Critical Thinking Chesapeake Energy

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Critical Thinking Leading Innovation and Value Creation Andrew L. Urich, J.D. Puterbaugh Professor of Ethics & Legal Studies Spears School of Business Oklahoma State University [email protected] www.andrewurich.com
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Transcript of Critical Thinking Chesapeake Energy

Page 1: Critical Thinking Chesapeake Energy

Critical ThinkingLeading Innovation and Value Creation

Andrew L. Urich, J.D.

Puterbaugh Professor of Ethics & Legal Studies

Spears School of BusinessOklahoma State University

[email protected]

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Who’s Smart?Robert Van Winkle, No UniversityProfessor Robert C. Merton, Harvard University, Cambridge, USA andProfessor Myron S. Scholes, Stanford University, Stanford, USA

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Critical Thinking “There is no reason anyone would want

a computer in their home.”

President of world’s second largest computer company (DEC) arguing against the PC in 1977

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Critical Thinking “The world potential market for

copying machines is 5000.”

IBM turning down the eventual creators of Xerox

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Critical Thinking “I think there is a world market of

about five computers.”

Founder of IBM in 1943

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Critical Thinking “Who the hell wants to hear actors

talk?”

Warner of Warner Brothers arguing against the need to add sound to silent movies

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Critical Thinking Obama and McCain spent $1

Billion on their 2008 campaigns – Absurd?

Coca-Cola spent almost $2 billion trying to get us to drink sugar water in 2008.

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Critical Thinking “Sensible and responsible women

do not want to vote.”

President Grover Cleveland, 1905

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Critical Thinking “We don’t like their music and

guitar music is on the way out anyway.”

Decca record executive turning down the Beatles, 1962

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Critical Thinking “Television won’t last because

eventually people will get tired of staring at a plywood box every night.”

Daryl Zanuck, 20th Century Fox Movie Producer, 1946

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Critical Thinking “Everything that can be invented

has been invented.”

Commissioner of US Patent Office arguing to President McKinley to close down the Patent Office in 1899

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Critical ThinkingDon’t try this at home! I prefer being given the correct answers rather than

figuring them out myself.

I don't like to think a lot about my decisions as I rely only on gut feelings.

I don't usually review the mistakes I have made.

I don't like to be criticized.

I don’t have the courage to move outside my self-imposed limits.

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Why Don’t They Give Us an Owner’s Manual For Our Brain?

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Why is Charlie Sheen an Actor?

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What Happened to GM?

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Why is it So Hard to Face Reality?

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Three Tips for Critical Thinking?

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The Secret to Happiness

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Why Don’t They Give Us an Owner’s Manual For Our Brain?

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The Brain’s Inner WorkingsThe Wiring 100,000,000,000 neurons (brain cells)

15,000 synaptic connections each

By age 15 half are gone and the superhighways are up and running.

These mental pathways become the filter–producing recurring patterns of thinking, feeling and behavior.

Examples: Empathy–confrontation–authoritarian–dogmatic–emotions–tolerance for uncertainty.

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The Brain’s Inner WorkingsThe Parts The brain is full of zero sum games

Ever find yourself feeling conflicted? Competing modules MRI research on picturing yourself as old

Stanford study No payments until 2010 Disagree– brain off Agree-- pleasure

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The Brain’s Inner WorkingsThe Parts Parts of the brain

Amygdale-fear responses Fleeing the stock market like you are fleeing a lion

Prefrontal cortex – recently evolved – controls voluntary actions

Logical and analytical Limbic system - oldest physical part of the brain

The rat brain – Impulses gut reactions

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Amygdale: Fear Responses Total US Stock Market

1982 value = $1.2 Trillion Return 1982 to 2007 13.3% Theoretical 2007 value $28.2 Trillion Actual value $18.7 Trillion Lost to market timing $9.5 Trillion

NASDAQ 9.6% Return 1973 – 2002 4.3% Actual average return to NASDAQ

investor Zweig, Jason, Money Magazine, December 2007, page 76

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Your Strength Strength is a recurring pattern of

thought, feeling, or behavior that can be productively applied.

Strength is more important than experience, brainpower, and willpower.

You cannot teach strength.

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Your Strength What to notice, what to ignore What to love, what to hate Your motivations, ego, altruism How you think - practical or

strategic Your attitude - optimistic or cynical Your filter is your Strength

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The Strength of Great Accountants Innate love of precision

Happiest moment is when the books balance

Gallup survey

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Using Your BrainYour Unique Strength + Critical Thinking = Success

Your value and ability to prosper and reach your goals come from:“sensing, judging, creating, and building

relationships.” Thomas Stewart, Intellectual Capital

We all have the same information – it’s what you do with it that counts.

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ApplicationsUsing Your Brain Exploit your strength!

Don’t correct weaknesses, work around them. Skills and knowledge can be taught, Strength

cannot. Here’s what we can change!

Core beliefs New skills and knowledge Your values Self-awareness Capacity for self-regulation Hidden strengths

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“Our minds are like inmates, captive to our biology, unless we manage a cunning escape.”

Nassim Taleb The Black Swan

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Why is Charlie Sheen an Actor?

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Why Do We Do What We Do?Albert Einstein

“Fear or stupidity has always been the basis of most human action.”

Worst paper ever…. “People have two legs, animals

have four, except fish which have none.”

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Basis of Human Action and Decision Making? Beliefs Act out your beliefs Desires Pursue your desires Instinct Succumb to instinct

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BeliefsYou act out what you believe? I believe the world is a dangerous

place. I believe people should______. I am skeptical of all claims. An “ideal” manager does ______. The best investment philosophy

is___.

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BeliefsFilters and Reinforcements

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Desires Cialdini knows where our desires

come from Are we honest about our desires?

Mark Cuban and flattery Desire to feel good Desire to feel safe

I have to scare you first. First I create the disease – then I

create the cure.

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Living by Instinct“Nature, Mr. Allnut, is what we are put in this world to rise above”

Rose Thayer (Katherine Hepburn) The African Queen

Human Animals – Instinct…...................Human Beings – Critical Thinking Wealth/Greed................................... Altruism and charity Seek security at all cost....................Get out of your comfort zone Preserve status quo..........................Change Meeting society’s expectations...........Be authentic to yourself

(following the herd).......................... (think for yourself) Traditional gender roles.................... Equality of the sexes Tribalism (nationalism)..................... Multi-culturalism Praise authority................................ Question authority Praise and follow the leader.............. I don’t need a leader Consistency is safe............................Strive for improvement Guided by personal experience...........Critical thinking Freewill???........................................Free Will!!!!! Surviving........................................Living

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Basis of Human Action and Decision Making? Beliefs, Desires & Instinct You do what you feel obligated to

do. You do what is the easiest. You do what makes you feel safe. You do what you’ve always done.

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You Might Be Thinking Critically If….. You change a core belief. You get outside your comfort zone. You admit you were wrong about

something important. You increase your self-awareness. You do something you wouldn’t do.

What if I like what I do?

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Punch-line Early in life we get theories of the world

– the theories make sense – but making sense is not the same as being correct.

Beware of your Brain’s wiring! Your brain is programmed

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What Happened to GM?

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Smart People Trying Hard

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GM History 1950’s - Half of all cars in the US

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GM History 1980 - 853,000 to 284,000

worldwide

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1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”

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1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”

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1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”

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1st Q 2009Passenger cars

Toyota 19.4% GM 15% Honda 12.4% Nissan 10.2% Ford 10.0% Hyundai 6.2% Chrysler 5.2% Mazda 3.4% BMW 3.2% VW 3.2% Kia 2.6% Subaru 2.6%

Volvo 0.8% Saab 0.2%

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What is Critical Thinking?Using your brain to create value for yourself and your organization!

Making decisions and taking action based on reason, evidence and analysis.

Focus on what matters Identify drivers of value Embrace diversity Face reality1.

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Focus on What MattersJD Power Top 10 Reliability

2004 2007 Buick145 Porsche 110 Lexus 145 Lincoln 114 Cadillac 162 Buick 115 Mercury 168 Lexus 115 Honda 169 Mercury 121 Toyota 178 Toyota 128 BMW 182 Honda 132 Lincoln 182 Ford 141 Subaru 192 Mercedes 142 Jaguar 197

2004 2007 Buick145 Porsche 110 Lexus 145 Lincoln 114 Cadillac 162 Buick 115 Mercury 168 Lexus 115 Honda 169 Mercury 121 Toyota 178 Toyota 128 BMW 182 Honda 132 Lincoln 182 Ford 141 Subaru 192 Mercedes 142 Jaguar 197

2004 2007 Buick145 Porsche 110 Lexus 145 Lincoln 114 Cadillac 162 Buick 115 Mercury 168 Lexus 115 Honda 169 Mercury 121 Toyota 178 Toyota 128 BMW 182 Honda 132 Lincoln 182 Ford 141 Subaru 192 Mercedes 142 Jaguar 197

2004 2007 Buick145 Porsche 110 Lexus 145 Lincoln 114 Cadillac 162 Buick 115 Mercury 168 Lexus 115 Honda 169 Mercury 121 Toyota 178 Toyota 128 BMW 182 Honda 132 Lincoln 182 Ford 141 Subaru 192 Mercedes 142 Jaguar 197 Acura 143

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Focus on What Matters BMW “We don’t make automobiles

[we make] moving works of art that express the drivers love of quality.”

GM: Car guys and bean counters– no marketing

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Focus on What Matters

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Focus on What Matters

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Focus on What Matters

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Focus on What Matters

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Emphasis on Big Picture

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CalipariFocus on what matters Relentless marketing– Image Think differently Inspire dedicated fans Big picture (China) Look for big challenges

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What Matters Most? Iraq and Afghanistan

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What Matters Most? Iraq and Afghanistan Mine Resistant Ambush Protected

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Value FocusLoss of Trust & Respect

Trust Issues Consumers Dealers Workers Beat up suppliers Banks, Public opinion Shareholders - Bondholders

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Value FocusLoss of Trust & Respect

Loss of commitment Playing favorites Keep your head down and get along Stop working start having meetings

(Sr. VP of Nothing) Lack of Fun

Innovation Creativity

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Value FocusJapan has robots we need robots

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Embrace Diversity

Group think Stability over conflict Continuity over disorder Status quo over change

50 year old decision making structure Conformity over rebellion

Same design centers Run off renegades

De Lorean fired at GM -- Iacocca fired at Ford

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Face Reality Market Value versus Cumulated Strategic

Investments at General Motors

1980 GM = $13 Billion

1980-1997 $167 Billion or $332 BillionR&D and capital spending

1997 GM = 40 Billion

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Face RealityRoss Perot on the Subject From 1980 to 1985 GM spent $45 billion in

capital investments but only increased worldwide market share by 1%.......

"For the same amount of money, we could buy Toyota and Nissan outright, instantly increasing market share to 40%.”

Gorilla dust

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Face RealityAsk Rick Wagoner why GM isn’t more like Toyota. (69/70)

“We’re playing our own game – taking advantage of our own unique heritage and strengths.”

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Face Reality “I don't know anything about cars. A business

is a business, and I think I can learn about cars. I'm not that old, and I think the business principles are the same.” Ed Whiteacre

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Face RealityLet’s ignore gas mileage

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Face RealityNo money in small cars

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Face Reality

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Who’s Reality Bob Lutz

Global warming “is a total crock of [expletive].” “Hybrids like the Toyota Prius make no

economic sense.” “Imminent GM bankruptcy was always fiction,

created by Wall Street and the media.”

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Bureaucracy & the Status Quo Risk taker to Risk avoidance Cash poor to Cash comfortable Contribution to Playing favorites Opportunities to Problems Create value to Doing your job Marketing & sales to Finance & bean-counting Momentum to Inertia Working to Meetings END

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Does Bureaucracy Materialize Out of Nowhere?

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Applications

Have you clarified exactly how you create value for Chesapeake?

Focus on value creation and avoid activities that are not central to your strategy.

Appreciate and seek diverse (and contrarian) points of view

A fun and exciting atmosphere fosters creativity and productivity

Rage against bureaucracy and the status quo.

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ApplicationsManagement Issues

Leader sets the tone Processes often get in the way Bloomberg abolished titles Conflict breeds creativity Presentations– one-way

communication Promote and reward risk taking and

attempts at innovation

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ApplicationsJack Welch Bureaucracy Busting

Be relentless and outrageous Celebrate impassioned boundaryless

people Love the people who hate meetings Encourage managers to swing for

the fences Create a culture of excitement END

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Do We Always Think the Same Way?Did GM Think About This?

Global Product Development Tom Stephens, who runs the company's power-train unit Carl-Peter Forster London, Germany and Greece BMW, Opel

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Finally!Mary T. Barra

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Three Tips for Critical Thinking?

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Tips for Critical Thinking1. Put yourself in a position for good things to

happen

2. Self-awareness

3. Make things happen

4. Be happy?????

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Junkfinger Test Tattoos Traffic tickets Brushes with the law Being sick Promptness Pets

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If You Don’t Want to Fall in the Grand Canyon--Don’t Go to Arizona

What I do today affects what happens

tomorrow.

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Junkfinger TestIn the Business World

Inconsistency Excuses Making enemies at work Always talking, never listening Accept things as they are Acting uninterested – not engaged Lose credibility

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Goldfinger Behavior and attitude that put

you in a position for good things to happen:

1. ?2. ?3. ?4. ?5. ?

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Most people end up where their behavior indicates they want to be.

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Cannot Predict the Futurevs.

Spreadsheets and Models Predict Future Late 70s Energy Crisis

Early 80s Latin American Bank Defaults

Mid 80s Junk Bonds, Michael Milken

Late 80s S&L Crisis

Mid 90s Derivatives crisis

Late 90s Dot-Com Collapse

2000 Long-Term Capital Management

2008 Sub-prime Mortgage Debacle

Before 2015 Unexpected disaster

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The Future of Gold

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Focus on Unknown Unknowns vs.

Focus on the Known

Risk Management - Mirage Hotel in Vegas Hundreds of Millions on

Cheating Detection Employee Monitoring Probability and Diversification Theft Protection

Four biggest losses: Tiger attacks Siegfried or Roy Contractor wires hotel with dynamite Forms not turned in to IRS Owner’s child kidnapped

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Self-awarenessMetacognition

“The truth will set you free……….but first it will piss you off.”

Werner Erhard, founder, est Training

“The greatest of all faults, I should say, is to be conscious of none.”

Thomas Carlyle (1795 – 1881) Scottish writer

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Make Things Happen(3 kinds of people)What Do You Really Want? (Personal Philosophy)

Do most people suppress their personalities and their dreams?

Picture your 70th birthday

Reeboks says “Life’s short– Play hard.”

I say “Life’s long– Do something.”

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Value CreationGoals and Goal Setting What do I really want?

How do I set effective goals?

How do I increase the likelihood of good things happening and reduce the likelihood of bad things happening?

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The Trick to Setting Effective Goals Worry about the means not the

end.

In other words, set goals that are within your control that can lead to good things– as opposed to outcome based goals.

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End based goal:Impress the boss/Get

promoted Act with enthusiasm, show your passion and demonstrate

self-confidence

Don’t just do what you’re told– Develop the habit of doing things impressively

Identify the prototype employee and emulate that person

Professional Image Program

PRO-ACTIVITY HOUR: Spend one hour a week planning and reflecting on how success is measured and why certain people are favored

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Ends based goal:Be a millionaire/Retire

early Study investing and business opportunities for

three hours a week

Draft a budget and stick to it

Figure out what “matters” and do the those things first

Get two jobs

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Ends based goal: Vice president by age

35 Arrange four networking lunches per month

Volunteer for high profile/difficult projects

Find a mentor and stay connected

Try and make every co-worker/client into a friend and supporter

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End based goal:Find a good spouse

Put yourself in places where “good spouses” hang out

Don’t date losers while you’re waiting for a winner

Project the image that attracts “good spouses”

Be proactive not passive

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Priorities of ManagementAndy Roddick

Work Hard Have fun Be a good teammate Learn from mistakes Win

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The Secret to Happiness

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The Secret to Happiness

Self-delusion

Hypocrisy

Ignorance

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The Secret to HappinessIgnorance is Bliss

“People who do things badly are supremely confident in

their abilities—more confident, in fact, than

people who do things well. Not only do they reach

erroneous conclusions and make unfortunate choices,

but their incompetence robs them of the ability to realize

it.” Dunning, David Journal of Personality and Social

Psychology December 1999.

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The Secret to Happiness

Why?

Researchers believe that the same skills

required for competency are the same to recognize

incompetence.

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Critical ThinkingImagine “Imagination is more important than

knowledge.”Einstein

“The reasonable man (woman) adapts himself to the world. The unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on unreasonable men (women).” George Bernard Shaw

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The Secret to Success

Focus on what matters Identify drivers of value Embrace diversity Face reality Wonder, worry and

doubt!

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Thank You!

Facebook.com/ProfessorUrich

[email protected]

Page 104: Critical Thinking Chesapeake Energy

References Ailes, Roger. You Are the Message. New York. Doubleday, 1988. Bazerman, Max H. Smart Money Decisions, Wiley & Sons, 1999 Buckingham, Marcus, First, Break All the Rules, Simon & Schuster, 1999. Cialdini, Robert B. Influence: Science and Practice. 3rd Ed. New York:

Harper Collins, 1993. Ghemawat, Pankaj, Strategy the Business Landscape, Addison Wesley,

NY 1999. Golman, Daniel, Emotional Intelligence, Bantam Books, New York, 1995. Hirshberg, Jerry, (Founder Nissan Design International) The Creative

Priority, Harper Business, NY, 1999 Koch, Charles G., The Science of Success, Wiley & Sons, 2007. Lakoff, George, Moral Politics, Paul, Richard. Critical Thinking. Santa Rosa, CA: Foundation for Critical

Thinking, 1993. Pink, Daniel H. The Whole New Mind, Riverhead Books, NY, 2006. Schramm, Carl J. The Entrepreneurial Imperative (HarperCollins) 2006.