Judgment: Making Decisions as a Leader

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0:00:02.6 Producer: Welcome back,Culture by Design listeners. It's Freddie one of the producers of the podcast.In today's episode, we're continuing our leading with character and competenceseries with a discussion on the third cornerstone of competence, judgment.Previous episodes in this series have been on the four cornerstones ofcharacter, which are integrity, humility, accountability and courage, if youare just joining us in this series, you can start here, but there's plenty togo back and listen to. Today, Tim and Junior will share practical frameworks tohelp you improve your judgment and your systems thinking. We live in a complexworld full of information and interconnected systems that play together,judgment has never been more difficult than it is today, if you'd like toimprove your judgment and make better decisions every day, then this episode isfor you as always, links to this episode's show notes can be found atleaderfactor.com/podcast. Enjoy today's episode, The third cornerstone ofcompetence, judgment.

0:01:03.9 Junior: Welcome back,everyone to Culture by Design, I'm Junior. I'm here with Dr. Tim Clark, andtoday we'll be discussing the third cornerstone of competence, judgment. Timhow are you doing?

0:01:14.0 Tim: Doing great, thanks.How are you doing?

0:01:16.3 Junior: Doing excellent,excited for today's episode. I think it's going to be a good one. It's ourpenultimate episode in this series, we've got just one more that we'll berecording shortly, which will be the end of this series, I'm a little bit sad,even though we're two episodes out, this has been a really enjoyable fewepisodes for me.

0:01:34.6 Tim: It has been a greatseries.

0:01:36.5 Junior: Peter Drucker saidA decision is a judgment, it is a choice between alternative, it is rarely achoice between right and wrong, it is at best a choice between almost right andprobably wrong, but much more often a choice between two courses of action,neither of which is probably more nearly right than the other. Tim, what do youthink about that one?

0:01:58.7 Tim: I think that thathelps us understand how hard judgment is, and so let's just talk about that fora minute, junior, because we all get paid to do something in organizations, ifwe have a job, we get paid, and we get paid to make widgets of one kind oranother, we all do, some people make physical widgets, some people makeintangible widgets, and that's kind of what leaders and managers do. So if youthink about it, what kind of widgets do leaders make, if they're not on theassembly line, if they're not in production, if they're not actually makingsomething tangible, what are they making? Well they're making decisions. That'sthe widget. So decisions are the primary outcome of a leader... And where dothose come from? Well, they come out of a process that we call judgment, Sojudgment is a process, but we're gonna talk about that, and the reason we'regonna talk about it, it is because it's a bit of a black box to render judgmentand do a good job to have good judgment requires a combination of attributes,there's a few things that go into the mix here, such as knowledge andexperience, and skill, and vision and character, and maybe a few other things,and so it's hard to pin down.

0:03:17.8 Tim: There's no formula,there's no tonic, there's no algorithm that can exercise judgment for you orfor me, and so that helps us understand how difficult it is, and yet you couldmake the argument that we get paid for judgment more than any other thing, butit's a very very difficult skill or attribute to develop, so that's my preambleon this subject, Junior, it's really difficult, and yet it's so vital to anyorganization.

0:03:53.8 Junior: As I've beenthinking about this episode in preparation, I think it's safe to say for mepersonally, that judgment is one of those attributes that I aspire most tohave, if I could be known for one thing as a leader, it would probably be this,good judgment, I value that tremendously because I've seen just how importantit's been in my life, both personally and professionally, when I've been thebeneficiary of good judgment when I've been the victim of poor judgment, eitherby myself or other people, so I think that this episode is particularlyimportant, we're going to be framing judgment, defining it as much as we can, andthen going into some practical ways that we can improve our judgment, becauseit is a learn-able skill, so let's start off with a story about judgement.

0:04:45.8 Tim: Before we do that,let me make a couple of comments here, one is that, it's kind of a diagnosticquestion that I think all the listeners can ask of themselves. Here's thequestion, would people say about you, you are a good decision-maker, would theysay that? That person is a good decision-maker, if someone can say that aboutyou, what they are saying in essence is that you have good judgment. So reflecton that, is that your reputation is that how you are known, is that what peoplethink about you? So think about that question, it's a very important diagnosticquestion, and at the same time, just right out of the shoot, Junior, I wannagive a definition of judgment, and this is my favorite definition of judgment,judgment is about interpreting what is not yet obvious. This is what judgmentis all about, all about, If something passes the test of obvious-ness, we don'tneed judgment anymore, because it's clear to everyone what we need to do, it isobvious. Judgement happens before that obvious-ness occurs, so it's aboutinterpreting what is not yet obvious and then making a decision, taking acourse of action, figuring out what we need to do, This is what judgment is allabout.

0:06:14.1 Tim: So as we go throughthe rest of this discussion, I hope that listeners will ponder that definition,this is where judgment, this is when judgment is needed the most, it's notobvious what we need to do, Okay, let's apply judgment.

0:06:32.1 Junior: So any decisionthat involves judgment is made short of certainty. I love it. So here's thestory. In 1952, a group of renowned scientists gathered at MIT for what wouldbecome known as the summer study group, in the background, Cold War tensionswere escalating between the United States and the Soviet Union, what concernednational security experts most was the possibility that Moscow could dispatchlong-range bombers, planes armed with nuclear warheads and send them over thepolar region undetected. So in response to this threat, the US Governmentcommissioned its scientists to make a detailed study of North Americanvulnerability to such an attack, so it included Canada, out of thedeliberations came an urgent recommendation to build a distant early warningsystem, what became known as The DEW Line, consisting of state-of-the-art radarstations arrayed across the Arctic Circle. So think about the logistics, eventhough we're just this far, under the guidance of a bilateral agreement, the USand Canadian governments joined forces and commenced the project after lessthan three years of construction, an integrated chain of 63 radar stationsdotted the landscape 200 miles north of the Arctic Circle and stretched 3,000miles from Alaska to Canada's Baffin Island.

0:08:00.7 Junior: So this DEW Linerepresented at the time the world's most advanced detection system anengineering and logistical Marvel and the cornerstone of North American AirDefense. Sounds like a pretty amazing story. Here's the irony, the DEW Linethat stretched, as I mentioned, 3,000 miles was rendered obsolete almost assoon as it was built, so the project was commissioned in July of 1957, and thevery next month, Soviet scientists pulled off a game-changing move, theysuccessfully test-fired the R-7, the world's first ICBM, intercontinentalballistic missile, and it would take only two more years while they're buildingthis for the Soviets to deploy a military ICBM, allowing them to launch anuclear attack from their home turf, so originally we were concerned with bigbombers carrying nuclear warheads now, we have these ICBMs which are missilesthemselves that can be launched across continents, so with amazing speed, thesenew realities, these new discoveries had thwarted the much wanted newintelligence gathering capability of the United States and Canada, so so muchfor the DEW Line. So Tim why this story, why do you think that this is relevanthere?

0:09:23.5 Tim: Well, we go back tothe 1950s, and this is probably a story that many people don't even know about,it's a chapter in history, but it helps us understand if things were thatdynamic in the 1950s with the development of technology and competitive forces,what are they like today, it illustrates how fast things move, how fast thingsdevelop, and the fact that even with our best judgment in a given moment or fora given season of time, there are unexpected developments that are going to happen,so it shows us the unprecedented need for judgment in a highly dynamicenvironment where we have an interplay of many, many variables. This is prettyincredible. We spent three years putting these stations in place and thenfinally commissioning the DEW line in 1957 and... What did you say? The nextmonth, it's rendered obsolete.

0:10:31.7 Junior: The next month.

0:10:32.7 Tim: This is the 1950s.Right, so I think it's an incredible case study to help us understand thedynamic nature of the environment in which we are working and leading.

0:10:46.5 Junior: Well, and not tospend too much time on national security, but I think that it's interestingbecause at the time we're primarily concerned with physical security and thatDEW line was rendered obsolete a month later, now, are we more concerned aboutdigital security and how much more dynamic is that environment? And so I thinkthat that's an interesting angle, or a less interesting lens to look through isthe dynamism of the physical environment was such 60-70 years ago, and now lookwhat it is, not only physically but digitally. So the DEW line was this goodjudgment was this poor judgment? I don't know, we'll leave it to you to thinkabout, but there are a few questions that could have been and maybe were asked,I don't know the details of this story, which is why I can't render a judgment,but they could have asked what would have to be true in order for this DEW lineto not work, well, maybe we assume that those nuclear warheads are not carriedby plane, what if they're self-propelled? Well, then that would render thewhole thing obsolete, it stands to reason that if a month later, they were ableto create that ICBM, that there was sufficient technology to warrant the idea.

0:12:05.9 Junior: Right. And so itstands to reason to me, and again, I'm not in the room that we could havethought about this a little more critically and thought, You know what, if theyjust were able to do that one thing...

0:12:18.6 Tim: That's right.

0:12:20.2 Junior: This all would goaway and be irrelevant. And so maybe we would have approached it from aslightly different angle, again, I'm completely ignorant to a lot of thisstory, but I think it's an interesting question, so in order to compete intoday's world, in order to survive in today's world, not even compete, we needgood judgment. So what is judgment? Let's go to a few more definitions, Timtouched on just a couple. Google says The ability to make considered decisionsor come to sensible conclusions, in the book, you mentioned sifting, sorting,filtering and connecting information, logic, values and objectives, thinkingthrough different courses of action and their consequences.

0:13:01.8 Junior: So as I've thoughtabout judgment, there's this future element of judgment, it's not just now,it's in the future, it might be a day from now, it might be a year from now,all of which comes with uncertainty, different degrees of uncertainty, and yourability to predict is also a component of judgment that I think is reallyinteresting that we'll touch on toward the end of the episode, but those aresome angles that we can look at judgement, so what affects our judgment? A fewthings logic, values plays into judgment, objectives, experience, consequences.The information we have available to us. So the fact that values is in here isinteresting to me, So judgment is not just a moral, is it Tim?

0:13:52.0 Tim: No, it's not. Youhave to be guided by values and a moral position, otherwise you don't have aradar, you're radar-less as you're making the decision, and it's simply... Thenyour decision becomes to maximize utility, whatever that may be, but you're notguided in the way that you do it, and so there's a moral component always.

0:14:16.8 Junior: I think this is animportant point because to me, it seems implicit when we talk about judgment,and that's often what we mean, that it is guided by moral principles, butwithout that, it's almost impossible then to have good judgment if it's notguided by some principle as you say, So judgment and systems thinking, there'sa relationship here that I think is important, so what is systems thinking?It's making sense of the complexity of the world by looking at it in terms ofwholes and relationships, variables that interact with each other rather thansplitting it down into its parts. Why? Why Tim is systems thinking crucial whenit comes to judgment?

0:14:57.0 Tim: Well, as you say,Junior, you're trying to optimize for the overall objective, and if you don'ttake the whole into account, if you don't get up into your hot air balloon andlook at the big picture, you'll miss some things and then you'll end upsub-optimizing the whole and optimizing some part of the whole, so you can seehow dangerous it is if you're not bringing everything into the equation foranalysis. It's very dangerous. Also, let me add one more thing. Let's go backto values. As a leader, you have to be very careful that you don't thrustyourself into the equation, into the picture through self-serving motives,right. Because if you do that and if you're not able to restrain your ownself-interest and your own selfishness, quite frankly, then what that does isit impairs your judgment... Excuse the data. It contaminates the analysis.That's what happens. So you have to be an honest broker. On the outside, you'retrying to make the best decision possible and you're taking your own interestout of it, that's extremely important as you do this.

0:16:19.7 Junior: So judgment andsystems thinking, one of the veins that I think we can go down is that if youdon't use systems thinking, it means that you need to understand every singleone of those component parts and... Is that possible? No, it's not possible.There are too many variables to consider. And here's another angle to look atthis, it could be that you have a batting average that's better than someoneelse, but you make fewer decisions... Let's talk about that for a second. Atsome point, the volume of decisions that you make becomes important, now, ifyou make 90% good decisions, but you only make one a week, is that better orworse than someone who's consistently making more good decisions even thoughtheir hit rate's a little bit lower. Now, we can't speak in absolutes, but Ijust wanted to bring that up because there can be a tendency, I think, forpeople to look at it this way, I need good judgment, therefore, I need goodinformation, therefore I'm going to spend exorbitant amounts of time gatheringall of the relevant information so that I can have the highest chance of makinga good decision and then enter analysis paralysis, and analysis paralysis isnot good judgment, even though you may come to a good outcome, maybe it takestoo long or you did it at the expense of too many other things.

0:17:41.9 Junior: And so there'sthis really dynamic interplay across all of these variables and demands, and Ithink that that's part of what makes judgment so difficult just this week forme, there are several things on my plate that I'm trying to prioritize, andpart of the judgment is deliberately making a less than best decision on one ofthose items because I know that if I could give time to it, I could make abetter decision, so isn't that interesting that sometimes it's deliberatelytaking time away from something, because when we're thinking at a systemslevel, we can see that, Hey, this thing over here deserves a little bit moreattention.

0:18:21.4 Tim: That's true Junior.When we apply judgment, it's normally under conditions where there are constraints,there are deadlines, there's limited information, there's limited resources,we're not in some simulation where we can analyze things forever and we cankeep gathering information, that's just not how it works. So judgment is, ithappens under these pressurized conditions and limited resources, this is howit works, and this is where we have to learn how to develop better judgment, soone of the things that I like to say is that you can't read yourself intodeveloping better judgment, I mean, you can inform yourself with moreinformation, more knowledge, and that is helpful, but in many ways, the onlyway that you develop better judgment is through doing. Let me give you anexample. So I have learned... This is a matter of judgment. I have learned todiscount the assumptions of other people, the assumptions they make about whatit takes to do things to get a project done. Can you relate to this Junior?

0:19:37.8 Junior: Yes, sir.

0:19:39.2 Tim: So I've learned todiscount. If they say it's gonna cost this much, I'm going to add at least 50%of times, if they say it's going to take this much time, I'm going to maybedouble that, I'm going to analyze that very carefully, and I'm going todiscount their assumptions pretty heavily, because of the inherent biases thathumans have to not be accurate in trying to scope out a project in terms ofwhat it's gonna take, and I've learned this over and over and over and over thehard way, and I don't know how else I would have learned that that's a matterof judgment.

0:20:25.5 Tim: So that's one thingsecond, I've become more measured and not as emotional and getting excitedabout the dream outcomes that we may be talking about, the aspiration, thegoal, what we're shooting for, not that I'm not excited about accomplishinggreat things, but I've learned to be more measured about that, because there'sa susceptibility in humans to embrace the first order intended consequence of adecision and then not look at the potential unintended consequences, not lookat them carefully enough, and so to quote a moral philosopher and historianthat I love, her name is Gertrude Himmelfarb, she said "nothing is asseductive as the assurance of success, nothing is as seductive as the assuranceof success" but what does...

0:21:28.8 Tim: Reality tutors you tobe careful, to be more measured, to be less emotional, to discount assumptions,so that's what you learn through experience, you learn that throughself-discovery is very interesting. So the irony is that much of what you learnabout judgment, you learn through often failed attempts, through problems,through mistakes, through poor decisions, you have a lot of repetitions, youhave a lot of at-bats, and hopefully you're paying attention and you're doing avery careful post-mortem, after you make a decision and you see theconsequences, not only first order, but second order and third order, andsometimes it takes time before you can see what's happened, you need somelongitudinal data, but those things are so helpful and I don't know how youacquire that judgment other than... Much of it through experience.

0:22:32.1 Junior: So in addition tosystems thinking, what's out in element, search light intelligence, Harvardpsychologist Howard Gardner argues that leaders need synthesizing minds thatsee connections among fragments of knowledge, the challenge is that this needfor search light intelligent as he terms it, is not enough, given the sheervolume of information that has to be filtered, synthesized and made actionable.So this has several implications. And we can go into them at another point,there's a quote that I really like more in Moren Benison called, they claimthat leadership is the chronicle of judgment calls, so begin affirming evidencethat this is part and parcel of leadership, this is what it is, judgment callsand decision-making. So here's what complicates things, and we've already bornethis out, there's more information today than there ever has been, which makesjudgment more difficult than it's ever been, why? Because judgment happensbased on the information available to you, and if there's a lot of information,there's a lot of things to consider, so judgment isn't easy yet it's absolutelycritical. It's arguably the most difficult and yet most important thing that wedo.

0:23:44.5 Tim: I'll add a couple ofpoints to that Junior first decisions are only as good as the intelligence thatinforms them, think about that, you're going to rely on the intelligence thatyou have, the information that you have at the same time. And you said thisearlier, we make all business decisions, in fact, all decisions in lifesomewhere short of certainty, so you're never going to have perfectinformation, the assumption is that you're going to have to render a judgementand make a decision with partial information, always. That's what it comes downto now, but what's changed? Well, what's changed is the environment in which weare exercising judgment and making decisions today, it's more difficult todaybecause we have a complex interplay of variables, a highly dynamic environment,this fact alone tells us that judgment must be a collaborative process as well.

0:24:46.4 Tim: You can't rely onyourself, you don't have the equipment, you don't have the analytical power,you don't have the processing power to be able to synthesize everything to beable to see issues from every angle. So you're going to need some help. I thinka great illustration of this, Junior, is that take the economy, take the macroeconomy. The best minds in the world, the best economists in the world cannotpredict economic activity, they cannot predict inflation, they cannot predictunemployment, they cannot predict these vital economic indicators, they try andthey build models, and they forecast and they make judgments, and they gatherinformation, and sometimes they get it right, but no one gets it consistentlyright. No one. Why is that? Because there's just too many variables interactingin too many ways, and at some point, we lose our predictive power, we have alot of explanatory power after something happens, but we don't have very muchpredictive power going into the future, and so we have to realize theconstraints under which we do analyze and make judgments.

0:26:14.9 Junior: And That's where judgmentlives is in the future.

0:26:16.0 Tim: It does.

0:26:19.7 Junior: It does. Let'stalk about some tools that we can use, we're going to go through a few today,we're not going to go in depth in all of them, if you wanna go into moredetail, we'll put a link in the show notes, the book will go briefly over theVCTR model, it's an acronym V-C-T-R, VCTR, Value, Cost, Time and Risk. Thefirst time I saw this, I thought, You know what? That's pretty elementary.There's nothing very ground-breaking about this model, like of course you needto do those things, but it is amazing to me, the amount of poor decisions thatcould have not been poor, had they gone through this model and just theconfidence that you can have in what you believe is a good decision by goingthrough this and making sure. So value, cost, time and risk, we won't go intoeach of those, but that's the VCTR model. The next one I wanna spend a littlebit more on. Tim before we move on anything on the VCTR model, you wanna say?

0:27:17.2 Tim: Well, just toacknowledge the... What are we talking about? We're talking about for decisionmaking criteria, that should always be a part of your analysis, if you'remaking a decision, you should always be taking into account these four factors,what is the potential value if we do this? What is the cost? What are the timerequirements? What are the risks? So that's a fundamental discipline fordecision making, but as you say Junior so often, we do not adequately addressthese four decision-making criteria.

0:27:54.4 Junior: I saw a decisionnot long ago that had three of these, not the fourth, it had value, cost andrisk. Did not have time. And time was a very important piece of this decision,and it would just show me once more that all four of those are a part of theprocess, every time you gotta account for 'em. So next we're going to talkabout adaptive challenges, and so much of becoming or developing good judgmentis becoming skilled and fast at identifying adaptive challenges, here are thecategories are opportunity, threat and crisis, an opportunity is a potentialbenefit, a threat is a potential harm, and a crisis is certain harm. So inaddition to the VCTR model, this is another way to help us think throughdecisions, and the more ways that we can look at this, the better. I wasformally trained in strategy and management strategy or business strategy, andreally what business strategy is is learning a whole host of models and thenfiguring out when to apply those models to give a certain problem, a certainsituation, a greater degree of definition to look at it the right way. And soyou'll often hear me say words like angle or lens or frame, because the waythat we look at things, the lens through which we look, the angle from which welook are so important in providing that type of definition.

0:29:29.2 Junior: I love the story,it's not even a story, but Eskimos have nine words for snow, why? Becausedifferentiation is useful, and intelligence in so many respects is our abilityto make finer and finer differentiation among variables or in a givensituation. And so it's helpful. Okay, this things in front of me. What is it?Is it an opportunity, is it a threat? Or is it a crisis? And depending on whichone of those it is, will inform my behavior, it will inform my urgency, it willinform my sense of import, it will inform my sense of collaboration, is thisgoing to be a consultative decision? Is this going to be a unilateral decisionbecause we need to move? All of those things will be affected by just thisbasic overlay of adaptive challenge.

0:30:22.5 Tim: No, I agree, Junior.The first thing that we have to do is... Well, first of all, we're in thebusiness of responding to adaptive challenges, this is what we do for a living,but as you say, the first thing that we have to do is when an adaptivechallenge appears we have to interpret that. What is it that we are dealingwith, what is arriving here? Is it an opportunity or threat or a crisis, andjust that classification at the front end will help us begin to formulate ourresponse strategy, our response pattern. So interpretation is crucial upfront,what are we dealing with? And I think that's where this framework comes inhandy.

0:31:10.3 Junior: Let's go a littledeeper and talk about five factors as they relate to these adaptive challenges,the first is clarity, how clear is the adaptive challenge you're responding to,the second is urgency, at what level of urgency must the organization respond.Three is the response time. How much time do you have to respond? Four isavailable options, what options are available to you to respond? And five ismargin for error, what is the margin for error with this particular adaptivechallenge? Is it very low? Or is it very high? Is this something that I need totake care of right now? Is it something that I can push off till tomorrow? Ithink that part of what makes this valuable is applying these in retrospectwhen we do a post-mortem, we can look at the decision that we made, then goback and measure it against these, did I have clarity? Did I respond with theappropriate level of urgency, did I give appropriate response time, did Iaccurately see my available options and did I account for the margin of errorin the decision? Did I make the right decision? Given those things, if youdon't use that as a frame, then what do you do, you ask this really amorphousquestion, which is, was that the right decision? If there's no furtherdifferentiation, if you don't unpack it and apply a frame, it becomes reallydifficult to coach yourself, really, really difficult. Well, you just need toplay better next time. Okay, well that's not helpful.

0:32:41.9 Tim: No it's not.

0:32:43.4 Junior: What about... Wegotta get some differentiation, right?

0:32:47.8 Tim: Well, Junior, let'stake a couple of examples. Okay, so those five questions represent a filterthrough which to take an adaptive challenge to figure out what it is. So let'sjust take an example. So here comes an adaptive challenge, it's coming our way,and we're gonna ask these five questions, so let's say the clarity is low, theurgency is low, the response time is high, we have lots of time to respond,available options. We've got lots of different options, and the margin forerror looks to be low. Okay, what is that? Do you see the profile of that?That's an opportunity. Opportunities are not clear, they're foggy, they're faraway and foggy, they don't have an inherent level of urgency attached to them,usually the urgency level is very, very low, because there's something outthere in the offing that, okay, we can't even really make it out. So how can wefeel this great sense of urgency about it? That doesn't make sense, so theurgency is going to be low, we have time, so response time is high, we've gottime on our hands, we could try this if it doesn't work, we can try somethingelse if it doesn't work, maybe we try something else, we have options, we'vegot a lot of different options in the way that we respond to this, and themargin of error is low, right? So again, we don't just have one bite at theapple, we may have several different opportunities, that's the nature of anopportunity. Okay, now let's go to a crisis, what does a crisis look like?

0:34:35.5 Junior: Before we go to crisis?I will say that there are opportunity windows, we use the word window sometimesvery purposefully, in that there is urgency to an opportunity, and the time torespond is short, maybe it's something that comes across our desk anopportunity to who knows? Expand the location, we have an opportunity to bid ona property and the bids are done in the next two hours, there are occasionallytimes where there is urgency.

0:35:04.5 Tim: But what I would sayto that Junior is that if it's an opportunity, you may think... You may seethat, you may interpret that, but that's probably not obvious to everyone else,and so for you, there's a high sense of urgency for perhaps most others, it'snot. They don't see it that way, they're not interpreting it that way, that'swhy it's difficult to align an organization behind an opportunity, because theinherent level of urgency is typically low, right?

0:35:35.7 Junior: That's fair.

0:35:37.6 Tim: Now, if we go to acrisis, the profile of a crisis is the opposite, is their clarity? Is thereurgency? Yes, the nature of a crisis is that it's at the door or it's leavingtracks on your back, it's either right here or it's rolling over you, that'sthe nature of a crisis, so by definition, clarity is high, urgency is high. Alright,well, let's take a look at the other three factors. How about response time?No, you don't have a lot of time. How about options? Your options havediminished. How about margin for error? Your margin for has error is gone wayup, so do you see the trade-offs that come with these different categories ofadaptive challenge, that's why it is vital to be able to accurately interpretthe adaptive challenge at the front end. I gotta know what we're dealing with.

0:36:36.0 Junior: I wanna talk for asecond about timing, because it could be that the same adaptive challenge isany one of those three categories, depending on the timing, and so it could bean opportunity that you let pass that becomes a threat, which if you let passfor too long can become a crisis, and so adaptive challenges can move in andout of those categories depending on the timing. So there's a quote from TedWilliams baseball player that you put in there, "Waiting for the rightpitch is the most important thing for a batter." I think that that'sinteresting, when I first read that. Yeah, okay. But then I thought about itfor a long time, and I chewed on it for about a day, waiting for the rightpitch is the most important thing for a batter. What does that mean? It meansthat I'm not altering the swinging necessarily, every time a pitch is thrown.I'm just waiting for the right pitch, and it's not just what but when. And thiselement of timing, I think is really important as it pertains to adaptivechallenge, because we need to make a decision on the urgency front at somepoint and say, "We're going to act or not act." And sometimes thosetrade-offs with action and inaction are very difficult and very expensive.

0:37:58.0 Tim: And as you mentioned,we may see them differently depending on where we're sitting in theorganization, what information we have access to, what's important to us, andso you see the implications when there are a whole bunch of different people,it just becomes more complex. So Michael Porter says "The leaders are theguardians of trade-offs." That's your job. So if your job isdecision-making, decision-making is an act of trading off, so seeing how thesethings relate to each other is really interesting to me, trade-offs,decision-making judgment, it's this realm of uncertainty in future. That ishard, it's hard. There's a lot of a strife that happens when we're acting inthis land.

0:38:46.0 Tim: Well, Junior, I thinkyou just said that the defining characteristics for the environment related tojudgment are uncertainty in the future. That's what we're dealing with, that'swhat judgment is all about, is trying to make decisions in an environment ofuncertainty for the future, that's why it's hard.

0:39:11.2 Junior: There are two mainpoints that we wanna make that fall into this solutions category of things thatwe can do to improve our judgment. This next one I think is particularlyimportant, something that I'm trying to become better at. Surround yourselfwith talented, strong-minded people, that's the short of it, and we're going togo through a few quotes and examples that I think are pretty compelling.There's a verse in Judges in the Old Testament that I think is amazing, to showus that people have been dealing with this for a long time, I don't even knowhow to say this name, Abimelech.

0:39:43.5 Tim: Abimelech.

0:39:44.5 Junior: Maybe.

0:39:46.0 Tim: Yep.

0:39:46.5 Junior: I don't know whothat is. Hired vain and light persons, which followed him, part of the reason Ithink this is interesting is because this is thousands of years ago. And we getto read about it and see that this guy, Abimelech I apologize if I'm gettingyour name wrong, even though you haven't been here for a few thousand years,hired vain and light persons. Why? Why would you do that? Because vain andlight people are easy to put in line, they're easy to get to follow you in somerespect. What do you think about that verse?

0:40:15.9 Tim: This is such aninsight, it's the antithesis of what you just said, Junior, surround yourselfwith talented, strong-minded people. And then what did Abimelech do, he hiredvain and light persons, which followed him. Well, why did he do that? He wasmore interested in flattery, he wanted to surround himself with obsequioussycophants, people that will just tell you what you wanna hear. Well, that'snot gonna help you in rendering judgment, in analyzing complex situations andmaking a good decision, what a waste, right? But yet, do we see leaders doingthis today? Absolutely, I was just speaking with an executive about a CEO whohad packed the Board of Directors with friends that would rubber-stamp what hewanted to do, guess what? Here we are several years later, after he's beendoing that, and the organization is falling apart, because the governance isnot there, the checks and balances are not there, the accountability is notthere, the good judgment is not there, the challenging the status quo andchallenging the leader is not there. That's what you get. So, because thisleader acted out of self-interest, he impaired his own judgment and over timethings got worse, now they're falling apart, now he's sitting down to a banquetof his consequences. Wow, congratulations. This is exactly what he did, hehired vain and light persons, it's not going to help you.

0:42:06.9 Junior: Here's a line tofollow it up from The Little Prince, to vain men other people are admires. Soif you're a vain man, how do you see other people? As admires, what do you? Yougo and look for your biggest fans. So if you're the CEO and you'recharacterized by vanity then what do you do? You go pack your board with youradmires, why? Because there's no more friction for you, you can make unilateraldecisions essentially and do what you wanna do. Now is that in the bestinterest of the institution? Of course it's not, but we see this happen timeand time again, it's a predictable pattern across history. Here's someone whobroke the pattern, Abraham Lincoln. So I read the book, Team of Rivals. Tim,you read that book? Probably.

0:42:53.8 Tim: I think I read halfof it, but I didn't finish it, to be honest.

0:42:57.4 Junior: Well, I think thatmost people who started it didn't finish it because it's beast, but the pointis, he invited his competition into his cabinet, why would you ever do that? Hehad to put up with a lot of grief, a lot of grief, but there were clearly at somepoints during his presidency some benefits from doing that, and I think justpositionally it's an interesting move. And what does that tell everyone elseabout you? If you are solely interested in your own devices, in your owninterests, you wouldn't do that period, end of story, I can't think of areasonable way that you would invite your competition in, in order to achievethose ends. You really have to be looking for a different point of view, youreally have to believe that there's value lurking underneath the competition.And so it wasn't this just a really nice story of, we are all friends now, andwe're gonna work together and put our differences behind us, that is not thestory. Quite the opposite, they remained in competition, many of them, a few inparticular, and I thought that that's such a compelling story and appropriatewhen we're talking about the opposite of some of these examples.

0:44:21.0 Tim: Well, Junior, he hada hard job to do, he needed the best and brightest minds around him, even if hehad to put up with their personal ambition, their egos, the strife between oramong them. But he knew he needed that the job was bigger than he was, and heknew that.

0:44:42.9 Junior: Yeah. Here'sanother one in politics, John W. Gardner member of Lyndon Johnson's cabinetsaid this, "Most importantly perhaps it includes the capacity to appraisethe potentialities of co-workers and opponents." So this isn't speakingof, I think generally, but in this case, specifically, Lyndon Johnson or thepresidency. Generally in leadership, what constitutes a good leader part of it,it includes the capacity to appraise the potentialities of co-workers andopponents. It means that you have to be a good judgment of talent and a goodjudgment of character, a good judge of character, if you can do those twothings well and put the right people around you, you have a much better chance.And all of this speaks to the fact that if you do this alone, you're not goingto go very far, as a leader if you want good judgment you can't make decisionsin isolation and that almost goes without saying. But here we are, Machiavellisaid, "The first method for estimating the intelligence of a ruler is tolook at the men he has around him." How about that? That's an interestingquote too, and these are across a period of several thousand years, all ofthese examples, and they're all saying roughly the same thing.

0:45:58.7 Tim: There's a patternhere.

0:46:00.0 Junior: There's a pattern.

0:46:01.3 Tim: Right. So what we'resaying is that to get to good judgment on decisions and issues and courses ofaction, you need to surround yourself with the very best people. So how do youdo that? Well, you're going to learn to do that through experience, and youwill over time have some regrettable hires, but on the other hand, you willalso have some regrettable losses. Where good people that you wanted to keep,you wanted to retain, they walk out the door, hopefully you're taking notes,you're paying attention, you're doing everything that you can to increase yourability to judge, the capability and the character of those around you.

0:46:47.4 Junior: There's a wholesection on developing people in the book that I think is worth going into,we're not gonna spend a lot of time on it today, but it starts on page 144, ifyou have the book. It's about affiliation and accountability, it's aboutdelegation, about multiplying force and accelerating the development of thosearound you. So it's not just about getting the right people around you, it'sabout doing that and then continuing to develop them. The last thing that we'regoing to go into is, resist the arrogance and overconfidence that can come withsuccess. Warren Buffet observed a fat wallet is the enemy of superiorinvestment results.

0:47:27.0 Tim: I'll just add, Juniorto this point that we're making here, that we have to resist arrogance andoverconfidence, you've gotta take yourself out of the equation as you're doinganalysis and you're trying to exercise judgment. I said this before, but itbears repeating, if self-interest is a big factor you will skew the data, youwill taint the analysis and the entire analysis process, so get out of the wayor you may live to regret it. There's a moral component here that we should notunderestimate, this is where we walk away integrity comes in, you can't be socommitted to a course of action that you can't move off it and change your mindif new data says you should. So I wanna emphasize that point. So often whatwe're trying to do is act before circumstances conspire against us, we'retrying to stay in an offensive mode of performance instead of a defensive modeof performance.

0:48:34.7 Junior: There's a piece ofthis that I wanna go into for a second that I was thinking about just lastnight, and that's the relationship between humility and judgment, and I thinkthat these two things are highly, highly correlated. So here's how I came tothis, judgment seems to be influenced by your ability to predict the future,what informs your ability to predict the future it's, in my opinion, what I'vecome to, is that it's your ability to see the truth of the past, that's all youhave. How else could you predict the future. So your ability to see thepatterns of the past and extrapolate those into the future, because what hashappened in the past will likely happen again in the future, because humans arehumans, circumstances change, conditions change, sure, but there are someprinciples that happen over and over again. So what will the conditions producethis next time around? Well, maybe what they produced the last 100 times, maybeit's going to be different in the details, but people will probably behave thesame way. And so if you're brutally honest in confronting the past and sheddingyourself of your own bias, your own interpretation, you'll probably be able tosee into the future with greater objectivity, greater pragmatism, greaterclarity.

0:49:55.7 Junior: So what does thishave to do with humility? It's the ability to admit your own ignorance, and whatI've seen, especially relative to this surround yourself with talent andstrong-minded people whole idea, is that the most dangerous people are thosewho confidently but yet ignorantly march into the future. If you cannot admityour own ignorance and you look at the past through a lens that is not based inreality, it's based on the reality that you've created for yourself, based onthis echo chamber you've created of all of these other people, saying that,"Yes, you're right." That's so dangerous. And so our ability to stayhumble to see the truth of the past, to see the truth of the present willaffect our ability to see into the future, and I think positively impact ourjudgment. So that's one last thing I wanted to toss in there that's been floatingaround in my brain, Tim.

0:50:51.1 Tim: I love that, Iabsolutely love that, it's a great insight. Junior, I worked with an executiveearly in my career, and he would not tolerate dissent, and he made severalmulti-million dollar capital budget expenditures, and they turned out to bevery poor decisions. In fact disastrous decisions, but the entire process ofjudgment and analysis that led up to the decision, those decisions, thatprocess was not an open collaborative process where we had the opportunity andability to challenge the status quo and debate, he shut it down. And he didcreate an echo chamber and wow, I can't even begin to explain the consequencesof those capital budget decisions and the misallocation of capital. Which isjust one example of where you can go wrong, right? But it goes back to yourinsight, you have to have the ability to see the truth of the past asobjectively as possible, that means you get out of your own way.

0:52:05.9 Junior: And it'sinteresting to me that the judgment or lack of that you talked about affectedso many people. And so it's something that we need to be particularly carefulwith as we increase in influence, because our judgement for better or worseaffects more people and it has bigger ripples. And so if you see yourselfmoving up an organization this is something that you should think long and hardabout, and it becomes particularly important as you ascend that hierarchy.Okay. So to summarize, our effectiveness as leaders will largely depend on ourability to make choices, our judgment, each of us needs to do this, we need tocultivate judgment, how do we do that? Five things, identify and respondappropriately to adaptive challenges, two, wait for the right pitch, three,surround yourself with talented strong-minded people, four, develop thosepeople once you found them, and five, resist the arrogance and overconfidencethat can come with success. Tim, any final thoughts.

0:53:08.9 Tim: I would just go backto the original definition that I love so much. That judgement, what is it?Judgment is the ability to interpret what is not yet obvious. So if we applythose five steps that you just mentioned, Junior, I think we're gonna be betterin doing that very thing.

0:53:28.6 Junior: I do too. Well,thank you everyone for your time and attention. We appreciate your listenershipvery much, stay tuned in for next week, we'll be releasing a bonus episode aspart of a mini-series we're testing out called Single Point Lessons. So that shouldhit your downloads on Wednesday, if I'm not mistaken, if I am mistaken, I'msorry. But have a listen and let us know what you think. If you found value intoday's conversation please share it with someone who might find it useful.Take care, everyone. We'll see you next time. Bye-bye.

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0:54:05.0 Producer: Hey, Culture byDesign listeners, this is the end of today's episode. You can find all theimportant links from today's episode at leaderfactor.com/podcast. And if youfound today's episode helpful and useful in any way, please share it with afriend and leave a review. If you'd like to learn more about LeaderFactor andwhat we do, then please visit us at leaderfactor.com. Lastly if you'd like togive any feedback to the Culture by Design Podcast or even request a topic fromTim and Junior, then reach out to us at info@leaderfactor.com or find and tagus on LinkedIn. Thanks again for listening and making Culture something you doby Design not by default.

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