Episode with guest: Jack Stack
President and CEO of SRC Holdings Corp
(This episode was recorded in January of 2021.)
Key Episode Take-Aways:
1. Having a 10-year plan can help overcome the unexpected surprises. (click to jump to this topic below) We believe that once we hire somebody, it should be their decision to leave not necessarily the decisions of the leadership team, that we have answers to very tough, unexpected surprises. And so, I think the only way we can overcome the unexpected surprises and I've thought it for a long time is that you can have a 10-year plan.
2. Employees have a desire to make a difference and the willingness to learn. So, it is important to teach the numbers while the door is open. (click to jump to this topic below) I see the desire to make a difference, okay. And I do see a willingness to be able to learn, okay, and we've got to capitalize on it. So now that we at least have that door open, that they're willing to learn, it doubles down on what we got to do in terms of the deliverables to get them to understand what it is.
3. Why are more people not opening the books to all of their employees. (click to jump to this topic below) But I have not figured out why more people can't do it faster and I can't figure out why more people aren't doing it. The success rate is just at the validation rate is incredible.
Continue scrolling to read the full episode transcription.
Each year for the last 29 years, a community of game changers have gathered together from around the world to learn, share, and celebrate the principles and practices of the Great Game of Business at the world's largest conference on open-book management. This year we are back in Dallas baby! Stronger than ever because let's face it, we are better together. Join us virtually or in person in doubt September 8 through 10th. For the Great Game of Business Conference, visit openbookconference.com for more information.
Thank you for tuning in to this episode of the "Change the Game" Podcast with very special guest, Jack Stack. In this episode, Jack took the look back over the last 10 years with SRC and talks about his vision for the next 10. Here's your hosts Rich Armstrong and Steve Baker.
Steve Baker 1:18
Welcome back to the "Change the Game" Podcast where we are changing the Game by doing business differently. And we're highlighting stories of capitalism. at its best. I'm Steve Baker. And as always, with me here is Rich Armstrong, the president of the Great Game of Business and co-author of our new book Get in the Game. How are you Rich?
Rich Armstrong 1:36
I'm good. Steve, how are you?
Steve Baker 1:38
Very well, I'm very excited because today we have a very special guest. And Jack Stack, our founder and CEO of SRC holdings has been consistently our highest rated podcast. So, we're really excited about what we're going to talk about today. For those of you just joining us who are not familiar with Jack, he's been around SRC since before the buyout from international in 1983. The worst corporate buyout in American history, by the way, Inc. Magazine calls him the smartest strategists in America. We know him as the father of open book management, and he hates all of those descriptions. He's got a new book out, called Change the Game How to Save the American Dream by Closing the Gap Between the Haves and Have Nots, along with Darren Dahl, his co-author, Jack, welcome. Glad you could be here. How are you?
Jack Stack 2:27
Good to see you guys. I'm just getting off a bumpy plane ride. But I feel much better.
Steve Baker 2:34
A bumpy plane ride. Yeah, that's the theme, isn't it? Kind of wrapping up the 10-year plan and getting ready to roll it out on the tarmac?
Jack Stack 2:44
Yeah, today's you know, January 20. And our fiscal year starts February 1. So, we were targeting our organizations this morning saying we are landing this plane. It has been an extraordinarily bumpy ride. Nobody has gotten hysterical on the plane. And then crazy stuff. Okay, everybody has remained relatively calm during this stormy this rough ride. And I think it's been the disciplines of the culture. Okay, that's been able to stabilize and adapt and change and then bring the plane in and then get ready for another takeoff. So, we've been working the takeoff the last quarter. And so, we're launching the next 10-year plan, and we're really excited about it.
Steve Baker 3:36
You want to talk about the 10-year plan that's coming up. That's why people tune in, they want to know what your vision is for the company, the economy, let's start with the company?
Jack Stack 3:46
Well, I don't see any changes that have occurred over the last 40 years. Okay, I think we'll go on a 10-year run, we'll have some bumps in the 10-year run. And I think then we'll have a crisis after a 10-year period of time. And we'll have to figure out what that crisis is to the best of our abilities. Okay, I mean, but there is always going to be a, you know, a bump in the road. I mean, it's always going to be an easy ride. And the whole idea is to be able to make absolutely certain that when that bump hits, you know, you don't get hurt. And if anything, you can get stronger as a result of it. Okay, so when you have that kind of value proposition that we believe in jobs, and
1. Having a 10-year plan can help overcome the unexpected surprises.
we believe that once we hire somebody, it should be their decision to leave not necessarily the decisions of the leadership team, that we have answers to very tough, unexpected surprises. And so, I think the only way we can overcome the unexpected surprises and I've thought it for a long time is that you can have a 10-year plan. Okay, let's say five of it is probable, you know, the other five is just, you know, what they, I guess people understand that the evolution of a plan, you learn a lot and the plan that you made, and then you apply it to the next evolution or plan, okay? So, if you're not really planning and you're just living it day to day you're not learning anything from what you did. I think understanding deviations and variances to plans are what makes you stronger as a community, and that provides the diversification that you need to eliminate the paranoia in terms of what will happen if something goes bad or somebody drops off the table. Okay. So, we have been advocates of long period long, long, long time is to sit down and say, okay, what's the what's the consensus of the people inside the organization? And what is their feelings in terms of where they think the markets are going to be and what's going to be the new innovation and worst capital, again, a flow with new administration's and we go through a whole lot of analysis in terms of where we fit in terms of the organic products and services that we have right now. Will it continue to grow? Which ones will be obsolete? How will we put them together, and we spent a lot of time putting this 10-year plan together with a hairy audacious goal. At the end of it, our, 09 plan was to build a war chest over a 10-year period of time estimating that we were coming out of an out of a recession. And then we will probably go on a run for about 10 years, and then 2020 will hit a wall. And we've got to figure out how to make hay when the sun shines, okay, or the clouds come in, I guess, in this particular instance. And so, we've just gotten through that plan. We've made that plan, which is an extraordinary event. Right? And now everybody's looking at, well, what's the next wild ass big hairy goal for the next 10 years? Okay. So, we have rolled out the first element of what that plan is. And it's ironic that, it's not ironic, it's not the right word. But our 10-year plan going forward is really basically what we've learned from the last four-year plans. the last four 10-year plans, we put in effect, it's like we're getting stronger. And each one of these plans, okay, so our biggest problems in the last 10 years was we were always outgrowing our capacity. Okay, we were scaling, and we were growing, and we were the stock price was going to the ceiling, okay, and we were straining, you know, just to be able to meet the expectations of the marketplaces that were in and we would always run into like, building problems and know where we're going to put the business. And then that comes with long lead times on regulations and permits. And I mean, twice in our development over that 10-year period of time, our development stopped once because they initiated an Endangered Species Act of Indiana bats, okay. And we had bats on our property, and we couldn't build on the property until the bats left in October. Okay. I mean, you think that think that is funny, but it's true. Okay. So, one of this, year plan is we've now taken all the properties, we've taken all the communications for all the people. And we really created this visual imprint or footprint, in terms of how we're going to fill in and all of these real estate developments that were capable of performing to at the same time, that will be the elasticity that I think that the organizations need, when they go out to be able to grow their business is the satisfaction that, hey, we've already, we've already established the ground, we've already established the building , we shorten the lead times in order to be get up and running. So, we have a visual aid that's going out on Monday. And it's going to tell people what we see as the real estate, the rental income, it's going to be over the next 10 years. So, it's like here, you have this massive blueprint with empty spaces in it, that's just there, if you look at it from 40,000 feet is just an opportunity waiting to go into effect, okay? So, we're not going to get the opportunity then try to figure out where to squeeze it in. Okay. We have listened to the people through the high involvement planning process, they already told me what they're going to do over the next five years, okay, we got to have the form fit and size for them to be able to adapt to what their, their plans are, and their opportunities are. So, we got the 10-year vision, you know, the five-year plan sits, how it fits into the squares, any squares that can't be fit in, we're looking at building other elements of the real estate industry. We're looking at rental income as a diversification in terms of our business because we have learned that rental income is really good in a downturn. Okay. That rental income doesn't change. While you know, there's a tremendous irony of that going on right now. And that is that property values are really high right now. And rental income is really high right now. It's really steady right now in the knowing that we're in the midst of a pandemic. So, it'll only be a wise decision. So as our strategic thinking is, Ah, that's one more element that we can sustain the earnings on During a rough period of time, so it's a strategic initiative as much as an operational opportunity for all of our subsidiaries. So, I don't really think it's crazy. Okay.
Steve Baker 10:15
Well, it's, it's great, because that's exactly where we're headed to say, you know, how do you even begin to envision this, and I hear you saying, we're building the box, before we need it. And historically, we've outpaced the boxes that we built. I mean, we've done it faster than we planned it.
Jack Stack 10:35
We're wall-to-wall. I mean, if we're there, you know, I'm just waiting for the next general manager to come in and say, I need another 150,000 square feet. Okay, I mean, to get 150,000 square feet, you know, the lead time, you could lose the deal. By the time you get to 150,000 square feet, I mean, it's not that easy anymore. So, what we have to do is we have to be ahead of the five-year plan. Right, okay. But we also can be looking at this thing from a, from a standpoint is that this is going to be a healthy return on investment, that will last a long period of time. And if we're even wrong with the investment, we can then sell the investment. I mean, this doesn't this isn't this is kind of a low risk, high return type of analysis that we do when we put this strategic plan together. You know, it's, it's constantly, you know, looking at your plans and what could go wrong? What could go wrong? Okay, I was going to go run off and let's figure out how to build a build a floor. Okay. Then when we do hit the floor, we're not going to get knocked out.
Steve Baker 11:38
Yeah, exactly. And the other thing, so the idea about pacing, or out outgrowing capacity, the something we've learned over the previous 10-year plans. Another one you touched on was diversification. Talk about the you know, in what ways did diversification become even more clear in 2020?
Jack Stack 11:58
I tell you; I think that I think that's a great question. But I think it needs to be established to everybody that we had the highest concentration of retirees that we've had the history in the history of the company, okay. And it is incredible on having a 38-year-old company, and how many people stay with that company for a long period of time? And now we have everybody Nope. Okay, we have everybody, thank God, we got a system that we can bring people in. And, you know, we can bring them up to speed really, really quickly because of the processes that we have in terms of building business leaders. Okay. But then that transition of leaders, you know, I mean, what it really comes down to is how stretched? How far do you take the who, okay, how much stretch, can you really give them, especially when they're brand new, and they're inexperienced? And so one of our biggest challenges is obviously in is, I mean, we got to accelerate the training, we got to accelerate the base, okay, we got to accelerate the, the opportunities that people have in front of them, okay, so our investment in diversification is going to have a lot to do with the training programs that we're going to be putting in, to be able to spawn entrepreneurs to be able to fill into this blank vision that we have on filling all these buildings and taking advantage of these opportunities. Alright, so we've got two, we got two elements of diversification. One was that we wanted to buy a business, okay. As of this morning, we made an offer on another business. Alright, so we going to have another business opportunity, high volume opportunity in our in our wheelhouse. Alright, it'll be delivered to the board on Friday. Okay. And again, that is going to the board with the real estate plan. All right, as a method of diversification, because we're not going to go out there and ask our associates to give us their plans, and then give us their contingencies unless I'm taken to the board, the consolidated plans, and a contingency with it that we asked everybody inside organization. So, what our form of diversification is going forward is that they will have a new opportunity to new business, okay. Plus, they won't have the rental income, vision in terms of turning our properties over to retail or warehousing or logistics or manufacturing or something of this nature. So, we have that. We have the normal organic plan with innovation. And then on top of that we have well if that doesn't work, what are we going to do and then we have another business opportunity in front of us. In fact, it was a great game company that was very, very successful. We wrote about it in the book, as a matter of Fact, okay. And it's kind of funny that we stay with these guys for a long time. And they've done really, really well and scaled that really fast. And so, you know, we can come in there and provide some equity if the deal goes through, and then help them. And then they'll help us relative to our investments and our diversification. So
Rich Armstrong 15:19
I want to back up just a bit because we kind of glossed over this and saying, we just put a 10-year plan out there. There's a lot of people that may be listening going 10 years, are you kidding me? I cannot put in next month. What can you talk a little bit about? Why SRC? Does that and what the importance behind that goal setting and how that all ties in? Because I think people are trying to wrap their heads around a 10-year plan?
Jack Stack 15:44
I just I don't I think people miss the opportunity that people in your organizations absolutely love to be going somewhere. I mean, they just get tremendously excited about having this ladder. Okay. And participating in it. Alright, I mean, I just, I don't know people cannot get I think they're missing an element of productivity. I think there are a lot of motivation and engagement. But you don't call what you want. Somebody wants to call it a bow head. Right. All right. Yeah, a B hag, whatever it is. Right. Bow hag. B Hag.
Rich Armstrong 16:19
[Laughter] Mild acid.
Jack Stack 16:23
It's successful, competitive generations. We're a competitive country. All right, we thrive on competition. Okay. How can you have competition without having any kind of a goal? In order to reach it. Okay, and what are the benefits that you get by just the attempt? I mean, the slips and the mishaps teach you so much in terms of how you can improve and how you can get better? I mean, life is going to be boring without a plan. Okay. I mean, to me, it would be.
Rich Armstrong 16:54
Yep. Yep. I, you know, what I hear you say, and I think it's, you know, we see that with the clients we're working with is that it's a whole another level of engagement, right. And getting people to really see what the future holds for them, and where they can fit into that. And you can't do that without setting big goals. And so that's, that's, that's really interesting. The only other thing I want to talk about, and you talked about learning from the past, right, we just went through your crazy ride, you talked about it, as you know, you know, landing the plane. But um, you know, we always learn from the past, but this past year, there's been a lot of lessons, I'm sure. And I'm just curious about what has been your biggest takeaways, what's the biggest lessons learned? That’s maybe guiding now, your decisions going forward. Based on what we went through the last 12?
Jack Stack 17:41
I think it's an affirmation again, I don't think it's a lesson learned. It's an affirmation that you will get through the worst crisis, if you believe you can get through the crisis. And the fact is that there is always going to be a crisis. Now, some people are older, okay. And I've been through these crises before, you know, or kind of like, Okay, this is another thing we got to get over, okay. But it is really such an important thing to be able to tell people, you know, how life is short, and all the changes that it makes, okay. And, you know, this pandemic is horrific, okay. But it's a bump in the road, okay, it is a, and you have to be able to tell people, and they will believe, if you tell them that they will be out of this thing and how to get out of this thing. And there will be better times, okay. I mean, it's an affirmation of this whole idea of planning, right? You know, we planned a bump in the road, never have those specifications that it is today. Okay. But the whole idea of the plan was that what are you gone do when you get out of it? Alright, so this is nothing more than just an affirmation in terms of what we've always believed in what our culture is here. Okay. We'll handle it. We'll handle it. Okay, calm down. It's bad. We'll fix it. And we'll get better. And what else is there to do? Right?
Rich Armstrong 19:05
Steve Baker 19:06
Wallow in victimhood, that's the other thing you can do. [Laughter]
Jack Stack 19:10
Yeah, that's true. That's true. You know,
Steve Baker 19:13
You have a choice. And I will tell you that, you know, especially for our listeners, who were in the beginning part of their journey, or in a really challenging part is that working here at SRC, you know, the one thing that I love about it, maybe more than anything else is we win here. We figure it out, we win. And just knowing that and that there's, you know, 2000 other people pulling the wagon, the same direction helps. So, when you say it's an affirmation that we will get through whatever the world throws at us, if we believe we will, that belief is a huge takeaway, and that as leaders, we need to do that in all of our organizations. So that's, that's a good thing.
Jack Stack 19:53
I also think fundamentally, it's, I think the financial literacy. I think the open book management is about teaching leadership. Okay. I mean, that's, I mean, that's why we do it because we want more leaders, alright. And we want leaders, they have the tools to be able to succeed. And so, I don't think there's anything mis, more misused in the financials of a company, because so few people know how it works. Okay. So, I mean, the reason that we do this is to be able to, you know, to create leaders, and some of the leaders stay in line, and some of the leaders go to other companies to become leaders at other companies. And some of it blends over into, not for profits and communities. And, you know, that's what that's what it's really kind of all about is teaching people how to be successful, right?
Rich Armstrong 20:43
Jack Stack 20:45
Now courage is a different thing, okay, to take the risks and to take the jumps. And, you know, maybe courage comes with age and experience. And but it also comes the failure, right? comes with getting knocked down and having the desire to win and get it back up and take the next punch, you know, so I don't think you have it, like Tyson said, you don't have it without a plan, right?
Steve Baker 21:06
Jack Stack 21:09
You have a plan to get your first punch.
Steve Baker 21:13
That's why you have a contingency plan.
Jack Stack 21:15
Steve Baker 21:15
You said something earlier about the number of people that have retired in the past year or so. And the number of new people? I don't know what the number is, is something like at SRC 60% of our workforce is less than a couple of years old. Is that about, right?
Jack Stack 21:32
I don't think it's, it's that I think that if you take the anchor company, the first company that started here, in 1983, out of the 15 leadership positions, there's only one person in there greater than a year in that assignment. That's 99% of that organization is brand new, and that was aspiring to be $100 million company.
Steve Baker 21:58
So, take that, and now amplify it because you know, folks that are listening to this podcast, probably don't realize it. But you know, you've as CEO of the whole Holdings Corporation, have invited the leaders of all the different SRC companies to double down on training and education, because of the amount of new people courage and investment. Can you talk a little bit about your vision?
Jack Stack 22:27
I guess what you're looking at in totality, we say somewhere between 30 and 40% of the people have been hired in the last three years, I think that was the percent that you're using. But there, I can handle that much easier than I can have an entire team. Only 1% of the team being there. Let's say since let's just use 2017 is that three-year period of time, so you have 30-40% of people that are new out of the 1800, right? And then put the leadership teams are as high as 100%. Right? Wow. So, it just tells you that what you really need is to bring everybody to the same song sheet, thank God, we got to sing the song sheet. And what we do is, all of a sudden, we open up people's eyes and the why and why we do the things that we do. That connects them to the totality. And then everybody gets that collaboration and teamwork to be better off. And so, it's just really kind of common sense that it really says. And we've also learned a lot of accelerated learning processes over that particular point in time The Game is built by the input of the of the outside community, the insight community, the not-for-profit community, I'm taking any community want what we learn from this in order to be able to strengthen The Game. Okay, we is not something that was built in 1992. Okay, it was it keeps refining itself, with all elements of innovation and creativity and participation on that, on the behalf of everybody. This is a really interesting process, it gets under a lot of spotlights, okay. And we're constantly because we're so open not only as a company because of the process itself, always asking questions and asking, why did you ask that question? and trying to figure out how long how do we get there before you have to ask the question, what are we doing? Because then we can crack the code. If we can get everybody that 10 million level, that you set, you'll change this world incredibly, you know.
Rich Armstrong 24:26
Hey, you know, Jack, I had an opportunity to do some, a series of vistage talk, and this is the Vistage groups with the CEOs. It was really interesting because it was clear that the pandemic has kind of changed the CEOs thinking about the value of transparency and more financial discipline and financial literacy more experimented with that during the pandemic because it was almost required, right? They needed to find ways to be more open with folks. You get a chance to talk to a lot of entrepreneurs. I'm just curious. Did you Do you think we're nearing a tipping point where there's a shift in the mindset of the average entrepreneur regarding transparency and financial literacy? Is that changing?
Jack Stack 25:11
I think, you know, I guess what I feel bad about is it a lot, a lot of has to do with inputs and outputs, right. And what you're trying to see is output as it relates to the, what did they did they learn that was their most valuable, important asset? You know, how do I get that return on that asset, and I'm really sweating the inputs, okay, and the inputs into the community’s inputs into the business, which is the people coming into the business. And what I don't see is an elevated sense of engagement, Okay
2. Employees have a desire to make a difference and the willingness to learn. So, it is important to teach the numbers while the door is open.
I see the desire to make a difference, okay. And I do see a willingness to be able to learn, okay, and we've got to capitalize on it. So now that we at least have that door open, that they're willing to learn, it doubles down on what we got to do in terms of the deliverables to get them to understand what it is, you know, and that's why The Game, I liked The Game, because, you know, it allows us to be able to have that kind of an option to be able to make certain that we're tracking north and we're on the same path in order to get the plan, regardless of all the disruptions that can occur in terms of getting to the plan, you know, and one of them is always new people. And, you know, we are really, really concerned in terms of this Warren talent going forward, right, we identify that as a critical number in 2019. And we had a bonus program on retention, because prior to the pandemic, we had millions and millions of millions of job openings. And the forecast was that it was going to triple, okay, in our quest of the 10-year plan. So, what we really had to do is we got to invest knowing that there's going to be a shortage. And so, we got to differentiate ourselves. And so, it's really through knowledge, you know, that we're trying to differentiate ourselves from our markets or from the way we deliver our goods and services. And we do that by tapping the intellectual assets of the people that we have working with us. Okay, so what we're trying to do is, is even get better in terms of what it is and, and faster in terms what it is. And so, I'm worried about the input, so we should get some help on the input. So yeah, I wish people would be worker ready, okay, which means that they have a basic idea of how the business works, okay. And they don't have all these pre consumptive ideas of jobs and opportunities and skill sets. Okay. And have the idea that, you know, hey, it's about creating outrageously successful company, don't worry about the chickenshit things that you're worried about right now. You know, plan on the big picture plan on five years from now plan on 10 years now. I mean, I can't tell you we talked about this morning. I'm so proud of our people because we got a 99% participation on a 401k plan. Okay. That's incredible. I mean, years and years ago, it was barely 60%. And if you talk to most people, they don't even understand, you know, they don't even have 401k plan. Okay? And what are we doing it for the health and security of the people in order to be able to deviation from the employee’s membership program we have, right? Because we're concerned about the people now the concern can only go so far, sooner or later, they got to take up the torch, right? They're the ones that really got to be able to buy in and understand it and see the big picture. And sometimes it gets blurred. I mean, I, it's about the inputs right now. Okay. It's about the people coming in. And he'll have a different perspective about work and a different perspective about a job, okay? They don't look at it. It's the same thing that we're talking about, do you want to be a bricklayer? Or do you want to build a cathedral, that is a significant difference, I want to get less brickfield builders. All right, I want to get to Cathedral builders, and I'm losing a lot of our Cathedral builders is because the outrageous success that they've had. I mean, most of the people that retire this year is because the Aesop was probably going to be one of its highest because the pandemic is going to take a hit on it. And when you got people that have well in high into the six figures that they have, and if you're going to see a 10% reflection because of this pandemic, okay, that's going to affect them for a long period of time, right? So, we've got to now be able to replace these people and have them you know, perform to what some of these people have been doing for 30 years and the relationships they have for 30 years and the handoff for these 30 years. So, I guess I'm at a balance okay. I know the people that are leaving here are solid and are strong and are going to continue to help in all the areas that we need help in and are more than willing to come back in and keep supporting the plans that we have going forward. And I also know they're going to do great for the community. Now we got to bring in a whole new group of people, okay to have those same aspirations, yeah, rewards and rewards. And I'll tell you what's really crazy. It's hard to tell people equity at the end of the rainbow, okay? It's a tough sell. It's a real tough sell. And it shouldn't be okay? Because that's the gap. Okay, the gap, like demonstrating the gaps that the gap between the haves and have nots is the haves know how to do it. So, it would only make sense to me is to try to figure out how, you didn't just take what the haves have and teach have nots, you'd probably get more haves.
Steve Baker 30:40
So, jump into that. I like what you just said, there, because you're talking about the, you know, if people understood it, they'd go after it. And you said earlier, people have to know that we're going somewhere. So now, how do we know we're in the business of trying to teach people how to teach their people? how business works? you've expressed your frustration with the education system, and with the governmental system and everything else? Is it really that big conspiracy that wants to keep people ignorant? Or is it something else Jack? What is it? What's keeping people from understanding business and equity?
Jack Stack 31:22
I still think businesspeople are too under the radar. They're afraid to stick their heads up. There's so many good things going on so many businesses, okay, the people are doing such incredible things. But we're not leveraging, you know, we're not leveraging them. I mean, we're afraid that people look at us as being bad. And it's really a lot. So, it's much better to be quiet. You know, why? Why stick your neck out. Now we eat our young. I mean, we do I mean, it's sad, we got us all the things that you do, you're one snap of a finger away from, you know, losing everything that you've achieved over a long period of time, it's a bad problem, you know, and what we got to do is just try to figure out how to change the behavioral patterns, okay, where we can develop repetitive processes to get stronger and stronger and stronger. And then when something happens, we can always revert back to those in order to be able to get back on track. Okay. So, a lot of what we do around here is very discipline, okay, for the purpose of being able to accelerate the learning process, but not make the learning process boring, in the hopes that we can make it exciting. So, work could be fun, you know? I mean, yeah, that's constantly dialing that in, you know, we're dialing that into the 10-year plan to, I mean, it's going to blow people's minds to see not only the expense of this particular program, but that somebody has really got that much hope in this organization, it's going to sit there and say, we're going to double the size in this particular period of time. And I don't mean that sales, I mean, the physical side of it, okay, three and a half million square feet. And I mean, just think about this, and then everyone now is going to look at that thing and say, Man, I like to color this in, you know, I'd like to, I'd like to have this little square. And maybe I could come up with an idea. And maybe I could put my business in there. Or maybe I can expand my organic growth. Because what these guys have taken is the lid off, they've taken the excuse away, in terms of what's going to limit me from the opportunities that are out there. That's what we do. A lot of times we try to take people's excuses away.
Steve Baker 33:32
I love that take the option.
Jack Stack 33:34
We learned that we learned that from the previous tenure. Okay.
Steve Baker 33:38
Rich Armstrong 33:39
There's hope for your art studios Steve, someday right out here.
Jack Stack 33:44
Look at the look behind he's probably selling a piece right now.
Rich Armstrong 33:49
There is a price on that.
Steve Baker 33:52
Well, it's it that's so exciting, because I you know, we run into a lot of, you know, big thinkers and theorists and people who are writing books about, you know, what the late You know, how to engage people and that sort of thing. And I ran across something recently, and I can't tell you the name of the book, but I'll get it for you. But one of the things that they bring out is this idea of people will act against their own best interests, subconsciously, as a default, that's just what people do. This is what this one author said. Even though they know it's not good for them, they'll do it. And that's why people get into you know, bad habits and whatever. Do you think that people it because you, you know, if you look at it, 40 years plus experience with people, do you think people will basically make the right decision given they have the right information?
Jack Stack 34:45
Only with peer pressure, not from the top down? Okay, well, I think the peers need to be heard. I think that's one of the things the Great Game allows to happen. It’s definitely peer pressure, you know, it's not it's not supervised or not command and control. It's, and then it goes both ways. I mean, when you're an open book company, everybody can see it. Everybody can see it. And no good side identifies the problems that you need to fix, but it also forces you to fix them. Right? Yes. Or the way of getting there, you know, I mean, you're going to fix things along the way.
Rich Armstrong 35:29
I'm curious about what, what's the question we should be asking you right now?
Jack Stack 35:35
Oh, it's real simple. Why aren't more people doing this?
Rich Armstrong 35:39
Okay, why aren't more people doing this?
Jack Stack 35:41
No, I'm not going to answer a question with an answer, right? I'm going to turn the question on you guys and say, what are you doing about getting people I'm out here building business, okay. I'm a CEO, a business builder, a cathedral person, okay. I'll keep carrying the torch. Okay.
3. Why are more people not opening the books to all of their employees.
But I have not figured out why more people can't do it faster and I can't figure out why more people aren't doing it. The success rate is just at the validation rate is incredible. I mean, we wrote about it in the, in the last book, okay, we go up nor down. I mean, you guys. I mean, we try to answer every question everybody's happy, you know, can this work on my industry? Well, you know, what, we ran your industry, okay. And it worked there. Okay, we all have the same report cards, and we're all judged on those report cards wanted to help you to be able to teach people how they could get good grades I get, we put all these people through this education system for all these years, and all they're accustomed to are A's, B's and my cases, C’s, and D's, okay? But we're grading on the entire way, then we send them out of business, and we don't give them the report card. It's crazy. I'm just thinking about all the time, hours you guys spent in the classroom to get a grade, we send them out and no company is willing to give a report card you know. So, I don't know where I'm going crazy with this. But we need to have, we need to be able to teach people how to get good grades, if you get good grades, you're going to have a good company. And you're going to have a good economy, and you're going to have a lot of happy people, and you're going to solve a lot of problems. But we find other ways to solve the problems. This is what gets in the way. Also, I know, there's a lot of noise out there. And especially now when we have no concept of debt. I mean, one of the things we've always preached for 40 years is we have an aversion to debt. Okay. We have an aversion to debt, okay, because it is so damn scary. All right. And we started out at a crushing debt level of 89 to one. So, we really knew what that pressure really was. And we developed programs to make certain that we never get into that type of situation. And now we're taking all the emphasis on debt reduction out of the equation. Now we're saying, you know, what, we've been telling people to worry about printing money for a long period of time, and nothing's happened. Nothing's happened. So, you know what, we probably been wrong. Let's just print more money. Okay. This is where they're good idea. All right. Let's recognize our mistakes of the past. And the mistakes of the past is telling people that we can't print money. But guess what, we printed all this money? And everything is fine. Yeah. Right. We're in the midst of a pandemic, but everything is fine. Alright, so let's print more money. And oh, by the way, once we start printing them, like, let's solve all the problems at the same time, because we don't know how long this cash register is open. So as long as we can. And isn't that what happens with every kind of a startup and a small business, they eventually run out of cash. All right, somewhere along the line, again, you run out of cash. And so, you know, here we are trying to teach people about how to be successful in business, watch your cash flow, and cash is God. Cash is man, people are lighting cigars with $100 bills right now.
Steve Baker 37:27
That actually brings us to a question that we've been wanting to ask people tune in to these podcasts when you're a guest, Jack, because they want to know where your head is. You know, they always want to know.
Jack Stack 39:10
That's really scary [Laughter]
Steve Baker 39:13
What your predictions are for the coming year, and, you know, what indicators? Are you watching? Where do you think the economy is headed in 21? Just in the next year to 18 months? What are you seeing in your crystal ball?
Jack Stack 39:27
Well, I've always said a lot of indicators, I watch copper, you know, copper is an interesting one. I mean, a year ago was like $2.40, today's $3.60. So that increase in terms of copper, copper and silver go into a lot of stuff, you know, and so that's a, that's a real simple methodology of determining, you know, just how much manufacturing may be or how much goods and services are going to be created. I don't think about where does copper get used, you know, there's a demand for it. There's a hype. There's a price for it, so I feel good about that. I really watch. inventories, for instance. And Ag has been really strong. Okay, farmers have money, farmers buy. We just had a tremendous December in agriculture. Construction is a lagging indicator. We like to watch constructions, if construction development goes up, it's even better in terms of recession because those contracts are LED and they're out there, okay. We watch where the new administration is going to be spending money. And one of the things that we learned a long time ago by participating in some of the organizations is that even before someone gets elected, private equity is always figuring out how to leverage even the money that we print in the government, okay, to be able to hit an innovative opportunity or a new business or something of that nature. So, we, right now we see private equity money going into real estate, okay. One of the things we learned in our macro-economics, in the higher realm and planning is that most of the private equity are spending a tremendous amount of money in terms of buying land and buying buildings, I mean, this whole next day delivery process that has evolved in accelerated because the pandemic means that you need more space. Okay. And in order to gain more space, people are going to be building and so private equity, which is the biggest investment now is in rental income. So well, it's the private equity people are doing, why aren't we doing it? And so that was part of the reasons we incorporated it into our 10-year plan. They were sitting on some very valuable properties that we bought in the recession of 2000, and gay, and man, that property value is increased. So why don't we build something on it, and then we milk the cow as a result of what we learn in terms of the past. Okay. So, we have a really, really broad based, okay. A lot of it too, though, is listening to the people, okay, because I believe we're just a middle of the United States company, we're probably Middle America. And everything that's happening on a global sense really is going to affect us. All right, we're not protected from anything. So, let's just figure out where we're at, and the position that we're in, and then figure out what's going to happen in the various categories. trucking was devastated in 2020, you closed down those restaurants, you closed out in those retail shops, you close on a good stop moving truck stop moving, transportation get takes a big hit. At the same time, when mass transportation shut down, all of a sudden, people bought more cars, because now they had to get to work because they didn't want to get on the trains, okay, for fear of having the pandemic. So that means that cars are going to be really strong. So, you want to say, Do I have a footprint? Or do I have a position? And what is the mood of our customers that are in the car business? Okay, so we check for moods, and most importantly, as we tap our people, and in their asking them to participate in the decision-making process around here, they're pretty good at what their feelings are, right? What do they think? What's the direction? I have 11 grandkids, okay. And this last, we had a little birthday party for one of them. And we're sitting around, and I do some stock picks for each one of the grandkids. And then I give it to them, so they go watch it. So, they maybe learn something. Okay. So, my 11- and 12-year-old is the first time they really got engaged, and we're not going to have you do it pops, you know, we want to do it. Alright. So, I think one of them pick Roku, and one of them pick Tesla. Okay, and so what was I getting? I was getting, you’re going to macroeconomics and what these little kids are listening to, you know, and what they would buy and knowing that I'm Middle American, alright. I just want to move to what everybody else is moving towards, right? So, it's important for us to be able to listen to our associates saying, hey, do you buy this rental income diversification? And it's already presented to them in terms of the strategic plan. And when you see it to go, Wow, this makes sense. You bought this piece of property 30 years ago, for 250,000. It's worth $6 million right now. Now, you're going to put something on this thing, and you're going to grow that earnings based on the 250,000. And you know what the coolest thing about it? I own that.
Rich Armstrong 44:35
Now, that's good. That's good.
Steve Baker 44:37
Well let's keep the conversation going. Guys send us your stories, your best practices, your ideas, your challenges, your victories, your questions, and remember, you're not alone. This is capitalism at its best. Thanks for joining us. We will see you next time.
The change the game podcast is produced by the Great Game of Business. To learn more, visit greatgame.com.