Branching Thoughts: Issue 43
The major difference between our greatest and worst company cultures
What I've Been Thinking About
🏢 The major difference between our greatest and worst company cultures
Strong and cult-like company cultures seem to be at the center of many of our greatest companies as well as the most spectacular blow-ups throughout history. And what's interesting, is that almost every blow-up was viewed from the outside as a great company, right up until the day the company falls apart.
The most spectacular failures and successes usually both look very similar in the beginning, the only thing differentiating them is the eventual outcome. Without knowing the outcome, it might be difficult to estimate which one it might be based upon early stories of the culture.
In fact, I'm sure there's a company right now that's viewed from the outside as a company that's destined to succeed; it will eventually collapse and people will comb through history and select anecdotes to backward rationalize and make it seem inevitable.
When things are going well, quirks are viewed as positives. When things are going poorly, those quirks are pegged as the reason for failure.
This tells me how little we really know. The majority of our confidence and experience is just a collection of cherry-picked situations viewed with the aid of hindsight bias. We dismiss our failures as luck and attribute our successes to superior decision-making.
Ultimately, company culture at its most fundamental level can be described by the behaviors people are rewarded and thus incentivized to take. These behaviors are typically reinforced by leadership and surely enough trickle down to the rest of the organization.
While there are many strong company cultures that can lead to success, I think there may be a similar unifying thread between all of the cult-like company cultures that will inevitably blow up.
Strong and good company culture is one in which everyone has a shared belief that has them taking a perspective of reality that the greater market doesn't share and it's usually ridiculed by outsiders. From Amazon selling books online, to Apple's exceedingly late entries into the mp3, phone, and headphones markets, and Netflix becoming the preferred way to bring Hollywood into our homes. However, all of these companies have a clear-eyed view of reality. They have extremely high conviction in an unpopular but feasible version of reality.
Bad company cultures have the same high conviction, but their belief is fundamentally rooted in the distortion of reality. They're not in a unique position to bring about an unpopular but feasible version of reality, they're all fervently squeezing their eyes shut in order to believe in a collective dream.
In the worst versions of these, this collective dream isn't to be challenged. Anyone who questions or brings up roadblocks to this dream is ostracized and disempowered. The company fails to incentivize critical thinking or any systems or roles to provide checks and balances.
Leadership is applauded externally for their dream and they eventually surround themselves with only true believers on the inside. Everyone is incentivized to believe in the dream.
At places like Enron, WeWork, Theranos, and Fyre Festival, the external validation being heaped onto the leadership caused them to buy into their own myth and then systemically root out anyone internal to the company who didn't also believe in it.
I think the moment this culture begins to eat itself from the inside is when they begin to label failures as successes. The company has probably had a string of so many successes that it would be rude to stop the party. What's more, the media is probably praising this failure as a success, so why go out of your way and challenge them?
After a while, the definition of success has slowly shifted and evolved, to a convenient point where every failure is now a well-qualified success. This is why the meltdown comes as such a surprise. They seemed to be cashing in successes at an ever-increasing rate.
To avoid this fate for ourselves, the culture must incentivize everyone to call out, own, and learn from their failures. View it as a warning sign when people are allowed to wrap up failures in enough caveats and "but stills" that it begins to look like a success.