek:Change the model. Everyone else kind of stayed in. Elizabeth and Sonny said we're gonna fake it.
Reed:Which has to be the wrong idea, wrong conclusion at any time. Well, It's but just not only not only a bad business decision, it's immoral.
Derek:But if you go back to this question of, I think you asked me probably last episode, but like what does this mean to us personally? Yeah. It's the same thing.
Reed:Yeah.
Derek:We live in unresolved tension. Doesn't mean we get rid of tension, but you look to the tension for science. You look for information and you say, why am I living this way? And you get real about it. And then you say, there's a different way of looking at this.
Reed:And That's profound. It sounds sounds easy, but it's profound.
Derek:So so let's go back to Rocky. We love that one. So what did Rocky do? He looked at the problem differently. Just What got
Reed:do I really want?
Derek:He got swept into this thing. Now he's he's like he's this example of, you know, the the underdog and he's gonna fight the champion and
Reed:And the other one thing let's just remind people that in the first movie, is set up against Apollo Creed almost as a joke. Mhmm. Nobody expects him to last more than two rounds.
Derek:And and he he's just going along for the ride.
Reed:And everybody expects him to be another of Apollo Creed's long list of easy chumps.
Derek:And then and then Rocky figures out what he wants out of this. And he wants to go the distance. And so that means
Reed:He not only brings out the best in himself, he also forces Apollo Creed to up his game.
Derek:Sure. And and Yeah. So so they get the best result possible and not to mention a movie franchise that goes on forever. Right? Yeah.
Derek:But the point is is that that Rocky did the mental work to figure out what was really happening and what was possible and what he wanted, and he lined them all up. Grove and Moore did the same thing. We're gonna go in that ring. The Japanese memory companies are gonna pound us and it's gonna be it's gonna take a long time and it's gonna be really ugly. Do we want that or do we want to look at it differently?
Derek:And so that unresolved tension might get resolved and you will still have tension. But it's tension that's pulling in a direction which you're now clear on. I don't know if I can make if I can take this further at this time because I just learned about this over the past few months. I have to think about some of my client conversations, but I can tell you one thing. And that is sometimes we've done some work, we're figuring stuff out.
Derek:I ask a question and it's kinda like my client's head snaps back and there's a pause And then it's, I've never thought about it that way.
Reed:Yeah. Yeah.
Derek:And then we move to a place we haven't been before.
Reed:And part of it, not thinking about it that way is because that way by that way lies madness. That's right. That's right. This that way is hard. But we've said before, a crucial crux moment, I made a decision.
Reed:And part of that I made a decision was I'm going to embrace the hard.
Derek:Yep.
Reed:And and you've inspired me to that end. I'm I'm really grateful that I learned more about essential dynamics and how it applies to life and business. I'm not so great at business, but I'm pretty good at life, and at least I'm still here. And I think part of the reason is because I made a decision, and one of those decisions was to come back and support my friend, oh, captain, my captain, professor Derek Hudson. And it's come to that time again where we have to wrap up and say to our many listeners, we appreciate all six of you.
Reed:Please keep writing. And we're we are we're hopeful that everybody can follow some of the things we're saying to to improve their own lives and and business practices. And while they're doing so, please everybody consider your quest.