Founders - #260 One from Many: VISA and the Rise of Chaordic Organization

Starting point is 00:00:00 It is 1993, nine years since I abruptly severed all connection with the business world for life on the land. It is still hard to believe. Turning my back on Visa in 1984 and walking away at the pinnacle of success was the hardest thing I have ever done. The reason is still difficult to explain, but it's not complicated. That inner voice that will not be denied, once we learn to listen to it, had whispered since the beginning, business, power, and money are not what your life is about. Founding Visa and being its chief executive officer is something you needed to do, but it's only preparatory. Each time, I resisted. You're crazy. Preparatory for what? And why? There was no answer. Only silence. In time, the voice became incessant and demanding.

Starting point is 00:00:59 Feast is not an end. Give it up. And the business world as well. Completely. Now. In time, you will understand. It was frightening. It was maddening. I felt a damned fool to even think about it. A rational, conservative, 55-year-old businessman who had never smoked a joint or dropped a drug, listening to inner voices? Absurd. Throw away a lifetime of work, success, money, power, prestige, as though it had no value in the vague hope that life had more meaning? Madness. But the voice would not be silent. This was not my lifelong friend and companion, the rational old monkey

Starting point is 00:01:46 mind, the certified expert of logic talking. This was another voice entirely, and I knew it was right. I abruptly left Visa and severed all connections with the business world, offering the only possible explanation. I feel compelled to open my life to new possibilities. No one believed it. Why should they? I could scarcely believe it myself. I hadn't a clue what those possibilities might be, but I intended to be open to them. The nine years since I left Visa and opened my life to new possibilities have been good years.

Starting point is 00:02:29 Filled with things I deeply love. Family, nature, books, isolation, privacies, the infinities of imagination. More than enough to make a fine life. Life is not about control. It's not about getting. It's not about having. It's not about knowing. It's not even about being.

Starting point is 00:02:55 It is a magnificent, mysterious odyssey to be experienced. That is an excerpt from the book that I reread and the one I'm going to talk to you about today, which is one from many, Visa and the Rise of the Chaotic Organization, and it was written by Dee Hawk. I originally read the book for the first time about four years ago. It was episode 42 of Founders. Dee recently passed away and it hit me kind of hard because after I read the book for the first time, I thought the way he thought was so interesting. I went and found other books written by him. And so he has two books of maxims. They're called Autobiography of a Restless Mind, Volume 1 and Volume 2. And for the last several years, Volume

Starting point is 00:03:36 1 has been on my nightstand next to my bed. I pick it up, if not every week, a few times a month. I just pick it up, turn to a random page, and just read a few of his thoughts. And to me, that experience was like having a wise old man, like a wise old grandfather figure, pull you aside for a few minutes, and just teach you little bits of knowledge that he's learned not only from his very unique life of founding and starting Visa, but also reading thousands and thousands of books. And so when I heard he died, I was like, okay, the only like the small way in which I can honor somebody who I've spent a lot of time learning from

Starting point is 00:04:10 is I'm going to reread the three books that I have of D and I'm going to do podcasts. So I was originally gonna put it all in one podcast, but the autobiography of Restless Mind, volume one and two, each one is about 200 pages, has about 1 1200 1300 uh different maxims in each book so that's 400 pages you know maybe 2500 maxims something like that so i'm going to do this episode today just on one for many and then another episode i'll release very soon as

Starting point is 00:04:37 soon as i make it on autobiography of a restless mind volume one and volume two and so before i jump into the book i want to give you this overview. This is, I'm pretty sure, how I found out that he died. I've said over and over again that, you know, most of the founders that I pay attention to are all, like, throughout history. Don't really try not to pay too much attention to what's going on today. I use time as a filter. It's the only way I can tell if, like, the ideas are good or not. But one of the most impressive to me founders in present day is Patrick Collison of Stripe. And he was the one that tweeted out, and this is what he said, and I want to read this to you because I think it's a good overview of why D. Hawk is so important to study.

Starting point is 00:05:13 And so Patrick says, D. Hawk, the creator of Visa, died this week at 93. He was a very underrated innovator and someone who inspired me and my brother, who's also Patrick's co-founder. David Stearns is the author of the definitive book about Visa, who now works at Stripe. So David now works for Patrick, and he shared this below. And then Patrick linked to three paragraphs that David Stearns wrote about overview of why DHawk is so important. And having read all of these books multiple times, I think this is a really fantastic overview of why he's so important and why I think people, formidable entrepreneurs like Patrick, spent time studying and learning from him. So I'm going to read that to you right now. DeHawk realized something in the late 1960s that few others really understood. Computers and

Starting point is 00:06:02 telecommunications would soon make it possible to build a global electronic value exchange system that would enable consumers to pay for goods and services anywhere you want to be. But his true brilliance was realizing that such a system would require a fundamentally different sort of organization than the traditional franchise model that the Bank AmeriCard had been using. Don't worry about these terms. I'll get into them later, but that's the precursor, almost like two steps before Visa. And it was called Bank AmeriCard because it was created originally by Bank of America. So he goes into what is going to be required. A truly global payment system required something akin to a financial United Nations, a social

Starting point is 00:06:42 structure in which multiple competing institutions could cooperate just enough to build something far bigger than any one of them could build alone. I'm going to pause right there. Think about the term or the title of the book that we're going to go over. One from many. Just said a truly global payment system would require something akin to a financial United Nations social structure in which multiple competing institutions could cooperate just enough to build something far bigger than any one of them could build alone.

Starting point is 00:07:09 That is what makes Visa special. Why did he see what others failed to see? And this is why when I read this paragraph that describes really not only what he did, but the person behind him, considering that every single person that we study is a misfit, a rebel, some kind of outsider, you'll clearly see why I was like, oh, okay, this guy has a lot to teach me. Let me go and buy every single book that he has and not just read them once and read them casually, but read them over and over again. So it says, why did he see what others failed to see? Or what made him successful

Starting point is 00:07:38 where others had previously failed? Part of the reason was that he was an outsider. He was not your typical banker. He grew up poor in rural Utah. He didn't go to the right schools, nor did he have a prestigious internship at a large financial institution. He thought from first principles and questioned everything, even down to the nature of money itself. Now, that one sentence is going to appear. Remember that for later, because that appears over and over and over again.

Starting point is 00:08:06 You won't even believe how this guy thinks. He thought from first principles and questioned everything, even down to the nature of money himself. He uses that tactic over and over again. He was disappointed in most social institutions, but he saw the potential for thriving chaotic systems like those he observed in nature. Another main theme of the book that we'll get into. He saw a better way of doing things,

Starting point is 00:08:28 and he didn't listen to folks who said it couldn't be done. So that one sentence real quick, Dee has in common with almost every single, we're up to what, 260, something like that, 260 biographies of history-based entrepreneurs. They all could be described that way. He saw a better way of doing things and didn't listen to the folks who said it couldn't be done. And most importantly, he hired and inspired a group of people who shared his vision

Starting point is 00:08:53 and were truly excited about it. The passion that he has for doing this is, there's a line in the book that I'll share later on where I wrote a note to myself. It's like, it's impossible to read this section of the book and not be fired up. From our current perspective, it's difficult to appreciate what Hawk and Visa had accomplished. And why is that the case? Because we're living in the future that he foresaw many decades before today, right? Today, I can hop on a plane to almost anywhere in the world and use my Visa card to purchase goods and services, regardless of the language spoken by the merchant, the currency of the merchant's bank account, or the time zone difference between the merchant's shop and my issuing bank.

Starting point is 00:09:29 In the early 1960s, this was simply unthinkable. Today's magic was yesterday's dream. That's a great line, by the way. Today's magic was yesterday's dream, and Hawk was one of the biggest dreamers of them all. Rest in peace, D. You will be missed. So with that, I want to jump into the introduction of the book. This is where D himself tells us, hey, this is what the book is about. In 1969, Visa was a little more than a set of unorthodox convictions about organization slowly growing in the mind of a young corporate rebel. But this book

Starting point is 00:10:02 is much more than the story of the barely believable events that brought Visa into being. It is also the story of an introverted, small-town child, passionate to read, dream, and wander the woods, the youngest of six born to parents with but an eighth-grade education. It is a story of crushing confinement and boredom in school and church, along with the sharp rising awareness of the chasm between how institutions profess to function and how they actually do. So this book is almost 20 years old. This idea where he has, he's dedicated, if you go to his personal website, it's dwhawk.com. He starts with this idea. There's three questions that he has been, his life has been

Starting point is 00:10:45 obsessed with, and he's writing the words on his website when he was 90. And so his whole career and kind of intellectual odyssey is the way he would put it, is trying to answer these three questions. Number one, why are institutions everywhere increasingly unable to manage their affairs? Number two, why are individuals everywhere increasingly in conflict with and alienated from the institutions of which they are a part? Number three, why are society and the biosphere increasingly in disarray? So those are the three questions he's going to repeat over and over again. It is a story of lifelong search for the answer to those questions, which had everything to

Starting point is 00:11:20 do with the formation of VISA. It is a story of harboring four beasts that inevitably devour their keeper ego envy greed and ambition and it is a story of a great bargain trading ego for humility envy for equanimity greed for time and ambition for liberty so what he's talking about there is the fact that he founded and ran visas as its CEO for 16 years. And then that voice, which I started the podcast with, just made him give it all up. And so that's when he goes on his website. He's got a fantastic outline, very simple outline of his entire life. And that time period, it's from 1984 to 1992. This is how he describes himself. And he's very gifted

Starting point is 00:12:06 with language. And he gets right to the point. Ranch owner, recluse, student, and philosopher. And so when I do that other podcast on the autobiography of Restless Mind, Volume 1 and Volume 2, he goes into detail what his daily schedule is like. This is extremely fascinating. So that's coming after this, okay? So it it says it's a story of events impossible to foresee that sent a man of 70 on a journey more improbable than visa and infinitely more important beyond all else it is the story of the future of something trying to happen of a 400 year old age rattling in its deathbed as another struggles to be born. It is not just my story, although I am in it. It is not just your story, although you're in it. It's a story of us all. And so before I go into his early life and a little bit about how he came to think the way he does,

Starting point is 00:12:59 one thing I feel like we have to define a term here because it's in the subtitle. What he's talking about there is like there's a 400-year-old age rattling its deathbed. He's talking about what he describes as command and control. So think in our modern world how every single institution, whether it's the government, the school, how most companies are operated. And his main point is that that is not going to work in the information age. You need to devise new ways of organizing people to work together. And so he uses the word chaotic. And he says, I borrow the first syllables from chaos and order, and I combine them and chaotic emerges. And so then he'll define it for us, something that appears over and over again in

Starting point is 00:13:36 the book. So it's important to know this. The behavior of any self-organizing and self-governing organism, organization, or system that harmoniously blends characteristics of chaos and order. The second definition and where he got like his, uh, the inspiration for this and the way he thinks about all things comes from nature. Number two, characteristic of the fundamental organizing principle of nature. And so Dee's love of nature is fundamental in understanding why he thinks the way he does. He grew up next to the Rocky Mountains in essentially something between shelter and a house. So we'll get that. We'll go into that right now. I trot happily behind a tall, godlike father a quarter mile through the trees to the neighbor's well. The five-gallon can is

Starting point is 00:14:20 slowly filled by my father as he proudly explains that there'll be no stale piped water in our house. We'll have water from this well. Nothing finer, he says. So that's Dee's way of explaining, hey, there's no indoor plumbing in my house. Outside, icicles hang from trees. I weigh an extended bladder and cramping bowel against a 50-yard dash between three-foot snowbanks to the icy outhouse. That is his way of saying he doesn't have a toilet inside. Nothing finer. So this idea, you're going to hear me repeat that a few times because his family, his dad, and his mother, that's how they describe to their children that you actually don't need that much in life.

Starting point is 00:14:59 So nothing finer is always put in quotation marks. It's to indicate to the reader that it's coming from his father or his mother. So when he's explaining to his mom, oh, I got to run outside to the outhouse. It's snowy outside. She says, nothing finer. You don't need anything more than an outhouse. And according to my mother, this teaches one to attend to business and not dawdle. Earlier this evening, my mother produced her special treat, which she called rich man's soup. So now he talks about what were they feeding him? They're very poor. They don't have a lot of money. They're not, they haven't, he just introduced the book saying not only, you know, they lacked education. We didn't have a lot of money. We kind of had to live off the land and we spent a lot of time in nature.

Starting point is 00:15:37 Nothing finer describing her rich man's soup. These were the ingredients, hot water, bread, salt, pepper, and butter. It is years before realization dawns that there may have been no other food in the house. A hint that we are not the most fortunate of people and a hundred homilies lurking in the parental mind leap out to assault my ears. So then he just lists off all these like maxims that his parents would repeat over and over again to him and his other siblings. Riches are not in the number of possessions, but the fewness of wants. Wish not, want not. The road to hell is paved with good intentions. And this is the reason I'm reading this to you. Very much against my will, the intuitive wisdom of centuries was being handed down. That is exactly what his books of maxims do as well.

Starting point is 00:16:27 It was there in that tiny college in the small farming community at the edge of the Rocky Mountains that the three great loves of my life arose. Literature, nature, and a lovely girl with beautiful brown eyes. So he's going to meet his wife in this area when they're 14. They wind up getting married at 20. They would have everything to do with the unorthodox ideas that led to the creation of Visa, although I could not know so at that time. When and how I learned to read is lost to memory. Ours was not a bookish family. My parents considered themselves lucky to have graduated eighth grade

Starting point is 00:17:01 before pride and necessity drove them to earn their own living. Where the books came from, I have no idea. Probably from people who knew, that hawk boy's a little strange. He'll read anything. And so there's a lot of this section that is double underlined for my own personal reasons, because this seems very similar to how I was when I was a kid. One of the most powerful memories of those early years is the countless hours curled up on my side in my favorite place. The floor in the corner next to the warm wood stove, face propped up on my left hand, my right hand turning the pages of a book. I had gone to another bed and slips it between the sheets. Nothing finer, she says. And what she's describing is nothing finer. Dee describes. It's an icy room and cold feet on a hot rock for a kid anxious to again disappear in the pages of his book. And all that I'm reading to you just appears over a few pages,

Starting point is 00:18:13 and he just does a great job because at the end of this, you have an idea of exactly who he is, and these traits just burn in him forever. It is easy to know where the second grand passion, love of nature, came from, the Rocky Mountains. Vast hours and days in the midst of such magnificence, often wandering alone, are impossible to describe, nor can words convey the abiding love of nature and deep intuitive sense of connection to the earth. So we're going to see multiple times throughout his career where he is beaten up, bloodied, depressed, wants to quit. As you can imagine, building something like Visa in the 1960s and 70s could not have been easy. And every time it's like his walks in the woods and spending time in nature is his therapy. And he has beautiful

Starting point is 00:18:57 language to describe why that was important and what it gave him later on. So it says it gave him a deep, intuitive sense of connection to the earth. Love me as they will. There's a growing feeling of estrangement from my family, a feeling of not belonging. No one shares my passion for reading or wandering alone. No one directs them either. I live largely in a private world of nature, ideas and imagination. And so that's a description of his first six years of life. He loved the fact that he could read whenever he wanted to, go spend time in nature. Then they're like, okay, now you have to start going to school and church. And this is where he gets introduced to institutions for the first time, and he does not like them.

Starting point is 00:19:36 Nothing in my first six years prepared me for the shock of institutions. With school and church came crushing confinement and boredom. It is though everyone began to shed their humanity at the door of institutions. It's as if adults suddenly turned into a mob to confront one child. All right, kid, you've had the joy of life for six years. That's enough. Grow up. Learn what life is all about. Failure to conform brought discipline. So he starts getting into trouble for failing to conform when he's six. That happens throughout his entire career. He's constantly getting,

Starting point is 00:20:11 in many cases, fired because he refuses to conform. And so he's spending time in nature when he's not in school or church and he can't reconcile in his little young brain. Like, why are they so different? And so he's like, if I have to choose one, I'm going to choose the natural world as my blueprint. Nothing in nature feels like church or school. There's no principal pecking away at the rest of the flock. There's no super frog telling the others how to croak. There's no teacher tree lining up the saplings

Starting point is 00:20:39 and telling them how to grow. Something's crazy. Is it me? I can't begin to think about it in a coherent way. Let alone understand the resentment. Confusion and doubt. But the sense that something has gone awry. Is powerful.

Starting point is 00:20:54 And so he does the only thing that comes natural to him. And that's rebelling. I rebelled. It was persistent. Stubborn. And at times stupid refusal to accept orthodox ideas. To be persuaded by authoritarian means, or to seek acceptance by conformity.

Starting point is 00:21:08 So that's the kind of mind, if you go back to that post I read, the three-paragraph post I read from David Stearns, the author of the definitive book on Visa, it's like, well, why is he, why was Dee able to succeed? Like, what did he see, and why was he able to succeed where others had failed? And part of that was obviously that he was an outsider. The idea that he had spent the previous 10 or 12 years of his life working at different banks and financial institutions is almost unbelievable. And in fact, right before he starts Visa, he decides, OK, I give up.

Starting point is 00:21:37 I've been beaten, brutaled. I'm just going to he calls it retirement on the job where he keeps the job. He's like, let me just find I need to pay bills to support my family. I want a job that I could do in my sleep, pays me enough, and then leaves me more time to read and to spend time in nature. And then that's what he thought his life was going to be. He tried to predict the path of his life and then the unexpected opportunity to do visa where essentially he has almost no free time at all is actually what actually occurs. So the years passed alternating between the magnificent mysteries of nature, the imaginative joy of books and the dull reality of institutions and work, work, work. And so this is where he gets into his first jobs. His family doesn't have a lot of money. So this idea is like, I'm going to have to start working all of my spare hours from the age of 10. And so he lists all the things he was doing at age 10. I was hand harvesting fruit and vegetables at a penny for the pound. At 12, I was thinning sugar beets at $20 the acre.

Starting point is 00:22:31 It's all manual labor. As you can imagine, what a young, young, uneducated person would be like, what kind of jobs they would be able to get. That was followed by the first salary job at a farm as farm labor for 20 cents on the hour. At 14, I got a job dumping slop in a canning factory. Summer and afterschool jobs came one after the other. I was a mucker at a dairy. I was a hot chain dipper under a hundred degree sun. I was a spray truck operator in an orchid. I was a laborer in a slaughterhouse. None of it seemed demeaning. It was life. It was making a living. It was what proud men did without whining.

Starting point is 00:23:12 And so I'm going to fast forward a little bit. He was not supposed to go to college. He didn't have the money to. He was a really good at debate, won a bunch of debate competitions. And part of doing winning debate competitions gave him a scholarship to like what we would consider kind of like a community college and it's during his two years of college where he really starts honing on this idea where it's like institutions this is what they claim to do this is what they actually do why is no one doing anything about this at college the dean put me in way of the classics and some understanding of both the powers and limitations of the human mind at the same time increasing conflict with the college and other organizations

Starting point is 00:23:45 inflamed a growing preoccupation with the paradoxes inherent in institutions and the people who hold power in them. So all he's describing is the problems he saw that he struggled with for the next 15 to 16 years laid the foundation for the ideas of Visa. That is why he's telling you and I this story. The seeds of many of the perceptions that shaped my life, some now grown into convictions, were planted then in college. And then once he graduates college, we have 76-year-old D. Hawk describing the 20-year-old version of D. Hawk. Thus, at 20, newly married, unemployed, eager to learn, but averse to being taught,

Starting point is 00:24:27 emerged an absurdly naive, idealistic young man, an innocent lamb hunting the lion of life. The hungry lion was swift to pounce. And so right away at his first job, this is where he learned. So he calls them mechanistic industrial age organizations. And this is where he's learning how they really function, and he hates it. So it says, I fell into a job at a small, floundering branch office of a consumer finance company. Within months, the manager left, and his lot fell to me. Protected by remoteness, anonymity, and insignificance, four lambs. So he's constantly referring to his young self.

Starting point is 00:25:06 He's like an unrealistically naive version of himself as a lamb. And so it says, for lambs whose average age of 20 trashed the company manual, ignored the commandments and did things as common sense conditions and ingenuity combined to suggest. So that's this idea. It's like, I'm eager to learn,

Starting point is 00:25:25 but I'm averse to being taught. Did not just want to say, hey, do A through Z. I want to come. I want to think about what we're actually trying to do. Like, what is the purpose of the company? What are we trying to do for our customers? And think if there's a better way to do it. So that's something he does his entire life. Within two years, business tripled and the office was leading the company in growth, profit and quality of business. Anonymity was gone, and the blind fists of corporate power and orthodoxy began pounding for conformity. And then he does a great job with one sentence that gives you an idea of exactly what is going on and what he doesn't like.

Starting point is 00:25:55 Confrontation with superiors grew frequent and intense. So now the company transfers him to Los Angeles, and this is where he meets this guy named Dick Simmons, who teaches him, hey, you don't actually understand the company and the company you're working for and how institutions actually work in the real world. And you're not going to like it the more you know about it. And so D says, I was taken in tow by a charming man, Dick Simmons. He was extremely literate. Exceptional intelligence and perception lay behind the literacy and more than a little and a little cynicism. He detested his job and we swiftly became friends. And then this is where Dee and Dick get into detail about how, you know, large companies with little ownership

Starting point is 00:26:39 and accountability function. And so Dee's boss, this guy named Brown, says, hey, we have a problem to fix. And he says, visitors, he told me, were occasionally confused about the location of the senior executive offices. I was to attend to the matter and keep him informed. And so D's like, okay, this is simple. I'll just order some signs. We'll put them up. People won't be confused anymore. And this is where he gets his education into how mechanistic industrial age organizations really function. How do you tend to handle it? Dick asked. I'll call a sign company, see what's available, and then have it installed, I replied. His hands went up in mock horror. That will never do. You've been assigned a project. And important projects always take time. Yeah, sure, Dick.

Starting point is 00:27:20 Funny, funny, I replied. And Dick responds, am I not responsible for your indoctrination? Trust me, this will be fun and you're going to learn something as well. He explained, what you don't understand is that in companies like this, procedure is more important than purpose. So remember that idea? Dee talks about the important, like a lot of businesses flip that, right? So he's always like, you find out, you discover, like you ask questions, so you discover what is the purpose of what you're trying to do. And in our case, like what is the purpose of the business? What is it actually doing? And this is really important because his line of thinking breaks down, like what is money?

Starting point is 00:27:56 What is information? What are we actually doing? And so Dee makes the point that you start with purpose and then you can come up with procedure. And then most large companies are these, what he calls like these 17th century relics actually get this reversed. And this is one of his first introductions to this. He's like, what you're not understanding is that procedure is more important than purpose here. And method is more important than results. During the weeks to follow, I received a fascinating education about both human nature and the nature of organizations. Bored to death and disillusioned with the company,

Starting point is 00:28:27 one of the most intelligent people I had ever met casually extracted opinions about the quote-unquote sign problem from various officers, each of their opinions being different. So something that could be solved with a phone call is now going to be dragged out and suck the resources, time, energy and money from the company. It says he obtained diverse sketches, samples and prices from suppliers and then would expose them to officers and idle moments to elicit conflicting opinion and avoid decision. Fascinated, I watched as Simmons manipulated situation after situation. Not once was a lie told or a person misled.

Starting point is 00:29:09 He had more integrity and skill than that. This is the main punchline of this whole section. He simply left murky minds unclarified and petty minds free to fuss. I have never forgotten Simmons. Countless times over the years, I've asked diverse groups of people to reflect very carefully on their work and to make a simple balance sheet. How much time, energy and ingenuity did you spend obeying senseless rules and procedures that had little to do with the results they were expected to achieve? Which is a way of thinking about the story he just told us, right? I could have solved this with a phone call. Instead, we created a bunch of fake work and tied everybody else in knots and no one

Starting point is 00:29:45 realized because there's no accountability. No one realized the actual work wasn't getting done. And so when he asked these questions, he says it's rare. It is a rare person who works in like a large institution who arrives at a sum of less than 50% of their time and 80% of their time is not uncommon. So it's a tragic waste of human energy and will to D. I guess all of us, we probably agree with that, right? But he also noticed, the second thing he also noticed is that this is only happening to subordinates. What he realized is like people with power to write and enforce rules rarely spend much time following them. And so that's something D observes over and over again, rules for thee, not for me. And it strikes him as just inherently unfair.

Starting point is 00:30:26 And so in many of these examples of these books that you and I have studied, large organizations, maybe mature companies, they see bureaucracy as like, that's just the way things are. Founders see it as a thing that needs to be constantly eliminated, checked and then eliminated. I just recently, I just reread Sam Walton's fantastic autobiography. It's episode 234 founders, if you haven't listened to that yet. But he mentions this a bunch in his book. And I'm just going to pull out one quote from that book. So I thought it was it relates to exactly where you and I are in the Hawks book. And Sam said, if you don't zero in on your bureaucracy every so often, you will naturally build in layers. You never set out to add bureaucracy. You just get it, period, without even knowing it.

Starting point is 00:31:08 So you always have to be looking to eliminate it. And I think that last line is fantastic advice. You always have to be looking to eliminate it. It's not something just, oh, this is how things are. We should just accept it. It's like, no, it has grown. We need to beat it back over the line. So Simmons eventually leaves the company. Dee is going to get fired. But what I really liked is how he ended this section. He kind of tied everything together for you and I. And he's like, listen, I know this now as a 76-year-old man and having all the life experience and knowledge I had.

Starting point is 00:31:36 At 25, I wasn't ready for this lesson. I didn't truly understand what it was that I was seeing and what it was that I was learning. I was not the first person this also happened to, and I'm not going to be the last. And so he tells us about this time. What Simmons was trying to teach, I was not then ready to learn. It took him decades to synthesize the lesson, meaning himself. In industrial age organizations, purpose slowly erodes into process. So that's why he brings up the word purpose over and over again. And to think about, like, what is the purpose?

Starting point is 00:32:08 What am I doing? Start with there. Then you figure out how to do it. But you don't do it, you don't reverse those. Procedure takes precedence over product. The doing of the doing is why nothing gets done. Simmons had elevated the doing of the doing to an art form until virtually nothing got done. At 25, for all his rebellious, unorthodox ways, the lamb was too naive to see the realities. So remember, the lamb is just a metaphor for him.

Starting point is 00:32:35 He's describing himself. He wanted to believe in the company. He wanted it to be different. He wanted it to make it better. So he's saying he's talking about himself because he's describing the lamb. That's a little, it makes sense if you're reading it, but now reading it out loud, I can realize that that could be a little bit confusing. It is an old, old story. The lamb was determined to change the company. The company was determined to corral the lamb. It was no contest.

Starting point is 00:33:00 Within the year, a badly mauled lamb was out the the door much wiser in the ways of hierarchical command and control organizations and the people who hold power within them i don't have the kindle version of this book but i would have to guess that the word hierarchy or hierarchical and command and control is probably used 20 times throughout these chapters, this book may be the most detailed in terms of like the creation of a new company, new organization that I've ever read. What I find most interesting, though, is the multiple times of struggle and depression that he has to persist through. So he's 25 years old. He just lost his job. This is one of my favorite parts of the book. Loss of the job was a crushing experience. We had money for a month's groceries, no savings, considerable debt, two toddlers, and another baby about to be born.

Starting point is 00:33:52 One event is seared in memory. The feeling returns as sharp as a throbbing tooth. We were desperate to know what to do. We had no idea when I might find a job or receive another paycheck. We agreed I must apply for unemployment. The next morning, deeply depressed. And again, that's another word if I could use, like, if I had the Kindle version to search, I would imagine depressed or depression, sadness.

Starting point is 00:34:21 It's going to be repeated over and over again. That is one of the reasons to read this book because of I go back to that one of my favorite maxims in the history of entrepreneurship that excellence is the capacity to take pain it is unbelievable how much pain D had to endure to create Visa the next morning deeply depressed I drove to the nearest unemployment office a line of people extended out the door and down the sidewalk. Sitting in the car across the street, looking carefully at the faces of the people, I could not make myself open the door. One moment, I imagined myself in

Starting point is 00:34:57 the line. The next, explaining to a concerned wife why I had not done so. I told myself that refusal to get out of the car was ridiculous. Just false pride. The feeling would probably vanish as soon as the application was filled out and I'd realize how silly such feelings were. But I could not get out of the car. Something deep inside said, No. Take me there and I die.

Starting point is 00:35:34 Sick at heart, I drove slowly home to explain to a bewildered, pregnant young mother of two that entering that line was something I could not do. I did not know why then, and I still don't. The next morning, I began a frantic search for work, any kind, anywhere, doing anything. Within the month, a miserable job at pitiful pay appeared. I grabbed it, giving us momentary breathing room. We were determined never again to be in such a vulnerable position. We swore that with the possible exception of a home mortgage, we would never again have more debt than cash in the bank. Within a month, I took two more miserable jobs.

Starting point is 00:36:23 With Herculean effort, we paid our debts in a year and a half and put a small sum in the bank. I abandoned two jobs to concentrate on the best of the three, which was a tiny investment company in serious trouble due to corrupt management. The sole owner was a wealthy, dour man. He refused much in the way of salary, but gave solemn assurance of freedom to use unorthodox methods and a substantial share of the profits if success followed. He kept

Starting point is 00:36:52 the first promise. Five years later, the lamb sat down with the owner to divide a handsome profit from the sale of a successful company, only to come face to face with naked greed. Although worth millions, he claimed that the profit he had promised to share must include years of losses that preceded my arrival. Therefore, there was no profit to share, even though the company fetched a huge premium when it was sold. He was adamant. If I didn't like it, I could sue. It was no longer a lamb that looked deeply into those dead, expressionless eyes, drew a deep breath, and with a tinge of pity and a mountain of contempt, softly said, keep the money. You apparently need it more than I do. His dead eyes did not blink. The lips never moved. The expressionless face was frozen. The

Starting point is 00:37:48 beast, greed, had devoured him completely. The sheep turned and walked out the door. They never saw or heard from one another again. So this is interesting because now again, this is the second time I've read this book. And so not only do I have like the new notes what comes to mind when I'm reading it now but I also get to see what I thought four years ago and so this is my original note on this page was observing human nature and now this is me now thinking about the version of me that wrote it four years ago and I wrote listen that seems a bit cynical but i probably still believe it's accurate and then the note that did pop to mind on the second reading this time is now it makes sense why warren buffett spent so much time

Starting point is 00:38:36 on ethics in his shareholder letters and on only working he's like him and charlie munger says you can't make a good deal with a bad person which is exactly what d tried to do here he didn't know any better like he's younger didn't have the experience but you know they talk over and over again only work with people that you like admire and trust it's not worth chasing trying to the potential of chasing an extra dollar with just a crappy person i think um munger uses the term like hey most you know there's a ton of people that are just straight rat poison just avoid them don't try to make money with them just just keep it moving and so when i really read this part and this goes on for you know a page or two of this guy

Starting point is 00:39:14 that completely screwed over d for no reason really it's like okay it's really but there's a lot of wisdom in what buff and munger are advising us i really think about the ethics of the people they were working with. And so back to the book, Dee talks about the aftermath of this. I was just another hunk of unemployed mutton, bruised and bleeding on the sidewalk. After 16 years of unorthodox management and unblemished results, the sheep by the standards of industrial age command and control organization was a failure. The words that they used to inflict so many wounds, meaning describing him, right,

Starting point is 00:39:53 were not without some justification. Stubborn, opinionated, unorthodox, rebellious. And so really when I thought about this, I was like, man, you're reading this. And obviously I know how his life turns out. But I'm like, dude, you should just be an entrepreneur. What are you doing here? You're fighting here. You're stubborn, opinionated, unorthodox, rebellious. You cannot work in these giant companies. This is not going to work for you, man.

Starting point is 00:40:16 And so this is when he's going to come to the conclusion. He's like, I give up. I'm not going to try to excel. It's just like retirement on the job thing. There's a little bit more time that has elapsed but i want to bring up or he i want to tell you what he brings up like he's not only working the last 16 years this dude is obsessed with learning it says throughout the 16 years of successful business failure the sheep continued to read poetry philosophy biography history biology economics mythology anything and everything that satisfied his

Starting point is 00:40:45 curiosity about connectedness and relationships. He mastered nothing, nor did he wish to, but new ways of seeing old things began to emerge and new patterns slowly revealed themselves. The vague shape of some answers had begun to form, but the sheep had no idea what to do with them. Sheared, bloodied, and once again unemployed. He lost heart and wandered into a slow of despond. So he's dejected. He's lost his confidence. Now he's got to start all over again.

Starting point is 00:41:24 And so 11 years has passed since he sat there and he's like, I lost my job when I was 25. I just can't. I'm not going to go and get on unemployment. I'm going to work three jobs. But he's super depressed. 11 years later, still depressed. With three young children, a heavily mortgaged house, no job and little money in reserve, it was impossible to stay out of the dismal swamp of depression. Day after day, I walked the woods in the misting northwest rain.

Starting point is 00:41:48 My constant companion was an overwhelming feeling of failure. What was wrong with me? Now, this is insane because, you know, that old axiom like darkness, it's darkest before the dawn. This is, he's about to get the job at the national bank of commerce this is going to be where he gets the opportunity to do visa because national bank of commerce is one of the first few franchisees of the bank america card because the two founders so the founder of bank of america and the founder of the bank of national bank of

Starting point is 00:42:19 commerce were actually friends so that's that leads him to the opportunity that eventually he's going to turn into visa so he's like, listen, I feel like a failure. I got three kids. I've worked in this industry for 16 years. I had great results, no money and keep getting fired. And so he's like, what is wrong with me? It seemed impossible to act consistent with my beliefs and succeed in the corporate world. So he's like, OK, well, I'll just give up.

Starting point is 00:42:40 Yet there seemed no way to escape from the corporate world without putting the welfare of my family at risk. That I could not do. So this is the conclusion here I've said. I would make no more effort to climb the corporate ladder. There would be no more intense commitment to work. My victim would be one of the local banks where a modest living could be had at the cost of a pleasant demeanor, conformity, and fractional ability or effort. Henceforth, my life would be family, books, painting, gardening, and nature. And so there's one line on that page that I had to double underline and I had to really sit and think

Starting point is 00:43:18 about because he says, there will be no more intense commitment to work. I don't think D, and probably people like you and I actually have a choice in that matter because there's going to be no more intense commitment to work right before he does the hardest and most committed work he does in his entire life. So he wasn't able to adhere to that plan. But then you think of like, wait till I get to the next podcast on the autobiography of Restless Mind Volume 1 and 2. And I describe his daily schedule. It may be things that he loves and he's obsessed with, like reading and working in the land. But he's got an intense commitment to work. He's got an intense commitment to life is the way to think about that. I mean, he's got an intense commitment to organizing information. I know a bunch of founders that have read this book.

Starting point is 00:44:05 Like, it is insane how much information is in here. It's like it's a weird collection of two things at once where it's, like, extremely detailed about the creation of a new organization and Visa and everything else, but also written with, like, beautiful language and completely imbibed with his philosophy on life and living. It could not have been an easy book to create by any means so at this point in the story he's going through and he's like applying at all these different banks and jobs and he's like that these all suck and then he comes across one where he's like oh the people in here might be like me they might they're like different so he says the national bank of commerce were different and so he's having these job interviews he's like these aren't job interviews like these are like conversations about like what we're reading and philosophy and he's like i'm connecting with these

Starting point is 00:44:52 them as people as opposed to like employee employer and so they're like listen we like you we don't really have a job for you but let's just get you in here we can't pay you a lot and then hopefully something will appear like that that can match like your talent and your expertise. And so he says at 36, I would be a trainee, a nobody. We couldn't live on the salary. If a significant job and a better salary did not come within a year, our savings would be gone. But I really liked these decent people. And so then he talks about like, what does it take to make a decision

Starting point is 00:45:25 that feels right with your heart but is in conflict with your head when he is older i think he's i think he's in his 70s i think this comes from volume two he says like this is the advice i give my grandchildren to use your brain but follow your heart and then he says that's also good advice for adults and so this is where i think in it from my reading of all the stuff i've read that he's Use your brain, but follow your heart. And then he says that's also good advice for adults. And so this is where I think from my reading of all the stuff I've read that he's written, this is where I think he's taking his own advice. He's like, this doesn't make sense mentally. I'm jumping.

Starting point is 00:45:58 For the first time, I abandoned logic, tossed reason in the trash, and made a career decision on intuitive feeling and faith. And so they move him from department to department just trying to figure out okay what he can do they're mostly like jobs well beneath his like his experience in his talent level my days were filled with menial work that i could have done in my sleep but it was not without compensation it brought me time to read reflect on the past 16 years and dive even deeper into the obsession with organizations and the people who hold power within them. And so all the experience he's having is preparatory for visa. He just didn't know it at the time. And part of this is he's having to, okay, you're fighting with the outside world, right? You have to fight with what the government wants of you, what your job wants of you,

Starting point is 00:46:38 what maybe society wants of you. But he's talking about, it's like, before I'm learning how to manage myself with the external world, I've got to figure out how to I've got to focus first on managing yourself. And so he spends quite a bit of time about like, OK, well, if you're going to lead others, first you lead yourself, then you lead your superiors, then you lead your peers. And then if then from there, you just employ good people and you free them to do the same. And all else is trivia. That's something he repeats in the book. But before he does that, he's like, OK, I got to figure out who I am and I got to confront and get used to myself. And the reason this is necessary to do is because you can't run away from yourself.

Starting point is 00:47:13 And so he says, years before, words by Emerson had leaked from the page and stuck in my mind. Everywhere you go, you take your giant with you. That's what Emerson wrote. He was writing about the insatiable desire to escape the present and seek paradise in the new and different. New places, new stations in life, new possessions. A futile quest to escape self. And so then Dee reveals part of his inner monologue, which I don't think most people would do so. They're not going to tell you how they actually view themselves, right?

Starting point is 00:47:47 No matter how hard I tried to escape my giant, he always returned. The country kid. So now he's describing things that, you know, maybe the way he looks at himself, but also how his appearance is to the outside world. The country kid. The two-room house. Manual labor. No university degree. Estrangement, a raging sense of inferiority.

Starting point is 00:48:10 All this negative self-talk that is not helpful. It's not like this is constructive criticism, like self constructive criticism. So, oh, I do that. Maybe I should change that. This is just like this constant negativity going through his brain. And he's like, this is it is it like we're not doing this it was then that i had the guts to turn look my giant in the eye and say you're an ugly cuss and you scare the hell out of me but if we're gonna be forever linked we might as well get to know one another and live civilly together and so when all this is happening this is when he gets the opportunity to work on what eventually will become Visa.

Starting point is 00:48:45 But he has no idea that it's going to happen yet. And so there's a guy, his boss, this guy named Mr. Carlson, who he absolutely loves. He thinks Mr. Carlson was just a great man. And so Mr. Carlson has to say, hey, will you come? I need to have a meeting with you. I've got to discuss this opportunity with you. And this is what Mr. Carlson is saying. Bank of America has decided to franchise Bank AmeriCard, and we have agreed to take a license. We would like to be in

Starting point is 00:49:08 business within 90 days. Bob Cummings is to head the program. However, he has no experience with credit cards and I think he could use your help. What do you think? Mr. Carlson, there are a couple things you should know about me. I've been managing businesses since I was 20 and would be a terrible assistant anything. And I have absolutely no use for credit cards well young man if that won't bother you too much I expect it won't bother me either why don't you have lunch with Mr. Cummings and see if the two of you can work it out and so originally Bob is supposed to be running the program D is going to be his number two they do this thing where the beginning of credit card industries barely exists at this point and it's

Starting point is 00:49:45 not like it is today i think what they do is actually was deemed illegal now where it's like you don't have to apply for a credit card they would just send every single one of their customers a credit card through the mail so they wind up what bob and d are working on is they wind up sending like 120 000 customers up in 90 days he's going to work day and night, be completely committed for the next year. I'm going to skip ahead because just like he needed the help of others around him. So he saw Mr. Carlson. He's like, Mr. Carlson, I like and respect him. He gave me this opportunity. He works with Bob and Bob realizes, oh no, Dee should be the leader here. And this is just incredible that this happened. So it says,

Starting point is 00:50:24 I expected to work until the program was well established, and then I would get back to my retirement on the job. Shortly after the first anniversary of the launch, the senior vice president in charge of personnel asked if I could come by to speak with him. To my surprise, he told me that he needed to borrow Bob for another assignment, which Bob was eager to accept. That would not be possible unless I was opening to become head of the credit card department at a significant raise in pay. Remember he said, something doesn't pop off soon. I'm going to go through all my savings. I'm going to have to get another job. So now Bob's like, or excuse me, the senior vice president in charge of

Starting point is 00:50:59 personnel is like, hey, we got to take Bob, but that's okay. You'll have Bob's job and you'll make more money. It was 15, this is the incredible part. It was 15 years later at Bob's retirement party when Ron, who was the guy he was just talking to, finally told me the truth. Bob had walked into his office and abruptly announced, Ron, get me out of this job. D needs and deserves it. I'm just in his way. If Bob Cummings had not made such a magnificent gift of the job he loved, the extraordinary events of the next chapter would never have come to be. And so now Dee is in charge of a massive program that is growing exponentially and is full of fraud and hundreds of millions of dollars of losses. So you can really think about this as a problem that D and Visa needed to solve. But eventually it's going to turn into Visa.

Starting point is 00:51:49 Bank of America let it be known that it would license its Bank of America card program to other banks. Stories of the banking madness of the time are legendary. In the beginning, there was no magnetic strip on the card and no electronic card readers at the point of sale. This system for clearing sales drafts between banks was primitive, cumbersome, and impossible to fully describe. Basically say, hey, what if you were accepting payments everywhere through paper? It's ridiculous. Backrooms filled with unprocessed transactions. It became an accounting nightmare and a criminal bonanza.

Starting point is 00:52:24 Counterfeit cards were stolen on their way to postal departments and they were stolen from mailboxes by thieves and snatched up by pickpockets. There was no electronic system for authorizing transactions. There was no internet. There was no electronic entry of data at all. The massive outpouring of credit cards to gain considerable consumer and merchant acceptance. There was a massive outpouring of credit cards to gain considerable consumer and merchant acceptance. And as acceptance skyrocketed, the number of transactions flowing between banks

Starting point is 00:52:56 exploded. The clearing system swiftly disintegrated under its own volume. And this is the environment from which Visa emerged. By 1968, the fledgling industry was out of control. No one knew the extent of the losses, but they were thought to be in the tens of millions of dollars. They're going to wind up actually being in the hundreds of millions of dollars, a huge sum for the time and for the size of the system. And so Dee is the one that has to solve this problem. This goes on for a very, very long time. I, after reading, probably, I don't know, maybe a dozen pages of this, I just wrote a quick summary for myself. This is the previous few pages. Meeting after meeting, hundreds of groups, all with different

Starting point is 00:53:35 ideas on how to do things. No one with authority to do anything without approval. This is my version of hell. And so that line, this is my version of hell. One of my favorite things I've ever read in any book was from the founder of Patagonia, Yvon Chouinard. And he wrote this fantastic book called Let My People Go Surfing, The Education of a Reluctant Businessman. And I thought he said something in the book which was fascinating. He's like, what is like a way to find what you truly want to do? What if you were to describe the worst version of the job that you have? And then you, and in building your company, you design the opposite of that. And so he's also

Starting point is 00:54:10 really funny and very opinionated. Um, and so what he said is when I die and go to hell, the devil is going to make me the marketing director for a cola company. I'll be in charge of trying to sell a product that no one needs is identical to its, and can't be sold on its merits. I'd be competing head on in the cola wars on price, distribution, advertising, and promotion, which would know that his, Yvonne's counterpoint to that is like, I want to build products that are so great, they have no competition. And that book describes, you know, all these ideas he has, like quality as a distribution method, making sure that you're not doing, you're not just copying what other people are doing, that you're actually making a differentiated product. But I think even apart from his description of what version of, what hell would be for him, I think that idea of like, hey his description of what version of what hell would

Starting point is 00:55:05 be for him, I think that idea of like, hey, what is your version of hell? And then creating the opposite of that is a really smart. And so what Dee is having to do to try to get arrive at eventually the organizational structure that he does would be my version of how it's just these constant meetings. No one can make a decision. The end of the meeting is let's do another committee. And then that committee produces more committees and all the time that this is happening where it's like they're really not focused on purpose they're focused on procedure things are getting worse to the point where they have a complete system failure a complete system collapse and that is the one that creates d's opportunity and from this might be my favorite idea of D's. And this is something I wrote

Starting point is 00:55:48 in an old note to myself the first time I read the book. And now I yanked the post-it note and I put it on the wall. And it says, focus on how your product or company ought to be and nothing else. That may be, he's got a lot of great ideas. That may be my favorite one of his, but we'll get there in a minute. The problems were enormously greater than anyone imagined. Far beyond any possibility of correction by the existing committees are the licensing structure and growing at an astonishing rate. Losses were not in the tens of millions as everyone had thought. Remember, how would you even know what losses are? Everything, these transactions are being like compiled and just and paper just being stacked in back offices. You have no idea what's happening.

Starting point is 00:56:31 So it says it was growing at an astonishing rate. Losses were not in the tens of millions, as everyone had thought, but in the hundreds of millions and accelerating. That is in the 1960s. That has got to be terrifying. And so this is Dee's thoughts at this time. Suddenly, like a diamond in the dirt, there lay the need for a new concept of organization and a precarious toehold from which to make the attempt. And I think what he means by that is like, listen, clearly your way is not working. We're going to be racking up hundreds of millions of dollars in

Starting point is 00:57:00 losses. Let me try something new while he's then he goes back this this this chapter is called peeling the onion and you'll see why i'm about to say or in a few minutes like why i arrived at this conclusion i could see a lot of people that want to build uh encrypt in crypto uh reading peeling the onion and getting a lot of ideas. And I did not know that Dee was a fan of crypto either. I was actually listening to an episode of Business Breakdowns on how Visa makes money today. I'll link it in the show notes below. And he actually, Dee joined, I think he was like 90 years old. He actually joined a board of a crypto company because there's a lot of,

Starting point is 00:57:46 when you think about the fact that he didn't want anybody to have control, he didn't want like a top-down hierarchical, he didn't want, that's not what he wanted Visa to be. There is a lot of overlap in this. You'll see when I get there, I kind of, it'll jump out and I'll let you know about it. But there's some kind of weird echo,

Starting point is 00:58:02 I guess is what I'm trying to say, between how Dee thinks about organizational structures, what people are trying to do in cryptocurrency. And I would say how, remember that book on episode 176, Just for Fun, which is the autobiography of Linus Torvalds of open source software collaboration. These ideas are very much related and he discusses them in detail in the chapter peeling the onion. So if you happen to be working in that industry or that interests you, I'd pick up the book just to read the peeling the onion chapter. So before I get there, this is where he has this propensity to like break everything down from first principles and be like, okay, I needed to understand at a fundamental level, the problem I'm dealing with. And so he's thinking, it's like, how do I influence the future?

Starting point is 00:58:46 Influencing the future requires mastering four ways of looking at things as they are. Right. And his situation is terrible as they are, as they were, as they are, as they might become and as they ought to be. And so that is, I think the first time he mentions this, he mentions as they ought to be. This is something he describes and repeats over and over again. At the very end of the book, he is rather disappointed in his career because he used as things ought to be as his North Star, and he thinks he didn't get even halfway there. And so that's why I said this idea that jumps out of the book, jumps out at you from reading the book, that you should focus on how your product or company ought to be and nothing else is actually really profound. And so let's go into this like first principle way of thinking.

Starting point is 00:59:34 And it kind of makes sense what I was trying to get at. Like there's just this weird overlap between like what Dee was doing, how nature is organized, how open sources are organized. In fact, the reason I brought that up is because I think in that podcast episode on Visa, they said that if Visa was founded in today instead of the 1960s, the organizational structure he would have used would have been based on crypto today. So let me read my note real quick before I read what he's about to tell us. Everyone else was focused on the form, defocused on function. He broke it down and identified the essential function and then tried to build from that foundation. The nature of a bank, its essential function,

Starting point is 01:00:13 was the custody, exchange, and loan of money. But what was money? Money was not coin, currency, or credit card. That was form, not function. Money was anything customarily used as a measure of equivalent value and medium of exchange, which is exactly what Visa is going to enable for its customers, right? Going back to the beginning of the podcast where it's like, okay, I can hop on a plane anywhere. I can use my Visa card to purchase goods and services, regardless of the language spoken by the merchant, the currency in the merchant's bank account, or the time zone difference between the merchant's shop and my issuing bank.

Starting point is 01:00:50 It is just a way, a medium of exchange. And so then Dee goes into this. He's like, okay, if money's not a coin, it's not a currency, it's a credit card. Like, it can't be a coin because coins have long been debased. It's not based on gold or anything else like that he says certainly the paper on which currency and checks are printed have no significant value nor does the ink and he goes away think about this is like a barrel of ink and a pulped tree turned into paper costing a few dollars and that would you'd be able to print billions of dollars worth of currency on that

Starting point is 01:01:20 and so he says realization slowly dawned that money had become alphanumeric symbols recorded and transported on valueless metal and paper. But that still left a gap in my understanding. And then this is where he gets to his main point about why you could build or why it was possible to build a global electronic value exchange system. Money had become guaranteed alphanumeric data. Thus, a bank would become no more than an institution for the custody, loan, and exchange of guaranteed alphanumeric data. And so you can think of this chapter as Dee's fundamental understanding of the problem he was trying to solve allowed him to see the future. You and I live in that future. Money would become nothing but alphanumeric data in the form of arranged energy impulses. It would move around the world at the speed of light at minuscule cost by infinitely diverse paths. Any institution that could move, manipulate and guarantee alphanumeric data in a manner that individuals customarily use and relied upon as a medium of exchange was a bank.

Starting point is 01:02:29 It went even beyond that. Inherent in all this might be the genesis of a new form of global currency. And that realization leads to his oh shit moment. We were not in the credit card business. The card was no more than a device bearing symbols for the exchange of monetary value. That it took the form of a piece of plastic was nothing but an accident of time and circumstance. We were really in the business of the exchange of monetary value. So that is what the business ought to be. If that isn't a business that we are in, why don't we build from that purpose and create an organization that enables us to be in the

Starting point is 01:03:11 business of the exchange of monetary value? And for us to do that, we have to be able to coordinate with thousands of banks all over the world and millions of customers. And we cannot do that with the mechanistic command and control organizations of the present day. And we cannot do that with the mechanistic command and control organizations of the present day. And so he lists people, lists organizations like IBM and General Motors and things like that. And once he realizes the business that he's in, he's like, oh my God, think about the opportunity that's in front of us. Exhilarating realizations followed one after another. Any organization that could guarantee, and settle transactions in the form of arranged electronic particles 24 hours a day, seven days a week around the globe would have a market.

Starting point is 01:03:53 That market would be every exchange of value in the world. That was unbelievable. Did I think it could be done? No, it was impossible. Did I think that Bank of America would give up ownership of the program? No. Did I think that banks worldwide could be brought together in such an effort? No. Did I think that laws would allow it? No. Did I think anyone would seriously listen to such notions or allow them the light of day even if they did? No. But did I believe it was what ought to be? Ah, that was another question indeed. And that was powerful enough to draw me on. So there's a lot of detail in the book about what's taking place. I think he summarizes it amazingly on his website. So I'm going to read a paragraph from his website first.

Starting point is 01:04:43 And then there's just, you get fired up. Like this is the section I was referencing earlier, where it's like, it's just impossible to read this in a week-long effort to conceive an ideal organization, an ought-to-be organization, to create the world's premier system for the exchange of value. In 1970, after an intense year-and-a-half-long effort, the first part of an organization unlike any that had ever before existed came into being.

Starting point is 01:05:23 National Bank AmeriCard Incorporated, in the book, it's referenced by its initials, MBI, with Hawk as president and CEO. This is what's going to turn into Visa. Within two years, operating problems and losses were under control, and the business was highly profitable, growing at the rate of 50% compounded annually.

Starting point is 01:05:42 Within five years, the worldwide system was unified under the name Visa and was, by a considerable margin, the largest system for the exchange of value in the world. So that was the result. What Dee is about to describe in the book, to me, is the reason behind, like, why would you even try to pursue something like this. Traditional means of approaching the problem were closed to us, but we were enamored of the emerging concepts, for there seemed no better alternative. I was more than enamored, as one of the participants put 12 years later in a Harvard case study. Quote, it's a guy describing Dee, he had a passionate commitment to the ideas that bordered on zealotry.

Starting point is 01:06:28 In the beginning, few paid our effort much attention. As it advanced and gained attention, it was subjected to much ridicule. As it approached success, bitter opposition emerged from many sources. There were dozens of times when I longed to quit. What prevented me is not And then this is a great sentence here. never occurred cannot be determined by opinion, only by attempt. Attempting the impossible is not rational. It is beyond reason. It is a matter of hope, faith, and determination. Each time I fell into despair and wanted to give up, and that happened often, something softly whispered, not now, not while you still believe. Go on. Go on. What kept me going remains a mystery. It doesn't really matter, for there was an inexpressible sense that in some profound, non-physical way, existence would lose meaning if I did not persist. I want to actually get to the fact that he was a reluctant

Starting point is 01:07:47 leader, which I found very surprising and interesting. But the reason I'm telling you all this is because before I jumped to that section, I think it's because he's had to convince and essentially sell so many people. He's just got a really interesting way to think about sales. And it was very helpful at this point in his career. So I just want to read it to you. I held fast to the notion that until someone had repeatedly said no and adamantly refuses another word on the subject, they are in the process of saying yes and don't know it. And so once he gets all the different banks and the members to agree, he thinks, OK, great. This is my job is done. I can go back to my retirement on the job.

Starting point is 01:08:24 And they're like, no, we're only going to agree if you run this new organization. I don't think you understand. We want a commitment that you're prepared to move to San Francisco and head NBI. You've led the effort since the beginning and brought it this far. We don't want to risk a change of leadership during the remainder of the process or for several years thereafter. If you make that commitment, you will have our commitment. So the commitment of every single member bank, okay? Had I any intention of accepting if asked? None. I was exhausted. The work had taken every moment of my waking hours for a year and a half. Both of my sons were about to graduate high

Starting point is 01:09:03 school in four months. Our daughter was a freshman in high school. I loved the mountains, the forest, and the lakes of the Pacific Northwest. What I desperately wanted was my life back. I wanted to bring this dream into being, return to the Northwest, and perfect my retirement on the job. I explained my position and desires, And so as is customary, anytime he has to make a large decision in his life, he goes to nature. He goes for a walk in the woods. This is really interesting because we have his journal entry from this period of his life. I slipped away for a long walk in the woods. A few pages of notes survived from that day.

Starting point is 01:09:50 They were in a old file where they had remained unseen and forgotten these past 35 years. The flood of feeling that they evoke is impossible to describe. And I like that he wrote that line because when I read the autobiography of Bob Dylan, I was telling you on that podcast, the last episode of Founders, that I don't think there is another, like a more powerful medium to evoke emotion than really great writing. And so he's having that experience 35 years later, reading his own writing. And this is an inflection point

Starting point is 01:10:21 in his life. He doesn't know it yet, but this is how he's going to spend the next 16 years of his life. I walked to the hill and sat on a fallen tree. I leisurely whittled a maple walking stick. It came to me that forming and building NBI or anything of worth is much the same. It requires sound material, a good tool, a capable hand, and most important, a vision of things to come. It requires patience and persistence to pursue the vision chip by chip by chip and a willingness to change the vision as the nature of the material is revealed. What foolish logic would rationalize becoming president of NBI? It means giving up grass, rain, trees, birds, insects, all the natural living things. It means dirty air, city jungles, confinement in steel and concrete boxes, conniving

Starting point is 01:11:16 people, and fussing futile work. It means living where I do not want to live, liking what I do not like, and working how I work not. Perhaps I can hang on to reality if I remember the things I love best and simply write off the next three years for education of the children and my desire to provide my wife with freedom and some of the finer things that she so richly deserves. Will I come to prefer the corporation to whittling a cane? Somehow, I doubt it. So we obviously know he takes the job.

Starting point is 01:11:51 The newly elected board met and appointed me president and chief executive officer. Thus began what I expected would be a three-year commitment before I could regain a measure of freedom and return to a more private life in the Northwest. Had I an inkling that those three years would become 14 or of the trials and trauma that lay ahead, I would have walked away on the spot. And so it's amazing as you think the book would be like, look, it's a celebration. Look what we built. Visa's amazing. And it's not. He really focuses a lot on the failures and the shortcomings of not what Visa is, but what it ought to be.

Starting point is 01:12:28 And so I'll get there in one second. There's all these competing financial interests. Some of them don't agree with some decisions that D has the power to make. And unbelievably enough, they they resort to death threats. So they light up. They say, hey, we're going to kill you. They send him letters in the mail. Somebody breaks into his office office and like carves up his chair. And so this is how he dealt with that stress. It says 20 years making and collecting loans had taught me that anger, blame and condemnation and other negative emotions are fueled by like response. They are least able to be sustained when met with calm indifference. It has always been my inclination to quietly suffer through adversity while attempting to find a

Starting point is 01:13:09 solution. During dark times long walks in the woods have always sustained me. This time I broke the law to do it. The closest open space was miles of forested hills near where we lived. Posted everywhere were no trespassing signs. I would pretend they did not exist, excuse myself on the basis of dire need, slip through the fence, and lose myself deep in the woods. There I would climb for hours,

Starting point is 01:13:38 licking my wounds in the hope that a solution would appear. A sense that in the great picture of things, my trials and tribulations were of no consequence would slowly seep into my bones and allow me to face the next week. It was many months before the depression, there's that word again, gradually faded and years before the memory became less painful. And so then we get to the part where I was mentioning earlier, it's like, it's not like, look how, look how great I am. Look how great it is what I built. It's like, look how, how short I fell and failed to live up to my own ideals. So he calls it the successful business failure. It is painful to think about weakness and failure.

Starting point is 01:14:23 It is even more painful to write about it, but it's an essential part of the story. And so he's about to make the point for all my, you know, unorthodox behavior, my inability to conform, my desire to do things differently or think of a new way to do things. In many cases, I reverted to what most humans do, and that's just I copied what others were doing. He says, one of the first of my failures came early when we were establishing permanent NBI headquarters. Something about confinement in private quarters had always annoyed me. So he's talking about private offices. Yet in the world of institutions, physical separation from others had become a hallmark of success,

Starting point is 01:15:02 power, and prestige. It was the heyday of gigantic corporate headquarters with palatial executive offices and cubicles for lesser folks. Something about such corporate show-and-tell quarters offended me, probably because I was normally excluded from them, and when I was not, I often had poor experiences in them.

Starting point is 01:15:23 Nevertheless, I convinced myself that others, like banks, government officials, regulators, and prospective employees, would never accept NBI as a substantive organization if it were located in inexpensive, modest quarters. What is now clear is that I lacked ability and courage to lead in the direction of my natural inclination rather than copying acquired behavior. And so originally it was an open floor plan. Then he has so many meetings that he winds up having a private office. And then when he leaves, they take the entire open floor plan and just separate it into closed offices, cubicles for everybody else, and really nice areas for the executives. Exactly what he did not want to happen. Another failure, I enabled more debt to accumulate. From the beginning,

Starting point is 01:16:11 I believed in and worked for a transition from the concept of credit card to the concept of a transaction device for the exchange of value, a debit card, to use the jargon of the day. It was my hope that issuers would evolve from making the card primarily as an instrument for debt to making it as an instrument for the exchange of value. It was my hope that revenues of issuers would evolve from reliance on interest on cardholder debt to reliance on transaction pricing for services provided. It was my hope that this would equitably distribute costs between the most affluent and least affluent customers. 28 years later, he's really pointing out the fact that the exact opposite happened. 28 years later, that has not happened. And interest on debt of

Starting point is 01:16:59 those who need to pay monthly supports free service to the more affluent. And then his final mistake, and maybe his largest one, is that he couldn't stop reverting to a command and control structure. And the way to think about what he's about to tell us is like, I couldn't even live up to my own ideals. Perhaps the greatest failure of all was to completely underestimate the degree of individual cultural change such an organization required. The organization was so new, success so immediate, and growth so explosive that it was necessary to hire management from the outside. Each of these people came full of the techniques, cultures, and habits of the mechanistic industrial age organizations from which they emerged. Many took the openness and liberty of Visa as applicable to them, but not in relation to those over whom they had authority. Time after time, I would discover departments within the company where

Starting point is 01:17:57 people were subjected to ridiculous rules and regulations. There's exactly what Sam Walton noticed time and time as he built Walmart, right? When I would forbid it, managers quite rightly saw my efforts to restrain their conduct as command and control. And so it was. I used command and control techniques to prevent command and control. Plain stupid. All too often, I was simply unable to be the change that I wanted to see. And then this is where we get to his surprising conclusion about his work. And then he does end

Starting point is 01:18:33 on a positive note, though. Judged by orthodox methods of objective measurement, growth, size, profit, market share, and volume, Visa has been a phenomenal success. It would be a lie to deny a strong sense of privilege and substantial pride in presiding at its birth and guiding it to its maturity. By the standards of what Visa ought to be, it would be a lie to deny a sense of failure. In spite of my pride in all that Visa demonstrated about the power of the chaotic concept of organizations and all things that it has accomplished, I do not believe that Visa is a model to emulate. And so at this point, his next sentence to me is his message to future generations of founders. It is no more than an archetype to study, learn from, and improve upon. And then he leaves on a positive note here though, but that's quite all right. Failure is not to be feared. It is from failure that most growth comes,

Starting point is 01:19:32 provided that one can recognize it, admit it, learn from it, rise above, and try again. And then he leaves the business. Early in 1984, the curtain came down on my performance as CEO of Visa. The business costume went into the closet, and I went directly from the commercial theater to life on 200 acres of remote, ravaged land. It was shockingly difficult. An aching void emptied of things once craved. Money, power, prestige, position. All achieved and now abandoned. The lifelong dream of pioneering a new concept of organization had been realized. There was pride and gratification

Starting point is 01:20:15 in knowing what it had been, what it now was, and what it might become. There was also a sense of failure about what it ought to be. The world was marveling at Visa's success. To me, its flaws were all too apparent. Well, so be it. Life flows on. One by one, I picked up the frayed ends of more beautiful threads. Nature, literature, grandchildren, art, contemplation, humility, and slowly wove them deeply into the fabric of being. Gradually the void filled, pain eased, and ten drastically different but wonderful years emerged.

Starting point is 01:20:59 And that leads us into the next two decades where he writes Autobiography of a Restless Mind, Volume 1 and Volume 2. That podcast will be coming very shortly. This is where I will leave it. If you want the full story, highly recommend reading the book. If you buy the book using the link that's in the show notes in your podcast player, you'll be supporting the podcast at the same time. That is 260 books down, 1,000 to go. And I'll talk to you again soon.

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Founders - #260 One from Many: VISA and the Rise of Chaordic Organization

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