So Menger was involved in what was called, and you may have heard the term, the Marginalist Revolution. And what was the Marginalist Revolution? It was really the simultaneous and independent discovery by three individuals of different nationalities at about the exact same time, as I said simultaneously, of the principle of marginal utility. And I'll talk about what that principle means, it's at the base of the Austrian system of economics. And who are these so-called Marginal revolutionaries? They were an Englishman who was Stanley Jevins, Carl Menger, of course, who was an Austrian, and a French economist who lived in Switzerland, Leon von Ross. Now all of these men discovered the principle, but they had different terms. Menger really didn't name the principle himself. His student didn't call it marginal utility. And in this case, as we'll see, the term marginal is really synonymous with the term relevant, the relevant or dependent utility. And as we'll see, utility is really nothing but a name for satisfaction. Jevins called it the final utility, and von Ross called it rarity. OK, let me just show you the persons involved in this drama. There was Stanley Jevins, kind of a dashing ladies' man. But when he got older, I mean, he looks like one of those guys that feeds the pigeons on a fart bench. And this is Leon von Ross, who is kind of dark and diabolical. And he's younger, but then he's like your sweet old grandfather when he gets older. Don't age well. But Menger was kind of handsome and hip when he was younger, and handsome and dignified when he was older. And this seems to have carried over to later Austrian economists. OK, well, I mean. Now, the important difference in the conceptions of marginal utility by Menger on the one hand and Jevins and von Ross on the other hand is that Menger and Jevins and von Ross conceived of utility as a quantity of satisfaction that could be added up. So if you had a can of Coke, that might equal 10 eudels. And if you had a granola bar, that might be another 15 eudels. So you had 25 eudels of satisfaction that you were consuming. Of course, the question is, what the heck is a eudel? I mean, there is no unit in which satisfaction, which is an intensive magnitude, can be measured. Now, Menger understood this. So for Menger, utility was really an individual actor's judgment about how important a thing was to improving his well-being or how important it was to his life. So for Menger, if you had the choice between these three items that I have listed here a bottle of water, can of Coke, a granola bar, he would spend his money assuming that his funds were limited to only purchasing one of these items, and they all had the same price. He would purchase that which was ranked highest, that which was most important to his well-being. And that was the marginal utility. That was the satisfaction that he would derive from consuming this good. So satisfaction was purely subjective, purely ordinal, meaning you could only rank it. You could not quantify it and add it up and compare it between different people. You could stand at a vending machine and observe as people all purchased like the same cans of Coke Zero, let's say. They all paid the same price. But yet you would not be able to determine what utility that had to a person. How important it was to their lives, because there is no magnitude. Or there is no unit in which you could measure utility. And Menger understood that. Some of his followers kind of waffle back and forth between the idea of utility as a quantity and the idea of utility as a purely subjective, intensive feeling or magnitude. But of course today, all quantification has been completely purged from the Austrian notion of marginal utility. OK, but Menger went beyond the principle of marginal utility. He created a whole system of economics that was based on subjective value and individual choice. As we'll see, Menger showed not only why people consumed various goods, but how the value that people placed on these goods were imputed, you'll come back to that word, were imputed back to the machinery, the factories, the labor hours that were used to produce that good. So what Menger showed was that the consumer and his wants, or her wants, were at the center of economic activity. So this was his revolution. It wasn't merely discovering the principle of marginal utility as in the case of Al-Ras and Jevin. So they had other contributions. But for Menger, it was creating from this principle a whole vision of the economy and how it operated and what the end of the economy was, what the goal of the economy was. So some very, very important economists and historians of thought realized how important Menger's contribution was and what a genius he was. For example, Joseph Schumpeter, who was an Austrian by birth but really was not a member of the Austrian school, wrote, Menger is nobody's pupil and what he creates stands. Menger's theory of value, price, and distribution is the best we have up to now. And that was an obituary written in 1926 for Menger. But that's still true today. His theory of price actually as it was extended by Eugen von Bambaverk, Bambaverk was a very close follower of Menger's. Is the theory of price that you will learn this morning? Jeff Herbert will talk about subjective value and price this morning. Ludwig von Mises wrote, what is known as the Austrian School of Economics started in 1871 when Karl Menger published a slender volume and it was a very small volume and I recommend that everyone read it. It's very easy to read. The slender volume called the Principles of Economics. Until the end of the 70s, there was no Austrian school that was only Karl Menger, so he was the founder. And lastly, Friedrich Hayek, who won the Nobel Prize and was a student of Mises, wrote the fundamental ideas belong fully, or the Austrian School's fundamental ideas belong fully and wholly to Karl Menger. What is common to the members of the Austrian School constitutes their peculiarity and provided the foundations for their later contributions is their acceptance of the teaching of Karl Menger, okay? So Menger is truly the founder. Now when Menger was writing, the dominant school of economic theory was the classical school, the British school, and there were three eminent classical economists, David Hume, Adam Smith, and David Ricardo, and Menger did not downgrade the accomplishments of these economists. What he wanted to do was to put what was true in their system and there was a lot of truth in the classical system. He wanted to put it on firm foundations and then complete it. As we'll see, the classical school focused on the businessman, okay, the business owner as the primary actor in the economy. Res Menger, of course, focused on the consumer and his or her wants. So what did the classical school say? The classical school said many true things. They said that prices aren't arbitrary or random, okay? Prices were formed or determined by certain laws of nature that operated in the social realm. And most importantly, the law of supply and demand, at least in the short run. They also believed that in the long run, the costs that business men incurred to produce goods determined the value of those goods and that was a big error and I'll explain how that error occurred and how Menger purged that error from economics. Also, the classical school understood perfectly that profits and losses were central to the operation of a capitalist economy. Profits, their profits meant that the goods which were profitable were being underproduced and were more valuable than some other things that were being produced and that therefore the profits would spur businesses to increase the supply of those goods. If there were losses, it meant that there was a loss of value, a waste in the economy but the losses themselves would serve as incentives to stop businesses from producing as many of those goods and the supply would decrease. So as the supply of the profitable things increased, their prices would come down and as the prices of the unprofitable things or the supplies of the unprofitable things decreased, their prices would rise and eventually profits and losses would disappear and they saw a very important tendency in the market economy which was the continual destruction of profits and losses, wiping out profits and losses but because of continual change in the economy we always had them reappearing again and that's something that the Austrians really that notion was developed by the Austrians the central role of profits and losses and we'll explain in my lecture on socialism and calculation why socialism will always fail economically where it's really impossible because of this lack of the profit and loss system. Okay, unfortunately the classical school believed that in the long run all profits and losses would disappear and costs of production would be equal to prices. Now that is true in the long run but the long run is only imaginary, okay? It shows us the tendency of the economy. Unfortunately, this is where the classical school went wrong. They believe that the cost of production determined the prices, that in the long run the cost of production, the amount of money that was spent on producing a good pulled the prices back to that level, okay? And that's completely fallacious and Menger saw that and corrected it. Okay, what was the main flaw in the classical system, okay, which was really the fountain of their other mistakes. Basically they attempted to explain the value of goods and you can understand this in abstract classes. So diamonds were valued as a class of goods, okay? And so they would ask the question why are diamonds more valuable than bread? Why is beef more valuable than coal? Is steel or iron more valuable than copper? Okay, and that's the wrong question to ask. And Menger made his breakthrough by asking the right questions, okay? So we know though that and this is because of Menger we know this that human beings when they purchase goods and services they don't think of all the coal in the world and what that value is to the human race, okay? They think of the units that they are purchasing and how can they allocate their resources? How can they use their money and time to acquire units of goods that are more or less valuable to them? So they think in terms of a pound of bread or three pounds of prime rib or five pounds of potatoes or a business owner will think of a ton of coal versus a certain amount of oil. So the key is that goods are valued in concrete units and this was understood by Menger. If you don't understand that then you're gonna get bogged down in what we call the paradox of value in economics or the water diamond paradox. And that's what caused much grief to the classical school, what stopped them or stunted their theory from developing. So what is the paradox of value, okay? The paradox of value goes as follows. Sometimes called the diamond water paradox. Sometimes it's easier to use bread instead of water. So the question, the paradox goes as follows. Diamonds have a very, very high exchange value which was another term for price that was used by the classical school. But it has very low use value in everyday life, okay? In the sense that diamonds are mere ornamentation or they're displays of wealth so that people can show off how well off they are. So-called conspicuous consumption. If all the diamonds in the world were wiped out not much would change with human race, okay? However, if suddenly water or bread which was the so-called staff of life, okay? And was the main staple back in the, of most people in their diets back in the 18th and 19th centuries, then human beings would die of starvation or die of thirst. So why is it then that the exchange value of diamonds is so much higher than the exchange value or price of bread and water, okay? Well, water has a relatively low exchange value, okay? And so does bread compared to diamonds, okay? If you compare a given weight of diamonds with a given weight of bread, but yet both are indispensable in human life, okay? So how did the classical school solve this paradox? Okay, let me, so this is just an example here. This is a diamond that went for $46 million. Now, which at the time that was sold about 10 years ago was the most expensive gem to be sold at auction. Since it has been passed, there's one that's sold for $70 million or something like that, okay? Well, why, but yet it's not, in terms of use value, from the classical school's perspective, it's not as useful as water, okay? So this really sticks out, okay? So the classical school said, you know what? We're not gonna really solve the paradox. We're gonna do an end run around it, all right? So what they did was, they said, well, you know what? Economics really is not involved and is not interested in talking about use value, okay? Any good that's purchased on the market has a use value and that's what we're really gonna say about it. So they didn't really focus on the demand for goods. What they said was, we're just gonna focus on explaining the prices of goods, the exchange value. That's what economics is all about. And so it's easy enough to explain. Diamonds are more expensive than water or bread because diamonds cost more to produce than water or bread. So notice what's happening. They're slipping into this cost of production theory of value. Where's the consumer in all this? Where's consumer values, okay? Well, that drops out of the picture. The consumer is necessary. Yes, the consumer must value the good in some way, but we're not gonna talk about how the consumer goes about valuing units of different goods because they're not even thinking in units. They're thinking in whole classes. So they're saying diamonds are more expensive as a class and have a higher price on the market than does bread as a class because diamonds cost more to produce than bread does. Period, end of story, okay? So they sort of slipped into this cost of production theory of value. So, and in addition to that, the classical economists believe that the acquisition or that economics is about the acquisition and accumulation of wealth by businesses. So business owners would buy low, okay? So they try to minimize their costs and maximize the prices of the goods that they sold, goods that had high prices compared to costs, and in that way they were able to accumulate wealth. So the whole definition of economics became the explanation of the accumulation of wealth. Adam Smith's The Wealth of Nations. Okay, where's the consumer in all this? Consumer is not interested in accumulating wealth. The consumer is interested in the consumption of goods that satisfies his or her wants. But that dropped out of classical economics. So then Menger comes along, okay? He read all the classical economists. He also read economists that were not classical economists, French economists, German economists, Italian economists, and going all the way back to the 17th century, Spanish economists, scholastic economists who were Catholic economists in Spain, they had all realized this alternative tradition that value was subjective and that the consumer was central to explaining economic activity. However, they did not come up with the principle of marginal utility so they didn't develop a full-blown theory of economics like the classical school did. Though they had the correct value theory. It just wasn't refined enough to allow them to develop it further into a whole system of economics. So what did Menger write? After having absorbed all the different traditions of economics, he wrote in the preface to his great books of principles, I have devoted special attention to the investigation of the causal connections between economic phenomena. He's very interested in the cause of economic phenomena which is ultimately the consumer, as we'll see. He says, causal connections between economic phenomena involving products and the corresponding agents of production, meaning the factors of production, the inputs, not only for the purpose of establishing a price theory based on reality and placing all price phenomena together under one unified point of view. And he goes on to say in the rest of that quote, but in also allowing us to explain all economic phenomena and extending to things like business cycles, though he himself did not do that. So he was interested in causality and reality. He was interested in explaining the prices that you would pay right now if you went to Walmart and you went shopping, okay? How did those prices arise? Who was involved in the determination of those prices? They're certainly not random. They're certainly not arbitrarily set by Walmart. If they overnight made those prices five times as high, many things would change, okay? They could not sell as much with prices five times as high tomorrow as they are today. So we have to explain prices exactly as they are in the real world, not some equilibrium price, and that'll be mentioned later on, but Jeff Herman will talk about that. So what Manger established was what we call causal, realist economics. He was interested in what the causes were in determining prices in the real world, okay? And so he began that tradition. So primarily economic theory is about the investigating the causes of prices in all their forms, okay? Including wages, rents, interest rates, and so on. Now, as Manger was writing his book, but before it was published, he had a notebook that he wrote notes for for whenever he had thoughts that were relevant to what he was writing. And so here's some of the things that he wrote. He says, man himself is the beginning and the end of every economy, okay? So now we're getting to the root of the cause of economic activity. He also said, our science is the theory of a human being's ability to deal with his wants. So the human being and his or her wants are at the center of economic activity. And then the very first line of his book, the very first sentence of his book says, all things are subject to the law of cause and effect. So I'm just trying to show you how important causal realism was to Manger. He also wrote out a little diagram, okay? Sort of a trinity or a triad of causal connections. So in his notebooks, we find the following. He wrote ends, means, and realization. I put the arrows in there. He wrote man, external world, subsistence, and he wrote out wants, good, satisfaction. And what he was doing there was showing how the subjective wants, ends, or the nature of the human being himself. How those things are the ultimate cause of economic phenomena. And those things are all what? Those things are all subjective. They're all intensive magnitudes or feelings that we have, okay? We feel a lack of satisfaction. Mises sometimes call this felt uneasiness. We're uneasy. We're imperfect beings. We're incomplete and we'll never be complete, okay? We're continually striving to improve our lot but we never become perfectly satisfied. So Manger recognized that. So now notice that that feeling of imperfection, of lack, of defect leads the individuals to then look around in their environment and search for means. The means of improving their welfare, of satisfying these wants, okay? And those things are in man's environment. We also know them as goods. Those are the external elements in economic activity, okay? So the wants cause people to look around, acquire, and produce goods, but then the goods themselves, those external things are the causes of a change in our subjective states. So when we consume the goods, it causes the satisfaction of the original wants and hence the arrow that goes back to wants, okay? So all action begins in the human mind, uses elements of the objective world and ends in the human mind, right? Now that was powerful. I mean, that was an example of Manger's creative genius. Come up with that. Let me mention that the exact same number one, exact same statement also appeared in the French economist's book, Frederick Bastia, very important and insightful and influential free market economists who was writing in the mid-19th century. He had a subjective theory of value, okay? But he didn't develop it like Manger did, but it's clear Manger read him because there's a few statements which just takes right from Bastia. Okay, so here it is in a little more vivid form. Guy's hungry, right? And so he looks about his environment and he sees these things that can serve as means, okay? For ham sandwich and so therefore he combines them. And by the way, Manger understood this and actually the French school of economists understood this even before Manger, production is not the creation of anything. The French economists who were Catholic economists didn't believe that human beings could create anything, okay, only providence could create. Human beings could only transform things that providence gave us, okay? So production, J.B. Say in 1802, French economist who was very influential on Manger, pointed out that production is only the transformation of means into ends, the transformation of things in our environment into other things that are more useful for serving our wants, okay? So you get the subjective and objective elements of action in this diagram, okay? So one of the keys when we focused on what Manger saw as the objective elements in human action were goods and he developed the whole theory of the good. He basically said there are several preconditions before something can become a good.  Secondly, the thing must be capable of being brought into causal connection with the satisfaction of the need. That is it must cause the satisfaction of the need. The ham sandwich must cause the satisfaction of one's hunger, all right? There must be human knowledge of this causal connection. The individual must know that those various inputs, the mustard, the knife, the cheese and ham and so on, that when they're combined and transformed into a ham sandwich that they would satisfy his hunger. And there must be a command of the thing. He must have control of these things that are sufficient to allow him to transform them to satisfy his need, okay? Now Manger made an error here and von Mises later corrected it. Mises pointed out that look, it's not that you have a knowledge, an absolutely correct knowledge of the fact that there's a causal connection between the means that you're using in the end, but you have to at least just believe that it's true, so he said, we'll wipe out two and three, they can be combined and the proper precondition of a good is the belief that a thing has the capacity to cause the satisfaction of the human need. That's all you need. Now Manger actually realizes, a couple of pages later, he says, well, there are imaginary needs, okay? Or rather imaginary goods, goods that don't really satisfy real needs, okay? That really don't bring about the achievement of a satisfaction. So today we might think of things like psychics, I mean, that's what Manger was thinking about, you know, who will claim that they can put people in touch with their dead relatives or the New York Times, for example, that claims that they objectively report the news. So things like that are imaginary goods, okay? And Manger's thought, but we know that, look, they have prices. If they have price like any other good, they're all goods. Okay, and then Manger came up with the notion of economic good, okay? So an economic good was a good for which the wants for that thing exceeded the amount of the good available. So an economic good was a good for which it was an insufficient quantity to satisfy all human needs for that thing, okay? Or all human wants for it. So Manger thereby introduced scarcity. Once you have scarcity in the world, once things are scarce, then you have to choose between which ones that you want to acquire and which ones that you wanna renounce, put aside.  There's not enough goods in the world to satisfy all your ends, okay? Or if you as a human being don't have enough resources to acquire or produce the goods necessary to satisfy all your wants. Well then you have to economize on goods, okay? You can only use them for the most important needs. So Manger replaced the classical economic man, so-called homo-economicists, who just wanted to accumulate wealth with the economizing man, okay? So he talks about the economizing individual continually. And that's the person who will use the things that he acquires through economic activity only for the most important purposes. Just going back for a second. Manger would not say that air was an economic good. In fact, air is not really, doesn't have any value. Air in a normal situation doesn't have any value. The reason is that it's not an economic good. There's more than a sufficient supply in a normal situation to satisfy all our needs. That's certainly not true of air for someone who is going into space, outer space, or someone who is deep sea diving, okay? Sunlight, which you want as one of the means for having a picnic or playing softball or something like that, that's also not a good, okay? Not because it's not scarce, because when you have rain and so on and an overcast sky, you don't get the sunlight, but because you can't control it. So that other precondition isn't met. You don't have the command of the thing sufficient to allow you to use sunlight for your ends. Okay, so let's get to the law of margin utility because that's really the punch line. So the value of a good is, so let me just, before I go into that, what was the question that Manger asked that allowed him to solve the paradox of value because that's what the law of margin utility did. It solved the paradox of value. The question that Manger asked was someone has supply of the same good. Someone has five sacks of wheat. We'll go into this. Someone has five bushels of wheat and has many uses for this wheat, okay? What is this wheat? What's the value of this wheat? Is it the value of all? Is it the value of the highest need that these five sacks of wheat fulfill? Is it the average value of the five different ends that this wheat could serve? Okay, how do we determine the value of it, all right? So let me give you the definition of margin utility and we'll give an example of how Manger answered that question. So the value of a good is determined by its margin utility. Marginal means relevant. Utility means satisfaction, okay? So it's the satisfaction from the least important or lowest ranked ends served by the available supply of the good, okay? That determines the value of all units of the good that you possess. The value from the least valued unit, the unit that's, or better put, the unit that satisfies the least valued want, okay? So what the law of margin utility leads us to understand is that as you increase the supply of a good that an individual possesses, the value of the good falls, okay? The more you have of a good, the lower its value is. And so now let me show you an example. And this is an example very like the one that Manger used. So Robinson Crusoe harvests five sacks of wheat and wants to use them, okay? It's an economic good. They're scarce so he has to economize. Therefore he has to rank the different ends for which he will use the wheat, according to which is most important to him, all right? There's no quantity of utility here. He just ranks the first, second, third, fourth. He uses ordinal numbers and not cardinal numbers, not quantities. So the most important is that the first sack of wheat will allow him to sustain his life over the course of the year, okay? Second sack of wheat he'll also, let's say, transform into bread because that second amount of bread will allow him to be healthy and vital and to provide for other needs. The third sack will be used as seed for the next harvest. He'll plant it so that he can live another year. The fourth will be used, let's say, to allow him to vary his diet, okay? So he'll keep some goats while goats that he's found, he'll domesticate them, he'll feed them, and now he'll be able to have the goat milk and cheese and so on. Finally he wants, you know, a beverage. He wants to be happy, he's alone, lonely on this island, so he'll turn it into a manger said whiskey, I like vodka, so I put vodka there, okay? And then if you have a, now it's scarce so that there are other things that he would like to do with wheat, but he doesn't have enough. So he's lonely and he would like a parrot, but he has to give up that end, okay? Because there are only five sacks of wheat and there are five more important wants than feeding his parrot and keeping the parrot company. Okay, so the question is then, what is the value to him of this wheat? Well, it depends on its margin of utility. What is its margin of utility? Well, let's say that after he's harvested this wheat, you know, he's stored it and let's say a vermin break into the barn where it's stored or into the shelter where it's stored and they consume the second sack of wheat, okay? Does he ask the question? Does Robb's and Crusoe go without that second amount of bread that he could produce? No, no matter which sack of wheat is consumed by the vermin is destroyed, he will give up what? His lowest ranked end because that gives him the least satisfaction. All right, so every sack of wheat is equal to the satisfaction from drinking vodka, okay? No matter which one he loses, that's the satisfaction that he gives up. That's the satisfaction that an economizing man, as he would say, would forego. So from anger then, margin of utility, okay, or the satisfaction of the lowest valued want that the supply can fulfill or serve, that is what he gives up and that is the margin of utility. If he finds or harvests a few more sacks of wheat, then what happens to the, oh, let me just stop there for a second. So now what happens to the value of wheat after one sack is destroyed? Is it more or less important to him, each of the remaining units? The value has gone up because notice now if he loses one of those four, what happens? He has to give up a greater satisfaction. He has to give up the milk, the cheese, the goat meat, and so on, all right? So the lower the supply of units of good, of the good, the higher its margin of utility. The more important it is to him, okay? So to give a more modern example, let's say, there's a family that has three automobiles. Let's say that the husband's the primary breadwinner, the wife has a part-time job and so she uses a car. And let's assume they're all sort of identical like the wheat. And then Junior just got his license and so Junior can, the third car goes to Junior. And let's say the old man cracks up his car. Is that, does he stop going to work? Or does Junior stop driving around? Junior starts to stop driving around because that's the lowest valued use of the car, okay? So now the margin of utility of cars has gone up. Now it's the income from the second job that would have to be given up. Let me give you a little test on this, a little quick quiz. Okay, let's say there's a farmer who has three horses and two cattle. Now the horses and cattle are different goods. They serve different wants. They can't serve the same wants. And let's say he values the ends that they allow him to achieve in the following way. The first horse is used for plowing, for wheat. The second horse increases the productivity. If you hit your second horse to the plow, it allows you to produce more wheat. The first cow allows you to produce milk, okay? The second cow allows you to produce beef. And then the third horse is for recreational riding. Which of the two animals, horses or cows, are more important? Yeah, because you don't look at the top. You don't look at the fact that it doesn't matter that the horse serves the most important want, okay? It matters that the satisfaction, let's say there's, Manger would say, let's say there's a barn in which all these animals are being housed and catches off fire and can only save for the animals. Which animal do you leave in the barn? The horse, because it serves, because the larger utility of horses is lower than the larger utility of beef or of the cow, okay? So now what happens? Now that you only have two cows and two horses, what happens to the value of the animals? Before the horse was less valuable than the cow. Now what's true? The cow is less valuable than the horse, okay? Because with the cow, beef is less valuable than the second horse used for plowing, the extra amount of wheat that you get from plowing. Let me just finish this up. Manger also wanted to talk about not just consumer goods, but also goods that go into producing consumer goods, which are the higher order goods or capital goods. So he talked about orders of goods. And so the higher order goods are goods that are further away from consumers. And so what he did was to show that the iron ore, for example, plus labor causes the production of steel and steel plus labor causes the production of various shapes of steel and so on. So as you get closer to the consumer, you get to lower and lower order goods, okay? And those goods then, eventually, when they become consumer goods, that's the final good or the final order good or the lowest order good that satisfies consumer demand, okay? So the value of the means, the value of the higher order goods, which are means for producing the consumer goods, which is again, only a means for satisfying your want, is determined by the value of the ends, okay? So value is imputed backwards from consumer value judgment. So if you buy a new car, it's not the car itself that's valuable, it's the satisfaction you get from driving around in that car, okay? That satisfaction is valuable. So because the car causes that satisfaction, the car itself is valuable. And the parts that were assembled into that car are valuable only because they cause the production of that car, which in turn cause, generates the satisfaction. And that goes all the way back, okay? And so the value is imputed backwards. So if you look at this diagram, you'll see the difference between the classical school and menger. So the classical school said and menger, they both agreed that production goes from the higher order to the lower order, goes from farm tools and wheat, then through to flour and then to bread, the baking of the bread and so on, okay? In that stage and then finally the bread is shipped to retail stores and sold to consumers and the wants are satisfied. But the classical school said, the bread is valuable because the farm tools are valuable and the wheat is valuable and the flour is valuable. We have to pay prices for those things. The cost of these things determine the value of wheat of bread, menger said that's not the case. It's the exact opposite. Value goes the opposite of production. Value is imputed backwards, okay? The only reason why farm tools have any value, whatever, is because they cooperate in the production of the bread, which is what satisfies human wants and therefore has value, all right? So just to take an example that menger gives an example, the only reason why tobacco has a price is not because it's very costly to produce tobacco or cigarettes and cigars and so on, it's because people value them. So let's assume that suddenly people really took warnings about smoking seriously. Everybody did and the demand for all tobacco products dropped to zero. What would happen to the demand for tobacco land? What would happen to the price of tobacco land? Which is very, the price is very, very high in the United States by the way. Assuming that it could not be used for any alternative uses. Supply of tobacco would, or the price of tobacco land would fall to zero. Same thing is true of diamonds. I'll finish on this note. There was a great movie in the 1980s. Harrison Ford started, it was called Witness. If you're interested in Amish life, it gives a very good depiction of how the Amish live. Now the Amish are people that are in South Eastern Pennsylvania and in a heart of Ohio and elsewhere. And they're also known as the plain people. So any sort of ornamentation on their clothing is considered sinful, so they don't even use buttons, let alone any jewelry. So let's say everyone adopted the values of the Amish. What would happen to the value of diamond mines? What happens to the value of diamonds? They're four to zero. And then the wages of dealers and specialists in the same gems and diamonds. Diamonds, that would all fall to zero. And then so again, with the value of the diamond mines. So this was Manga's great revolution. I'll stop here. Thank you.


Well, I trust everyone enjoyed their lunch and I know you came back not to see me up here But to see our next speaker Simon Sinek who is been on everyone's lips this morning You know, he's an exciting and dynamic speaker, but first I want to introduce the moderator for this afternoon's Conversation and that's one of my fellow deans Peg Klein Retired rear animal and a wonderful moderator and all things academic. So I'm will please your great Thanks, Tom. I thank you and welcome Good day, Simon. Thanks so much for joining us. It's good to see your face up on the screen For those of you who are meeting Simon for the first time Simon's books are on the professional reading programs of the Navy the Marine Corps and the Army So he is not a stranger to the Department of Defense The heads of Navy and their spouses are here from over 100 countries both physically and virtually Our voices are being broadcast here and across the campus at the war college and to our virtual participants these leaders Represent their country's investment in keeping global and local commerce open in the maritime domain as you well Know Simon. This is an investment in hardware, but more importantly in people the symposium's theme is strength in unity and we look forward to spending time with you to talk about how leaders develop strength and build unity with each other and what they do when they leave here in Inspired to lead their teams So over to you for a few words and then we'll get into questions Thanks, Peg good to see you again. It's been it's been a while It's it's an honor to be here, you know, I've I've committed my my life and my career to studying this thing called leadership I think it's one of the most misunderstood Subjects we often confuse rank and leadership And one of the things that I've learned is that they are completely completely different thing I know many people who have rank who are not leaders We do as they tell us because they have authority over us But we don't necessarily trust them and we wouldn't follow them And yet I know many people who have no particular formal rank And yet they've made the choice to look after the person to the left of them and look after the person to the right of them and we trust them and follow them everywhere and so the question is is as we move through the ranks What does it actually mean to become a leader? What does it actually mean to? To show up not to be in charge, but to take care of those in our charge It is a skill a learnable practice will skill. It's a muscle the more we use it the stronger we get And the reality is is that the more that we become leaders the more that people learn to trust and follow The more they become independent and be willing to take care of each other as well, which it is sort of a remarkable thing Difficult problems and difficult situations require good leadership And it's it's what allows great organizations to thrive for the long term command and control and sort of sort of Over over over reliance on rank is is highly effective in the short term It's highly effective under under extreme levels of stress But for the survival and thrivable of any organization good leadership is highly necessary Great. Thank you. So for the delegate in the room and virtually I have a few questions that I've teed up for Simon That are relevant to you to some of the opening comments this morning from the secretary and from the CNO and from Linda Welcome, and then I'm gonna open it up at about 45 after the hour to questions from you and We'll talk about that in a few minutes. So Simon the first question I have The leaders gathered here are responsible for keeping waterways open for global commerce You often say that being at the top of your organization carries great Responsibility, what are the principles that guide your thinking on leaders? responsibility The So being a leader is is much like being a parent Where you accept responsibility for the lives of human beings and the more that those human beings feel Like they're being taken care of the more They are committed to the mission the more they are committed to each other When when the people inside an organization fear Their leader then They actually spend more time and energy protecting themselves from their leaders than actually being focused on taking care of each other Or the mission quite frankly and so When you talk about the principles, it's understanding that Leaders understand that their job is not to act. They're not responsible for the results They're responsible for the people who are responsible for the results And that's an entirely different skill set the people in the room are Are not tactically Actually able to keep waterways open. They're not on the ships. They're not on the front lines They're responsible for the people who are responsible for the for the mission for keeping waterways open And I think understanding that coming in with that mindset is is is imperative so You also talk and write extensively about trust and I think it is woven through everything you've written At least everything I've read which I think is all of your books I don't think you would find anyone who would argue the value of trust but trust takes time to build on your organization and Some leaders are not sure that it's worth the investment of their time They think it's kind of gonna magically happen. Is there a trust hack or shortcut to building trust? I mean, I think I know the answer. I think everyone knows the answer, but you have written so extensively on it It would be wonderful to hear Hear your thoughts on trust You know, I wish there were an app That certainly would make life a lot easier The reality is we're all different some people trust quicker and trust some people trust slower But but trust is a human experience now one of the things that I misunderstood about trust and like who's considered trustworthy, you know I used to think it was the person and The more I learned actually from studying the military Is that trust is not about the individual? It's about the environment that you can take a good person and put them in a Bad environment and that person will actually work counter to the organization Likewise, you can take someone who may have had a checkered past and you can put them in a in a in a different environment And they'll become strong and trustworthy members of the team in other words It's the environment and one of the responsibilities of our leader is to create that environment in which trust can thrive And there are many things that have to be done We've already talked about one of them Which is that people feel That the leader actually thinks about them that has their interests in mind That doesn't always mean things will go their way That doesn't always mean that the people will agree those things are fine But rather that that they're at least considered in the decision That their well-being is at least considered and sometimes and sometimes they will witness their leader Sacrifice some of their interest for the good of their people What's so fascinating about this is this this is there's anthropological evidence of this If you go back in time We lived we as a species lived in populations that were rarely bigger than about a hundred and fifty people This this was the case for thousands and thousands and thousands of years before we started farming Which we only started doing about 10 or 12,000 years ago And it produces a very interesting problem Which is We're all hungry these austere times austere It's an austere environment and if someone brings food back to the tribe what happens You know do we all Russian and the strongest ones shove their way to the front so that they can eat And if you're the artist of the family You get an elbow in the face This would be actually a very bad system for survival because if you punched me in the face this afternoon The odds are I'm not going to wake you and alert you to danger tonight And so we actually evolved into hierarchical animals We were constantly assessing and judging who's alpha who's more senior in the pecking order It's a natural thing we do sometimes we have formal rank so we can easily see who's more senior But even amongst friends or amongst peers We're constantly assessing and judging and we defer to our alphas We defer to those who are more senior in the organization And so if you have rank you were afforded certain Certain treatment right if you're senior and you left your coat in the other room Someone will get your coat for you if you're junior and you left your coat in the other room you get your own coat That's just how it works And the interesting thing is as a species we actually have no problem with that There's not a single person in any organization who's morally offended By the idea that somebody more senior than them in the organization gets a higher salary or A better parking place We we're totally fine with it What really offends us is when our leaders are willing to sacrifice our lives to protect those perks That's when dissent starts to show up inside an organization when we start to feel secondary to a leader protecting They're there the all the perks that are given to them by for their for their rank And so what's fascinating is is we are happy to give our leaders all of these advantages You know leaders get first choice of meat and first choice of mate So as I said if you go back to those caveman times, you know We defer to whoever the alpha is we all step back they get to eat first I don't get an elbow in the face and I get and I get to have a I get to have a meal. It's a good system for cooperation But we don't give those perks for free There's an expectation that when danger threatens the tribe that our the leaders who are actually better fed who actually are Stronger will be the first ones to rush towards the danger And so we we actually show tremendous loyalty when we see that our leaders defend our organizations from From from other organizations that when they see that we're given the best equipment or that we're taking care over the best training that that our leaders Look to us and are willing to be there to champion us This is a large part of what it means to be a leader and this is how trust evolve So the question is can you hack that again there? Trust is like like any interpersonal relationship, you know the reason our spouses fell in love with us is not simply because we remembered their birthdays or bought them flowers and valentines day It's the lots and lots and lots of little things that we did we went to get a drink from the fridge And we brought something from them without being asked Things like that. It's lots of we wake up in the morning and we'd say good morning before we check our phones It's lots and lots of little things that in time we wake up in the morning. We're like, oh my goodness I love this person trust is the same way Trust is the some some total of all these little little things and some big things And it's the feeling that our leaders Actually view us and care about us and are at times when necessary willing to go to bat for us Yeah, do you Do you think that do you subscribe to the theory that sometimes you can transfer trust? so, you know Admiral gilday has received a briefing from You know Admiral Klein right and Admiral Klein also says hey this speaker is worthwhile Not Simon a Simon. I didn't have to say anything about Simon is a matter of fact But and then there's some level of trust you're at least temporary You know when I say when I make a recommendation and kind of transfer that trust is that Does that work in your experience? The answer is of course We we we trust our friends and it's and it's one I mean this is the closest thing you're ever gonna get to a hack Because as social animals we cannot We don't have the time as individuals to do all the research ourselves to double-check every answer So we actually have to trust that people Are are good at their jobs and the more tenure we have you know somebody when they get a new job when they get a big promotion They bring the people they've worked with for years to be on their staff. Why because they trust them They don't expect that they're gonna be get everything right. They acknowledge there might be more talented people out there But it's actually the trust that's more important and we trust different things sometimes we trust somebody's degrees Or we trust somebody's experience, but nothing beats Trusting people we've worked with for a while to have a track record of being there for us and if things go wrong Being accountable So yes, absolutely when there's somebody that we trust that vouches for someone else when there's someone that we trust that gives Us a briefing we don't go double-check all those things we trust in We trust in that person if it was a stranger, we might be a little more cynical But absolutely we and this is why people are constantly advertising their credentials and their rank and their experiences They're attempting to to to to demonstrate their trustworthiness But yes, we absolutely can rely on the word of our friends. It's a real thing We can also lose trust if we trust somebody and they let us down Not once but twice and again and again and again then at some point We're gonna be we're gonna keep arms length and we may we still may interact with them But those relationships become very transactional We will demand something in return Or we will be cynical or we will double-check the answers or we will have a plan B So so trust can be can be lost if as well. That doesn't mean not making mistakes That means failure to take accountability It's one of the beautiful things about being able to bring leaders from over 90 countries to this forum So that they can develop those Relationships they can share common causes. They can have conversations that are deep and meaningful and start Building those bridges of trust. So thanks for for taking that question How do you then and I think we just touched on it a little bit But so we'll say that leaders spend a few days here together and they develop trust relationships with each other and And then they leave and they go home How do they help their subordinates? Embrace a similar level of trust How do they how do we help them? Understand the power of trust I guess is the best way to put it Well You know, I think Stern the famous violinist said music is what happens between the notes Trust is what happens between the meetings the the value of the symposium like this one is less about The folks like me it's less about the things on the stage and it's more as you said the interaction they have with each other and The more people embrace those interactions as opposed to every break they disappear to go check their email You know, the people in the in the auditorium have a distinct advantage over the ones who can only attend Virtually the ones who attend virtually get the benefit of these of this meetings, but it's the between the meetings It's the walking into the auditorium. It's the walking out of the auditorium It's that having the meal sitting down where you start to establish the relationship and hopefully some of those relationships There's enough interest or or common cause that they will trade Information and continue to talk on the phone and develop real real friendship real trust As opposed to the seeds of trust And the same goes back when we go to when we go back to our to our organizations, you know, so socializing break, you know breaking bread together Inviting people into our homes using the telephone like all of these things are very old-fashioned and they work extremely well And nothing really replaces them. One of my concerns Is how digitized we become and especially young younger generations where All it's astonishing the amount of normal everyday communication communication they conduct without actually interacting with another human being And so I'm a great believer in putting people in situations where there are no devices where they literally just socialize And that's how trust is built It's allowing people to talk to each other and I you know when you I don't think anybody needs to be convinced of the importance of trust The question is are we doing a good good job of building it? People will trust our rank to a to a degree, but at some point And different cultures are different obviously But at some point people also want to feel like they matter and that's a you that's a that's a Universal for the for the for every human being we want to feel like we belong and that we matter so I want to switch gears a little bit and talk about Structure versus flexibility You know our organizations I think regardless of what country we're talking about Rely on some amount of structure and rules Predictability especially when it comes to our family's understanding schedules in your most recent book you talk about flexibility as Something that prepares organizations for the infinite game right or the light you know I've loosely translate to the long view How do leaders balance that need for flexibility in the institution in their leaders? With the stability that some people need to feel safe You know just it is a balancing act for sure, and I'm just wondering what you think It is a balancing act. You know there is art and science to this Clearly both are necessary excessive amounts of structure inhibits innovation new thinking new ideas Whereas too much too much of it as you said it creates sort of sort of what of the flies sometimes Where where where it's it's sort of every person for themselves And and and things start to break down and things don't get done But the reality is is the rules are there for normal operation and the rules don't consider all all things And and it's and how we maintain rules, but also how we promote flexibility depends on how we Recognize and enforce the rules that rules have context. Let me give you an example I'll give you a real-life example. We have a very simple Rule in the United States Air Force for example It's we tell our pilots don't fly into a rainy and airspace It's a pretty simple rule And so there are two real-life events that happened and they're unrelated a Casey 135 was in the region Flying donuts in case anybody needed gas and the crew accidentally drifted into a rainy and airspace big no-no Okay, completely unrelated separate event Different different day different time a Casey 135 same situation was in it was in the region doing doing some loops and a fighter jet in the area Called bingo. It was out of gas and the Crew made the decision that they could get to that pilot quicker if they just sliced through a corner of a rainy and airspace Now both crews broke the same rule And both should get in trouble for breaking that rule But they didn't only one crew got in trouble Which is the crew who were idiots and drifted into into the airspace Were the ones who made a calculated decision to save a to save a life Though they accepted that they could get in trouble and they made the decision anyway but that's Actually didn't get in trouble and it shows that an organization and then leadership considers the context in which those rules exist So structure is there for the normal operation and every leader should understand why the structure exists If somebody asked the question Why do we do it this way and the leader says I don't know that's just how we do it then perhaps That structure is outdated or no longer useful like just because we have structure doesn't mean we can't evolve the structure Tradition is totally fine. And if part of the reason is it's tradition that that's okay But but but structures can evolve and we should know why we have the rules we have and why we do the things we do And we should also when those rules are broken broken We have to consider the context because if all we do is administer them by the book That's where you get bureaucrats, you know It makes a bureaucrat is somebody who doesn't care about the context and the people on the receiving end of of that discipline They know that it's unfair Now again, sometimes they accept the punishment because they understand that it they have to demonstrate You know, but then there's accountability But at the same time how the leader addresses them and how it's done it all matters And so and so part of it is context quite frankly Structure matters structure absolutely matters, but good leaders know We don't trust people to follow rules. We trust people to know when to break them. Yeah, I mean you You bring up a point that really points to the principled approach that we take and and I think shared principles are part of the strength that we build and You know as we as we think about the difference between, you know, your two examples, right? There was a principle of operational expedience and Somebody who thought about what they were doing there's there's certainly more that goes into that conversation, but Leaders who share their principles leaders who not only demonstrate them but share them with subordinates really are also making an investment in their subordinates to agree with that 100% the best organizations and the organizations in which trust thrives are values based organizations not rules based organizations And so, you know the stronger the values inside an organization the more the leaders Spouse those values and demonstrate those values the more they hold people accountable to those values The more we expect that the values actually guide people's decisions, even if they're counter to the rules So for us, for example, we value human life And so if you look at our highest medal in the land the Congressional Medal of Honor Very often the Congressional Medal of Honor is awarded to people who either suffered mission failure or Sometimes ignored direct orders not to do the thing that they ended up doing And it's because we value one of our values is to protect life and protect each other and no person left behind That when somebody puts themselves at personal risk to protect protect others We actually think that's more important than any rule that we've ever written or any any mission that we necessarily have Which is which is fascinating So so So, yeah, the organization and its leaders have to know the values those values have to be immutable They can't change every year. They're probably they probably have some historical relevance and cultural relevance And they have to be upheld and preached and demonstrated Yeah, yeah, thank you Also At our best At our best we are organizations that take the long view But oftentimes we have statutory limitations that keep people in their job jobs for short periods of time Sometimes commanders are in command for just one or two years You know, what do we do to help those leaders take the long view, right? What do we do right and I I for what it matters to the audience? I totally buy into You know leaders at this level lead people. They don't necessarily themselves out there defend the maritime spaces, right? We lead people so how do we extend this Incentive to take the long view to people who might be in a job just for a year or two So I've spoken a lot about this and have pretty strong opinions about this you know, I think we do our organizations at disservice by Rotating people as frequently as we do doesn't mean that some jobs can't have frequent rotations But to have so many jobs a disproportionate number of the jobs have such high frequent rotation it does a disservice to our organization and And it starts to create an environment in which An officer can only get ahead in their careers if they keep having all these experiences So it's in there. It's in their career interest if they have any ambition to Change a lot and make a quick mark Rather than do something that will outlast them that they may not get the credit for because whatever they did won't show Fruit doesn't bear fruit if you plant us if you plant a tree You may not be around to see it bear fruit And that's part of what good leadership is good leadership is the willingness to plant those trees Even if you're not there to receive the credit for the fruit that grows And so part of it part of it is is is finding balance finding some jobs And I know the Navy has done a little bit of that. There are some jobs that are six-year tours Because the problem was short-term especially when you have broken things and need something fixed You can't fix anything in 18 months to two years. It just doesn't exist, you know, rare rarely can you let's just say that And not to mention if somebody's a bad leader everybody just waits them out and just doesn't do anything And if someone's a good leader sometimes the impact doesn't last long enough So I think one of things we need to we need to do as as as Navy's quite frankly is to look at our incentive structures Look at our promotion structures and look at how we Judge the quality of our officers and frequent rotations sometimes we're accidentally doing ourselves and those and those leaders of disservice Because we're incentivizing the wrong thing So yeah, I think a blended model but given given the fact that let's assume it's not going to change anytime soon And it's above everybody's pay grade here to change it maybe It goes back to instilling in our organization That we lead these organizations better shape than we found them and found weight and find ways to reward people after they've left I'll give you a funny example There's a company. I know Who when they have a hiring? They have hiring fairies every every year, you know, they bring people in to apply for jobs and There's always the person who's assigned to run it and then there's the person who ran it the year before Who is assigned to coach that person? And they have all kinds of metrics to judge whether it was successful or not and If it does better if it does well the bonus goes to the person who did it the year before the bonus goes to the coach Not the person who ran it. So there is an incentive To share every lesson I learned tell you everything that I did wrong so that you'll do a better job than me because I'll get my bonus if you do better Which is a fascinating which is a fascinating setup? Imagine if we actually offered some sort of recognition or commendation to the person who left the job if the person who follows them does better Think about how we would set up our organizations if we did that Yeah, thanks I'm gonna have I have one more question for you then I'm gonna ask the audience to think of brilliant questions All right, and the brilliant questions. I'm thinking the more brilliant and we move back Continue to get more and more brilliant questions. All right, because Simon Simon is a thought leader and when he in your programs it says that he's a trained ethnographer which means he really studies people and He is so sincere about Studying people that when he came in when I met Simon and the Pentagon I was working for the Secretary of Defense and we were trying to figure out we were talking to thought leaders about How we get the best from people how people are led to bring their best to work and Simon sat down for a couple of brainstorming sessions with us and the second brainstorming session He said hey all this talk is fine It's great to talk to your team and to brainstorm ideas that the next time he showed up He brought six different industry leaders everybody from Disney Imagineer to the company He was just talking about the co-CEO of the company. He was just talking about To come and help my team think about these are some of the best practices that we see so ask him really hard questions Until then I have one more quasi softball for you Simon not by design But I know this is something that you speak a lot about You know, we're trying to we're here. We're focused on strength. We're building Relationships and then reality is gonna hit, you know, if you check your email reality is probably already hitting But reality is gonna hit when you get to the airport and get on the airplane and start heading home and focusing on the task ahead How do they continue this? How do you set yourself up? What habits do you? Do you have you seen that work best for continuing this focus on how people feel and extending trust? So in an effective hierarchy we delegate And delegation is really important And you talk about trust, you know that we can trust that we can delegate to other people If you're the the top of an organization, your job is up and out Your job is to look beyond your job is to ensure that the organization is prepared not for this year But for the next five ten fifteen fifty years Both in equipment and training and and all the rest of the things and culture and values, etc And I think a lot of leaders unfortunately get distracted by down and in It's very easy. I've been Peg you and I have seen at a number of times, you know Service chief comes in with grand ambitions and unfortunately gets sucked into the daily grind of putting out fires And it can be demoralizing for one, but also it doesn't move the organization or help the organization advance and grow And so one of the things is delegation. The other thing is is the curse of email quite frankly We get so many emails Because quite frankly we send too many emails and we CC everybody and half the people who get CC'd on our emails Which sometimes include us sometimes where this CC don't need to be on that email But we've now created an influx of email that somebody has to get through every day And they actually have to read emails They don't need to read and so I'm a great believer that one of the things that we can do to help ourselves To reduce the amount of sort of flooding that comes in at us of information Is to reduce the amount that we're sending out because it's usually it's new tony in in its reaction At least the amount that we send out comes back in if not more So So I'm a great believer in assigning assigning responsibility to people Having them brief us on on progress I'm a great believer in in only sending an email to somebody who has to be on the email and not see seeing everybody else Creating a culture where again where we trust people one of the hardest things is Is going to these symposiums Where many people will stand up and and walk away and check their phones and react to every little thing And nothing says I don't trust you more than feeling the need to react and respond to every single email Quite frankly because basically what you're saying to the your people is i'm going to the symposium to become a better leader and learn more and build my relationships But I don't I don't trust you enough to let you just you know run things for a day or two There are always things that need your rank to To approve something, but that's just not on a daily basis. Those things are so I challenge everybody To only make the decisions that that that that you and you alone can make Whereas can you delegate as Everything else and what that allows for is it allows for you to to build those relationships It allows you to take that that higher that higher view that that you should have that objective view of your own organizations But if you're in the grind every day, it's very hard to to be objective and forward forward looking and forward thinking Great. Thank you All right. I have I already have a question So first of all I want to prime the audience by saying many of you are naval war college graduates And we are proud when you walk across the stage And we talk about the fact that you have gathered great critical thinking skills If you are a graduate of one of my flag courses, I have asked you to get better at asking questions Right not playing stump the chump but asking good questions So with that when you have questions, there's a microphone in front of you. You have to hold the button down It is not just press and release but hold the button down And please we have a we have the first question already Thank you very much. Simon. It was very interesting to hear your thoughts on this. My name is torben biggs. I'm admiral danish fleet When I have been deployed I wanted to Alligate actually delegate authority. I wanted to command by veto And I want my subordinates to to think For themselves and have the initiative that is That is needed not to tell them how to do things but tell them what we're supposed to do But when we come home, we are struck by the New public management dilemma Where everything is controlled in detail I don't expect you to Give me the answer on that but I want to hear your perspective in that because I think it's it's a dilemma At least when we come home and and we act as now I act as admiral danish fleet and and there's a lot of details That i'm responsible for but I want to delegate authority And uh, and it will be me that actually reports to the chart if something goes wrong And that is the dilemma if you want to to create that and delegate authority yeah, um the As many of you know a lot of this stuff works really well when you're off on your own and you're doing your own thing because you're you are You have a contained culture And you're right when you come back You're now overwhelmed by the pressures of whatever's going on in the nation and in the world at a much greater It's exaggerated when you come back And the reality is is this is one of the risks of being a leader Um, as I said before, you know the anthropology of leadership is so interesting that leaders Get all the perks they get because they accept a higher level of risk than than than the rank and file Uh, it is it is leaders who are held responsible when things go wrong Even if they didn't actually quote-unquote do anything Um, and so I you think about you think about trust, you know Who do you really trust if it's your job on the line not theirs, which I think raises a really interesting question It also raises the standard of trust And at some point, you know, it's it's We can't do everything and be in every meeting Um, it is a dilemma. It there is no easy answer Um, this is why you keep your your closest and most trusted people Near you at all times because you can let go of some But I also think one of the big but one of the big things is also communication quite frankly, which is What I've seen Definitely in the u.s. Military and some of the militaries that I've had the opportunity to interact with around the world Is we don't teach our officers How to present quite frankly I don't I think there's a lot of room for improvement how we present to ourselves and how we do briefings But that's a that's a side, but even how we present to the general public or how we present to the media We defer Immediately to facts We give rational explanations for everything And the reality is human beings are much more emotional and reactive than they are easy to just simply convince And explain things away And so I think part of it is context Let me give you a silly example Of what context looks like and where values and purpose Can benefit Let us pretend that we're going on a date And i'm sitting across the table from someone that my my friends set me up with And oh, let me let's uh Let's not make it about me. Let's let's take it about my let's take about our imaginary friend david And david's going on a date with somebody his friend set him up with and this is how the date starts He says I'm extremely rich He says I make a lot of money I know a lot of famous people And I have a very successful business. I have a beautiful home. You should come see it sometime And I i'm on tv all the time, which is really good because i'm good looking Right now the question is will she find that attractive and the answer is Probably not And there's probably not a second date coming anytime soon But all of those things are true And perhaps when her friend said, you know, you're gonna love this guy. He's really good looking He's got a big house. He's really well. He's really successful and she goes. Oh, I'd love to meet him Right. The funny thing is is that that those things are Intellectually things that we think we want until they're presented to us in that way Now let's send him out again and this time he's going to present His he's going to present himself separately. He's going to start with purpose and cause And he says something like this. He says, you know I love my work I get to wake up every single morning with a clear sense of purpose I wake up every single morning to create a world in which the vast majority of people wake up every single morning inspired Feel safe wherever they are and end the day fulfilled by the work that they do It's my passion. It's my love Now as a result, I've been able to make a lot of money, which is really amazing And I bought this big house which is humbling and you should come see it sometime And you know, I get to go on tv all the time, which is good because I'm good looking and I get to be All these famous people and it's this crazy life And now that it's contextualized in some higher purpose all of those things now serve as proof that they're actually less arrogant Or less distracting and the same goes for when we give press conferences and we talk to our our leaders to our civilian leaders Which is we can do a much better job of providing Purpose and cause that surround whatever we're about to say But militaries for some reason always default to numbers and facts to demonstrate their success And it doesn't always work because the people on the other end They're not interested in facts and figures. They're interested in the emotion the facts and figures are important But they're they're they're they're important second And so one of the things I would recommend as a way to provide context for people who a don't understand your culture And b who are imposing sort of civilian standards upon upon you and how to find and strike that balance Is to offer is to offer Purpose and cause that helps contextualize the argument you're trying to make And all of these things can be taught by the way, you know good presentation and communication skills Um are all are all teachable. Like I said, I think in general militaries can do a better job of teaching teaching their officers how to breathe Thank you, Simon. Uh, we have another question Good afternoon, how are you? Very well, thank you. Thank you so much for being here with us. Um, I'm wondering with your study of of the Of leadership if you have any observations about gender differences Um, it's not something that they talk about in the military that much openly But I think it would be interesting to hear in particular what are some features Of female leaders that you've seen rise to the top as being Very effective. Thank you Um, so there are traditional Uh, uh, female let's call them traditional feminine characteristics That include things like maternal instinct, patience, empathy Um, and there are traditional male characteristics masculine characteristics like decisiveness and aggression Um, and what I've learned in the study of leadership is it's not that we need More, uh, female leaders is that we need more leaders to act more female and women just happen to be better than that better at that And so it's it's that finding that balance where things like empathy and caring actually Matter to all leaders And I think one of the things that we've done accidentally is we've we've we've we've we've falsely believed That that good leadership always looks like masculine leadership always looks like these traditional characteristics of decisiveness and aggression Um, and it's just not the case the best leaders regardless of their gender Tend to have a a a much more balanced approach So, uh, you know, many of the women who came up through the ranks More so in the past could only do so by acting more masculine And and and suppressing those more those those more those other qualities like caring empathy and and and that sort of that maternal instinct So I I think we need to promote the characteristics of good leadership And like I said, women tend to understand them quicker and easier women understand my work usually, uh quicker than men Men men want case studies for everything that I say and women sort of say yeah, that makes perfect sense. We should do that Um, I'll tell you a quick funny story though of the importance of blended teams The marine corps when they when they, uh, when they run, um, some some of their their things and at ocs At their officer candidate school when they run it with, um, all men That's how they do it. It's it's teams of men and teams of women It's still separated and when they run it with all men one of the things they've discovered is Men don't spend enough time trying to figure out the answer They're too quick to make the decision as a result. They make the wrong decision and they fail the mission They fail that they fail the task Women, um Very often spend too much time coming up with the answer Um, they come up with the right solution, but they didn't leave enough time to execute for the exercise And so they end up failing the mission And so it makes a strong argument for a blended team and it's that tension It's that push me pull you but maybe we should think a little more versus we should act a little quicker That's probably that's probably, um, uh, right plus we respond to men and women differently, you know When when a male officer, uh, yells at you we it comes across differently than when a female officer yells at us Um, it's not just the rank the gender does play into it. And I think we need to consider those things I've heard this, you know, a soldier was was saying that when a male officer yells at him Um, he takes the feedback and he goes on about his day and when a female officer yells at him It's like his mom's yelling at him and it's way more personal Um, and so I think we just need to consider those things. It's not good bad or right or wrong It's just different and I think we need to consider those differences. Um, as we grow our leaders Thank you. Thanks, mrs. Gilday. I didn't introduce her. This is mrs. Gilday who is not only Um, cno gilday is right, but a department of the navy senior executive. So, uh, thanks for that Questions other questions. I'm gonna sneak over here in case there are questions from folks in the virtual on the virtual end Are there any questions from any of the folks? Questions here Oh, go ahead, please. Thank you Uh, hi, simon. I'm komodo shahid from pakistan. Uh, during the beginning of your talk, you mentioned about the evolution and the human behavior So the theory of natural selection. There's an inherent competition between the species and that is because today the homo sapiens are sitting here So this natural competition between the human beings once it also translates into the organizations Which have a pyramid structure with this national competition. So how does a good leader? Mitigates and regulates this sort of inherent competition It's such a good question. Um, you know, uh I think very often the culture of the organization either promotes internal competition or it promotes internal cooperation and I for one, um I think it's unhealthy to pit our people against each other Um, I think as a as a society definitely in the west and we've over indexed on individual, um Incentives versus group incentives. We definitely have over indexed on individual reward of a group reward We have accidentally promoted behavior that encourage people to hoard information or Um, or work against each other because that way I get my promotion Um, and I think what we need to do better at is considering how people Accomplish their goals not just that they accomplish their goals. I see this in business a lot Where we give somebody an arbitrary Number to hit on an arbitrary date and if they hit it we give them a financial bonus But we don't consider how they got there where they you know hurting other people along the way Beg bar and steal they have a big promotion at the end of the year and all of a sudden they get their number And then we celebrate them and we tell that's the same as telling the rest of the organization We don't care how you do it as long as you accomplish the goal You'll do well here versus a good leader Who's who's running a really good team with steady progress? And we can see the metrics are are growing the team morale is high and they get along and they're cooperative Um, uh, and at the end of the year they miss their number But clearly they're going to get it in another you know a month or two We can see from the trend data, but we give those people nothing And so I think we need to consider trend data. I think we need to consider momentum as one of our metrics I think we need um, we need new metrics that we need to include That include issues of uh of morale and 360 reviews and things like that The army rangers have been doing peer reviews for decades because they had a problem when they were putting soldiers through uh rangers school called spotlight rangers Where they could do all the tasks brilliantly. They were excellent at their jobs And they could um and the and the the the officers the instructors loved them They were they were great, but as soon as the spotlight was turned off The other uh soldiers hated them and they weren't they they were very very selfishly driven. They didn't care about helping the group um And so the army rangers implemented peer reviews And so now to advance through rangers school you need to pass three things You have to be good at the job you're being asked to do You have to the instructor has to think you're good at the job that you're doing So all those things that they didn't before but but now Your team has to respect you and think that you're a good a good team player Because if you're only playing for yourself, you actually can't make it through the organization And we have precious few metrics to measure someone's Come camaraderie to measure someone's uh a sprita core and team worthiness So I think part of it is quite frankly missing missing metrics Also, if you have a leadership team that promotes cooperation And rewards proper cooperation and recognizes cooperation and insists on cooperation. You're more likely to get cooperation So so I don't I don't think inherently we are competitive against each other Um, I I think we if our if our survival and ability to thrive depends on each other We we find ways to cooperate and going back to that social question If we like each other and trust each other and we've got to know each other a little bit And we have social time together. We're more likely to trust and cooperate because we see each other as friends Great. Thank you. We have a question From the virtual side of the symposium from captain polo How can we get leaders that are diametrically opposed to each other's beliefs? To find common ground to lead their people towards peaceful resolution of the issues Ah brilliant question. It's so topical for the day. It is one of the most underappreciated skills that we Do not teach in business We do not teach in our companies and I think we can do a much better job teaching in our militaries, which is listening um It's the ability to Let another party Speak and we listen to understand that instead of instead of judging we replace judgment with curiosity If you would like an extreme example of what this looks like um The there is an amazing. There's a very there's a fascinating documentary made by a woman named dia khan Dia is a muslim woman who lives in the uk now. I think she's originally from Denmark But she lives in the uk and she was um troll I know we paid our zoom bill There we go Fortunately, we have the best av team on the planet And I don't tell jokes so we're just going to give them a minute Hey, we have just a minute left. So I'm conscious of time Yeah Do you want to uh, you want to press? Thank you so much. So I'll pass all your regards to simon He is a huge supporter of the military Um And uh, and you know really enjoys working with all the services. So thank you and uh back to you tom. Thanks Thank you, admiral I wish simon could hear the collapse because that was a great presentation and uh, He spoke last iss and he did his rave reviews and every time I hear him speak. I'm truly inspired and it's very insightful So it's a shame. We lost out the last minute. I really wanted to hear the end of the story But thank you admiral for doing a great job moderating and keeping the conversation flowing and directing it to uh Us in the audience. So we're going to take a break now. We have 30 minutes. We come back We're going to have a great panel on covet and how the different navies around the world have adjusted the operations to meet that So, uh, please go out of a cup of coffee and keep these conversations going It was a great great hour. We just had