Note: this transcript is unedited and can not be used for any other purpose except those specifically authorized by the Progress and Freedom Foundation

Renewing American Civilization
Class 4
Pillar three, entrepreneurial free enterprise, focuses on entrepreneurial free enterprise as the great producer of wealth, solutions to problems, and developer of opportunities January 28, 1995.

>>The following is a special program produced by RCTV, College television, in Waleska, Georgia. From college in Waleska, Georgia, this is "Renewing American Civilization." In this, the fourth of 10 class presentations, Congressman Newt Gingrich, an adjunct professor at college, will continue his course, which presents the foundational principles necessary to the renewal of American Civilization. This week's lesson, pillar three, entrepreneurial free enterprise, focuses on entrepreneurial free enterprise as the great producer of wealth, solutions to problems, and developer of opportunities.

Welcome, and let me begin by welcoming the students of Mind Extension university, which is in, I think, some 26 million homes around the country. In this course, our suggestion is that there is an American Civilization, and that it has five pillars. That the five pillars are: the historic lessons of American Civilization, personal strength, entrepreneurial free enterprise, the spirit of invention and discovery, and quality as defined by. Now, what we're going to do is take two hours on each of these five pillars, and then we're going to talk about four areas, and we're going to apply the five pillars to four different areas.

First, to the third wave and American Civilization, what will the information age mean for America. Second, to creating American jobs in the world market. Third, to replacing the culture of violence and poverty with a culture of productivity and safety. And, fourth, citizenship and community in 21st century America. Of these, today's topic will be the pillar entrepreneurial free enterprise and looking at: why is entrepreneurial free enterprise so important? And that's where I want to start, because I want to explain just for a minute what we mean by that. We have to first examine in America: why is entrepreneurial free enterprise important? And I think this is a very key question to what we're trying to get at. Let me say, first of all, when I use the word "entrepreneur" from the French "to undertake," I don't just mean making money. The first time I taught the course, I used a section out of a book on dinosaurs called "T-Rex" by one of the leading current dinosaur collectors, and in the book, he talked about the fact that they found a Tyrannosaurus Rex and didn't have the money to get it out of the ground, and he explains all the different things they did to get the corps of engineers to lend them a bulldozer, get a company to loan them a big truck, get volunteers to go out. He undertook -and the meaning of the word "entrepreneur," he undertook to solve his problem. If you look at the great teachers in the country,

If you look at Jaime Escalante in California who teaches Hispanic kids so that they can go to M.I.T.. and Cal tech on a regular basis because he makes calculus come alive in the barrio, he's an entrepreneur. He's an entrepreneur of learning, and he does what it takes to get it done. So entrepreneurship doesn't mean just getting rich. It means a psychological attitude that says: I will undertake something, and in that process, I will make sure it happens, and I will learn what I have to learn to get this done. That is, it is a project-centered learning. If I can for one second, this is one of the most important things to learn about the difference between the dead end we've gotten to in credentialing and how America works when it's healthy. In credentialing, we say to you: learn what is in this box. You will get five hours' credit, and then learn what is in this box, and you'll get five hours' credit. And when you learn enough boxes end to end, you'll have a Ph.D.

What entrepreneurs do is they say: I'm here now. I want to get here. Everything I have to learn in order to get there, I will learn. And it is the project which drives the learning. If I have to learn psychology in order to convince the banker to give me the loan, I'll learn psychology. If I have to learn management skills in order to be able to take care of a particular project, I'll learn management. If I have to learn accounting to be able to take care of the cash flow, I'll learn accounting. You tell me what the project requires, let me break it down into a series of learning sequences and I'll learn them, and my payoff is in the real world, not am I credentialed, but am I accomplishing something? And if I'm not, let me go back and start again and figure out: now, what is it I missed? So it's a learning-driven system, but the learning is defined by what we're trying to accomplish, and that is a very, very different approach. When you liberate human beings to be entrepreneurial, that is, you break down the bureaucratic habits and the sloth that says, "you sit there until I give you red tape and I tell you the regulations and I'll define for you"

-- there's a great funny story Sonny bono told the other night. True story. Bono had retired from the entertainment business, had gone to Palm Springs, had bought a restaurant, he wanted to put up a sign. He goes into the city hall, he says, "I want to put a sign in my restaurant." The bureaucrat in city hall says, "you're in Palm Springs." He says, "I bought a restaurant. "I want people to know it's Bono's restaurant." He says, "you don't make the rules. "we make the rules. "fill out all these forms." Fills out the forms, he comes back, the bureaucrat says, "It will be a while before we decide whether or not you can have a sign." Bono comes back again, he said, "I've bought the restaurant, I'm making monthly payments. "I can't get people to come to my restaurant because they don't know it's Bono's restaurant, and I need a sign." Finally one day, he said he walked in and he said, "I've found a solution." And the bureaucrat looked at him and said, "It's not your job to find solutions. "we find solutions." Bono said, "I'm running for mayor and I'm going to fire you." And the other night at the Washington Journalism Foundation dinner, Bono looked out and he said, "but I'm a compassionate man. "he's my gardener now."

Now, the point of the story, which I believe, by the way, up through the "I'm running for mayor," is absolutely true. The point of the story is that bureaucrats and academic credentialers and people who are locked into control, they basically create a sense of passivity on the part of the recipient. "you sit there and we'll take care of you." "you sit there and we'll get around to you." Entrepreneurs are very different, and again, because of the cynicism of the culture which broke down American Civilization beginning in 1965, they don't get -- they don't get this next paragraph. I'm going to read to you one of the most important paragraphs from Adam Smith's "the Wealth of Nations" in which he tries to describe why entrepreneurship works in a free society.

He said the following, and I quote: "In spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they proposed from the laborers of all the thousands they employ be the gratification of their own vain and insatiable desires, they are led by an invisible hand, and without intending it, without knowing it, advance the interests of society." Now, this is very much like the Federalists. The Federalists who are writing, after all, in the same period as smith, understand that it is human nature to be selfish. That all of us are selfish. That when you see the noble government officials, it's just disguised selfishness. When you see the noble reporter, the noble politician. Now, you can raise people to a higher moral standard. You can occasionally get a person to seek fame, to seek long-term glory, to believe in virtue over greed, but it's very hard, and it's not the natural state of things.

It is educating people above their normal behavior. That their normal behavior is to be self-interested. I mean, you find those exact quotes in Madison's -- in "the Federalist." But that if you free up people to pursue their self-interest in the marketplace rather than any political bureaucracy, that in order to please themselves in the marketplace, they have to sell you something that pleases you, or you won't buy it. So if you can harness their desires to your desires, so the only way they can succeed is to give you a service or a product you want, then they get to be happy because they're selling, and you get to be happy because you're buying, and if they aren't clever enough to figure out what you want, then they're not going to be clever enough to be successful. So they can only achieve their success by pleasing you, the customer. Now, that's the core of Adam Smith's argument that the more freedom you create, the greater the opportunity you will find a chance to buy what you want to buy, to live the way you want to live, because you'll now create an opportunity for entrepreneurs to invent things you never dreamed of.

I mean, nobody invented the thought of walkman till it was invented. I mean, nobody walked around all day and said, "gee, I sure do wish I could listen to a radio or a tape recording while I'm jogging." The second it was invented, people said, "I've got to have that. "I can't live without it." Nobody invented the microwave. I mean, nobody who sat around as a consumer and said, "I need a microwave." The minute it was -- or the fax is an even better example. I mean, the fax exploded in use once it was invented. But smith's point is that what you want to do is create a very free society in which whoever pleases you best, not the best Ph.D.., Not the best lawyer, not the best bureaucrat, not the most powerful person, not the richest person, the person who pleases you best is the one that resources shift to, because you as a consumer say, "I want that one." That's why you had the rise of Japanese cars. That's why you've had the resurgence of Ford. If you watch what happens, the competition ultimately exists to serve the customer, not to serve the producer.

And in that framework, what you've got to do is encourage maximum entrepreneurial behavior, and in a, sense you can see the Father Flanigan at "Boys Town" as an entrepreneur if you watch the Spencer Tracy movie. That's clearly entrepreneurial behavior. He had his vision of what he wanted to accomplish. He went out and put it all together. He overcame obstacles. And so entrepreneurial behavior is not just about getting rich, but it is about having a dream and figuring out: what does it take to put together the resources to achieve my dream? The resources may be inside you. I want to be a world figure skater or whatever. And the first key to this, I think, is that entrepreneurial free enterprise depends on personal strength. If you are not personally strong, you cannot possibly engage in entrepreneurial free enterprise. A couple of good reasons. First of all, you have to have the courage to take risks. It takes tremendous courage to -- again, to go out and try anything. I think I may have told you all at one point about I tried to learn how to roller skate when I was in my early 30s, and I had never roller skated. Its just something I hadn't done. And my two daughters, when I ran the first time and lost, they said to me, "okay, it's our turn. we want you to learn how to roller skate." And I found myself in my early 30s, overweight, not particularly athletic, out on skates in a skating rink down in Newnan, Georgia, and a 4-year-old skated by backwards waving at me. And I'm looking down at this little kid and I'm barely able to stay up on my skates, and the kid is skating away from me backwards smiling, and I realized whatever it is you're learning for the first time is hard. And so whatever you've already mastered, when you go to the next one, it's a whole new experience. And you have to have courage to keep learning, to keep growing, to keep trying. Second, you have to have the discipline to persevere and to work harder.

My older daughter owns a coffee company in Greensboro, North Carolina, and she's learned the hard way setting up her own business. She has two coffee stores and an 800-number mail order service, and a coffee cart at a hospital. Suddenly she has, I think, 20-something people that work for you. It's really hard work, you know, and yet she loves it, she enjoys it, she's having a great time, but it also owns her. I mean, first you own the store and then the store owns you. Okay? I mean, anybody who's ever been in a small business knows that's how it is. Well, you've got to decide you want it bad enough. I met recently with the Amway folks. We were talking about putting together for Americans who don't have money an entire program on cable television designed to say to them: you know, you can do beauty control, you can do Mary Kay, you can do Amway. There are 100 systems you can get into for almost nothing if you want to get out there and you want to sell, but then it's hard work, but don't tell us you don't have an opportunity.

What you're telling us is the opportunities are too hard. Very different attitude. So you've got to have courage. Now, what I want you to look at for just a second is a little film about Alger. Alger is the great figure who popularized in the 19th century the concept of rising. I think as you watch this, you'll have some sense of what 19th century cultural values were about.

Don Johnson: gifted with a keen sense of observation, Alger began interviewing the children of American immigrants. Most were poor, many orphaned without family or teachers to inspire them or guide them. But these were Horatio's heroes. They earned their keep shining shoes, peddling newspapers, delivering messages, lucky to earn a penny or two a day. From their courageous stories, Alger produced 134 novels reflecting the theme of rags to riches through ambition, honesty, and respect. The titles tell it all: "sink or swim," "try and trust," "brave and bold," "strive and succeed," stories and bywords that motivated generations of American youth to reach for the stars. And just how many books did the rejected poet end up selling? Over 400 million copies, making him still the most widely read author in America and a name synonymous with hard-earned success. Alger's effort was to popularize, and it was modeled on Samuel smiles, who was a writer in Britain, and both of them were trying in the mid 19th century to say: here are -- in very simple, very easy-to-read books, here are the habits that work. Here is the way to succeed. Here is how you should live your life if you want to get ahead. In a very real sense, the key to this is to understand that Alger is about you. That the goal here is to say to every American: you should be an entrepreneur. If you aren't an entrepreneur, why not? You have all the freedom to be an entrepreneur. You have all the opportunity to be an entrepreneur.

Remember, that means "to undertake." It doesn't mean you have to go out and start a small business. But it means you get up in the morning with an attitude that says, "gee, I wonder what I'll undertake today. "I wonder what I'll do today." Not how I'll suffer, not how I'll be victimized, not how I'll feel sorry for myself. What will I do? And that reminds me. You were asked last week to turn in reports of being -- people who were your personal hero or heroine, because so much of this is an attitudinal thing. Here are just a couple. I'm not going to give you the names, but here are various folks. "I've been influenced by a large number of very special people: my father, a teacher, my commanding officer in the service, people from history, but my greatest hero is my wife. "she had polio as a child, was told she would not live past age 14, spent a total of three years in a body cast as a result of five back operations, lost her first husband in an accident at age 30, and was left with three children and a bankrupt business.

"Yet through faith and hard work, she has persevered and succeeded and is an inspiration to everyone she meets." And in the 19th century, she would be the subject of a Alger type book. In the 20th century, of course, since she's succeeding, she could not make it on Donahue. Whereas, if she would refuse to do anything, stay at home and explain that she'd been victimized by bad luck, she could be on at least three talk shows. Second example, "my heroine is my paternal grandmother, who mothered me in many ways. "she struggled with her husband in a dry-cleaning business, struggled with his alcoholism, had one child at age 36. "she probably overattended to family business and underattended her child, a child who would ignore her for the rest of her life. "her husband died in 1966, and she lived completely alone in little love for 20 more years. "she could have chosen to be bitter. "she could have chosen to isolate herself from her son and grandchildren. "Instead, she was always welcoming, nurturing, and loving her grandchildren, and never had a disparaging word for anyone in her family.

"She is my heroine, and her gifts in the midst of apparent emptiness are a shining example." Third example, "my grandmother is my example of a heroine. "she survived four husbands, with two dying of heart attacks and watching one die of cancer. "through all this, she managed to raise three children, all of whom are successful leaders in the community today. "she also had a full-time job and worked another job to keep her family above poverty. "she has been a leader in her church for the past 30 years. "she has survived two heart attacks, and still continues to be a community leader, as well as a church leader today. "she inspires me through her continued strength and perseverance." Now, again, imagine every one of those excuses to say, "well, I've had it. "time to quit." Lastly, "while I was in the military, I had an instructor that was a Vietnam Veteran. "he'd been an air crewman on medivac helicopters and lost both of his legs while saving the lives of two marines.

"He overcame his disabilities to teach others. "His knowledge of rescue obviously saving many more lives." So I just want to give you a flavor that when we talk about courage, perseverance, strength, that this applies to every person. When we talk about being an entrepreneur, we're talking about every person. If you didn't get up this morning thinking, "It's great to be an American, I'm a free person, time to go do something," then the problem's in you. It's not in the country. Now, in that framework, there are three big concepts. First, the entrepreneur as a creative inventor. By that, I mean that when you encounter a problem, the trick for the entrepreneur is to invent the solution. Now, again, I mean -- so over and over, when an entrepreneur runs into a problem, they try to think through: what would solve this? Rather than: look at me, I can't get it done. And as a general rule, entrepreneurs have a lot of common sense and they are very creative at problem solving, and the more they practice being an entrepreneur, the more creative they are.

Second, it is the customer or the market or the goal which defines success. That is, you have to decide: what is it you're trying to please? How do you keep score? And I'm not asking you to have a -- I think every American should keep score separately. You ought to keep your score. But when you do, it is this thing outside you, it's the customer or the marketplace or the goal, that's what defines for you what your success is, not inside you. So as an entrepreneur, I'm not talking about your values. Your values should be internal to you. I'm talking about how you focus your energy and your effort. It ought to be outside yourself, which you'll see also in "effective executive" is a major point, that leaders are focused outside. What are you trying to accomplish? Now, the third is to recognize that getting the job done is the focus. And again, the credentialing really tears us apart, because credentialing says getting the right piece of paper is the focus.

That's why modern education is collapsing. Because we have too many people who know how to get papers and too few who know how to learn, and you say -- that's why bureaucracies collapse. Bureaucracies say, "hey, we did all the processes. "Why are you mad at us? "The fact that nothing got achieved is not our fault. We had every meeting, we've stamped every paper, we reviewed every document. You shouldn't be mad at us." But an entrepreneur knows that it's getting the job done. See, you define the job, you make sure the job fits your goal, your market, or your customer, and then you get the job done, and you do what it takes ethically and legally to get the job done. Now, this comes into a fascinating thing which Jeff Eisenach and others have really opened me up to and the whole concept of: how do we define getting to success?

And I want to share with you what I think is truly, if you'll focus on it, a remarkable insight. There are two visions of success that grew up in the 20th century: Character building versus popularity seeking. That from Benjamin Franklin's "Poor Richard's Almanac" and the autobiography of Benjamin Franklin up through Napoleon Hill's "Law of Success," which is a great old book that I really recommend to you to just to at least check out of the library and take a look at. The "Law of Success" by Napoleon Hill, he went around and interviewed Andrew Carnegie and Henry Ford and Thomas and a generation of successful people, and he said: what works? And he wrote down what works. And if you read this, I mean, it says to any American: if you spent some time and read this, for example, the "Law of Success," Lesson 8, self-control, and he walks through why self-control matters. You find that he focuses consistently on building character, on what it is that we need to do. And you can read "the Effective Executive," which I'll come back to. You can read "Grinding it Out" by Ray Kroc. These are -- when people, "say how can I be successful?" "go to a used book store and get a copy of 'grinding it out' by Ray Kroc, or go to the library and check it out for free. "don't tell me you're too poor to learn."

It's a great book. He founded McDonald's. It's a study of perseverance and his story of getting permission to build a McDonald's in Chicago, but only according to the specifications of the original McDonald's brothers building in California, which was in Bakersfield near the desert, getting to Chicago and realizing they had no basement for a furnace, and spending a year getting them to rewrite the documents so he could build a furnace in a basement, is hysterical. Or his discovery that one of the secrets of McDonald's is its French Fries. Anyone know why their French Fries are different? What do you mean by "blanch"?

>>they're slightly cooked and I guess to seal in the moisture. No? Aged. no, they're aged. This is very important. He discovered -he couldn't get the French fries right in Chicago. He went back out to the desert. He -- again, he's following the problem to get the knowledge. He goes back out to the desert and he says, "what do you do?" They say, "well, when we buy the potatoes, we put them out back in the shed." Turns out they were dehydrating 8 to 10% of their body weight. The French fries from McDonald's are slightly dehydrated. That's why they're crisper. But he had to work his way back historically to figure out what they had done. It's a great book. Equally great book, Sam Walton. I mean, if a man makes $17 billion net worth, creates the largest retail system in the world, does it all after going broke and does it all as a very down-to-earth, practical kind of guy, maybe it's worth reading. And so when somebody says to you, "oh, gee, I don't know how to do all those things." Or in a more complex way, "the 7 Habits of Highly Effective People" by Stephen Covey. Very popular best seller, now out in paperback. Very worth reading. Available in your library.

And I say this in part so people who are in public housing and who have no money and can't find any opportunity at all say -- but are sitting there getting paid full-time to not have to do any work for an entire month, "walk to your nearest library. "pick up a book." The book which turned me a on to the whole concept of character versus popularity, a tremendous human being, John McCormick, "self-made in America." First-generation millionaire, went bankrupt at 29, sitting on the beach feeling sorry for himself. An older man of European descent came by and watched him for three days and finally said, "and why do you feel so sorry for yourself?" And he said, "oh, I went broke at 29." He said, "you're so lucky. "I was in my 40s before I went broke. "much better to get it out of your way now." And get back up on your feet and do it. And again, a modern version of napoleon hill, "Think and Grow Rich: a Black Choice" by Dennis Kimbrough, who's from here in Atlanta, and Napoleon Hill, translating specifically challenging black Americans and "saying, here is a way to do things."

Now, in this context, what I want to suggest to you: that there is an entrepreneurial spirit in American history, and it teaches us at least three key lessons, and if you look at the history of entrepreneurship in America, you learn a lot, because we're the most entrepreneurial society in history. Lesson one: new experiences force us to rethink old rules. What used to work in Europe doesn't work in America. Big shock when you arrive from England or Germany or France, you're on the edge of the great forest, you're in a new society, a new environment, you'd better rethink it. Well, guess what? If you're at the edge of the information age, you know, our new frontier is this Third Wave Information Age. New rules are going to have to grow up, new discoveries, new ways of doing things. Lesson two: the market is more productive than the bureaucratic system. This is a very important central lesson. Are you going to gamble on being productive in a bureaucracy or are you going to gamble on being productive in the marketplace?

Now, if you say, "In the marketplace," I'd say to you, "fine, why do you have 18 years or why do you have 12 years of mandatory bureaucracy for education?" You've got to take seriously what the words mean. If the market's more productive, maybe we should rethink education from the ground up. If it's -- and so you've got to start -- not just education, the whole bureaucracy, the whole way we do medical care. Which do you believe in, bureaucracies or markets? And why? Third, lesson three: technological innovation can precede scientific understanding. It's a very important Americanism that we came very close to losing in the last 20 years because of academics and credentialing. In the academic world -- and by the way, this is a big problem with the food and drug administration. Because if you can't explain -- aspirin could not be today brought to the market because we do not know why it works. You cannot do a paper explaining for the food and drug administration why aspirin's good. You know it's good, but you can't explain it. Since we can't explain it, you couldn't do it. It's exactly backwards. But if you go to credentialing, credentialing says, "If you can't explain it, it doesn't exist."

So here you have the entrepreneur -- and again, this is why Americans historically were anti-intelligentsia, they were anti-credentialing. If you go back and you read the -- go back and look at how Americans dealt Europeans who had lots of college degrees, and there was an automatic sense of, "I'll bet you can't do anything competent," and the reason is, if you are driven to ascertain fact by credential, you do what your tenured professor tells you to do, and that's the truth, so that in the middle ages, they didn't go out and count the number of teeth in a horse. They read Aristotle and how many teeth Aristotle said a horse had, even if, in fact, it was no longer accurate. There's a book by white on medieval agriculture which he points out that the actual practices of agriculture were 1,000 years ahead of the way it was taught.

Because the farmers weren't trapped into doing what the Greeks had done, so you just went and did better things. And they'd actually had 1,000 years of invention by the middle of the middle ages in what farmers actually did, none of which showed up in the academic world. And so you've really got to look at this question of: what if it just works? Could we do it? What if we can't explain it? What if it's intuitive, or what if we have a discovery or we don't yet have an explanation? Could we just use it for a while? Penicillin. I mean, there was not a theoretical model to get to penicillin, but it worked. In fact, you may remember the reason they discovered penicillin is they were trying out an experiment, they couldn't get the bacteria to live long enough because the mold kept killing it. And they finally said: if the experiment is to figure out how to kill the bacteria but we can't get the experiment to work because the bacteria keep getting killed, maybe we ought to look at the mold. Which was an accident. Penicillin was an accident. It was a discovery. Now, entrepreneurial free enterprise works and bureaucratic credentialism fails for a couple of reasons. I think these are very, very profound about how far off track we've gotten from American Civilization. First, the real world is very complex. So many different things come together to make up the real world that it is impossible to capture them in any kind of academic environment. Second, much of reality is non-verbal, non-rational, and non-linear. You look across the room, you see the right person, you fall in love. Now, that's not just a romance novel, that's not just a movie. It really does happen. You are suddenly caught up in a situation, and everything in your life has gone fine and you get mugged, and suddenly whatever your current line is, it changes. Or you find out you have liver cancer. I mean, much of life, you know, you're having a really great time, you have a great marriage going on, and you have triplets.

Your whole life changes. And my point's just that a lot of reality can't be captured by drawing lanes on a board or having academic studies. Best example of this, if I can, David Ogilvy, terrific guy, "Confessions of an Advertising Man," founder of Ogilvy-Mather, one of the great advertising geniuses of the post World War II era, this is his description, okay? He's in high school, and then he gets to college. "I was too preoccupied to do any work and was duly expelled. "that was in 1931, the bottom of the Depression. "for the next 17 years while my friends were establishing themselves as doctors, lawyers, civil servants and politicians, I adventured about the world uncertain of purpose. "I was a chef in Paris, a door-to-door salesman, a social worker on the Edinburgh slums, an associate of Dr. Gallup in research for the motion picture industry, an assistant to Sir William Stevenson in British security coordination, and a farmer in Pennsylvania. "my boyhood hero had been Lloyd George, and I had expected to be prime minister when I grew up. "Instead, I finally became an advertising agent on Madison avenue. "the revenues of my 19 clients are now greater than the revenues of her majesty's government."

And he goes on to talk about being all these different things, and he describes what it's like to work for a great chef in a great restaurant and the lessons he learned there that he takes 20 years later and applies to advertising, because he understood that if you learn everything and keep saying, "now, how does it apply to this," there's nothing which is outside the box for your lifetime, because you don't know what you're going to do later on. So when you say, "why am I doing this boring thing," the real question is, "what can I learn out of this boring thing that will apply later?" Totally different attitude. Nothing is boring if you think it applies to you. Is that not true? Just think about it. It's the key to why I learn a lot, because I think everything applies, so you can walk in and talk to me about anything and I go, "wow, that's interesting." Because sooner or later somewhere I'll be able to figure out how to apply it, and that's Ogilvy's point. The third big principle, I think, is that learning by discovery should inform and guide planning, not vice versa. Now, the idea of learning by discovery is very, very important. Go out and do it, and as you're doing it, say to yourself, "what am I learning?" This is how I'm becoming Speaker, by the way. I mean, we're doing it and then we're checking it out every night, we go: now, what did we learn today? So the opposite of planning. Because, you see, what happens is -- and here's the -I'm going to see if I can put it up here in a chart real quick. What we tend to say is: okay, we will now have a planning meeting. This is our plan. Unfortunately, it turns out reality is outside the plan.

What do we normally do? We translate this and lie to ourselves and bring it to here. Right? Because we're going to do our plan. Instead, if you say, I think I'm going in this general direction, but I think I'll figure out if this is what's happening, I think I'll try to learn from what I'm experiencing, it's a very different model, and then I'll do my planning, getting up every morning, trying to think through: what did I discover yesterday based on what I was learning? And now I think I'll apply that to rethinking my plan. As opposed to: what did I plan? Which means -- which is going to make me deny reality and go ahead and do it even if it isn't smart. Now, there's a powerful reason for this, and this may surprise you. It's inside us. Self-interest is real and powerful. Self, you, yourself. I'm talking about you personally in this class.

You have a powerful self-interest. One of the things, if you use it as an entrepreneur, is self-interest leads you to learn about your projects so you can achieve your goals. This is self-learning. "boy, I really want to get this done. "I better really focus on it. "what do I have to learn so I'll be happy, because I'll get what I want?" But the very same self-interest encourages you to hide from negative information. It is self-protection. The technical term in society is cognitive dissonance, blocking information, which will cause you to have to rethink what you're doing. You buy a dress you really love, except you look horrible in it. You don't want to be told you look horrible. Now, you know you should be told you look horrible in it because you really don't want to look horrible in it, but then again, if they tell you you look horrible in it, think how bad you'll feel about all the money you just spent on this dress that looks horrible? So which do you want? Do you want your friends to say to you, "boy, is that horrible"? Or do you want your friends to say to you, "well, it's an interesting dress"?

Do you see the problem that builds up? I was talking to the guys on that one. You know, several of you -- just think about those long weekends. Now, the point is when you think about -- or getting your haircut or whatever. What I'm trying to say to you is you've got to think about half of you wants to be told the truth even if it's painful, because you really want to do better, and after all, you won't do better if you don't have the truth. The other half of you wants to be protected from the truth if it's painful, because you don't like the pain. Bureaucracies and credentialing minimize self-learning and they maximize self-protection. "I don't have to learn these things. "I'm already a tenured Ph.D.., So I don't care what you think of my class." This is not true of me personally, but this is a -do you see what I'm saying? "I'm a bureaucrat, so even if I'm an arrogant, stupid bureaucrat doesn't matter, because you can't fire me. "It's too much trouble." On the other hand, because markets won't let you hide from failure, they maximize self-protection and they minimize -- I mean, they maximize self-learning and they minimize self-protection. In the marketplace, if you lie to yourself, you go broke. People refuse to deal with you. You know, if I'm a bureaucrat and you have to see me to get your driver's license, I can be as nasty as I want to be, because you have to see me.

But if there are three competitive driver's license offices and they pay the government a little fee to be allowed to issue driver's licenses, you're going to go to one that is the most efficient, the most courteous, the most available. Now, I, the bureaucrat who's now a contracted out self-serving person, I now have to be nice to you or you won't come to my particular drive -- there's no reason you couldn't issue driver's licenses through three or four or five different companies. Each of them would pay the state a fee for issuing the driver's licenses. Sure. You're seeing lots of different things. But just think about it. You see it in hospitals. I mean, look at the ads you now see: "come to our hospital. "you have more fun having a baby with us." I mean, I don't know of any woman who's had a baby who thought that was a convincing ad, but it's -- but the principle's right.

But notice the difference in the two systems. In a credentialed, bureaucratic structure, if you don't like what I'm doing, tough break. I don't have to learn it, because I'm still here. In a market environment, if I don't pay attention and I don't do what the market wants and what the customer wants, I go broke. Now, because of self-learning and self-interest, entrepreneurialism ultimately requires a moral basis. This is one of the things which I think the modern age has explicitly failed to understand. You see the cynicism and the attitude of the elite culture and of the press corps about this whole notion of markets and entrepreneurs and bureaucracy, what they don't get, and frankly, this is partly because of some levels of libertarian thought. What they don't get is that Adam Smith wrote two great books. The more famous is "the Wealth of Nations." It is actually his later book, and I suspect in his own mind his less important one, this is "the Theory of Moral Sentiments." Let me say up front, it is a lot harder to read than "Grinding it Out" by Ray Kroc. This is very dense, mid 18th century literature. But his argument's very simple, and it's well worth your spending a minute on. Smith is a moral philosopher. He's not an economist. Economics -- and this goes back to credentialing. In the early -- in the original world of learning in the 18th and 19th century when Smith came out, you learned what you needed to learn to write what you needed to write.

Only in the modern age under the influence of the German school of professionalism we began to break it down so that this is an economist, this is a political scientist, this is a historian. And we have all these various subdivisions which are our efforts to break life down so we think we can master it by knowing a great deal about one subset. So I know a lot about your wallet as an economist, and I therefore know you, which is silly. Of course it's not true. Smith, however, was of a different world. Smith was a moral philosopher. He would have thought of economics as a subset of moral philosophy. And in the theory of moral sentiments, he's trying to wrestle with: why do people behave the way they do?

He comes up with a great concept. It's important, remember, the invisible hand is his model in "the Wealth of Nations," that the free market guides us to serve the most people in order to make the most money, and if we don't make you happy, you won't pay us, so you won't be happy and then wewon't be happy, so our own self-interest forces us to learn about your self-interest, which is why the marketplace is the most self-disciplining mechanism ever built, much more so than a totalitarian police state. Because it is the invisible system which forces me to make me happy to figure out what will make you happy. And since Spielberg does it with "Jurassic Park," he got more money, so he's happy. If he produces a bomb, he won't be happy. And even though he might say, "I sure wish we could pass a law to make all of you go to my next three movies," as long as it's a free market, he will only succeed by pleasing you. So that's the invisible hand.

In Volume 1, the earlier work, "the Theory of Moral Sentiments," what Adam Smith says is there is a man or woman in the mirror. Every person, except for people who are sociopaths, every person has an invisible mirror in their head which they look into and they say, "Is it right?" And they can't avoid it. And they do wrong, but they know it's wrong. I mean, since we're all weak, we all do wrong, but he says -- he builds a theory of moral sentiment. He says the base of society is right and wrong. It's not money, it's not economics, it's right and wrong. And that a healthy society consciously thinks about: how do we establish a framework in which the rules tend to favor those who ask that question and listen to it? So it's a framework that favors the honest over the crooked. Now, that may sound obvious, but it's not obvious. It's a framework for example which would be very tough on passing bad checks, because it is a deliberate act to defraud your neighbor.

And so we would say, "hey, we want to really reward honesty. "we want to set a standard of honesty, "we want a standard of not taking from your neighbor." Very different kind of society. And Smith saw economics, "the Wealth of Nations," as a part of this much larger picture, which begins with the notion that if we're going to have a free society, if we're really going to -- if you think about it, free societies require enormous levels of trust. We'll form a partnership. We'll both work at it. That's a very high level of honesty. That's an assumption that you're not going to try to rig the game and cheat me. If you live in a society -- there are cultures on the planet where people don't trust each other. They wake up in the morning with distrust. In that kind of a society, it's very hard to work together to be creative, because I assume you're going to cheat me, so I've got to figure out all sorts of -- this is why lawyers are devastating to American Civilization. Because lawyers create an adversarial environment.

I mean, if you live in a country where there are TV commercials that basically say, "If you haven't sued somebody recently, why don't you bring your rolodex down and let us go over it together"? I mean, the legal system of adversarial thinking is devastating to an entrepreneurial society. Because it begins to break down the barrier of friendship and relationship and trust, and begins to say -- we're having -- I mean, I've found in my own business now that there are moments when the lawyers who now are trying to protect me and make sure I don't do anything are saying, "well, if you do 'x,' it will set up 'y,'" so you're being told: don't do the common-sense, compassionate, decent thing, because it will be a pretext for a lawsuit. You've got to wake up every morning assuming every person you deal with could potentially sue you. Now, that is death to an entrepreneurial society. The lawyers. In a totally misshaped understanding of what the purpose of the legal system is. It is not the purpose of a legal system to find ultimate justice at the ultimate end no matter how destructive the total cost.

The purpose of a legal system is to create a framework in which people live together with reasonable costs, solving problems in a reasonable way. Now, what you have today is a legal structure which is dominated by the trial lawyers who make the money by the lawsuits, who rig the game in favor of more lawsuits. I mean, it is a very sick system, and it has to be thoroughly overhauled.

Do you think it can be changed? >>sure. That's what we're all about. You can come to the town hall meeting. Are you doing a town hall meeting today? Sure. At noon in Woodstock. I do it every Saturday. But my point is, is you think about it culturally. This is a cultural point. It's a point makes in his book that he says the two greatest challenges to us in the world market as a society are the cost of health care and the legal system, which creates adversarial psychology. And that comes right back to this notion to have an entrepreneurial free society, you have to consciously cultivate honesty and a sense of trust, and you have to instill that and you have to reward those who follow it, and you have to punish those who break it. Otherwise -- and punishment can be things as simple as economic costs. I don't mean put them in jail, but finding says -- somebody once said reestablishing shame. You know, re-creating a sense of: that's bad behavior. That's unacceptable. Now, in that framework, let me just suggest to you that markets reinforce success, but bureaucracies reinforce the failure to get accurate information.

That to maximize your own success, you have to emphasize honesty and integrity and discourage misleading or dishonest information. This goes right back to remember the notion that if you put on a dress or a suit that doesn't look good, in a truly healthy society, you would like your closest friend to suggest to you taking it back. Wouldn't you? Isn't that the real the fact, that you'd like to get honest feedback, but to get honest feedback, you have to live in a society which values it? On the other hand, if you think you'll be punished for giving honest feedback, you know, "complain about us and we'll see that your papers get lost and the bureaucracy won't approve it for three months," or, you know, "mess with me and you won't get tenure," or "mess with me and you won't get a good grade," and so the more you can get down to a marketplace, the further you can get away from bureaucracies and credentialing and the better off.

This fits, by the way, the one uniquely American philosophy, pragmatism as developed by William James. "Pragmatism," which actually grew out, and James gives credit to an earlier American who'd written an article actually in a scientific magazine, is a fascinating concept. It's originally based on the work of Charles Pierce, and what Pierce was trying to discover is: how do Americans think? And what he concluded was that Americans have developed a new philosophy where they looked at reality and then came back and created their thoughts. The pragmatic did not mean to sell out. In Washington today, "pragmatic" often means selling out. That's not what the term meant. The term "pragmatism" meant trying to use common sense and your real understanding of real life in order to then formulate a philosophical understanding working back from it. Being pragmatic meant taking in all the data, thinking it through, and then reaching a conclusion that fit the realities you were dealing with. And it was seen by 19th century Americans as the absolute logical way to deal with things.

So you didn't start out and say, "look, here's what I have in my head. "let me now re-interpret reality so it fits what's in my head." It said the opposite: "let me try to understand reality and then come back and think in my head what I should do now that I've been in close touch with the real world." Did not mean, you know, to compromise. It did not mean to sell out. It did not mean any of those things. It was, in fact, a way of trying to come in close touch with practical reality. Which is why pierce first writes about it in a popular scientific magazine, not a philosophical journal. He's trying to grab: why are we such an inventive people? Because we're willing to pragmatically try to solve things, as you'll see next week when we talk about the spirit of invention and discovery. This is a country which has a huge drive to invent, to discover. You know, Benjamin Franklin invents the lightning rod. Why does he invent it? Because he wants lightning to quit hitting buildings. How does he invent it? He tries to figure out something that will draw the lightning -- the electricity away from the building. I mean, why did he use the product he used? Because it worked. "It worked" is -- for most of American history, "It worked" or "It failed" were definitive statements. Only in more recent times do you say, "well, it may be failing, but let me give you the really good explanation of it." In most American history, it was, "well, that didn't work. "let's go try something else" which is a pragmatic kind of approach.

There are five enemies of entrepreneurial free enterprise: bureaucracy, credentialing, taxation, litigation, and regulation. Let me walk you through them. First, bureaucracy. Bureaucracy teaches that process is more important than achievement, that rules are more important than productivity, and that bureaucrats should dominate productive people. And I think those -- and all three of those are absolute -- I could validate 1,000 times a day that those three things happen every day. Second, credentialing. You can apply this to your own experience of college; emphasizes attendance over achievement, obedience over creativity, and it emphasizes an elite's definition of useful knowledge. And the elite, by the way, is largely a credentialed elite. It's not an aristocracy or an elite of achievement. Third, taxation shifts resources away from hard workers, achievers, and entrepreneurs into the control of bureaucrats. Taxation discourages the productive by taking from them the fruits of their effort.

Taxation transfers wealth from the best market-oriented entrepreneurs into the control of government careerists who focus on inputs, not outcomes, and who measure processes, not successes. "how committed are you to dealing with drug addiction" is a question which means: will you spend a lot more money? It does not mean if you find out that the most effective drug programs in America are very cheap, do we take all the expensive ones and replace them with cheap ones? Which, by the way, turns out to be true. Almost all successful transformational programs are very inexpensive, because they rely on a missionary spirit and a spirituality, which are antithetical to government bureaucracies. And almost every one of them are cheaper than the parallel government service which fails. Yet if you were to say, "I have a terrific idea. "I'm so committed to helping addicts, we should cut the program in half," people would think you were crazy, because that is not how the modern welfare state measures.

It measures process, not result. Investment, not outcome. Regulations are a burden to entrepreneurs, a diversion of their time, often a process that requires learning the bureaucrat's meaning and the bureaucrat's system even when it objectively has no impact on reality. It is a daily reminder that the bureaucrat is more powerful than the entrepreneur in modern America. That's a very key statement. At the present time in modern America, a totally obscure bureaucrat who has achieved nothing and knows nothing has more power than a person who creates a million jobs. You decide which of the two can put the other out of business. Litigation is a direct threat to the entrepreneur. Operating on scarce resources to create a better future, the entrepreneur is constantly threatened by the specter of a lawyer whose lawsuit will, at a minimum, divert time and money, and may literally bankrupt the endeavor. Just when the entrepreneur should be focused on achievement, he or she must focus on legal self-protection. Now, those are the five killers of entrepreneurial behavior, and so what we're going to think about as we come back in the second hour is we're going to lay out looking at: how do we create a more entrepreneurial society?

Remember, "entrepreneur" means "to undertake." It doesn't mean just to make money, but we want an entrepreneurial society so that people create local ballets, they create local sports team, they create local charities, local hospitals. Entrepreneurship is the idea. I think I want to get something done, I will go undertake it. Now, what you want to have is a healthy free society where there are 260 million people who get up in the morning and go, "wow, this is a great day. "we're free. "we're Americans. "I wonder what I'll undertake today?" And then if we do that, our gamble is, this has been our gamble for 300 years, that the explosion of energy that we arouse by allowing everyone to pursue happiness creates such enormous creativity that it drowns the more disciplined, efficient systems of centralized dictatorship. So we'll let the other team have the bureaucracy, they'll be real smart for three weeks.

We will then drown them in the sheer energy and creativity of free Americans who are liberated and who, therefore, rush around with enormous energy trying to pursue happiness. Very core cultural commitment of our civilization. So any -- I think John said there was, like, a minute and a half. Any questions? Yes, sir.

'What kind of an advantage or disadvantaged environment would you say that having been a historian and not an attorney in your political life, which is essentially a world of lawyers, has been? Well, I believe it's not being an historian. I believe whatever you want to do, study the history of those who did it. That's what napoleon hill did. If you ask me to what -- what advantage do I gain by any problem I face, I start by saying, "tell me a story." And I listen to the history of the problem. I listen to the history of the people around it. Why did they fail to solve it? What are their views. So if you say -- if you're asking me how valuable do I think it is to start by learning about reality by studying history? I think it is irreplaceable. I think it's one of the real keys to my success. It's different than being a historian. It's useful to have historians who write histories you can then read, but every American, I mean, I think every successful entrepreneur who's smart, you learn this over time, starts by studying the history of what they're trying to do, and I think in that sense it's invaluable. So when we come back, we're going to pick up the notion of what would getting back to American entrepreneurial behavior, reestablishing the "Laws of Success" of Napoleon Hill, and looking at how to be an effective entrepreneur, a variation on "Effective Executive," and we'll gather in a couple minutes.


>>let me remind you where we're at at this point. We're talking about to undertake, entrepreneurialism. And what I'm going to suggest to you in the next few minutes, using the standard model for planning that we've talked about for analysis and planning, is we're going to look at entrepreneurial vision, entrepreneurial strategies, entrepreneurial projects, and entrepreneurial tactics. So we're going to literally come right down to a model of vision, strategies, projects, and tactics, and we're going to look at in a large sense, if you really wanted every American to have in themselves the sense of it, if you grew up in America, planning to undertake things, planning to be an entrepreneur, what would it be like? Interestingly, it's very different than the working model that came out of world war ii. Remember, in World War II, we mobilized 15 million people, put them in uniforms. Big systems did big things. We had the manhattan project to invent the atomic bomb. We had a huge fleet.

We got in the habit of if you look at the Eisenhower cycle, you have the habit, and it's legitimate in total war, a large structure doing large things in a very orderly manner, and so the big became the thing. We -- you know, we admired IBM, we admired general motors. But now look at an entrepreneurial society. What would you favor? You'd favor the small, the beginner, the one who undertakes. Now, imagine you rewrote your tax code. Right now, if you work for a big corporation, you get a tax break if you buy your health insurance. If you're self-employed, you don't. Just start with that and work your way through the whole system. So imagine you started and you said right now, if you're in the welfare system and you go out and start to work for Amway and you report your earnings, you get kicked off welfare, so you might earn enough out of Amway to begin to learn how to sell and to begin to learn how to work and to begin to learn how to have money, but if you got just that first rung of the ladder, basically what we've done in the welfare state is two things. We've said, in terms of big and small, that government which is very comfortable with the big.

The president could meet with the head of the three auto companies. You can't meet with 20 million small businesses. So in a sense, the government tilt between big and small, the bias is towards big. The big -- and it's not because of any corruption. It's because they're easier to find. They're more organized. So you say, "let's pass a regulation." The big already have lawyers on their staff. It's the small who have to go out and hire a lawyer. So the big says, "not a big deal. "this is not a bad regulation. "just more work for my lawyer." The small goes, "that's my margin of profit." Okay? Second, to understand an entrepreneurial free society, you have to have a ladder. This is a ladder. I can't draw very well and I can't write very well, but just bear with me. What the welfare state does is it -- it says: you'd better jump from here -- this is a stick person.

This is not a giraffe. In a healthy free society, you're down here. You're poor. You get to the first rung. What the welfare state does is it says: if you can't jump from here to here, we're going to punish you. So you can't go out and get a part-time job. It's illegal. You can't go out and begin to undertake. It's illegal. You couldn't open up a beauty shop in your public housing apartment. It's illegal. Yet how did people historically rise? They worked at home, they did odd jobs, they got a little bit of money, they learned the habits, and three to five to six years later, they're up here. We've killed the first five years of rising. Made it illegal. And that's why you've got to revisit this whole thing. You know, a smart society favors entrepreneurs, because entrepreneurs provide the resources for helping others. I mean, if you're going to -you know, if you're going to tax the successful, it's helpful to have lots of successful, and if you have enough people -- if you have enough people who are successful, they give away enough money.

Andrew Carnegie endowed 2,563 libraries. He built them personally. The deal was the city or town would provide the land. And they would provide the books. He'd provide the building. 2,563 personally given libraries around the world. Now, in order to do that, he had to be very successful. And yet today, we don't -- there are a lot of people who love jobs, but they hate job creators. So they punish the job -- sort of like loving eggs and hating geese. So you keep shooting geese so that you can't get any golden eggs, because you'd be happy to have eggs, but the stupid geese keep coming in. Very important to say if you really want energy and success and wealth, you'd better encourage lots of people to be entrepreneurs. Now, culturally, we're still okay. We haven't totally broken down, despite the discontinuity from 1965 to 1995. Americans favor achievement over bureaucracy, learning over education, health over health care, housing over housing authorities, safety over government ineffectiveness, and job create over taxation and regulation.

And literally, what I'm suggesting is you can take the ones we favor, achievement, learning, health, housing, safety, and job creation, and start saying: all right, what would be -- the changes be like to get to there, the changes culturally, the changes in the society, the changes in government? Or to put it differently, look at the difference between entrepreneurial business and bureaucratic business, entrepreneurial government and bureaucratic government. I mean, government doesn't have to be bureaucratic, and business is not automatically entrepreneurial. There are big corporations that are so bound up in red tape and so bureaucratic that they are basically parallel variations on the government. And there are some government systems that are so lean and so creative that they arelike the most -- they're like the best of the entrepreneurial systems. So the question is not: where is the structure? It's not government versus business. The question is: are you entrepreneurial, are you problem solving, are you creative, are you focused on the market and on the customer and on getting the job done?

Or whatever you happen to be, private or public, are you slow and dominated by procedures and dominated by red tape and dominated by people who tell you the rules rather than the achievements? And those are psychological. Now, another factor here, and this is going to be a huge factor in the next few years, a healthy, productive system is very decentralized. I can't say this too strongly. Very decentralized. What you want to do, I mean, it's interesting if you watch the way I am speaker. People think I'm the strongest speaker in maybe 70 years. The fact is, I decentralize all the decisions. Dick Armey runs the house on a day-to-day basis. We have very strong committee chairmen. My strength comes by delegating back out to lots of good people who are then to get the job done so that they are solving the problems. I called Joe Paterno a couple months ago and asked him about being a head coach. He said: one of the keys is to let your assistant coaches make mistakes.

Because if they can't make mistakes, they can't grow. So you've got to delegate, get it away from you, let them go learn. You want a very decentralized society. You want local people making local decisions. It's a totally different model from the sort of centralized command bureaucracy which grew out of Ludendroff's management of Germany in World War I and then was gradually primated throughout the modern world and ended up with people thinking you could plan health care and you can plan education. You need centralized national plans. Totally wrong. You need a centralized national direction. You need leadership that says, "we're going that-a-way." But when you say, "go west," you then want 20,000 individual wagon trains. You don't want to try and have one centralized, you know, government wagon center. A very different model. And as a result of being decentralized, a healthy, productive system has a lot of small units.

So that one of the things you want to do is you want to constantly create the nurturing of: how do I spin off small things? For example, when Zoo Atlanta became privatized instead of the mayor of Atlanta spending five minutes every three months thinking about Zoo Atlanta, you had a full-time director and a president of the Zoo Atlanta -- of the friends of the zoo who worked on it every day all day, because they now had control and they were in charge. It went from $850,000 budget to a $9 million budget. It went from being almost disaccredited because it was so bad to being a world class research zoo. It's totally privatized. All the funding's now private. There's no tax money left. And by decentralizing away from the city of Atlanta to that unit doing its own thing, we have dramatically changed how it operates. Now, one of the reasons the post office is failing, frankly, is that it's neither fish nor fowl. We've neither said to it, "you're now in charge, good luck," nor do we take it under the government and say, "we're going to reshape you, because we're in charge."

So you have a bunch of guys who aren't really in charge because the rules are set by the congress, and then the work rules are set by the union negotiations, and then it's a mess. And we would be much, much better off to decide decisively: how do you want to get it run, and then run it. And get it away from the federal government, which can't think about these things. I mean, you can't think about Bosnia, Chechnya, Somalia, Haiti, Rwanda, trying to think about the entire national economy, and then micromanage a system of 800,000 employees. Nobody has that kind of span of control. So what you want to do is have lots of smaller units. You want to constantly devolve things away, get them back to somebody who can actually do something. A healthy, productive system is best educated and shaped by markets. I'm lost. What are you doing? Let me go back and try again. If you look at the notion of marketplaces, what we're suggesting here is that to truly shape things, you want to have the market making the decisions.

Not the bureaucracy, not the politicians, not the academic elite, not the lawyers, but the marketplace. And you want to find out some way so that you have choice. In a funny way, it means you're constantly thinking about you as a consumer. How do I maximize your right to choose, your right to choose in health care, your right to choose in education, your right to choose in government services? If there's not some overwhelming reason for it to be a government monopoly, why not simply decentralize it and dump it into the market? Even if the government wants to do it. Have the government do it in a competitive manner. Now, it's also fair to say that as a result, if you're going to have a very decentralized system with lots of small units running around focused on the markets, that a healthy, productive system has a lot of leaders. And that that model, having a lot of leaders, means you've got to think about a system where it's not who's the president or who's the speaker or who's the government, but it's: who's doing something neat today?

So Bill Gates shows up, he dropped out from college, he never got a degree, and he happens to be worth billions of dollars and he runs Microsoft, which happens to be the most heavily capitalized company up to GM in the world. Or somebody else shows up, you know, Steve Jobs drops out of college and invents apple computer. Or Spielberg creates "Jurassic Park." I mean, what works is what works. This goes back to remember pragmatism? How can you tell what works? Because it's working. And what happens is credentialed people and academics and bureaucrats want to have something that gives them stability. They want to decide what works. And so very often, they will define the most grotesque failure as a good step in the right direction. You know, have you ever noticed there are no public failures? I mean, you know, if McDonald's did as bad at serving the customer as public housing, it would not only bankrupt, it would probably put the head of McDonald's in jail. But there are no public failures. If you put the word "public" in front of something, it's morally good. That's an example of what happened in the mid 20th century.

I mean, why is it morally good? Why should the word "public" mean anything except that it's a great word? I mean, yet you can talk about people and you can say, "well, public spokesman" for it as though private is bad. But what we're suggesting here is that what you want to test is: does it really work? What are the real products? Let me tell you, you measure much of modern government by that test, it's gone. You measure much of education by that test, it's gone. You measure a lot of health care by that test, it's gone. Because if you go to the customers and you say, "are you happy? "do you think you're getting the best product? "Is something actually working?" You'll suddenly discover that they're being coerced by the legal power of the state to engage in behaviors they would not voluntarily engage in and which they don't think are very productive, and so what you want to do is you want to say, "all right, by definition, you show me something real big and I'll show you something we should rethink," and that includes the Pentagon.

I mean, I'm not standing here saying, "let's not look at everything but." I'm saying: you look across the board, and then you've got to say if you want the society to get something done, try to keep it private, try to keep it small, try to keep it decentralized, try to find local leaders who grow by doing. Which is totally different than a credentialed simply bureaucratically planned system. Then you come back to the notion, which is really the scary part of this, that entrepreneurial free enterprise includes the right to fail. Very important. I mean, if you're not going to let people fail why do you think they're going to learn? If you have a school system that says, "as long as you show up, I'll give you a 'C,' even if you can't read, I'll at least promote you because we don't want to make you feel bad about yourself," nonsense. If you're 9 or 10 years old and you can't read, I want you to feel terrible about yourself.

I want you to say to yourself, "I have got to buckle down here and learn this, because I am never going to get a job in my whole life." I mean, I want you to feel miserable if you can't read when you're 15, and I want you to say, "I feel so miserable, I'm going to start learning how to" read. If we say, "well, it's really socially acceptable because we know you mean well and we don't want in any way to impair your self-esteem," baloney. If you can't read, I want you to have terrible self-esteem and then buckle down and learn how to read. Yes, it's scary. But the truth is, you can't read. If you can't read, you can't get a job. If you can't get a job, you don't have money. If you don't have money, you don't have any power. So now we've said: we want you to be the powerless person with a lot of self-esteem. We've lost our minds. There's no harm in failing. I keep telling that to my friends. I ran twice and lost.

My first try at writing a novel was so bad that Alvin Toffler's agent wrote back and said, "I assume you shake hands better than you write fiction." That did actually stop me for four or five years. I decided, I mean -- but I bounced back after a while, and I'm back again. I've got a new novel coming out. I mean, you can't -- but my point is, you know, every -almost every -- not every one, but almost every successful writer can show you the first five manuscripts. I mean, Hemingway was once asked to write 1,000 words on how to become a writer. He said, "the key to writing is" -- he then wrote in the word "write" for the next 994 times. You know, I talked to Jack Kemp the other day about he was desperate to be a pro football player. He worked out four times a day. He would throw 500 passes a day all summer. He was just -- it was his thing when he was a young guy. He had to do it. And it's hard. You know, and I think unless we're honest about it, a free society is the right to soar gloriously, and it's the right to crash and burn. When you get to a nanny state that says, "we're going to protect you from crashing and burning," they're also going to stop you from soaring, because you won't learn enough, you won't have enough adversity. You won't collide with reality. Years ago, I read a little "Reader's Digest" story about a butterfly that was coming out of the cocoon, and somebody stopped and helped him get out of the cocoon and so disoriented the butterfly because it didn't have to go through the difficult, painful struggle of getting out that it couldn't figure out what to do next. Sometimes people have to get out of their own cocoon, they have to struggle, they have to learn. And if you try to block that from them, they don't have the growth experience, they don't have the internal knowledge that they need.

Now, I want to carry you back and remind you just for a second, because we're going to leap into this and I want you to apply it, remember the four layers of planning: vision, strategies, projects, and tactics, because I want you to think about entrepreneurship, undertaking, getting things done at all four levels, and remember that you successfully lead by a process: listen, learn, help, and lead. So first you listen to people, you learn from people, you help people, and then in a rational society, people who know that you'll listen to them, learn from them, and help them want you to lead. And a good entrepreneur does a lot of listening. They have a burning vision of where they want to go, but they listened a lot about how to get there. Okay? Now, I want to come back to where we started, where we were at the end of last week, and take back up Peter "the Effective Executive." Now, remember that I said to you last week, that I thought this was maybe the most important single book on effective citizenship and effective entrepreneurship in the 21st century that has ever been written, and that I really wish every American citizen read it, and I wish probably starting at freshman year in high school it became sort of a once-a-year required reading. The reason is that there is so much in it, and when you first read it, it's going to overwhelm you, so you've got to come back again. And I think if people came back at it once a year for five or 10 years, it would truly create an entrepreneurial society.

Now, I decided that my strategy last week failed, because I was trying to not put Chyron up, but if I don't put up, I can't make the points clearly enough. So then I decided that I would write out some key things for you to think about. So I started with something which a lot of people normally skip, that's the preface, which are roman numerals vii and viii. How many of you skipped past that? Okay. Good. I'm glad you read it. Those of you who read it, being as it is -- I'm now going to give you something like -- something like nine or 10 Chyrons that come out of that page, out of these two pages, because when you see them -- okay, first point he said, he argues, is that you have to manage yourself for effectiveness. Remember, this is, in a funny way, a book not about managing others, and although "the Effective Executive" sounds like, "I'll go up there and I'll be important and I'll be the executive," what he really is saying to you is: managing starts with yourself. So everybody has a target for being an executive. It's you. And everybody, therefore, can do it. And that's his second point. One can always manage oneself. Now, let me just say to you, this goes to the heart of victimology. And let me just stop you for a second.

I don't think technically John can put that back up again, but I really think this is worth really stopping on for a second, because this is a radical assertion. Remember, I talked to you about the notion that you were really faced with a question here of American Civilization with a discontinuity. And this is a good example. One can always manage oneself. >From 1607 to 1965, the dominant culture would have absolutely agreed. They would have said, "that's obvious." From 1965 through 1994, we had a discontinuity. And you had a dominant elite culture that said: how can you expect Sam to manage himself? Sam's black, or he's a poor white from West Virginia, or he's a refugee from Vietnam. Sam's had a hard life. He'd like to manage himself, but, I mean, it's hard, you know, and it just isn't fair to expect that of him. Sam's a victim. And for you to set some goofy standard that Sam has to actually manage himself is just a sign you're either totally uncaring or you're out of touch with reality. Now, isn't that close? I mean, how many "Oprah" shows have there been?!

I mean, what -- can you imagine if Donahue and Oprah said halfway through -- if at the end of the first half when the victims got done explaining their pathologies, the second half of the show was: now, tell us again why you didn't manage yourself? And the whole second half of the show was: tell us why -- do you have a telephone? Do you have yellow pages? Can you afford a newspaper? I mean, you have people who can buy beer every weekend, but they don't have any money for a newspaper. And then we're supposed to say: that poor victim. You have people who are paid to do nothing all month, and they sit there a block from the public library.

One example I was given the other day, I was on a radio talk show somewhere, I think in Boston or somewhere, and they called in and talked about a woman who had been now on welfare for 17 years. And my question was: that meant that she had 17 years times 365 days, take out Christmas and new year's and whatever, to go to the local library. But she'd stayed home to raise her children, which is certainly a legitimate argument, although working mothers go to work and put their children in nurseries to pay the taxes for this person to stay home, but that's not here nor there. Okay, fine. As soon as the kids went to school, which was about 12 years ago, did she go to the library then? Because she had, after all, from 9:00 A.M.. To 4:00. And it's not to pick on this individual woman, but it's to say look at the mindset we now accept. I mean, when Drucker says, "one can always manage oneself," that's a very radical assertion in the welfare state.

And if you take the words seriously, going back to George Orwell's great essay "Politics and the English language," words matter. If one can always manage oneself, the first question to ask of every able-bodied person is: so what are you doing to improve your life? When a homeless person shows up for the 12th straight day, a good question: and what are you going to do to earn your meals? And the minute you say, "well, they're a victim," then either right or not right. Should the real sentence be, "one can always manage oneself unless one is a victim"? Or is it, "one can always manage oneself"? I mean, it can't be both. Now, let me carry you a step further, though. And this is where really was a genius in his studying of Sloan and Marshall and Theodore Vail. What came to understand was that effectiveness is a small number of practices. And that you can practice effectiveness until it becomes a habit.

And this is part of what truly changed my life. And the reason it changed my life is if day to day being effective is literally learning the habits that work and then practicing the habits that work, then you can begin to say: okay, what is it I can't do very well? I mean, maybe you're not a good salesman or maybe you're not a good speechmaker, or maybe you're not a good bookkeeper. Then you can begin to break those down into habits. Now, what are the habits? What are the practices? And you'll notice it uses the analogy of practicing Mozart. He says his music teacher taught him as a very young person. This is another example, by the way, like Ogilvy, that, who is writing a management book, is using a lesson he learned from his music teacher, because knowledge matters where you can apply it. It doesn't matter based on credentialing. So he's giving you a management lesson about life based on his piano lessons. Which is why real liberal arts is non-disciplinary. It is using that which makes sense out of the real world and tying it together with the perceived wisdom of 5,000 years of written history, whether it's a play, whether it's a history book, whether it is politics or it is economics, whether it is a statue or it's a business course. It's bringing it together into one synthesis based on life. And so point is his music teacher says to him: you can't compose like, but you can practice like.

Again, those of you who play golf, you may not be able to putt like a great golfer, but you can practice putting like a great golfer does, and that means that once you begin to realize that it's a small number of practices and that you can practice effectiveness until it becomes the way you are, you literally grow and change. You become the habits. Somebody just came to me a while ago about taking pictures. I take pictures very efficiently, because I have to, because, I mean, I have so many pictures made all the time, and so I've learned to totally relax. And most people, watch yourself the next time somebody takes your picture, you tense up. I do just the opposite. I totally relax. For me, taking the picture is a moment of rest. It's a practice I learned in order to survive doing what I do.

Jack Kemp came up to me one time, and he used to practice falling, because when you're a quarterback, you get to fall a lot. And he said literally, you can practice falling a way that you minimize damage to your ribs. So you literally -- I was very impressed, because it's a practice, it's a habit. Once you can identify pieces that work, you're going to run a small business? There are hundreds of little habits that make the difference. You want to be a public speaker? There are habits you can learn. And as you practice them, they become how you function. Now, the other thing he said that I think was so important that I underlined one word he doesn't underline: "all" effective executives have had to learn to be effective. Remember, he says here that after 45 years of studying executives, every one of them, Marshall,, Eisenhower,, every one of them had to practice. There were no natural-born effective executives. Which is also a sign of great Hopefulness, right?

And he goes a step further. He says "all" effective executives have had to practice effectiveness until it became a habit. So first you have to learn how to be effective. Very important distinction here, two-step process. First you learn it, then you practice it. They're not the same. Learning in an academic setting is enough to pass the test. Practicing is enough to live it in your life. Do you do it automatically every day? Listening, I am not a natural listener. All of you by now know this. I'm a natural talker. I love to battle. My grandmother used to say that I clearly had a lot of Irish blood because I would just babble all the time. And my grandmother was a doctor, and so she's allowed to say this. This is not an ethnic slur. You know, and I like to wander around -but I've learned the first discipline when I start a meeting is -- what do you think I do?

Ask first what everyone else thinks. >>you ask questions. You listen. You go around the room. You gather the information. That's a learned -- and I'll go into meetings when I'm tired and I'm in a hurry and I'd like to cut through all that and get right to my deciding, and I stop myself and I say, "don't do it!" Because if you do it -- it's like trying to rush a cake. We'll bake it for half the length. We'll turn the heat up an extra 150 degrees. You know, and literally what offering you, is a cookbook on effectiveness. He says a third thing, which I think is one of the most encouraging comments I've ever read: "all" the ones who worked at making themselves effective succeeded. Now, go back and double check here. Every person he knows who actually worked at it became an effective executive. Now, if you go back in, notice how radical this is in terms of the discontinuity we've been living there. The idea of walking into a public housing project and say, "hi, all of you can learn to manage yourself.

"and by the way, if you'll practice these habits, all of you will learn how to be an effective executive." How different is that from the current tone? And we'll create a ladder you can climb. But you see how totally different that is psychologically in expectations and structure of thought? Now, I decided -- I hate to do this, but I looked at it and I looked at it, and I decided that just as a way of starting the game, I mean, I really last week was trying to figure out how could I not put up to tell you about this book, because I don't want anybody who's watching to think, "oh, I've now heard about the book, so I don't have to read it." This book is -- when you realize that everything I just showed you up to that point is out of those first two pages, then there's the rest of the book. But I think the core principles are so powerful, I want to spend a minute or two with them. The first one is: know and manage your time. Bob weed, who was my first administrative assistant, was a great fan, and weed and I really were built into this habit.

I manage my calendar all the time. I manage it annually, I manage it quarterly, I manage it monthly, I manage it weekly, I manage it daily, I manage it hourly. I'm extremely aware of how I spend my time. So people say to me, "how can you be speaker of the house, go back home and have a town hall meeting, teach at, write a book?" The answer is because I spend more time managing my time than anybody I've ever met, I mean, and it's because I'm a disciple of and I know it works. And so you get up and you say to yourself -- first -- and he makes a very important point. This goes back to pragmatism and to learning about reality. What is the first thing says you should do in order to manage your time? Does anyone remember? Record it, right. First he says, this is pragmatism, learn how you are spending your time, right? Now, an example, I made the ultimate sacrifice, at least in terms of normal peacetime behavior, I called my wife last night and I said: we've been running so hard the last week and we only have such a short time off tomorrow, that I'm prepared to give up the Superbowl and just hang out with her and to heck with it all.

She doesn't totally believe me yet, but we're negotiating. But my point was I suddenly stopped and said to myself: yes, in a normal environment, I'd really like to sit and watch the Superbowl, but given what the last week's going to be like and what the next week's going to be like and what the last month was going to be like and what the next month's going to be like is not nearly as important to me as just hanging out with Marianne. You have to make real decisions, but if you don't stop -- if I had not stopped and said: what's this last week been like? What is next week going to be like? You say, well, we can watch the Superbowl, but we'll find some time later on in the week, nonsense. Not right now, not what I'm doing and not what she's doing, either. She just got a promotion.

So it's really sort of -- you've got to -- but you've got to start by saying: how are you spending your time? Then you've got to say: what are your goals and values and priorities? So now you've got column a, how you are spending your time, and you've got column b, what is it you think you'd like to do? Then you've got to create column c, which is to impose b on a. One of the points makes, which has been invaluable in my training, is the higher up you go, the less time you have. Because everybody below you has the right to claim your time. So I know I start every week with a whole range of meetings I can't get out of before I get to decide anything about my time. It's the opposite of the way people think it works. Now, that means I have to reach way out, three, four, or five months, and figure out what it is I want my associates doing so that they're calling the meetings I want to go to. Because if I don't get them doing the right things, they'll be doing the wrong things, and they'll be doing the meetings on the wrong topics, so the only way I can control my time is to strategically be so far ahead of the system that I'm assigning task forces on the topics I want to meet on, because they're going to call me to the meetings.

I won't have any choice. So I'd better think through three months from now what I wish we were meeting on. Otherwise, if I wait and decide Monday, what I'll find out is that I've already spent 80% of my time in meetings I can't get out of. Does that -- do you all begin to see a little bit of -- so you've got to start with: what are you doing? And you do that by literally recording every 15 minutes. As you get important, you have a staffer who does it with you. Then you look at: what do you wish you were doing? And then you stop and you put the two together, which means making choices. It means two things, okay? It means choosing, and it means sticking to the choice. I mean, I have now been coerced by age and embarrassment into exercising regularly, so I get up and I go -- I leave at 6:15 in the morning and I go swim at least four days a week. Which means about 5:45 every morning, I have this choice. You've just got to work through this.

>>doesn't that kill your flexibility, though?

>>no. It means that you're being flexible when you do this. Remember that I do it constantly. I do it hourly, do it daily, I do it weekly. I go through this sequence four or five times a day. How long does it take to do that? >>to do which part? >>I mean, how much time is that actually detracting away from your schedule? Minutes. You learn -- I mean, when you've done it 25 years, you learn how to do it very fast. I tried doing that, and it took me an hour and a half. Yeah, but you'll learn. I mean, this goes back to the point about climbing the ladder. I mean, right now it takes you an hour and a half. Then it will take you an hour. Then it will take you a half hour. I mean, you'll gradually get -- you'll get the habit, and then you'll begin to know, "oh, yeah." If I say -- and, I mean, right now, I have my schedule for all of next week. On the plane back today, I will look through all of next week and I'll figure out what I want to kill, how I want to use the meetings I have to be in, and if I only have time for three meetings I get to call, they'd better be the right three. So it requires me to think through what I'm doing. There's got to be some fun out there somewhere. There's a lot of fun. I mean, but look, this can be, "I want to go to the zoo." This is not just work. You've got to decide what's fun. I mean, I have to tell you, I mean, sitting behind the president of the state of the union is okay. Yeah, but, I mean, getting -- the other part of it is if you decide -- and you put your finger on a really good point. If you decide you want to do something, you ought to relax and enjoy it. I decided I'd be an important person. When you're an important person, people love to get their pictures made with you. You know, the other night we passed the constitutional amendment, we got to the dinner late, we spoke to 2,000 people. There were 150 people who had not gotten their picture made with me because they were supposed to get it made before the dinner, but we were passing the constitutional amendment, which we thought took precedent, and at 10:15 at night, having -- for the third night in a row, because we had the state of the union, then we had the Washington Press Club Foundation, and now we're doing this.

At 10:30 at night, I was standing there getting my picture made 140 times. And somebody said, "boy, that was really nice of you." No. It's the business I'm in. I mean, if you're a dry cleaner and you've got to keep the dry cleaner open because it's the prom night and folks are coming by to get their suit, you keep it open. If you're not going to take care of the customers, why should the customers take care of you? Now, if you don't want to be in that business, go get in a business you like. You'll see -- you'll see, and I can't remember now when we used it, the segment -- I think it's in the third wave, the segment about the guy who founded steak and ale, where he talks about the number one advice he gives to people: find something you want to do, because if you want to do it, you'll do it. People say to me: how do you get kids to read? I say: find out what they're interested in and let them read what they want to read.

My mother-in-law just did that, so she has a nephew who wants to be a drummer, so he's now reading biographies of drummers. He's so excited, he can't stand it. Now, you'd never get a normal school class to say that's an acceptable topic, but he'll read like crazy if he gets to read about what he wants to read about. So I come back to you and say: if you find out when you go through this and this you're miserable, rethink this. Why are you doing it? That's why I didn't become a lawyer. I knew enough lawyers. And I don't mean that disparagingly, but when I was younger, I assumed because I wanted to go into politics, I'd probably be a lawyer, and I watched people who were good lawyers, I didn't want to do what they did. I didn't want to think the way they thought, and I liked history, so I became a historian. I did history because I liked history. Because I think it's useful, because it's fun, it's interesting. It's like reading novels. To me, reading a good history book is like reading a good mystery. I'm always curious what's going to happen next. And just a different way of thinking about things. My point is: if you're not happy doing this, erase it and start over. And that's where part of -- and there's also a difference between being satisfied and having fun. I'm too tired to be having fun. But I'm very satisfied. And again, I think that's an adult thing. If you watch somebody -if you watch a grandmother who has the whole extended family come home for Christmas, my mother-in-law does this, and she cooks and she fixes and she feeds everybody, it isn't fun, but it is enormous satisfaction. I think sometimes we're too juvenile. We use the word "fun" when we really want -- when we ought to use a more adult word, you know: are you satisfied with the way you're spending your life? If you're not, then stop and rethink column b, but don't complain about it, don't whine. It's your life. Change it. Now, the second big thing is: focus on outward contributions. Effective executives do not focus inward. Any time I run into somebody and I say, "how are you doing" and they start by telling me how they feel, I worry.

If they tell me, "wow, I've got this great project, I'm doing these neat things, we have these good" -- you know, something good is happening, if they're focused on contributing, "here's what I'm achieving." "I'm writing a script" or "I've got a great movie underway" or, you know -- or "I baked a good cake today, and we're having a bunch of folks over," anything which is outward. Effective executives focus outward. They don't focus inward. This is, by the way, the opposite of the way bureaucracies function. Bureaucracies please their own internal hierarchy. Market-driven systems please the customer. Totally different models. And so an effective executive gets up every morning and says: what am I going to do this week that makes a difference? How am I going to be more effective outside my activities? How is my company, my bureaucracy, my business, my museum, my zoo, you know, my house of representatives, how are we going to serve out there better? And then you want to clean up inside, you want to be more efficient so you can be more effective.

There's a big difference. Efficiency is doing things right. Effectiveness is doing the right things. It's better to do the right things inefficiently than to do the wrong things efficiently. Again, one of the places where bureaucracies die. So you focus outward. The third one, and this I mentioned the other -- last week, but I want to come back to it because it's so important and it is so opposite of the discontinuity's culture. You build on strengths. You do not build on weaknesses. Remember I showed you last week, these are mountains. If you're going to have mountains, you're going to have valleys. You've got a strong personality, you're going to have big weaknesses. What you want to do is find a way to balance them so that you get this strength, and then you find out what this weakness is and you get a strength that fits this weakness. So your team is very strong, because somebody in the team has a strength for each thing you need. But what you don't try to do is get that well-rounded, dull person who's here.

And look at modern human resource management and look at schools and look at the way we normally think about things in big systems. What do we look for? The person who doesn't make waves. The person who's not disruptive. The person who goes along to get along, to use Sam Rayburn's phrase. That's not leadership. Leadership requires mountains. And so when you look around, when you try to recruit, you've got to say: what are you good at? What are your strengths? Some people's strength is they're brilliant. Other people have the strength that they work very, very hard. Other people have the strength that they're able to Look out and they're able to organize other people, so while they may not be very brilliant or work very hard, they get so much out of the collective team that it all works. But notice how different this model is. This is a model that says -- and by the way, this is particularly true of young males. You get an "a" or you get an "f." Very common for very, very strong young males to do very well with the things they like, and do very badly with the things they don't like. Just very common. I'm not going to make any more comments about hunting, but it's very common. And yet you have a society which very often will say: well, first of all, do you really want to reward strength? I mean, won't that make people feel bad who have weaknesses? Is it really appropriate to have people who do as well as they can do? Secondly, how comfortable are you with somebody who comes in, you say they're a genius, they're also a pain in the neck. Are you really prepared to manage that level of diversity?

And yet argument is that great, very effective executives are very, very good at spotting, recruiting, and nurturing strength and will tolerate a lot of weakness in order to get the strength around them. The fourth point, which has been an enormous help to me, is the argument that effective executives focus or concentrate on the few main areas that are decisive. If you think about it in that sense, the contract is a management tool. It gave us something to talk about that focused the debate. Whether you liked it or you didn't like it, it sounded positive, it did exist, you know, it was in print, and so it focused what we're doing. It's given us a focus for 100 days. So you say to me: what are we doing? Doing the Contract. It makes my job easy. I just delegate the Contract to Dick Armey, and he has to now figure out how to get it all done, but then -- but it makes his job easy, because he walks into the conference and says to all the committee chairmen: guess what we're doing the next 100 days, guys? They all have the same document.

So then they go to their committees and they say: guess what our committee's job is for the next 100 days? So in a sense, you've now focused everybody on one goal. So you've now brought together 230 members and 6,000 staff on one goal. Now, what brave leaders do very -- and effective executives do is they figure out of all these possibilities. Which ones are central to their game? And they then magically focus in on their game, whatever it is. This is their assignment in the near future. They don't pay attention up here and they don't pay attention down here. So what they do is they work back from the marketplace and they work back from their goals. What is it they want to accomplish? They think through their vision, they think through their strategies, and then they say: what are the two or three decisive points? Never more than five. Never more than five. No human being can manage more than five decisive points.

You can have three and get two of them done and add two more. And you can do that the rest of your life. But you cannot at one time handle more than five things. It is impossible psychologically. It's just too complicated. And what you found is that effective executives shrink their area of focus so that they can truly focus. It's the difference between a shotgun and a rifle. And then they put all of their energy, all their time, into solving the specific requirements of the things they have decided matter. Which gets me to the last big point. We've now focused down, we've said: here's what matters to me. You're now rewriting your schedule to fit what you've said matters to you. You've brought around you strong people with strong personalities, which means they all -or with great strengths. Not necessarily strong personality, but great strengths. They may not be strong personalities. I mean, you may have a computer person with no personality, but boy, are they great at keeping your whole information system up.

Or an accountant who's not exactly the life of the party, but boy, do they keep you out of trouble with the IRS. Then you've got one more thing. Now that you've focused, now that you're thinking about it, effective executives makes effective decisions that establish systemic change. Now, let me tell you what that means. Every time you run into a problem, the first thing you do is you say -- first you stop, right? There's a problem. And what do you do when there's a problem? Look at it and you listen and you learn. Then before you start to solve it, you say to yourself, "aha, is this a symptom of a deeper problem?" Automatically. Never ever, ever, I mean, unless it's something goofy like "we need to put a postage stamp on it" or something, but if it's anything which requires -- if it's anything which requires you to stop for a meeting, that's complicated enough that it's worth listening to for a meeting, then don't solve it until you've asked the g, that's complicated enough that it's worth listening to for a meeting, then don't solve it until you've asked the question: is there a deeper problem? The reason's simple: if there's a deeper problem, when you solve this one, guess what's going to happen?

It's going to resurface. And then when you solve this one, it's going to resurface. But the effective executive, and this is the essence of and Marshall, and it took me five years to figure this out in the mid '70s, the essence of it is you sutomatically stop and you say -remember, this is the reverse of vision, dtrategies, projects, and tactics. This problem is a tactic. So, now, let me see, am I going back up to a project level, or am I going back up to a strategies level, or am I going back up to the vision level? What's wrong? Why did this happen? What's going wrong in our system? Did we have the Wrong strategy? Do we need to rethink it? Did we design the project wrong? Or is there a flaw in our vision of what we're doing? Because then it's worth your taking the time. You see, it's going to take you one hour to solve this, one hour to solve this, one hour to solve this, and you still aren't there. But if you will stop, figure out what this is, and get rid of it, none of these will come back. And you'll be a stronger institution or a stronger person or a stronger organization.

Sort of like I learned when I woke up after having -- after having been out drinking all night that I had a hangover. That may mean take lots of aspirin or it may mean think about something deeper here. Or I'd really like to exercise a lot, except I never go out and get sweaty. I'm using silly examples, but I'm trying to drive home a deep point here: if you get in the habit when you run into a problem of asking if there's an underlying class of problems that this is a symptom of, and then thinking through the systemic changes you need to solve this problem, what you'll find happening pretty rapidly is you're really moving.

Now, notice what you've done now. You've created a system where you focus outside to decide what you're going to do, you then focus, narrow down to the things that really matter, so you're really focusing your energy intelligently, you then control your time so you're able to be focused on the things that really matter. You then recruit strength so you have strong people helping you solve your problems, and you then always make systemic corrections rather than just solve the tactical problem. When you find yourself doing those five things as an automatic rhythm of your life, then you'll find, a, that you are amazingly effective.

I mean, Drucker was right. I mean, he got this. He absolutely understood how to do this and put it together -- I mean, he's still in his, I think, late 80s writing, but this book is a work of genius. And my point is: you take those five ideas, you don't have to have a penny. You don't have to have a master's in business, you don't have to be -- you know, you don't have to own a business. You know, you can get up in the morning as a poor person, take those five key habits, and by the end of the day, you're better than you were when you started, and if you did that every day for a month, you'd be a lot better than you were at the beginning of the month. So every american can learn these five principles. They can learn the five habits. And if every -- I mean, if we say to them: that's our expectations, you're an American. Why aren't you being effective?

Notice how different that is from the psychology of victimization. And by the way, notice I'm not controlling anybody. We're saying: why don't you be effective at the game you want to play, pursuing the life you want to do, so you can have happiness on your terms? Because you're an American. You're free. But to be free, you have to have personal strength, and if you're going to have personal strength in the information age, you ought to learn to be an effective executive, because that gives you the tools to be personally effective. And just take that model and compare it with what we're used to seeing. Next week's topic is pillar four, the spirit of invention and discovery and the development of pragmatism and practical common sense, and next week's reading is "Democracy in America," volume II, the first book, chapters 9 and 10.

Last Updated 3/1/95 [HTML revised 2004-03-28 by Terrence Berres]

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