Also featured in Kaizen are: student essay contest winners Farzaneh Farhangi, Kelly Foster, and Rebecca Robinson; Extreme Entrepreneurship Day; filmmaker Jeffrey Van Davis‘s discussion panel for his film Only A God Can Save Us; and guest speakers Douglas Den Uyl, who visited us from Indianapolis, and Federico Fernández and Martin Sarano, who visited us from Argentina.

A PDF version of Kaizen is available here. We will soon post separately the full interview with Ms. Chan Luu.

If you would like to receive a complimentary issue of the print version of Kaizen, please email your name and postal address to CEE [at] Rockford.edu.

Jack Stack is the founder and Chief Executive Officer of SRC Holdings Corporation, an award-winning, employee-owned organization based in Springfield, Missouri. Springfield Remanufacturing Corporation and its 22 subsidiaries provide a wide range of products and services, including engine remanufacturing, packing and distribution, business consulting and banking. SRC employs 1,600 people and generates annual revenues of about $400 million.

Kaizen: Where did you grow up?

Stack: I was born in Chicago in 1948. My father bought a house in Elmhurst, Illinois, and I lived in Elmhurst from the time that I was about three years old to about 30. Then I was transferred to Springfield, Missouri, where I’ve spent the last 31 years of my life.

Kaizen: It sounds like you were a wild card as a youth—you were kicked out of college and seminary and fired from a job at General Motors?

Stack: I just couldn’t find what I really wanted to do in life. My dad worked in a factory and had a college degree and believed in everybody in the family working. So I had an unbelievable number of jobs as a child. I delivered newspapers and sold Christmas trees and went door-to-door selling. Then I worked at a post office delivering mail. I was a janitor in high school; kids would leave from school and I’d clean the classrooms and the restrooms. I worked all my life; I always worked at something.

Then I went to college and I couldn’t handle the boredom. I went to strong Catholic Schools, so it was all repetition: nothing was interactive; nothing was exciting. It was mostly rote. So I didn’t pay a lot of attention.

When I went to work, I worked in organizations where you could get the job done fast, and I had a lot of time on my hands. At General Motors, my job was picking parts. You had to pick 400 line items in eight hours; that was the minimum expectation. I could be done by 1:30 or 2:00. I had nothing to do, so I went and played poker in the back room with the guys because that was more active. Eventually we got caught and I got discharged. They didn’t think that my vocation was to be a General Motors employee.

Kaizen: But your father worked at International Harvester and got a job for you there?

Stack: He got me a job in the mailroom, so I had the opportunity to work in the mailroom for a while. I always had good relationship-building skills and people liked me and took care of me. If they hadn’t, I probably would have been discharged from that operation. But they kept pressuring me to go to school and be something.

International Harvester gave me challenging jobs; they threw me in over my head and I just loved it. I had ten jobs in ten years, and every one was twice as hard as the previous one. They had faith that I could get it done, and I could get it done. I wasn’t good at showing up on time, but I would work late into the night and be totally focused on whatever assignment they gave me, and I had the tremendous satisfaction of pulling everything together to get it done. I could get it done, which was really a skill that I began to develop.

But at the same time, being a young kid in this massive factory, whenever they gave me this big job I would always go through this cycle. I began to believe that there is this crash factor that one has to go through — I call it the “freakout factor.” Every time you have this new job, you think it looks small and you can do it. Then you get into the job and suddenly it turns into this big thing. And you say, “What did I get myself into?” Then, depending on how fast you freak out, that’s how fast that job gets smaller.

I was good at freaking out fast. I’d call my boss in the middle of the night and I’d tell him I couldn’t do it. I’d embarrass myself and tell him I’m not the right guy for the job. Then I’d wake up the next morning at rock bottom. From that point on you say to yourself, “It can’t get any worse.” And then, suddenly, you take the assignment on.

This happened to me six or seven times in my career. I began to watch other people we put in positions to see how fast they’d hit that wall. The faster they hit the wall, the more entrepreneurial they were. So I was always watching for the person that you promote to find out how they lose total confidence in themselves—they have this breakdown. And they wake up the next morning and say to themselves, “It can’t get any worse than this.” And then it gets better from that point on. That was what happened to me when I worked at International Harvester.

Kaizen: In what you call freaking out, is there two parts? One is quickness—sizing up the situation and realizing that you have a big problem—and then resilience in being able to bounce back when you’re overwhelmed?

Stack: It’s an entrepreneurial trait to be quite naïve. Naïveté is really, really good because it’s the point by which you start. You have the confidence. It may be a little bit stupid to think you can leap tall buildings in a single bound, and then you find out you can’t jump very high.

Once International Harvester gave me a public relations job. The plant had never had a PR department. It was the largest manufacturing plant in the Chicagoland area, where the corporate office was, and it never had plant tours. They didn’t want to show the people off.

They put me in charge of Public Relations. Now, I can’t write a paper. I can’t write a sentence. I’ve got to write newsletters, PR notices. I’ll never forget sitting there in front of that blank piece of paper and just staring at it for days. It was like a piano was on my back. Finally, I was like, “Look this job is not for me. I can’t handle this job. I didn’t go to school to do it. I don’t like it.” Then I made an ass of myself. The next morning I woke up and dug the hole deeper; I didn’t ladder my way out of it. So I went back and said, “Okay, I’ll do it,” and I did it. It’s a trait that I see quite frequently in a lot of people.

Kaizen: In all these jobs at International Harvester, what made them say, “Let’s give him this new job and see what he can do”? You were a kid who started in the mailroom. What were they seeing in you?

Stack: Well, I think they saw my ability to work with other people. Like I said, I had good relationship-building skills. It was a timing issue because most of the people were ex-World War II people — confrontational. Management was a big issue inside the factories. Nobody sat down and really talked to anybody.

The average age in the factory was about 55 years old. I was single. I didn’t have the responsibilities of children and home and car payment. I was carefree and loose. I think they missed that, embraced it, appreciated it about me. As strong in discipline as they were, they liked a bit of mischief and fun and laughter.

It broke the monotony of the situation, because International Harvester must have been very, very stale from the ‘50s and ‘60s. It was the “organization man” mindset: you worked in a box. The second guy I replaced sat in the same chair for 26 years. It was, “Do your job, nothing more and nothing less; just do your job.” It was process oriented. I broke every rule there was. Someone told me to be quiet and I would talk about it. Someone told me it can’t be done—well, we did it.

Kaizen: Aside from International Harvester’s stale culture, from your book The Great Game of Business it sounds like it was a rough culture with lots of conflict.

Stack: We had the worst union, UAW. Local 6 was the worst UAW in the United States. It was the toughest union.

Kaizen: What did you learn at International Harvester about management and dealing with those kinds of problems?

Stack: It was obvious to me that people wanted to win; they did not want to just coexist. They did not want to walk into an empty box where the jobs were boring. IH’s management didn’t make it exciting — it was boring as you could believe. The result was conflict.

So my concept was: How do you get people to feel like winners? So I would set up these crazy little games—anything that meant someone could feel good about themselves. Once they started feeling good about themselves, they had an edge on almost anybody in the organization. My organizations could outperform because we made everybody feel like they’re number one and they were the most important thing in the world. When we hit a target, we’d throw our fists up in the air and celebrate. We’d party and do crazy things.

Kaizen: What’s an example of making a game out of a boring job to make it exciting?

Stack: We were shipping tractors to Russia to save the division, and they didn’t think we could get all these tractors out. They told us it was an impossible order: We had to do 700 tractors. So I put out a scorecard, and every day I would post how many tractors went out—15, 20, 30, 40.

But the cool thing was the finish line—it was the tension and whether you could or couldn’t do it. I’ll never forget the time that we did it and we put balloons all across the board and how good everybody felt.

You begin to realize you can do anything you really want to do—because of the ingenuity of people, and the ability to be able to put a team together. If you can put that team together, it’s almost like you’ve doubled the size of your intellectual capacity. When you use the wisdom of the crowd, it’s incredible what can happen.

The greatest one I had was when I became a superintendant of manufacturing when I was 26 years old. Five general foremen had been told they were going to have the job. They were all my father’s age and I was 26. And I don’t know a machine tool from a hammer. They just threw me down there, and the closest guy in age to me had spent 30 years more in the profession.

I did a freakout again. I went out the night before and had too much to drink. I woke up and I was petrified. I walked in and said to the five foremen: “Listen, it’s not my fault that I have this job. I didn’t pick this. I know you’ve been promised the job. All I can tell you is I will work my heart out to get you the tools to succeed and to get out of here as fast as possible to make room for one of you guys. But by the same token, if any of you guys try to go behind my back or you don’t want to play by the rules, I will personally punch you in the nose on the shop floor.” I told them that. They thought I was crazy and they said, “Why you would do that?” I said, “Because both of us would get fired at the same time. We have a policy here if two people get into a fight, they both get fired.” And I said, “That’s all I’ve got.” I walked out, and I could see these five old guys with gray hair, bent over, walking back to their departments saying, “This is the craziest son of a gun I’ve ever seen in my entire life!”

But I was also able to give them numbers and information that they had never had in their entire careers. We had an Iranian programmer down in the bowels of the storm shelter. I’d go down there, and he was developing a productivity report that was only given by carbon copies on a Thursday night, prior to a staff meeting. This guy had been paralleling this thing with a big IBM 76. Nobody was paying any attention to any of those reports. I went down to him and I said, “You mean to tell me that you can give me my productivity every single day?” He said, “To the penny.”

I had five departments at that time: five general foremen, 26 supervisors, and 500 UAW guys. Ours was one of seven divisions in the plant. We would all go to the staff meeting and we’d all get beat to hell on productivity. We didn’t know the day before or the day after; all we did was prayed to God that we wouldn’t get killed.

My division was the seventh out of seven: $53 per person is what we were running. We had all kinds of bottlenecks because of union contracts and compromises. The previous plant manager went in and said, “We’re going to run 300 crank cases through this machining line, and there’s going to be no rework area.” Well, there are 1,172 perishable tools in this line, and they didn’t tell the perishable tools when to fail. So obviously you had a lot of rework, and rework kills your productivity. The unions had flat rate allowances, so they would never allow any productivity changes, like tool changes and tool set ups and things like that.

So when I started to teach them they were lowest of the seven. I would have the Iranian give them their numbers every single day. The first several weeks, they didn’t want to look at them. Then they started to look and wanted to know why there were so bad. What did we need to do to be able to improve them? We were able to talk to the union—to tell them that we needed to make the changes on the three shifts, do the tooling on the second shift. We did more things because people wanted to be winners.

By the time we ended up, we were turning $72 per person, up from $53. The other divisions were chasing us.

Then we started to make bets with the other departments. I bet one machining superintendant that we could take him on. One time it was within a sixteenth of a cent in terms of productivity. He was running $72.16 and I was running $17.19 all the way to the very end. His department lost $500. We took the $500 and had a party inside of the department.

I’ll never forget one guy. We got down to one guy out of our 500 who was holding everybody up. I went to him and I said, “Look, you’re the key here.” This was a Wednesday, and we had Wednesday, Thursday, Friday, and then the contest was over. “If you don’t turn it on and do 79, we’re not going to take this guy.” He said, “I come to work every single day for 25 years. I have exceeded my quota. I performed better than anybody else in the organization. And you come around here and you change the whole parameter of the game.” I said, “Listen, I’m not trying to change anything. What’s it going to take for you to do 79?” He said, “Okay, I’ll do 79 if you promise me you won’t change my standard so I still could be number one in the entire department.” He did 79 and we won; that was the whole thing. And then I had my general foreman go on a bike—we had a little bell on the bike—and he rode around the competitor’s organization ringing his bell.

We did those things because jobs are boring. Here we had the most incredible numbers, and we did it by having fun. We tricked people into learning things they didn’t want to learn.

But there had been this invisible wall between everybody—and it was crazy, it was absolutely insane, and it was stupid. Those are some of the things that would cause us to lose the manufacturing edge that we had in the 60s and the 70s.

Kaizen: When you were just 30 years old, IH sent you to Springfield, Missouri, to head its Springfield plant. Were you ready for that leadership role?

Stack: It was like everything else. Anytime there was a pile of crap, they threw me into it. This was a big pile of crap. I didn’t know where Missouri was, let alone Springfield. I took my wife and kids and jumped off the face of the earth. No family down here, didn’t know anybody.

I went in the first day and talked to the organization. I told them I was there to help them and do what I can to get them the tools to do the job—the same thing I tell everybody. I promised them I would give them a visible idea of everything that goes on and they’ll be as transparent as they want. And I said, “Do you guys have any questions?” And this guy raised a question: “How old are you, anyways?” I said, “I’m 30 and feeling like 50.”

I was actually sent down here to either close the facility or to get it up and running. IH banked on it being closed. I basically fell in love with the people. As tough as it was up in Chicago, this was so much easier.

In Chicago, my guys went home to Indiana, Wisconsin, or Illinois. There wasn’t a suburb like Rockford where everybody kind of knew everybody, knew the factory, and stood behind the business. In Chicago it was tough to get the whole idea that we’re in this thing together.

But down here in Springfield, it’s this community; it’s like a cul-de-sac. So I was able to pull everybody together. They were also very entrepreneurial down here. They didn’t have a union contract. They were the type of people who came off farms and did things with their hands.

So what we did is we taught them how to run the business, we taught them how to be profitable, we taught them how to be safe, we taught them how to provide good quality. And as we began to teach them, they taught us.

Kaizen: What did the Springfield plant do?

Stack: It was building transmissions and engines and anything that you can imagine that went on a crawler tractor for construction, or a highway truck, or a farm tractor, or industrial equipment. Any component that was on there, we had the responsibility for remanufacturing it and getting it back out there, for the entire International Harvester company.

Kaizen: What was the plant’s financial condition when you arrived?

Stack: They were losing $2 million a year. For a small operation, that was huge.

Kaizen: Did you have a timeline for turning around or closing it down?

Stack: Well, they gave me about six months.

The plant’s up-to-schedule condition was about 28 percent; that’s how on-time delivery was. It was horrible. Their inventories were growing because they didn’t have very good manufacturing discipline. The plant was developed as a sales and marketing tool, and it was run by sales and marketing people with no manufacturing experience. That’s why I got the job: to discipline the manufacturing.

In manufacturing, you have a lot of metrics, a tremendous amount of metrics, when it comes down to the product. I knew how to handle the metrics. The metrics really motivated the people. If you can measure it, then you can play the games, and you can have success, and you can have wins. If you’re 28 percent on-time delivery and every time you go to 30 or 40 or 50 or 60 percent, there’s cause to celebrate. You also draw inventories down.

One thing the employees never had access to was the financial metrics, because they were heavily burdened by corporate overhead. So we started to create our own common-sense financials to tie in with teaching the employees the metrics of manufacturing. Then we taught them the metrics of the business. If you can do both at the same time, it’s perfect because most companies just teach people how to make a product or a service. They don’t teach them how to make a company. If you’re focused on making the company, you have to have great products and services.

Most companies’ processes have a tendency to dumb people down. You always have: Go out there and do a good job. If the company fails, they can’t put two and two together. But if you teach people what it takes to make a successful company, then the products are better, the services are better, because they are totally cognizant of the fact of where the end zone is. Instead of running them from the 20 to 20 yard lines and they’re getting frustrated because they can’t score—when you give them the balance sheet and the income statement, then they know how to score. So we then taught them that and within six months we were smoking.

Kaizen: That’s great. But even so International Harvester as a whole was in deep trouble and heading toward bankruptcy?

Stack: Arthur Andersen Consulting came in and said that in order for IH to go into the next decade, they had to have a significant change of leadership. So in 1980, they started bringing in these whiz kids and hotshots without any industry experience. They came up with an analysis that said: in order for the company to go forward, it really needed to break the UAW. So they took on the UAW.

An ex-Xerox guy and ex-Continental Can guy were the two head guys. They knew nothing about our business. They took the UAW on, and the UAW walked and they stayed out on strike for six months. We weren’t prepared for a strike. We brought in inventories. It was pathetic. We ended up with a tremendous amount of debt. We ended up with 6 billion dollars of debt by 1981—and then interest expense went up to 22%. We were hemorrhaging like crazy.

But here in Springfield we were doing really well. We didn’t strike because we were non-union, so we were doing good. But it didn’t matter because the whole company was going down. IH had to start selling assets all over the place.

Once they came back from the strike, we didn’t change one work role. We didn’t gain a darn thing. It was terrible how many things they were negotiating for that meant absolutely nothing; a very, very bad strategic move. That killed the company. IH had to start selling assets all over the place.

Our people in Springfield were looking at the assets sales and the factory closings and were panicking. They were trying to figure out what was going to happen. They were asking me whether they should get married, whether they should have a kid, whether they should buy a car. I’m questioning the whole concept of leadership. I’m sitting there saying to myself, “Here you are, a bigshot in a small town because you’re working for a big company, but in reality you can’t help people. When the company tells you to shut the factory down, there’s not a damn thing you can do about it; you’ve got to shut it down.”

I could see the handwriting on the wall—that we were no longer part of the core IH businesses—so it was only a matter of time before they were going to take a bullet.

Finally, I just couldn’t take it anymore. I said, “Look, don’t get married, don’t have a kid. The economic reality is we’re not going to be part of this company, and several things could happen. One: They shut us down cold and there are no severance packages. They just let you go in an unemployment market of 11%. Or: They could sell it. Or: if IH did survive and owes that kind of money, it’s going to be a brutal comeback.”

So I suggested that we try to buy the place. I was hoping that they would say “You’re crazy,” because I didn’t know anything about running a company. I knew how to make things but I didn’t know how to make a company, because I was never taught how to.

But this is my mental outlook: This was just a cop-out. I was sitting there saying, “What could I do for these people? I can’t do anything.” I dreaded the fact that I had to lay them off, so I thought if I said, “Let’s try a buyout,” and if I failed at that at least I felt I tried. The employees were so petrified at that meeting they would have followed anybody—they would have followed Rin Tin Tin. So I ended up trying to do an employee buyout. It took me two years of negotiations.

Kaizen: That process sounds tedious, with lots of setbacks. You knew nothing about raising capital investment money at this point, so you were learning everything on the job?

Stack: My first call to the bank—all  I had was a letter of intent—the letter of intent that I wrote the IH company asking them to sell me the place. The guy laughed at me and he started asking me these dumb questions like, “When are you going to pay this money back?” And I went, “Wow, really good question.” I didn’t plan on paying it back; I needed to save the jobs.

Kaizen: International Harvester was asking for about $6 or $7 million?

Stack: I offered them $6 million, but eventually got up to $9 million in two years. The letter for intent was for $6 million and they said, “No, we’ve got to have $9 million.” I got a line of credit for $8 million and a receivable for them for a million, or something like that.

Kaizen: Your debt ratio was huge: You and your colleagues raised $100,000 but had to borrow $8.9 million to buy the Springfield plant. At the time, did you realize it was the largest debt-ratio for a leveraged buyout in American history? What made investors willing to stake you at those rates?

Stack: Well, they saw a lot of assets. They saw inventories. They saw a building. It was a leveraged buyout, so they pretty much felt that they could sell the assets and recover some of the debt. That was what I thought. But then the day I signed the papers, my lending officer wasn’t there because they had fired him for booking bad loans. He didn’t show up.

Bank of America was in tremendous disarray: they had fired their CEO out in California, and they’d fired their president out in New York. They were desperately trying to survive and we got caught right in the middle, and we were very fortunate to get the loan. Because they were getting out of leveraged buyouts at the time, so it was like divine intervention.

Kaizen: How was it for you psychologically taking on that debt and responsibility? Were you scared, confident—both?

Stack: Naïve, totally naïve. If someone told me 89:1, I wouldn’t know whether that was 98.1 degrees body heat. It meant nothing to me. We had a chance. I found later on it was really significant, but we were naïve. We were not afraid.

Kaizen: Who else was involved in buying the plant with you?

Stack: I wanted to make everybody owners; I wanted everybody to have 100 percent. “All for one, one for all” — all these things you grew up with — Robin Hood and things like that. But the bank wouldn’t take all the employees so they said, “We’ll take the management team because we don’t want to chase people all over the United States paying back this debt.” So they took the 13 managers and then I designed an equity formula for them. Then I went to the thirteen and they all chipped in the $100,000.

Kaizen: After SRC Holdings bought the Springfield plant, what was your first priority?

Stack: Well, I felt strongly that I had to drive down inventories as fast as I could. But I was amazed about how stupid we were because I didn’t negotiate an IT contract with International, so I ended up with no computer system.

I had to scramble because the banks were now getting mad because they found out what they had done. So we started this income statement, this manual income statement. I would have a huddle on a Wednesday. We’d get everybody together and forecast for the month what we are going to do.

It was absolutely extraordinary to have this “Aha!” moment: for every single line on my income statement I had a person that was responsible for the line. It was amazing. And then for every line on my balance sheet, I had someone who was responsible for the line. I had spent fourteen years writing job descriptions and accountabilities and going to all these schools and measurements. And here, right in front of me, was the purest form of measurement I had ever seen in my entire life.

When a person says he’s going to sell a million bucks—then somebody buys as a result of someone buying that million dollars—and then someone hires as a result to someone selling that thing. The income statement folds out as nothing more than stories about people—that’s what numbers are. But more importantly, they’re standards that people set for each other.

I came from a world where most of the standards were set by industrial engineers, and you then had to fight with the hourly guy on the shop floor to convince him that you could make that many pieces in that short a period of time. Now all of a sudden, I began to realize that — holy cow — the marketplace sets your standards; people set your standards. Very few people understand that it’s what we say to each other that is the most important thing. Our actions are based on what we see.

So I started to run this huddle, and I started to build financial statements on the walls of the staff room. We’d come in and fill them out every week. We’d fill out what we thought we would sell for that particular month, then what the balance sheet was going to be, and what the cash flow statement was. It was brilliant. Everybody took the psychic ownership. We had transparency. What you had then was peer pressure. But you also had, at the same time, reward and recognition. That was everything that I was looking for. I was looking for stability. Income statements and balance sheets and cash flow haven’t changed since the 1400s. So I had the stability of the financials, but the change occurred with the numbers. And that was what made it entertaining; that’s what made it exciting.

Some people hate change, some people love change; well, here I had both. Sales is always going to be here, profits are always going to be down here, cash starts the balance sheet, equity ends the balance sheet. The irony of the situation is that it hadn’t changed since the 1400s. But what blew me away was so few people knew how to interpret them; so few people knew how to read them.

I began to realize that most failure occurred not because an entrepreneur didn’t have the ability to service or make something: they had no idea of the metrics of the business. So we began to teach the metrics and we appealed to a higher level of thinking in people. We just didn’t give them a worksheet on how to build a transmission. We said, “You’re running a company, and these are the metrics of the company.” All of a sudden, it’s 28 years later, and they’ve just been outrageously successful from that point on.

Kaizen: Your method seems to have three elements: motivation, power, and knowledge. Employees are motivated if they connect working hard to rewards that matter to them, if they have some control over the process, and if they know how what they’re doing fits the big picture. But there’s also an empowerment element?

Stack: There’s a psychic ownership. That’s what you want. You want them to have the ownership of the line. When you go into that meeting and you’ve got to post that line, you’ve got to actually physically walk up and say, “This is me, this is my organization.” It’s very powerful.

Kaizen: It breaks down traditional barriers between management and owners.

Stack: There are no barriers.

Kaizen: Right. People know there is a division of labor and what everybody is contributing. There is a bottom line: everyone knows it, everybody has ownership.

Stack: There are no divisions. That’s the fabulous thing about numbers: it is what it is. Everybody sees it.

Kaizen: In your two books, The Great Game of Business and A Stake in the Outcome, you explain in detail what you have come to call the “Great Game of Business.” Can you summarize its core strategy?

Stack: Here’s what happened to me. I always thought it was crazy that we would lay people off. They’d go out to the parking lot with the pink slip, and that would be the first time they knew that the company was in trouble. It always broke my heart that you had to lay somebody off. You’re affecting families and everything of this nature.

Then I came down here and then I saw the fear in everybody’s eyes about whether they should have a kid during that economic period. I questioned the whole model — somebody working for somebody else. I came out of that hierarchical organizational structure: everybody’s coming from the top down. Nobody ever, ever questioned whether people like working for somebody or not. All the studies and all the conferences and all the degrees that I eventually attained—not one was ever centered around, “Maybe people don’t like working for somebody else.”

When I began to write business plans for the banks, I went to 50 some organizations to try to borrow money because I had a horrible, horrible business plan. Because of the customers I had, nobody wanted to finance International Harvester on a receivable when they already owed 200 banks six billion dollars. So I ran these financial statements. I got angry at the banks. I got angry at the company—because the company never taught me how to run a company. They never taught me how to measure the success of the company, with the idea that 115,000 people would do their jobs and it would work: you’d have a great product, you’d have a great service, you’d have a great company.

So I promised myself that if I got this company, I would really teach people what it takes to be successful. They would never ask again whether they should have a kid or buy a car. If they can understand the balance sheet, they can sit there and say to themselves, “If you’re 89:1, you’re brain dead and you’re in trouble, so maybe I ought to hold things off for awhile; maybe I ought to make some decisions that I didn’t make in the past.” I never found a more honest way of always telling everybody what the condition of the company was. I never found a truer way of letting them know what the company was.

Once I found that, I said to myself, “Let’s change the leadership dynamics.” At the early stages, I was trying to develop an accelerated learning process for them to get it. Remember, I wrote it out 50 times and I got it. Figuring financial ratios, seeing the messages what you have to do, and listening to the bankers, saying, “This is good, this is bad.” I finally began to think like them. I felt if I could do this, then why shouldn’t everyone in the company be able to do it?

They were reluctant at the very beginning and that’s when the idea came of telling people that business is no different than Monopoly, it’s no different than sports. Business is a game: It has rules, it has scorecards, and it has an outcome. Those are the three elements of the game.

I kept thinking that if I could create this game, then instead of having an organization structure that is top-down, we would be working together at fixing the game. We wouldn’t be working at fixing each other. Remember, [W. Edwards] Deming said that the Achilles heel of the American management system is the way the Americans manage. Nine times out of ten, when we have a problem we shoot the person. But nine times out of ten, you’ve got a systems problem. But if you don’t have a system then you go after the people.

So what we decided to do was to use this theory of the game. When we had a deviation or a variance, we said to ourselves, “What are we doing wrong with the game?” Then we’d fix the game.

That became a new leadership platform. People weren’t working for somebody else; they were working for each other first. We broke it down by all of the responsibilities of the financials. Everybody assumed the financials and took ownership of them. They all came together to see what they could do for each other.

Kaizen: This is a revolutionary approach to management: Part of it is not working for other people but working for yourself. And part is that work is not a “living dead” drudgery, as you call it. Work should be fun. Another part is treating employees as people who can understand how a business works and not as cogs in a machine.

Stack: But every time we had a deviation, though, our solution to the deviation was a game. It was not an order. It was, “How do we develop something of interest so that once they fix the deviation people feel like they really created a win?” Then there was the whole conceptual idea of building winners. I saw it on the shop floors of Chicago. Once you got them feeling like winners, they don’t want that to change.

Life is tough outside of work; why make work so bad? Why not feel good? It’s not that hard. It’s small wins, too, not big wins. People will compete for pennies, they’ll compete for pizzas, they’ll compete for margaritas. You don’t have to have that much for them to be able to win.

Kaizen: You also introduced “open-book management” here. What is that?

Stack: For my lifetime, no one was ever allowed to see the financials. Even today, instead of being more transparent, we’re becoming less transparent. We’re not opening our books; we’re hiding our books even more. It’s the most ridiculous thing I’ve ever seen in my entire life.

The whole part of the Game was that they had to understand the scorecards. The first rule is that the marketplace sets the rules, so we spent a lot of time bringing the marketplace to our people. We bring it hard to them twice a year. Who is your competition? What do they make? What are their financials? What are their competitive edges?

We really, really train the people, and then we forecast. Once we forecast, we then ask the associates to vote on the forecast. Do you believe we will sell this much? You have as much information as our sales and marketing people, now you make the call. Is this the financial plan? Once we establish the financial plan, you can either hang it out there or you can live it every day.

The next part is to change the scorecards. Put the financial scorecards everywhere for them to see, and they see what they need to do to improve. If they have a lousy shipping month and it affects sales and builds inventories, then let’s get a game. Let’s figure out what we have to do. Let’s pay attention, focus on it by playing a mini game. We had the Great Game, which is the big game of building the company, to have it sustain over a long period of time. Then we had all the mini games that fix the variances and the deviations, that don’t threaten people.

Kaizen: Let’s turn to the fears and criticisms of open book management. One is that if you open your books to the employees, conflicts arise. What’s behind that fear?

Stack: I used to think the first fear was that if employees saw what the company was making they would ask for more money. That was number one. Number two is that they would think their employees would take their ideas, start their own companies or compete against them, or go to work somewhere else. I used to think that.

Later on in life, I began to realize that few CEOs really understand financials. They’re totally reliant on CPAs; they’re totally reliant on bookkeepers. They farm out a lot of the financials in the operations. They’re totally reliant on lawyers; lawyers tell them not to do it, not to share it. Their family-owned companies never shared their books with anybody else for a variety of reasons. But any downside that I have ever come across the last thirty years paled in comparison to the benefits of open books. There really isn’t a sustainable reason.

I just wrote an article for The New York Times, and I included someone I thought was a skeptic. I called a skeptic up and he goes, “Oh no, I’ve never been a skeptic. I haven’t done it for two reasons.” I said, “What are the reasons?”

He goes, “Well, one is that I’m more afraid of the unknown than the known.” I said, “What are you talking about?” He said, “Well, I’m afraid if we have bad period of time and my people see bad numbers, then they’re going to leave and they would go somewhere else, and I couldn’t handle them not knowing.”

I said, “They know anyways. They know it by your gestures. They know it by your attitude. They know it by the sales. They’re not stupid. You’re making them stupid by not sharing it with them, because they know something’s wrong. And you’re probably scaring them worse because they don’t know. And you’re not exercising the ability for them to be able to help you through that difficult period of time.”

The second one was he didn’t know how to create a fair equity bonus system inside the organization. I said, “Our bonus system is the same for everybody else. We pick one financial ratio inside the company, and then everybody is playing to beat that one ratio. That one ratio comes out of the financial process that shows where you’re weak in the company. You’ve got to have the courage to fix your weakness. If you fix your weakness, then you can go to the next year and then you’re going to have another weakness.” And he said, “Oh, so they all can make 15 percent of their salary?” I said, “Yeah, in good times when they do better than market, they deserve better than market. They can make 15 percent.” He goes, “Oh, well that answers that question.” People just don’t read the book.

I think it’s crazy, because I can’t define how freeing this is as a leadership style. I can’t tell you how free it is for a CEO, especially when I see all the CEOs out there that believe they’ve got to have all the answers, that they are the ones who can solve all the problems. They harbor this fear that it’s their family money, so they deserve all the rewards and feel employees don’t understand the risks that they take and the debts that they have.

Kaizen: So it’s freeing in one sense that you are not quite delegating, you’re outsourcing. The wisdom of crowds; you can trust your people. If they have the knowledge and the power, then it’s going to be win-win.  And it motivates them to solve problems so that it doesn’t all come back to you as the guy who has to solve all the problems.

Stack: I delegate everything. They’re very smart. They’re very educated. They know the pattern. They know it’s their responsibility.

Kaizen: There are critics who claim that open-book management leaves a business vulnerable to competitors. You don’t. Why?

Stack: I never had it happen. We run a conference to teach people what we do. My competition has never been at one of those conferences. Anyways, take the system; it’s going to be tough to duplicate the people.

You know what happens, I guess, is that when you play this Game and you really listen, everybody wants a crystal ball, but you have a crystal ball in your ratios. In the area of profitability, efficiency, and solvency there are maybe 10 to 15 different ratios in each one of those categories. You can get 15 ratios off an income statement, you can get 12 off a balance sheet, and you can get 10 off a cash flow statement. You compare those ratios to the marketplace: that tells you who is best practice; it tells you who are the big players; and it tells you what you can do relative to the practice that you’re in.

Where the courage comes in is that you’ve got to fix the ratio. If you don’t fix the ratio, then over a long period of time it’s going to affect sustainability. So, what we do is have the courage every year when we take everybody’s stories, we consolidate the financials, we compare the ratios to their industries, we find out where their weaknesses are, and we then put the incentive program to be able to fix the weakness. People are incredible; they’ll fix it. Then next year we’ll have a different weakness.

Kaizen: SRC is a big and complicated company—how long did it take for you to work out and fine-tune the Great Game of Business to your satisfaction?

Stack: I don’t think you know that you achieved the results until you look into the past. I think every year is brand new. Even though we do five-year and ten-year plans, and we do them every year. Every year is a new Game; you reinvent yourself again. You don’t realize it’s successful until you look at millionaires who have left the company, and the fact that there are new other people setting up, still having a quality life. Success is something you look at in the rearview mirror.

Kaizen: How long would you say it took you to develop a good pattern?

Stack: I’d say the pattern took two years, when it truly became a pattern. Knowing how many times you have to do it, where it can’t be boring. I think if you have a repeatable pattern, I think that is what creates the accelerated learning. I think culture’s behavior is affected by repetition, repetition, repetition. The idea is that it can’t be boring; you’ve got to figure out how to have a skill where people aren’t bored. If you can work beyond the boredom, then you’re probably going to be better than everybody else in the marketplace.

And so our repeatable pattern is twice a year the marketplace is brought to the people. Once a year they do a financial plan, going on five years as a result of that. We have weekly huddles. Our bonus programs are quarterly. So they know what to expect. In other words, every year we’ve had 58 sales and marketing meetings so far. So they know what to bring to the table, and they get better at bringing it to the table because the marketplace is always changing.

So when our people know that they’re going to have to go in front of all the people in the organization, and they have to make this presentation, and it’s going to be in six months, that means every day, after the presentations, they keep working on making the next one. So they know what to expect. And once it becomes a pattern, and once you’ve worked out all the bugs in terms of whether it’s dull or it’s boring—and that’s what you’ve really got to work on, is to create the excitement, the fun, that really, really thrilling moment where they cross the finish line—then you’ve really got it hot; then you’ve really got it smoking.

You see, what happens here is people just take a piece of it. They come in and go, “Wow, your incentive program is the best I’ve ever seen.” They’ll just put in the bonus program; they won’t provide the education in making profits.

Debt-to-equity was our first critical number — it had to be. So I had to teach everybody how they affected debt-to-equity. I spend one year teaching them debt-to-equity. Well, after one year they got debt-to-equity, and then the next year was diversification, because a janitor told us that all our eggs were in one basket, and he was right.  We had to diversify, so we went on a diversification binge.

People want a crystal ball; they don’t know they have it in front of them. It’s there. The business tells you what you really have to do, what directions you have to take, but you have to have the courage to take them.

Kaizen: Clearly your system has worked. In 1983 you had 120 employees and by 1991 you had grown to 650 employees. How many employees does SRC have now?

Stack: We have 1,200 here and another 400 overseas.

Kaizen: You paid $9 million for the company in 1983, and by 1991 the value of the company had increased by 18,300 percent. How much is the company worth now?

Stack: We’ve cashed out $57 million worth of shareholders, and the company today is worth $83 million dollars. It’s about $135 million from $100,000 but we’ve got 880 shareholders. They all had the opportunity to be owners.

Kaizen: Business Week has called Springfield, Missouri a “management Mecca” because of the thousands of businesses that have come to observe SRC’s management strategies. You also have a website with a wealth of information. What do you most want managers to take away from visiting SRC?

Stack: We really believe that this is our economic strength. We believe also it falls on deaf ears. A fraction of businesses in the United States practice this.

What’s crazy is it that it works. We see it time and time again. Now we’re living long enough where we’re seeing our kids do it. I have two daughters who own their own businesses. I’ve seen my daughters go the traditional route, and then I see them converted to the Great Game. You can tell the differences in terms of the way the business runs and the way they work and the way their associates are tied into the organizations. This is something that we’re giving back to anybody who wants to take a piece of it. It’s just something that we really see as one of the best practices.

It drives you crazy when you see the Arthur Andersons and the Enrons and everything that’s happening in our society today, and you know that it’s due to the lack of transparency. You know that if we were practicing open books those things wouldn’t happen, because too many people know about it. It’s not an inclusive group of people who are called “sophisticated.” There is a phase the SEC uses in terms of sitting there determining whether or not you should have the information or not, whether you are a “sophisticated associate.” It’s pathetic.

GE just had 18 people in here two weeks ago. I was blown away. They brought them in from as far as London, and it was an honor to have GE. One guy had 27,000 people working for him. They got it. I was amazed, they got it. I turned to the guy and said, “Look, if you want to put this as a GE practice, I don’t really care because it’s a very, very sound practice.” It’s one we need in our universities; it’s one we need in our politicians. I just see it as a significant tool in terms of economic survival. Why not teach people how to make a great company, why not teach people how to make a great university? University life is more hierarchical than International was in the 50s and 60s. I served on a lot of boards at universities, and they’re good people, but it’s crazy.

Kaizen: You have received many recognitions for your successes—you’ve won a National Business Ethics Award, been called the “smartest strategist in America” by Inc. magazine, won the National Entrepreneur of the Year Award in 1991, and many, many others. Do such recognitions add to your sense of satisfaction with how much you have accomplished?

Stack: I am the most realistic person in the world and know that in our society we eat our young. I know that I am one DWI away from total disgrace. It doesn’t matter all the things that you have built up because it can end in a heartbeat. I also know that this has really been hard, because it’s one thing to go out and consult—it’s one thing to go out and teach it—but it’s another thing to consult, teach, and then have to live it every single day, knowing that if you blow it inside this company, nobody will buy it on the outside. The pressure has been more of a concern than the praise.

I knew all these guys. I was on Tom Peters’s board, for instance. He’s one of the most brilliant guys you ever saw in your life, but he couldn’t run a company to save his life. I know Franklin and Covey, with the time-management company. These guys can’t run companies! To be able to run a company and practice what you preach is just a pain; it’s painful. You’re realistic, because you’re about a snap of a finger away from failure. You don’t get heady with anything that you’ve achieved.

Kaizen: So it’s one thing to develop a theory, even if it’s a very good theory, but it’s another thing being able to put that theory into practice? It’s another skill set to have both of those and then to walk that walk consistently now for several decades? Do you have a strong set of accomplishment? Is that your primary reward?

Stack: I have a strong sense of when you can take credit for accomplishment, and that’s after you leave an organization and it sustains for five years. This is back to the rearview mirror philosophy.

Kaizen: So that is going to be the test: to what extent is SRC a Jack Stack success and to what extent it is a Jack Stack plus a whole bunch of other people built this thing that sustained. Your big success will be when you leave five years after?

Stack: Right. The goal is to create the sustainability.

Kaizen: What is next for Jack Stack?

Stack: This is by far the best year we’ve ever had in our 28 years. It’s just incredible how well we’ve done this year, in the worst economic period. I can’t believe it. I think the real test of a company is what happened in the fourth quarter of 2008, when everybody was panicking and everybody was trying to figure out what was going to happen.

Yet this company figured out how to position itself for another ten-year run. I was so proud of this company, the way it set up a ten-year run. I have never seen a company set up for a ten-year run where it has only a few things to fix in order for it to be able to make those ten years. I’m in the final tweaking process right now, making absolutely certain. Maybe it took us 30 years to get here, but to be able to see it from a distance over a ten-year period of time.

Kaizen: What has been the best thing to you about being an entrepreneur?

Stack: I think what’s incredible is that when I came into Springfield, Missouri, there weren’t a lot of jobs. What has really transpired is how we have been able to create jobs. We created enough jobs where even our kids can stay in Missouri; they can stay in Springfield. It’s really rare. I’ve got five kids and they are all here and they’re all having grandkids. In 1979, I didn’t think you could find a job for a child in Springfield.

But now to have built this organization that has created this culture that is attracting Fortune 500 companies to Springfield. It’s really dynamic to be able to know that within a three-year period of time we could create 2,000 ancillary jobs around the 1,200 that we have here. That is mind-boggling to see the ability to create jobs.

For instance, we brought John Deere in and then we worked with them on a program. They liked the Game, they liked the people, and then they had the right to buy it out. So they bought it out and put a global operation here. This will turn into like 300 to 400 jobs. There are 250 there right now; that’s outside of our 1,200. We’re now bringing in everything—what is really cool is that we built this economic development program that is really going to provide opportunities for people.

Kaizen: What has been the most challenging thing for you about being an entrepreneur?

Stack: You don’t like to go into places in town where you meet people who didn’t make it at SRC. It’s not a very pleasant thing to do. For whatever reason, they decided to leave. It’s a small community. You’d like to have a perfect record; you don’t always have a perfect record, so you feel bad about the losses that you had in terms of people. That’s probably the most significant thing.

Kaizen: Looking back, what thinkers, writers, or consultants were most influential on your business philosophy?

Stack: I liked Herb Kelleher a lot, from Southwest Airlines. I always thought he was really good. From a politician standpoint, I liked Richard Gephardt. He was the one that took the vote when they were going to impeach Bill Clinton. He was the Majority Whip in the House of Representatives, and he was able to stand up — a tough guy. He now serves on the board of Ford and really has a passion for this Great Game. He was always a big believer in it.

My writer, Bo Burlingham, is probably one of the smartest guys you could ever run across — inquisitive. He came from very high ethics as a writer; couldn’t even compromise the guy. He was always at the truth. He drove me absolutely crazy. I come from Chicago and I could say something and understand what it means, but he could actually break it down into what it really means for someone else to understand it. He gave me a communicative ability that I didn’t really have.

But I’m sure there’s a lot of others. In my early career, I had one guy who was in the Korean War. He was a leader, and he got shot in the war and had some serious injuries. I worked for him for a long time. Anything that I ever did, I didn’t do good enough. As good as I did it, there was always one more step that I could have done. That drove me absolutely crazy. He could communicate in a way that, when you walked away, you just said, “Darn, why didn’t I think of that?”

Kaizen: What was your inspiration to challenge the odds and make American business history? Why not settle for an easier life and do more, say, bass fishing?

Stack: Listen, I don’t even look at the money. I don’t even think that I can take the wealth that’s been created out of this company. I know that I have enough that, if something happened to me, my wife would have an earned income going forward, and that’s about all I really care about. If I sat down and counted, it just doesn’t feel right. I came from a very, very good family; it worked for everything it had, and it was wage oriented. This whole idea of equity is mind boggling. I want people to understand that for every dollar’s worth of earnings they can make it eleven times multiple if they really understood it, but when it comes to myself, I don’t count with money.

Kaizen: Having made your financial goals, what motivates you to continue working hard in business?

Stack: It’s not remodeling, it’s finishing. I’m just trying to finish the picture so that it will be sustainable over that five- to ten-year period of time. Maybe it’s an impossible final act, but I think that I’m about 80 percent of the way there and I’ve only got 20 percent left. That’s the exciting piece of it.

But life deals you some really cruel blows. Until I was 40 I was scared to death. I got raised in a family with a fear of failing. Then you get to 40 and you say to yourself, “Well, the white male life expectancy is 73.” And at 40 you go, “Oh man, I don’t want to go through the next years of my life being afraid.” So you calm down. You try to get a bit more courage. You can start seeing a path through the woods. Then you begin to realize that, in the pursuit of retirement you ask “What would I do if I retire?” You get these unpleasant surprises. Because I was planning on retiring at 40 and saying, “This is it, I’m gone, I’m cashing out, I’m doing things.” Then you go to fifty, and then you go to sixty. Just see what happens when you get there.

Kaizen: About your “finishing the picture” metaphor. You have a vision of what you want to accomplish and you’re 80 percent there, so it’s that drive to finish?

Stack: I have three major projects. I’ve got two joint ventures in process. If the joint ventures turn out as well as our previous joint ventures, that will build a huge annuity for the people in the company. Their balance sheets are really strong right now; they’re just so solid. One is a three-year term and one is a ten-year term. Once we get those things working, the only thing we’ve got to do is replace some business at one of the other factories, and then they’re on that path. Those are the last three things that I think need to be done, and we can transition this thing into a younger organization.

Kaizen: What is the best advice you’ve been given from a mentor?

Stack: One of the higher laws is that you get what you give. The more you give, it’s incredible how it comes back. You can be down to nothing and give somebody a helping hand, or you can give something, and then next week something comes along that you just can’t expect. It’s simple to sit there and say the Golden Rule is “Do unto others as you would have them do unto you.” But the whole idea of paying it forward, giving it back, that’s what’s it all about.

As I wind down, that’s what I keep thinking about now: how do you keep giving it back? This process has been our way of giving it back, and to be able to make it as affordable for anybody that wants to see it, understand it, have it. It’s like the more we give, the more our company is successful.

Which is ironic because one of the reasons people don’t want to do this is they think that someone is going to steal something from them. They don’t understand that when you teach people the business, you’re teaching people debt literacy, you’re teaching people economics, you’re teaching them financial planning. You’re making that person better at home and in their own lives by teaching them what we’re trying to teach here. This is a huge, huge program that affects so many people’s lives, it’s incredible. The dividends are that people look at you as a healthy company. They look at you as, “Wow, I trust these guys.” And that’s very, very important in any business transaction that you do. It’s allowed us to have successful years, successful giant ventures, and successful organizations.

Kaizen: In closing, what advice would you give to young people just starting out in their careers?

Stack: One thing I’ve observed is that if you go to college, that the transition from your senior year to your freshman year—it would be great if you had a dream. Whether it is being on Broadway, running a music store or a retail store, you should definitely pick something you love when you go to college. Then when you’re in college, the curriculum should be centered around teaching that person how to attain what they really love. I watched my daughter go to school with this whole idea of building a retail center to revitalize downtown. Every course she took, as difficult as the course was, was always a reflection of her dream. It was amazing because she struggled in school until she had this dream. So when she went to an accounting course, it wasn’t just accounting — it had a connection.

Build your business plan. My daughter built her business plan for four years in college. She had every professor working for her. It was brilliant. Even when she went to the banks after she graduated, she did her business plan and then went back to the professors again and had them look at it and had them critique it and built it. She did fabulously in college; that was the best time in her life. Not really, because she’s doing fabulous right now. She went from that great period of time. I really think that they’ve got to have some connection. That’s why the MBA programs were built on the idea that you go out in the real world, find out what you want to do in a couple of years, then take your MBA. That’s part of it. But there is this part where we could give them one thing — whether it’s a farm, whether it is a manufacturing facility — they need some substance to be able to draw the knowledge and apply it somewhere to something.

So many kids are desperately moving from one area to another area; they’re jumping around and they don’t have any stickiness. We run an organization that’s for all the college kids in town—it’s a packaging operation where we knock down things and put the kids in. They get the Great Game. They have to do the financials every single week. What’s interesting is now, for the first time, they understand why you do engineering, they understand why you do sales and marketing, and they understand why you do accounting. It’s amazing just to have that income statement, and all of a sudden it organizes their thinking in college. They’re not just taking a course in ethics; they’re taking a course because it ties to something.

Have any dream. Make it up! Be a turtle hunter. It doesn’t matter. But have something to apply your knowledge to. It’s a simple, simple thing.

* * *

This interview was conducted for Kaizen by Stephen Hicks. For more information about Jack Stack and the Great Game of Business, see www.GreatGame.com.

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Kaizen: Where did you grow up in Argentina?

Marty: In Buenos Aires. I went to elementary and high school here and the University too.

Kaizen: Before university, what was your education like?

Marty: Well, I went to school called National Buenos Aires. That’s the oldest high school in Buenos Aires, created in 1770. It’s a public school, but it’s a very prestigious one. It was the first school in Buenos Aires. To enter, you need to pass a very tough test once you finish elementary school. From five students submitting and applying—they accept just one. Our education is divided into elementary school and then secondary school. When I was in sixth grade I tried to pass the exam and I did it, so I was one year younger than the rest.

The Jewish community attends that school a lot. It is a very intellectual community here in Buenos Aires. By the way, you know that after New York Buenos Aires has the second largest Jewish community in the hemisphere.

Kaizen: I have heard of statistics like that.

Marty: Yes, this is the case. The Jewish raise their kids in a very intellectual way. So they like to discuss; they like to argue; they like to read a lot. So those kids really influenced me a lot.

Some of them were leftists and the school was infiltrated by the Left. So most of our later guerilla fighters were intellectually fitted by that high school and they all became Communists or Marxists. Three of my companions were killed during those years by the military because they joined the guerrillas. Just to give you a sense of the climate—it was full of people discussing and arguing, and the professors really motivated you a lot. Most of them with this leftist mentality. But the discussion and the fight for ideas were taken seriously. You felt that you were in the middle of something important.

Kaizen: Excellent. Aside from the political issues, did you feel like you got a good education in other areas?

Marty: Well, my parents both were teachers. My father had books in the house by those who were famous men in Argentina.

My father didn’t force me to read at all, but in the conversations we had he was a freedom man. His mother was half Scottish, half English, and he received that influence, I think. In a way he felt a little bit alienated in Argentina but he transmitted—we were five brothers and sisters—to all of us that feeling in favor of freedom in favor of individual rights. That was part of my education at home.

My mom’s father was French. She raised us to listen to concerts. She was a very sensible woman—she loved to read self-help, how do you call those books?

Kaizen: Yes, self-help books.

Marty: I discovered them through her. I discovered Stephen Covey and all those guys, who treat easy things, but put into them a of sense of life that you need to go for it—impossible is nothing—invent—creativity. All those values.

Kaizen: This was when you were a teenager?

Marty: Right. Hollywood also helped. You go to the movies and you want to be the hero. I think I always had that feeling in my mind: the idea that you are Atlas and you put the world on your shoulders, right? In that way I always felt the responsibility of doing something for noble purposes. You do what you can with that kind of rebel feeling. You don’t want to hear that things are unjust, improper. You feel rebellion against that.

Kaizen: As a young man, did you have an interest in business, economics, and entrepreneurship, or did that come later?

Marty: When you live in a society where you have a dictatorship, like Peron, who was persecuting people—that kind of fascist leader—and you have a commissariat in every corner denouncing the neighbors who would listen to the opposition and would put you into prison—and who is forcing you to become a member of the union if you don’t accept it—that is a Peronist union—they put you into prison—you develop a strong sense of rebellion against that.

I saw my father in danger because of that, because he was in the middle of the opposition. Peron burned the churches. I was very young, but I knew that through my grandparents and my father and what I saw.

The feeling in Argentina was that we had a good country and because of bad ideas and bad influences and bad politicians—we destroyed the country. So, as you can see in Buenos Aires now, you have remnants all around of the great country this country was.

Kaizen: Yes, unfortunately.

Marty: We managed to destroy ourselves.

At the beginning in the political fight, I needed arguments, so I was in the university arguing.

I came under the influence of one cousin who kept telling me, ‘Eduardo, you cannot just pay attention to philosophy and you cannot pay attention to those issues—history—that you like. You need to eat. And in order to eat, you need to be practical. Why not follow a career like public accountant?’

I listened to him and said, ‘Okay. Okay. I don’t feel very enthusiastic about it.’ I just followed it.

Any humanities class I was in at University, I was arguing with the professors, most of them Marxists or Fascists or whatever. I liked those classes. But I was suffering in the tax classes, and I was asking the tax professor, ‘Why taxes? Give me the justification for income tax. Why?’ He would say just don’t ask that question; learn how to—how do you say that in English?—how to fill up the forms, you know, to calculate the tax. Don’t ask, ‘Why the tax?’

Kaizen: Just take the system as it is and fill in the blanks.

Marty: Yeah. Exactly. So I finally got my degree first before going to the states as a public accountant.

Kaizen: So first you went to University in Buenos Aires to get your Certified Public Accounting degree?

Marty: Yes, that is what I am. But at the same time I was learning, because I was arguing at the University as I had with my companions in high school. I needed to have arguments. So I discovered those arguments through the Center for Studies on Liberty and Alberto Benegas Lynch, who was sent to the United States as ambassador, where he met Leonard Read. Do you know who Leonard Read was?

Kaizen: Foundation for Economic Education (FEE)?

Marty: Right. They become friends. And through Leonard Read, Alberto met with Ludwig von Mises and Friedrich Hayek and Hans Sennholz. He invited them to come to Buenos Aires. I went to their lectures, so I met Hayek; I met Milton Friedman; I met James Buchanan; I met Sennholz. I didn’t meet Mises, because I was too young at the time, but he also came to Buenos Aires. And some of the intellectuals really started to give me arguments. My connection to them gave me arguments to fight with at my high school and my university. After one big fight at the University, I was in a big debate and was defending their views against the Marxists and the Peronists.

Kaizen: In formal debate?

Marty: Yeah. I was already very popular among the students because I was defending libertarianism with good arguments. So I became a kind of a leader at my University—a strange man who was saying strange things. Middle class kids from University were saying, ‘Well, I like those arguments.’

But it was a dangerous time because the guerillas were assassinating people and bombing, and the military were fascist. So it was a fight—a battle between people with fascist ideas—the military—against communists who wanted to enslave the country. So you were in the middle of that battle just looking at them saying, ‘What can I do here?’ But during the discussions at the University I become pretty popular. One day Leonard Read sent me a letter inviting me to visit FEE.

During those days I used to read El Burgues—that was a mix of Argentine writers with foreign writers. And you could read once in a while an article from Ludwig von Mises, Henry Hazlitt, provided by Alberto Lynch. He was re-publishing articles from The Freeman here in Argentina. That was my favorite magazine. And The Freeman, at the same time, encouraged you to research—you didn’t have internet at the time.

I was sent to Foundation for Economic Education by the man who recommended me to Leonard Read. Leonard Read gave me a scholarship. I paid my ticket, by the way. But I had one free week in New York—my first trip to the States.

Kaizen: What year is this now? To keep the timeline.

Marty: 1973, 1974. I went there, I learned—I didn’t understand too much. My English was very poor. So I just missed 70 to 80 percent of what was being said. In my high school we learned French and Latin, but we didn’t learn English. So I had very good French but I didn’t speak any English at that time.

I went to the USA and brought back a lot of books. I tried  to read them, but I couldn’t. Most of my successful ideas were through translations; but we didn’t have too many.

Kaizen: You’re back at home in Buenos Aires now?

Marty: Yes. One day I went to a conference delivered by Hans Sennholz. He offered ten scholarships. He said, ‘I’m going to educate ten Argentineans in Austrian economics and they will be the ones changing the country.’ Because I was one of the students going to the lectures I was offered a scholarship. Alex Chafuen was the second one. So we were three liberal guys in the whole of Buenos Aires. We call ourselves the Three Musketeers. The third was Juan Cachanosky, a very good economist. You heard of him?

Kaizen: Yes, definitely.

Marty: He’s not Objectivist. He doesn’t like Ayn Rand, but he’s very Austrian. He’s an agnostic and he’s funny. The second one, Alex Chafuen, is an Opus Dei guy and Austrian, and who at the beginning he was the one who influenced me to read Ayn Rand. But because of his religious views, he’s very, very rigid. But we are still very good friends.

Kaizen: Excellent.

Marty: I went to New York City because of that invitation.

Kaizen: So that’s how that came about.

Marty: Yes.

Kaizen: That led you to attend college at Grove City College, a small liberal arts college in Pennsylvania. How was your experience there?

Marty: Oh, it was amazing because, first of all, my English was very poor at the time. I remember Sennholz picking me up at the airport and telling me, ‘Ed, you are very shy. You don’t speak too much.’ I didn’t speak too much because I didn’t know how to speak.

On a test in the history of economic thought, I answered the questions in Spanish. My professor showed the answers to Sennholz, and Sennholz came to me and said, ‘Eduardo, you lied to me. You said that you spoke English. And that’s why we didn’t ask you to fill up your scholarship guide. We don’t tolerate these things. Unless you speak English in the next two months, and I’m able to test you, you will go back home.’

He was tough but sweet man. He forced me to take lessons with a beautiful blonde girl, very patient, who was just spending time with me, teaching me. And I was learning English and flirting with the lady at the same time. It was fun, you see. I learned my English that way. I was forced to speak with her. I improved my vocabulary a lot. So I finally was on the presidential scholars list with all A’s. And I wrote several essays that won some distinctions there. I had a good time.

But everything was strange. Grove City is 22 degrees below zero centigrade in winter. You have the Amish in the middle of town.

I remember the most important feeling I had there was that you had to choose. Like, you went to the supermarket. In Argentina you can choose from three products. In Grove City you have 1,000. And you said to yourself, ‘Okay, somebody tell me what to choose.’

During weekends, you were being invited for several fraternities and sororities—I didn’t know what that was—they kept asking, ‘Okay, tell me what is the best fraternity? According to your views, what do you want to do?’ This is different people following different interests. ‘What are you interested in? ’ I’d say, ‘I don’t know. Tell me which is the best.’

On the first day I remember going to different classes: ‘You want to become a chess player? You want to do parachuting? You want to be member of the Outing Club? You want to be part of the economics group?’ And I signed up for everything; I wanted everything.

Here in Argentina you feel you have to fight to get what you want. They put obstacles in your way. And they make you feel guilty for just being ambitious. But in Grove City you had all of those people offering you things and being part of different movements, like birdwatchers, and they describe the fact of watching birds in such an interesting way that I wanted to be there. You see? And I was instructed by so many things. I saw a society full of opportunities, full of nice people, not aggressive people.

The fact of seeing the football players—you went to buy groceries and you’re on your way down and there is a little path and you see the football players, twenty of them just throwing balls. Because there were very few foreigners there, they knew that I was a foreigner. So I saw them one block ahead of me. In Argentina the feeling of being teased or being attacked or being insulted would have been a very, very immediate thought. But in Grove City it was, ‘Hello Ed. How are you?’ I thought that they were just kidding—they couldn’t be so nice.

In Grove City they are very, very nice people, very sweet people, you see. People singing in chorus—religious songs. I liked to go to the church—I had always hated church—but I also liked to go to the church because the way the priests were discussing issues in the church, instead of speaking Latin or just saying nonsense. Most of them—they were moral issues; some of them were pretty good, some other ones not.

But the sense of life was different and I felt very, very alike; I felt at home there.

I felt alienated here in Argentina. That doesn’t mean that I don’t like Argentineans; I like my country; I love them. But the idea of feeling alienated in your own society. I would laugh—I used to laugh when nobody else laughed. And I used to look around one day and they were laughing—people were laughing—and I said, ‘What are they laughing at?’ So it’s a strange feeling.

Suddenly you are just in a different society feeling, ‘Okay, they are different because they think differently; they behave differently; but, at the same time, I feel closer. I hope Argentineans don’t read this. But I feel the sense of life is more alike. I feel at home—I feel more at home here than I used to feel at home in Argentina. So I had that alienation feeling. I knew that I didn’t belong there either. I had my history; I had my background; I love my country. So that’s a strange feeling because you don’t belong in any place. Here or there. So I finally discovered that you have some friends in Argentina too—my whole life I tried to find a way to find people and to show people that they are like you and felt the same way—that there is a way to build things and to think differently.

Kaizen: Let’s go back to your academics. Had you already committed to studying economics when you went to Grove City or was it a choice you made when you were there?

Marty: I had just gotten my degree here Buenos Aires. It took me five years. I had the draft in Argentina and I missed one year because of the draft.

Kaizen: The military draft?

Marty: Military draft. One year; I was late for one year. And you couldn’t do any other thing. And I took a year traveling through Europe with my mochilla.

Kaizen: Your backpack?

Marty: Yes. And another year I just read. I studied French and skied around—I love skiing. I didn’t like my career. I finally got my degree when I was 25. Then I went for one year to Grove City. I went to the Sennholz lecture. He said, ‘I offer ten scholarships to study with me.’ He didn’t say, ‘You get to come here to get a degree.’ He had a kind of agreement with UCLA to give you a doctorate degree if you spent one year with him as a special student, participating in seminars and discussions. That was the offer. But when you received that offer, he was telling us, ‘Come to my classes.’ And he was teaching other graduates. And after three months he said, ‘If you get all these credits and pass all these courses, you can get a bachelor of arts degree in economics. Are you interested?’ And I said, ‘Of course.’

After finishing that year and participating in those courses, he offered you the chance to stay one more year with him in his private seminars. So I went to the private seminars at the same time I was doing the university. And I learned a lot with him. But I had to stay and write a thesis and discuss and participate in seminars one more year and I didn’t want to.

He was also offering and recommending us to Israel Kirzner at New York University to follow a Ph.D. program—another four years—or just to stay with him one more year and to write your thesis and to discuss with him and get a Ph.D. degree from International University. Alex Chafuen got his degree there. The other “musketeer,” Juan Cachanosky, got his degree there. I didn’t because I never returned to do it.

Kaizen: So you returned to Buenos Aires at this point in your mid-twenties?

Marty: I was twenty-six, twenty-seven. I returned to Buenos Aires and I was hired by the Centros de Estudios Sobre la Libertad to work for the University of Buenos Aires to teach for the Superior School of Economics and Business Administration. It’s a master’s degree. Despite the fact that I was a public accountant and had a Bachelor of Arts degree in Economics, I was hired to teach master’s degree students.

Kaizen: Well, that’s a tribute to you. It says a lot about you.

Marty: Yeah. I taught at the University of Buenos Aires for ten years teaching the fundamentals of economics, principles of economics, and political economy.

Kaizen: Did you enjoy the teaching?

Marty: I enjoyed the teaching very much. But the University of Buenos Aires is a state-owned firm, you see, with all the liabilities. You are just a number. Nobody in my ten years at the university saw one of my classes. They didn’t know if I was there to teach or if I missed my classes—I still received my salary, a very poor salary. I was teaching a class of 200 students, most of them Marxists. Before entering the class I had to read Property is Theft.

Kaizen: Proudhon?

Marty: Proudhon, right. A big, big announcement. But Sennholz taught you how to discuss. We learned all the tricks of discussion. And he was very good teaching us economics. He was a powerful teacher, great teacher, full of passion in a German way that means that nobody move in the class. You see? And he would look at you. But at the same time, he was pretty Socratic. He asked a lot of questions. ‘Raise your hands. Tell me the answer. Wrong, you have a D.’ You couldn’t sleep in his class. He was an artist. He was a showman with a strong German accent. He was a great teacher.

I had a very good teacher of money and banking, too: Tom Rose, he was a Chicago guy. But I remember the book of money and banking and I learned how the system works. After that I read Murray Rothbard’s The Mystery of Banking [PDF] and I really learned more then what I knew. But Rose was a very Catholic man. He forced us to pray.

Kaizen: Is this in class at Grove City?

Marty: In class at Grove City.

Kaizen: Wow.

Marty: Yes, but guilt keeps your love calm, you see. Take your time to relax. He was very sweet man.

And I remember that we read all of these moral booklets about central banking—against central banking and all the problems with central banking. So I learned about the Smithsonian agreement and Bretton Woods and the history of banking and the history of your federal reserve bank. We learned basic things of Austrian economics, but very well developed. So when I was facing those 200 Marxists in Buenos Aires, I knew how to argue and they kept silent. They respect knowledge, you see. That’s what you see in Buenos Aires.

Kaizen: Had they only heard one side of the argument before? And so all of this was new and if it’s well argued, they are still young and open-minded to some extent?

Marty: And a little bit resentful. This society creates a lot of resentment, you see. The feeling of having been good in the past but not now. So a lot of resentment arises. People want to blame somebody. And remember that this country is populated by the Italians from the south, Sicilians. They need to blame somebody. And of course this is the country where the anti-American feeling is strongest in Latin America. Not on an individual basis, but they need to blame.

Right now for the first time I have the feeling that that Argentines start to suspect that what Fascist Peronists told us was not true. They are starting to suspect it now.

Kaizen: They are opening up intellectually and culturally?

Marty: Oh, yeah. You see that the new books in the libraries are—you have libertarian books in the libraries. Can you believe that? Historians defending the past of Argentina. That’s very unusual. But it will take a lot of renaissance.

Kaizen: It’s an encouraging start, though.

Marty: Yeah.

Kaizen: You’ve also been a professor at universities in Guatemala and El Salvador?

Marty: Yes. Well at the time I was professor at the University of Buenos Aires. I wrote and submitted a proposal to C.I.P.E., Center for International Private Enterprise. They gave me a grant to spread freedom in Argentina. We had a campaign called ‘Why not try freedom?’ following the Leonard Read book [PDF]. I hired my mentors, my professors in Buenos Aires to give lectures about freedom and to tour the country. It was very successful. When I finished that contract, because it was so successful, I was hired to do it in Brazil and in El Salvador.

By the way, through that program, I went to Brazil and right now you see a lot of libertarians there. I’m not saying that it was caused because of our lectures there. But we were influential enough that a group of businessmen in Porto Alegre created the Instituto de Estudos Empresariais and the Institute Liberal. They also created Junior Achievement Brazil. So I think that we next went to El Salvador giving lectures there in the middle of the guerilla war. It was fun. Later I accepted an invitation to Guatemala, where we had a hero there, Manuel Ayau, who recently died.

Kaizen: Yes, just this month.

Marty: Great man, great man. Very influential to all of us. We saw through him what you can do when you are committed. He was an example for all of us. So I was hired to teach there.

But I had applied for a scholarship to go to Washington, to Virginia, to work for the Institute for Humane Studies (IHS) to learn how to develop a non-profit organization. Alex was at Atlas at the time—Atlas and IHS. were working together.

The president was John Blondell an Englishman—he was doing very good fundraising. He taught me how to do it. And I follow him and I think he was very good. He taught me the first lesson you need to learn if you want to sell. If you go to a selling interview, what is the most important thing you have to do? You answer the question.

Kaizen: You want me to answer the question? (laughs) Back to me?

Marty: Yeah.

Kaizen: Well, you have to believe in your product or service.

Marty: It’s not enough.

Kaizen: And show them that it connects to their values.

Marty: That’s 30% of the selling.

Kaizen: That’s only 30%? Okay. This is why I’m a philosophy professor and not in sales.

Marty: What you need to do—you need to listen. You need to try to create a connection with listening. What you have to do—people pay to be listened to. Why am I so happy here? Because I’m speaking of myself. I feel flattered. You get bored after a while, listening to the same guy speaking about himself. But when you go to a selling interview, if you ask curious questions—the type of questions that make the other people feel that you care and it’s interesting to you—that person loves it. And they speak a lot.

Kaizen: Okay.

Marty: That’s the most important trick. So you open him to—he says to himself, ‘This person understands me. He’s curious.’ You trade that kind of dialogue that really helps a lot to get the other person to open. So, of course, after a while, you just keep asking questions and you discover where their interests are. So you need to be an artist and to be quick. But suddenly you just present your own case in a way that is not disturbing to your own values, but in a way that is compatible with his interests. In that way you really improve your chances to close the selling in very important ways.

In the beginning, I was just going to the interviews, saying, ‘Okay, my name is Eduardo Marty, Junior Achievement, this is the fastest growing not-for-profit organization in the world. It was created in …’ —the poor guy got bored as hell. After a while I discovered the importance of asking questions. ‘Who are you?’ ‘Where were you when you were 17?’ ‘How did you develop your career?’ and ‘Are you missing so much time with your family because you’re investing so much time with your firm?’ ‘What’s your favorite sport?’ ‘How did you build this company?’ I learned the tricks and I do it pretty well. In this country we raised two million dollars for Junior Achievement Argentina without any tax deductions. It is a cost for the firms to give you money.

Kaizen: Wow.

Marty: By our standards it’s pretty good.

Kaizen: And you had come across Junior Achievement in El Salvador?

Marty: Later I was hired to give lectures in El Salvador. The class was in a Sheraton hotel in San Salvador. And you saw the helicopters bombing and you were teaching and you heard bombs—voom! And you stopped teaching and said, ‘What the hell is this?’ And they said, ‘Don’t worry, this is the six o’clock run.’ Another one would come in one hour. It was pretty dangerous.

Kaizen: Oh my goodness.

Marty: When they were—when we went to the airport they, the people who hired us, came to the airport and they put us in a van with dark windows and they forced us to go to the floor. Just to resist any attempt. We were teaching under those conditions.

But I discovered a small group of students in El Salvador who were very entrepreneurial and very funny. I said to myself: ‘Very well organized kids, 17 years old selling goods with such enthusiasm.’ I asked them, ‘How did you learn this? Who’s telling you what to do?’ et cetera. They told us they were part of Junior Achievement.

So when I finally went to the States at I.H.S., I started to research Junior Achievement. And John Blondell and Marty Zupan told me, ‘If you are interested in Junior Achievement and learning how to build a non-for-profit, why are you going to a think-tank? Or are you going to organize Junior Achievement in Argentina?’ That was a tough decision.

Kaizen: So that’s when you to decided to start Junior Achievement when you came back to Buenos Aires?

Marty: I went to a couple of board meetings at Junior Achievement in Fairfax, Virginia. I saw a man, I think he was the president of Arco. I was in the middle of a board meeting trying to learn—trying to understand—what they were doing and he said, ‘Sorry guys, I have to leave, I have to give a class.’ And you had a man running a $4 billion company with 2,000 employees leaving a board meeting and going to teach a class for Salvadoran immigrants. It was so crazy for me: a wealthy businessman going to school to teach.

So I asked him, ‘Why are you doing this? In Argentina it would be unthinkable. A man like you just teaching a class.’

He said, ‘Because if I don’t teach these kids the process of wealth creation, they will think that I am making money at the expense of my workers, my consumers or whoever. They will believe in the exploitation Marxist theory. So I have to teach them that wealth can be created.’

And he said, ‘Do you know why you are poor in Latin America?’ I said, ‘No, why are we poor?’ ‘Because you never understood that wealth can be created. You think in terms of fixed wealth. And when somebody makes money it is at the expense of somebody else. You know why in Africa they are poor? The same reason that Bono thinks …’—what is the name of the band with Bono?

Kaizen: U2?

Marty: ‘He’s always asking for donations for Africa. And that’s exactly the opposite you have to do, right? You need to teach principles instead of giving away money.’

Kaizen: So, active wealth creation rather than passively receiving a hand-out.

Marty: He convinced me.

And he said another thing: ‘Eduardo, people don’t understand abstractions. People understand practical things, and once you build their self-esteem they can understand your ideas. It’s really very tough to teach ideas if people don’t process those ideas. In order for them to process the ideas, they need to have to think they need to have a sense of efficacy.’

Edward Hudgins told me that too. I’m just mixing arguments here. But you know Edward Hudgins?

Kaizen: I do know Ed Hudgins.

Marty: He’s a great, great intellectual. A very sweet man too. He had an influence too. He told me that if you never have a sense of efficacy, you don’t trust your mind. And if you don’t trust your mind, you don’t process information. You ask your neighbor what to do. So you need to build that. And in order for you to build that, you need to exercise yourself. And how do you exercise yourself in taking decisions?

You need to force the kids of your society to take decisions. But you’re in the middle of an educational system that rewards repetition. You repeat the lessons that are being taught by your teachers.

You know when was the first time after high school and the University in Buenos Aires—the first time I wrote an essay in my academic career was at Grove City. When they asked me to write an essay, it was useful for me. You know how to write and they were correcting—in Latin American terms, you put a lot of adjectives.

I remember the first essay I wrote Sennholz told me, ‘This is bullshit. This is shit.’ He said, ‘Full of adjectives. You are not describing facts. You need to learn grammar.’ And I was really good at grammar but it was full of adjectives—Latin style, you see.

Kaizen: To get to the subject.

Marty: To go to the subject, prove your point, be objective. And he told me, ‘Words are like …’—how do you say this in English?—like … tools when you operate.

Kaizen: Surgical tools?

Marty: Surgical tools. When you use a word you need to learn how to define it. You need to have the exact meaning. Don’t use ‘grey’ terms. Sennholz was very good for that, you see. He was forcing you to define your terms. Law. What is the law? Value. What is a value? He was very good forcing you accept ways—to define your terms. You can’t find that in hermeneutics, you can’t find that in modern philosophy, right?

Kaizen: (Laughs) There you find a lot of adjectives.

Marty: (Laughs)

Kaizen: Let’s go back to Junior Achievement. After these inspirations and getting the idea you came back to Junior Achievement. What did it take for you actually to launch Junior Achievement in Argentina?

Marty: A lot, a lot. I contacted Junior Achievement in Colorado Springs and I went there.. They have one of the most beautiful offices on a valley; it looks kind of like a John Galt valley. In Colorado Springs they have the valley there in a rock—in a mountain—they have a building, a glass building, that looks at the valley. An incredible view.

Kaizen: Oh, yes, Colorado Springs. It is beautiful.

Marty: But the building Junior Achievement has is a fantastic building. I went there and met a man called Sam Taylor. Uncle Sam. A man full of energy, full of passion for life. He’s more conservative but his view of youth and how to influence youth is simply fantastic.

He told me, ‘Eduardo, if you want to start Junior Achievement Argentina, what you have to do is go back there and show me that you are able to raise funds. You told me that you are being trained in fundraising. So go there and do it.’ But I said, ‘In Argentina I don’t know any businessmen. I’m more a kind of intellectual.’ ‘Just do it,’ he told me.

‘Impossible is nothing.’ He showed me those sentences that are part of Junior Achievement culture. Just do it’ was taken from Nike and ‘Impossible is nothing’ is from Adidas. They were all sentences of Junior Achievement companies. You saw the signs in the 50s and the 60s in the States—just the signs in the Junior Achievement classes.

I went back to Argentina—that was in 1990. I started to see businessmen. And, of course, it was very tough: ‘Why should I do this?’ ‘Are you asking me for money?’ ‘I’m just paying my taxes. I’m not getting any deduction.’ ‘You want me to get involved with education. Give me one good reason why.’

So I said to them: ‘You need to invest in the framework, you need to invest in the lake where you fish. If not, one day they will take your firm as Chavez does in Venezuela where they expropriate your gains and they tax you a lot. You need to invest in ideas and you need to invest in the new generation for them to defend freedom.’ I did well, I think. But it was very tough.

The first year I raised $50,000, so I had to put in my own money; I didn’t get any salary for one year and a half.

And I got a divorce for that, I think. Well, you see, women tend to understand well this kind of odd twist of altruistic-kind-of-selfish mix ideas. So you just postpone your family ideals, etcetera. I have a great relationship with her now, but it was a very tough year for me to start Junior Achievement.

It took me two years to get out of the ground. But we started just little by little. And the purpose of Junior Achievement was giving the Argentinian kids a sense of efficacy and sense of accomplishment. Building their self-esteem. In a country with an educational system that they don’t get it from. They are alienated.

Kaizen: What kind of programs specifically at the beginning did you start to put in place to help build a sense of efficacy and business skills?

Marty: Junior Achievement is a company where you challenge the kids to create wealth. You ask them, ‘Do you have money?’ ‘No, we don’t.’ ‘You have raw materials?’ ‘No, we don’t.’ ‘Do you have capital?’ ‘No.’ ‘What do you have? You have a mind. You need to mix your images and your work skills with the raw materials. Whatever you can get.’ And you can always convince people to trust your projects and ideas for which they have already formed capital.

The Junior Achievement company is a challenge of fifteen weeks where you ask the kids to create a product, to produce the product, to market the product, to sell it and to compete. When the fifteen weeks are finished, they share the dividends among the stockholders and they write a report saying: ‘We created wealth with our minds.’

Kaizen: Nice.

Marty: When they see that—when you see a kid come in with a check from a product that they sold and they see they can get money out of their minds, that’s a fantastic transformation. That kid is not the same for the rest of his life. He gets a feeling of ‘I can do it.’

Of course, it is not enough. If you don’t teach ideas and principles, it’s not enough. But I think it’s the basics for him to understand and to accept freedom ideas. That’s why you cannot just go teaching Hayek and Mises to Africa. They will never get it. But after they have just been through a Junior Achievement company and they get that feeling of accomplishment, they open up. They are more equipped to understand how the process works. What you need is to recreate that kind of self-esteem as a sense of efficacy process. In countries where the educational system is taken over by the Marxists, you need to open the window, to allow some fresh air to enter.

Kaizen: Right. So the two things that Junior Achievement programs emphasize are, on the one hand, the business skills—this is how you come up with the idea, implement it, market it, and so forth. But on the other hand you’re emphasizing the character that goes into building a sense of efficacy and accomplishment.

Did Junior Achievement have ready-made programs that you could adapt to Argentina on the curriculum side?

Marty: I translated them and I adapted them. And we created programs in Argentina that right now are being taught around the world. Citibank here asked me for a specific program for them. We created Banks in Action. I had read a book, The Mystery of Banking, and I created a book and program called the Battle of the Banks. Citibank Group found the title very aggressive. So they changed the name to Banks in Action.

We teach kids how to operate a commercial bank through a simulator that was built by Harvard University in the States. We went to Harvard and we asked them to create that simulator just to teach the kids the importance of thinking in terms of the risks of a banker—the importance of assigning the savings you get in proper ways.

Kaizen: This is all supplemental to the standard school curriculum?

Marty: Junior Achievement works in this way. You get money from the firms; you get volunteers from the firms. You also go to the Ministry of Education and you convince them of the importance of allowing your courses into the curriculum. Because Junior Achievement courses are short, you can always convince the principals to give up some time for you to come in with Junior Achievement courses.

It’s not an easy task, especially in public schools—they resist us. The unions resist us. Unions in Argentina have destroyed the country. We have a legislation copied from the Mussolini labor laws. The unions here are …

Kaizen: Did they literally copy the Mussolini program?

Marty: Yes, exactly. It is the same. We have the Mussolini labor laws. That is why there is such unemployment in Argentina, because they are always raising the minimum wages and you have big unemployment and any unskilled worker cannot get a job. That happens a lot.

Kaizen: So you’re developing the curriculum. You’re raising the capital. You’re dealing with business people, dealing with government administrators, unions, the principals . . .

Marty: Convincing the firms to give you volunteers—volunteer time, not just money. And you train them and you put them in schools. So I think you can have several influences: you can influence the students, you can influence the educational system, and you can influence the businessmen.

In this country businessmen are getting subsidies, credits with lower interest rates than the market is saying, and getting protection through tariffs, et cetera. They are always loving the government to get privileges from it. They have a very, very strong influence. So Junior Achievement allows you to get into the firms, to speak with the CEO, and give him your reasons. I think probably Junior Achievement has a lot of influence. You make CEOs feel the importance of just working for the long-run, not to get a privilege in the short-run because you suffer the consequences. It’s not easy. I really have the feeling of 50% of the responsibility for problems come from businessmen.

Kaizen: Okay. So it is a whole mind-set about how to do business that has to change.

Marty: Oh yes.

Kaizen: When you started Junior Achievement, how successful did you expect to be in the early years? Did you have benchmarks? In hindsight you have been very successful. But going into it, what were your goals?

Marty: I really—I just did it.

Kaizen: It was an experiment to see how it would work?

Marty: It was an experiment to see how it would work. And remember in this country the focus is always trying to survive. I was an educator and I knew that as an educator I was not making a living, so it was a very good way to enter into the business community, to find opportunities and be influential in terms of what you want to do. I was experimenting.

After twenty years I can say that I don’t know if I could do it again. I love what I do, but it’s tough. You see, it’s very altruistic. I left part of myself. I am proud of just leaving an institution after me. I know that the country will stay with Junior Achievement. Right now we have six offices, and I plan to stay with Junior Achievement five more years. I think I will leave the country ten offices. We’ll be reaching around 100,000 students in five years. I think that’s pretty good influence.

But it was tough. My expectations were just to influence a mass of young kids in proper ideas, just showing them sense of efficacy and, if I could, some free market ideas.

Kaizen: So, currently, about 70,000 students a year go through the Junior Achievement program?

Marty: Not in this decade. We did that many in the 90s with Carlos Menem. He was a more open, free-market president. After this crisis and the American crisis in the early 2000s, I got a lot of donations coming from American firms operating in Argentina. And after the crisis in Argentina they revalued the country’s currency in lower terms so donations coming from what they call ‘social responsibility’ are lower now.

So this year we’re probably at 45,000 students. But at the same time we are trying to develop a line to education to reach more students. That’s a process I think will help us reach more students in the future.

Kaizen: As you grew Junior Achievement, did being a manager and leader come naturally to you, or was that something you also had to work at?

Marty: No, no, that didn’t come naturally, no. I’m more a kind of professor; I like to teach. I hate administrative tasks. I’m not very good building a project. I think if I put my mind to it, any rational human being can do it.

Kaizen: This is a trained accountant speaking.

Marty: Yeah, but remember that I have my training in accounting because at that time all the humanistic careers were taken by the Marxists. So I finally preferred to learn some technical things.

Kaizen: So budgeting and administration is not something that you enjoy doing?

Marty: No, and human resources are very important. I’m reading right now about Steve Jobs—that’s a fantastic book. I recommend you read it.

Kaizen: What’s it called?

Marty: Inside Steve’s Brain. It’s a new book, but very well written. It shows you how to really—the importance of certain aspects of managerial skills that you need to develop in a firm. I think it is very good. And I do need to be a bit of a dictator, I think, in a firm. Of course you need to listen; of course you need to encourage participation, but I’m too sweet with my workers. I’m very much easy going. So they love to stay in Junior Achievement.

But at the beginning, just to give you a panorama, I had forty-five employees. Right now we have sixty employees in the whole country. And with Junior Achievement just in Buenos Aires I had forty-five in 2000; now I have ten. With ten people I do more than with forty-five. So the importance of having very low costs in your infrastructure—don’t have more workers than the ones you need. And to become more efficient is something I learned in a tough way, you see.

Kaizen: That’s the dictatorial element coming in there?

Marty: Yeah, you need to be tough. You need to protect your savings; you need not waste money; you need to lower your infrastructure. If you start an organization and if, instead of renting one floor, you rent two—instead of renting ten employees, you rent twenty—you’re in trouble. Fixed costs will kill you. Now I’m more efficient. I learned in tough ways.

I think that anyone starting a not-for-profit organization or think-tank or whatever should learn the importance of just not wasting one penny in infrastructure, in extra salaries that you don’t need. And the importance of hiring smart people.

Kaizen: Absolutely.

Marty: When you are new in management you try to hire people who don’t threaten you with their intelligence. And you pay the costs for that. Right now I always try to hire people who are smarter than I am. I see them as more skillful. And I resist the feeling of being threatened, you see.

Kaizen: Let’s come back to Argentina’s economy. Poverty rates have been very high since 2001-2002. Has Junior Achievement helped in offering students a route out of poverty? Can poor kids find more value in Junior Achievement programs than standard kids?

Marty: Yeah, but remember we get those kids when they are very young—sixteen or seventeen. We give them a sense of life and different options, but we are too small to have a really strong influence right at the moment. I think we do it, but remember it’s still a country of more than 40 million people and our courses are short—four weeks, five weeks, fifteen weeks the most important ones. But still I think our influence is very limited. That doesn’t mean that we don’t have any influence, but we will see it in the long-run, not the short-run. I think that the country would be worse than it is now. I like to think in terms of we have our influence.

You see, we don’t have Hugo Chavez. Our president, Cristina Kirchner, has the same intelligence as Chavez, but she’s facing resistance. And I think that resistance is coming from the middle class, from the media, from any well-born people and I think we have our influence among these people to resist this type of bad guys.

Kaizen: Do you have any hard measures of Junior Achievement’s success from the number of students who have gone on to start businesses or who will get in contact with you and say, ‘Yes, I wouldn’t have done this if it wouldn’t have been for Junior Achievement’?

Marty: We have our numbers, and we have what we call NEXA, Nuclear of the Ex-Achievers—they stay in touch with us. We, of course, have our polls where we see how much they learned through our courses. But through NEXA we keep track of some achievers and follow them. It is very expensive to keep track of kids who were in your program courses. But through NEXA we know about a lot of them who have become millionaires and they thank Junior Achievement.

Last month I was in a party I was invited by a former achiever, Pablo Lagoa. When we were in—just one o’clock in the morning we had a cake, singing happy birthday, he just stopped and got a microphone and said, ‘All of you who are here’—and there were fifty kids who passed through Junior Achievement courses—‘I invited you because this is a tribute to Junior Achievement and the influence of this organization. We are all millionaires, and we were inspired and we really understood the process of wealth creation and how to start our own business through Junior Achievement. So this is the importance of your courses.’ I felt very rewarded by that.

Kaizen: Very nice.

Marty: The Ministry of Education tolerate us and probably because they don’t know very much about what we do. We are kind of spice in the educational system; we infiltrate the system. I hope they don’t read this, but it’s a kind of infiltration of the system, because they don’t know too well what we do and because the system is so bad that any innovation helps so the principals welcome you—because they need to create a kind of interest for the kids.

Kaizen: Would you say it’s more important for Junior Achievement to keep connections at the local level with the principals and school districts than at the provincial or national level?

Marty: Completely. You to enter the system just doing connections locally, yes.

Kaizen: You’ve spoken about Argentine culture in general. Do you see advantages there with respect to entrepreneurship? Things that can be built upon? Inheritance from Italian or Spanish heritage?

Marty: Yeah, well Italian blood here—they are very much entrepreneurs. They like money; they like to create things. And because we are trained in obstacles, we are very pushy. If you see Argentinians abroad, they succeed because they are very well trained in obstacles.

So I think the entrepreneurial spirit is strong. I could say that the minds work pretty well in technical ways.

What doesn’t work here is the framework, the altruistic, the church—Catholic Nationalism really hurt a lot Argentina. The idea of the ‘common good,’ Rousseau and the French influence: the common good against the individual greed.

Kaizen: So you also have a top-down intellectual framework that discourages individual initiative in many respects? Also, Argentina has high rates of poverty and a sense of resentment, as you mentioned earlier, that is a cultural obstacle.

Marty: We receive a lot of immigrants coming from Bolivia and Paraguay and Peru, and there is no restriction at all. With the minimum wage laws, they don’t get a job in the formal markets so they work in the black markets.

Another thing that hurts Argentina a lot—this is a big country and it’s very unpopulated; it’s empty; so full of land. But if you have property and you want to divide it and to sell parcels, you face the obstacle that the government is forcing you to invest a lot of money before doing it. You need to open roads; you need to put electricity and you need water.

Kaizen: So infrastructure?

Marty: Much infrastructure is needed. Poor people don’t have access to that.

And because of inflation—we had hyper-inflation ten years ago, twenty years ago—always inflation—you cannot get a loan. And if you get a loan, it’s for one or two years. You don’t have a thirty years loan like in the States for a mortgage.

Kaizen: So you won’t have long-term investment or long-term research and development.

Marty: Right. There is no way for you to buy a house. So all of those people just get fiscal land and they enter there and it’s a mess. You have the favelas in Brazil, you have the villas miseria here. You have twenty to thirty percent of the population living there in a very small space. What kind of habits can you develop there? You have crime and all types of terrible things happen there.

And the government, this populist government forments that because they just give subsidies to them—they buy votes. And you have right now three or four million immigrants living in very poor conditions—and they are allowed to vote after their first year here. So the whole country becomes a mess that way. It’s very, very poor.

I’m in favor of free immigration, but with certain rules that you need to get a job and you need—you cannot get welfare—like this government is doing and allowing any immigrant to come. But we are subsidizing them, paying taxes, you see, and you create hostility from the residents to the new immigrants. The whole system calls for this kind of internal war.

Kaizen: So many educational obstacles, indoctrination, political obstacles, legal obstacles …

Marty: Yeah. Many regulations. You read Hernando De Soto, from Peru?

Kaizen: The Mystery of Capital. Yes.

Marty: The same obstacles you face in Lima—you face them here.

Kaizen: Right. There’s a multi-dimensional study—in terms of ease of doing business, Argentina is ranked 118^th out of 183 countries around the world. Though in some things Argentina seems friendlier: it ranks as high as 49^th on issues like protection of contracts, which is a good legal indicator.

Marty: The sense of life is better than in any other Latin American country. The culture is better. And you can trust people giving you a vaccine in a drugstore. The entrepreneurial spirit is good but it is full of regulations, inflation, taxes—the Mafia-feeling of people just invading your business and telling you, changing the rules so you feel very insecure.

It’s not like Egypt: contract law is not like much of Africa where somebody can take your property, but two percent of the properties of the houses in Argentina are taken by immigrants who find a way to enter your property because it’s empty for some reasons; in order for you to get them out, the justice system takes one year.

Kaizen: That’s a squatter’s rights issue.

Marty: Yes. So you don’t have the feeling of being protected. And, of course, for insecurity, the people living in the suburbs suffer a lot of insecurity. The police are corrupted, so you don’t feel like somebody’s protecting you.

Kaizen: On the positive side of the ledger, are entrepreneurial areas that Argentina is doing well: Telecommunications? Transportation? Banking? Other promising sectors?

Marty: Some infrastructure is good. Access to the Internet is good because you don’t have regulations. It’s a free system and it’s blooming. It’s full of smart people like in India, another feudal country with obstacles. So smart young kids enter there.

The food industry is our main asset. Argentina could supply food for 400 million people. And being a country of only 40 million we could be feeding, I don’t know, 8% of the world. There are competitive advantages for food in Argentina: fantastic flat surfaces and great food producing.

Kaizen: So the agricultural sector is strong.

Marty: I own a farm here. When I want to get away from Buenos Aires, I just drive like forty-five minutes. And through your seed you have your tree and you have your plants and the soil here is fantastic. The cows here—you don’t need to protect your cows in the winter. The weather is cold enough not to have too many insects to hurt your cows and your sheep. So the competitive advantages of Argentina—this could become a great food country.

You also see innovations in agricultural technology in Argentina. Customers come from Australia, they come from Africa, and they come from the States, from England to see the new machines that are being built here for the farms.

Tourism—the country is very pretty. You have the woods in Patagonia, the lakes are like in Canada. The ski resorts are fantastic. You can fish in our lakes feeling that you are Robinson Crusoe out there. And you have the falls in the north.

The Internet could be very, very good. It’s full of opportunities, if we allow the Argentinians to create.

Kaizen: So the three you singled out are the Internet, agriculture, and tourism.

Marty: Add to that mining.

Kaizen: Mining?

Marty: You see, in the middle of Argentina you have the Andes; they are the highest mountains in America. The Chileans really export, probably, I don’t know, 30% or 40% of their exports come from the mining. And it is the same mountains. In Argentina mining is unexploited because everything under the surface belongs to the state government, and they are always putting up obstacles to mining. But there are big opportunities.

A lot of Canadian firms are here, but they are being forced to deal with the governors and to tip people, so they are always insecure. To invest in mining you have to invest a billion dollars. And if you feel that somebody can just come expropriate you, you think twice.

Kaizen: Or you don’t think about it at all.

You’re also on boards of Junior Achievement in several other Latin American countries. Paraguay, Chile …

Marty: No, that’s not the way—I started the Junior Achievements in those countries.

Kaizen: Ah, you started them too.

Marty: Yes. I went there. I went to Brazil; I went to Chile, Paraguay, Colombia, and Spain.

And Cuba, by the way. Sam Taylor took me to Cuba. I worked five years in Cuba. They have my pictures in the window of the immigration office in Cuba. I’m not allowed to get in anymore. Five of my JA professors in Cuba went in prison. They were released after one day, but they were taken by the police and kicked out because they were teaching entrepreneurship in Cuba. But I started Junior Achievement there: I helped to raise funds and I trained the people.

And I worked in Spain for two years with JA.

Kaizen: Is Argentina’s situation unique? Or do the other Latin American countries have their own advantages and disadvantages—can we go through them individually to get your impressions?

Brazil is a success case in the last decade or so. Does its entrepreneurial culture help there?

Marty: I think its businessmen are healthier. The businessmen don’t try to get government advantages all the time. They are not just going to the visit the Secretary of Commerce to get advantages or to gloat. From that point of view, Brazil has it better than here. The sense of life is similar.

From that point of view, probably, the libertarian movement has stronger views in Argentina than in Brazil. Right now Brazil’s economy is very good. That’s a country that is blooming from an economic point of view. But in places where the businessmen are rich and the people are poor—that’s from feudal laws.

Kaizen: How about Chile? Is it similar in Chile?

Marty: No, Chile is a freer country. You have free trade in Chile. You pay 5% taxes to import or export, but it is free. You see good cars in Chile for a very cheap price. And you have to compete in Chile if you want to make money. That’s not the case in Brazil. Brazil is like Argentina.

Kaizen: You’re saying Chile has less political entrepreneurship or less of a culture of business in getting advantages through the state?

Marty: Yeah. But in Brazil the situation—they are more successful in monetary terms, but they are not good at all in terms of just being a free country.

Kaizen: Chile is also famous for its social security reform that has been very successful.

Marty: Yes. We had one here, but the government didn’t allow them to operate. Right now pensions belong to the government again. They got the money. All the savings were taken by the government. That’s the type of message this government is passing to investors. Invest here; we’ll take your money later.

Kaizen: Ouch.

In North America we hear less about Paraguay. Any special challenges or opportunities there?

Marty: Well, the situation there is that I think the state of the culture is lower. Again, you have feudal lords: people are getting state privileges and rule of law is still more insecure. Nice people, smart people, nice country. But again they are in the hands of a dictatorship, a guy with very, very low morals. They are elected through democratic rules, but they are kings—they do what they want. And the middle class is not so strong. So they are just in the process of becoming—we need to encourage—they have right now a very good libertarian movement; small, but it appeared, and they are already fighting, little by little. The ideas of freedom have started in Paraguay, and that’s a very good step forward.

Kaizen: Excellent.

Marty: In Chile for years you have several freedom institutes. They have a tradition of freedom in Chile. And you have a tradition of freedom in the south of Brazil. But not in the north, not in San Pablo—they are feudal lords. But Brazilians are—the state of the culture is better, I could say, than in Paraguay than in Bolivia.

Kaizen: Right. Most of what we hear about Colombia in North America has to do with drug wars and so forth. Are things healthier now in Colombia now that things have settled down there?

Marty: I think that with President Uribe, things are better in Colombia. I find him very, very good, and he really fought the guerillas in a very good way. I think that they are better. I think Colombia, if they win this battle, they have a good future. And a very cultured country too.

Kaizen: To come back to you personally. You seem very energetic and to make things happen: You went to a foreign country to go to college; you developed a successful academic career in several countries; you started an organization that is now national in scope. Where does all of your energy come from?

Marty: I think from my family. When you are born in a family that loves you and you get that warmth of your family—at the same time my mom was very ‘The world is yours, Ed. You can do what you want.’

I saw Braveheart, and I loved movies that tell you that you can do whatever you want to do. So I was raised with that spirit of ‘You can do it.’

Of course, you face the fear later when you see that life is tough, but that energizes you. I think that when you have good things to accomplish, and you know that you have your fire inside, because in your home they had that confidence in you and they loved you and they made you feel good.

My mom kept telling me, ‘You are the best. So just go for it. And do it.’ Whatever. Five brothers received that love and it encouraged you a lot.

And at the same time, you enjoy life. Despite all the difficulties, I just love my kids; I love to go skiing; I just love traveling. Facing the difficulties: that’s life, right?

Kaizen: It is.

Marty: Yeah. I think I got that energy from my mom. She was an adventurer. She was a romantic woman. She loved music.

Kaizen: Yes.

Kaizen: What’s next for you? You mentioned perhaps another five years with Junior Achievement. You’re still young.

Marty: I think I still have about twenty years to go. And I plan to work all my life, because I enjoy doing it. That’s something we teach our kids—the importance of mixing love for what you do with your work. You need to enjoy what you do. If not, life is very, very painful. Right? I would like to dedicate more life to the fight for ideas now. I believe in the importance of mixing entrepreneurial activities with ideas, with art.

Kaizen: Art?

Marty: I love movies. I think they are very important. You have M.P.I., the Moving Picture Institute, in the States.

Kaizen: Yes.

Marty: I think that through a movie you can invigorate kids a lot. You can show, you can teach principles and good things—and create discussions.

So I would love to organize a kind of liberal arts college to get all of those clients coming from Junior Achievement high school and wanting to follow an entrepreneurial career. I would like to create the kind of school where you could come to learn how to dance, how to interpret music, to listen to conferences and to discuss with the best minds on the world. To bring David Kelley here and discuss epistemology and run discussions with philosophers on the subjective and objective theory of value—your lecture. And to discuss these types of things. I think that if I could create that kind of atmosphere or debate in my last productive years, I could feel very fulfilled.

And I love to travel. And I love sports. I would like to live to at least ninety-two, so let’s see if I can do it. (Laughs)

Kaizen: Looking back on your twenty years now with Junior Achievement, what’s been the most challenging or difficult thing for you personally about making that happen?

Marty: I think it’s the money issue, right? In order for you to convince people to—I like better, instead of just going—I like the type of setting where the client comes to you. Where you just show your products and if they want, they come to you. This idea of forcing people to listen to your arguments for them to give you money to do something is a little bit more aggressive. I don’t have that temperament. I hate to do it. But I had to learn to do it.

That’s why I want to start right now a kind of school where students come to me and they pay for it. Instead of just going to businessmen who I don’t know how interested they are in investing and understanding this. I do it, and I do it very well. From each—five times I visit a businessman, I get money from two of them at least. So, I’m very persuasive. They look at me and they say, ‘I know. I’ve got to invest some money.’

But I try to reward them in a way. Businessmen like to belong, like good environments. I have a beautiful golf tournament that is probably the best after the Open of the Republic. By the way, you know there are 300 golf courses around Buenos Aires.

Kaizen: I did not know that.

Marty: It’s the third country after the United States and Japan. The weekends here in Buenos Aires are empty—people leave, because you have 750 country clubs.

Kaizen: Wow.

Marty: Black money—escaping taxes. And being persecuted now. And you have all these golf courses around, and some of them are very, very good. Everybody escapes the city because this is so stressful and full of politics.

So the most challenging thing is convincing the businessmen about the importance of investing in the framework—in the lake. I call it the lake.

Kaizen: Right.

Marty: You fish. If you fish, then keep the lake non-polluted in order for you to keep doing it. Understand how the system works. They think because they know how to make business they understand political issues. They don’t. We need to educate businessmen because they are influential people, because they have money. So many people look at them. They are the ones saying Ted Turner’s thing—your businessmen and some of those doing things that are not right, you hurt the system, right?

Kaizen: On the other side of the ledger again, you’ve received many awards for the work you’ve done with Junior Achievement, and you’ve made a lot of friendships. When you look back, what gives you the most satisfaction?

Marty: I believe that what is important is what you think about yourself. When people watch you, you say, ‘Okay, this is nice.’

But probably this interview is more rewarding for me than the few public awards I’ve received, because I know your mind. I know that you can explain to me the analytic-synthetic dichotomy. Plus I know that I value your mind and the fact that you are interested in knowing more about me means more than just any privilege you can get through your job. I value smart people. And sensitive people. That when you discover those individuals, you want to cultivate their freedom and their friendship, and I appreciate that about it.

So those accomplishments help a lot. It is always good to feel that people value you—but you like that when you know that they understand what you do. And that happens not very often, regrettably.

Kaizen: Nice. When you’re teaching students entrepreneurship character issues—initiative, courage, resourcefulness, perseverance, coming back from failure, and so on. If you had to choose, what character trait would you say entrepreneurs most need to have?

Marty: Perseverance is a lot, but you have to have fire inside. The fact that you trust yourself.

How do you build that trust in yourself when nobody else does? “If,” by Rudyard Kipling—remember that?

Kaizen: Excellent poem. I have it on my wall in my office.

Marty: How do you develop that in a person? I think that your mom can tell you that you are great, that you are smart or the best person in the world; but if you don’t see that in reality, if you don’t see that your decisions are just taking you to good places, you don’t trust them.

You need the basics coming from your family or from your friends, from a mentor, from whoever—an actor in a movie—and you need to feel that. And once you have that, you need to keep doing it and building it. Just forcing you to take decisions and to submit yourself to difficulties. The freedom to see that you can do it.

And if you abandon your career because you’re lazy, or because you don’t help yourself, or because of whatever—and we all do that in certain ways—you deteriorate your own self-image. And we are fighting with that all the time. It is important to persevere. The sense of achievement.

Of course, when you have to study, you need to concentrate and to focus. But it comes to your mind that you need to call a friend, want a sandwich or to take a shower—because your mind takes a lot of energy when you connect thoughts—you need to tell your brain to keep doing it, and it’s not easy.

What else is important is curiosity. And to take risks. When you see a person of curiosity, asking questions, taking a risk—but persevering and feeling inside that the critics cannot hurt him too much—when you see that, I think that you will see a successful man.

Learn more about the competition at the Kauffman Foundation’s website.

Also, be sure to read our fascinating Kaizen interviews with two highly-educated female entrepreneurs, Reena Kapoor and Judy Estrin. Both women share their thoughts on the effect of culture on innovation and entrepreneurship.

John Chisholm is the founder, former CEO and chairman of Decisive Technology, a pioneer in online survey software (now part of Google), and of CustomerSat, a leading provider of enterprise feedback management systems (now part of MarketTools). A 30-year veteran executive of Silicon Valley, he holds bachelor’s and master’s degrees in electrical engineering and computer science from MIT and an MBA from Harvard Business School. He chairs the MIT Club of Northern California, serves as trustee of the Santa Fe Institute, as member of the MIT Corporation Development Committee, and as mentor with the MIT Venture Mentoring Service. Previously, he has served as Chairman of the Board of the Stanford Institute for the Quantitative Study of Society, one of Stanford’s twelve independent laboratories; as a member of the visiting committee of the MIT Department of Mathematics; and as vice president of the worldwide MIT Alumni Association. He is author or co-author of two patents in online polling. We met with Mr. Chisholm in the San Francisco bay area to explore his thoughts on the benefits and challenges of entrepreneurship.

Kaizen: You have founded two high-tech companies, Decisive Technology and CustomerSat. Were you technically oriented as a youth?

Chisholm: I think you would say so. I liked to take clocks apart and try to figure out how the gears and springs worked together. I grew up in Jupiter, Florida, a small town about 20 miles north of West Palm Beach. In junior high school, my best friend Al Pion and I each memorized pi to over 100 decimal places—we would recite it alternating the digits, like tossing a ball back and forth. Talk about geeky!

I also had two great math teachers. The first was Mr. Rees in the eighth grade, who introduced us to probability theory. It fascinated me then and still does today: at MIT, I was a teaching assistant in applied probabilistic systems; and at both Decisive Technology and CustomerSat, real-time statistics and metrics were key competitive advantages.

My other memorable high school math teacher was Mr. Parrish. In trig class, I noticed a commonality between the roots of polynomials and Pascal’s Triangle. I kept analyzing it until I could describe the exact relationship, thought I had discovered something, and with Mr. Parrish’s encouragement, wrote it up in a paper called, “A relationship between Pascal’s Triangle and the coefficients of equations with altered roots.” When I got to MIT, I learned a bit more math and realized that this relationship had been known for centuries. But the experience gave me a taste of how exciting mathematical discovery can be.

Kaizen: When you went off to MIT, did you know you would study electrical engineering and computer science (EE/CS)?

Chisholm: No. I started out in civil, switched to mechanical and then electrical. My dad was a mechanical engineer. The 1970’s were a hugely exciting time in electrical engineering and computer science—digital signal processing, data communications, and interactive timesharing were just coming of age. Even then, EE/CS was MIT’s largest department, as it remains today, though not by as wide a margin today as it was back then. Like many others, I got caught up in the excitement.

Kaizen: Is that why you stayed on at MIT to get a master’s degree in EE/CS?

Chisholm: As a sophomore, I was accepted into co-op, a work-study internship program; and later into its joint bachelor’s-master’s program. Companies like GE, IBM, and AT&T committed to MIT to providing work assignments relevant to our studies. We alternated semesters between MIT and our co-op companies, got real-life work experience, academic credit, and best of all, got paid. I feel really good about co-op. Among other benefits, it helped pay my way through MIT.

I landed a co-op position with GE. There were four semester-long assignments. The first two were at GE Ordnance Systems in Pittsfield, MA, where I did FORTRAN programming for finite element analyses and conducted Monte Carlo (i.e., driven by random processes) simulations. I learned a lot about both engineering and its practice.

Pittsfield, MA is just north of Tanglewood, the summer home of the Boston Symphony Orchestra. By volunteering as an usher on weekends, I went to all 24 concerts that season. Over the eight weeks, the music progressed from medieval to baroque to classical to romantic to modern, so you could hear the evolution of music over four centuries. Among the great musicians we heard was Leonard Bernstein conducting Tchaikovsky’s Fifth Symphony. It was a priceless introduction to classical music.

My third and fourth assignments were with the GE Electronics Lab in Syracuse, NY in digital signal processing (DSP). The E-Lab had just introduced a chip that calculated Fast Fourier Transforms (FFT) very fast and was looking for applications for it. A form of DSP called cepstral analysis and homomorphic filtering uses the FFT four times, and so was a perfect application for the chip. My master’s thesis was to use the chip to implement this form of DSP. It encompassed a bit of everything—signal theory, algorithms, even writing microcode.

Kaizen: What were you thinking your likely career path would be?

Chisholm: At first I followed two routes in parallel: the EE/CS Sc.D. (MIT’s equivalent to a Ph.D.) program and applying to business schools. My b-school applications talked a lot about entrepreneurship—applying engineering know-how to start a new company. That is the path I finally chose.

Kaizen: You went directly from MIT to Harvard Business School (HBS). What was the most valuable business lesson of your MBA program?

Chisholm: At first I rebelled against b-school. At MIT, substance—content—had been all-important; at HBS, it seemed that packaging was most important. Gradually, I came to appreciate that packaging was important, too. My favorite courses at HBS, and the ones I did best in, were still the most analytic ones—managerial economics (ME) and game theory, in particular.

Kaizen: After Harvard, you went west—to Hewlett-Packard as a product manager in northern California.

Chisholm: I knew that Silicon Valley was the place for me the first time I drove through it, among the hundreds of high-tech companies. Being a product manager at HP in those days was like running your own business: you were responsible for product specification, marketing, pricing, sales training, competitive analysis, production planning, forecasting, even writing press releases.  HP was then still small enough that new employees were invited to meet with Bill Hewlett or Dave Packard. On October 3, 1978, I was one of a small group of engineers that got to spend 90 minutes with Bill at HP headquarters. That night I wrote two pages about him and the meeting in my journal.  He made you feel perfectly at ease; that nothing could faze him; and that he wasn’t concerned with making money but just wanted the company to do well.  I felt and still feel deep admiration and affection for him.

Both of the companies that I have started adopted HP’s egalitarianism. For example, until we merged with MarketTools, my cubicle at CustomerSat was the same as everyone else’s, as were Bill’s and Dave’s in the early days.

Kaizen: You went from HP to GRiD Systems. What did you learn at GRiD?

Chisholm: The value of focus. GRiD, my first start-up, was hugely ambitious: it offered a proprietary, flat-panel laptop, far ahead of its time; a proprietary operating system; a proprietary suite of management tools along the lines of Lotus 1-2-3 (a precursor to Microsoft Office) that ran only on the GRiD laptop; and even its own proprietary networking. The company became profitable only after it abandoned the proprietary architecture in favor of IBM compatibility, and then largely on the strength of its sales to the military/defense market, for which its ruggedized aluminum case was well-suited. Narrowing the focus to either just the laptop or the management tools software, and not attempting to re-invent the operating system and networking, would have been a path to greater market success, in my view.

Kaizen: Why did you decide to start John Chisholm Group and consult rather than pursue a marketing career within an established corporation?

Chisholm: Like many entrepreneurs, I was fired—in this case, from GRiD, after a disagreement with my boss about product strategy. While I was looking for another job, I landed a marketing consulting assignment. Then another. Then GRiD hired me back as a consultant. Eventually I lost interest in finding a regular job. Over time, I was able to parlay my consulting experience into monthly columns for Open Systems Today and Unix Review, which helped establish me as an industry expert, especially in the then-hot UNIX market. Today, it would be like writing a popular industry blog.

Kaizen: What kind of consulting did you do?

Chisholm: I developed a specialty in strategic marketing: finding optimal combinations of product definition and target market, given the relative strengths of a company and its competitors. The process involves inventorying the assets of the company and its competitors—e.g., product, brand, technology, distribution channels, and financing—and of estimating the size of market opportunity for each product and target market combination considered. The process requires collecting a lot of data, analyzing it, and prioritizing options. Think of it as searching out, evaluating and sorting values of the expression:

[Size of Target Market] * [Your Unique Strengths — Competitors’ Strengths]

for each combination of product and target market to which the unique strengths are applicable. The analysis is both qualitative and quantitative. It seeks the largest market opportunities for which your competitive advantage is strongest. We did this kind of work for clients such as IBM, Microsoft, Xerox, and Sun Microsystems. I also served as part-time director or VP of Marketing and as expert witness in high-tech litigation.

Kaizen: How did you get from there to founding Decisive Technology?

Chisholm: In 1990-91, our consulting included phone surveys—customer interviews. At the same time, we were engaged by Sun Micro to serve as brokers for divesting Inbox, an e-mail software business that was part of Sitka, a local area networking company that Sun had acquired. We sold Inbox to CE Software, publisher of QuickMail, then the leading email software for Mac, on June 30, 1992.

The combination of phone surveys and email made me think, “What if you could do a survey via email?” For months I couldn’t get that idea out of my head. I played with it, developed it, nurtured it, and hired software developers to first prototype it and then develop it for real.

Over 1992-93, John Chisholm Group evolved into Decisive Technology, publisher of the first shrink-wrapped software for conducting surveys via email. Our product, Decisive Survey, let you compose a survey under Windows and upload a distribution list of email addresses of recipients. The software then formatted the survey as a text message and emailed it to each recipient, who would complete the survey by editing and replying to the message. Decisive Survey then retrieved the completed questionnaires from the surveyor’s mailbox; parsed (i.e., read) the messages to find the responses to the questions; and generated a simple set of charts and statistics—frequency distributions and cross-tabs. In short, it used the PC and email to automate the entire survey process. After its introduction in late 1995, Decisive Survey quickly became the leading desktop software for conducting surveys online.

Using software to parse email messages to pick out survey responses was way ahead of its time. It was not 100% reliable—this was before the web—because with text messages, respondents could type in comments outside of designated response areas. To address this, Decisive Survey provided surveyors a split screen environment where they could compare how the parsing software interpreted the responses with what the person actually typed, to make sure that the software’s interpretation was correct. In 1996, as the web was taking off, we came out with Decisive Survey 2.0 which created surveys using the web’s Hypertext Markup Language (HTML) instead of plain text, and which eliminated the problem.

Kaizen: What other technical challenges did you face?

Chisholm: Oh, many. Working with all of the different email clients, for example—Microsoft, cc:Mail, Lotus Notes, Novell, and Eudora—each one had a different application programming interface.

Kaizen: As Decisive grew you became CEO of a bigger organization. Did developing the necessary management skills come naturally to you, or was it something you had to work at?

Chisholm: It was hard. As a consultant, I hadn’t gained much experience managing relationships with employees and board members. I half-joke that I made every possible mistake as CEO of Decisive so I could start with a clean slate at CustomerSat. After Decisive raised venture capital, we recruited Doug Stone as CEO, an experienced general executive and a valued friend and colleague.

Kaizen: Decisive Technology is now part of Google. How did that come about?

Chisholm: Decisive was part of what is known as a “roll-up”—combining multiple smaller companies into a larger company to achieve scale. Decisive was acquired by MessageMedia, which was acquired by DoubleClick, which was acquired by Google.

Kaizen: Your third venture, CustomerSat, was the next big thing. How did it grow out of Decisive Technology?

Chisholm: We learned a great deal at Decisive: that measuring customer satisfaction and loyalty was a critical segment of survey research; that enterprises (large corporations) needed professional services to help design and implement surveys; that they needed to conduct and manage multiple surveys concurrently; and to distribute survey results to large numbers of users.

At the same time, the web had changed the software landscape dramatically over the five years since I founded Decisive. While Decisive was a Windows application, CustomerSat was designed for the web from the outset. Decisive was primarily licensed software, that is, it ran on our clients’ computers. In contrast, CustomerSat was Software as a Service (SaaS—pronounced “sass”): it ran on our computers and was accessed by our clients through the Internet. CustomerSat helped define a new market category that analysts today refer to as Enterprise Feedback Management.

Kaizen: How was founding CustomerSat different from Decisive?

Chisholm: Several key team members came over to CustomerSat from Decisive, who helped us get up and running at CustomerSat quickly.

CustomerSat’s financing strategy was different from Decisive’s in several ways. At Decisive, we spent over $1 million in software development before we started selling software and generating revenue. In contrast, from CustomerSat’s inception, we provided web survey programming and consulting services that generated revenue, and used these revenues to fund much of CustomerSat’s initial software development. CustomerSat had nearly $1 million in revenues by the time we raised capital.

As a result, CustomerSat needed to raise less capital, and could do so on more favorable terms than Decisive. This is advantageous for many reasons. A greater share of the company’s ownership stays with the employees, on whose dedication and commitment the success of the company depends; the valuation hurdle is lower at which you have to sell the company for everyone to make money; and there are fewer conflicting objectives and power struggles that can distract the company.

Decisive raised venture capital from such respected firms as Softbank, Helix, and Hanna Ventures. In contrast, CustomerSat raised corporate capital from two strategic partners. J.D. Power and Associates was the world’s best-know brand in customer satisfaction, especially in automotive, and thus brought instant credibility to CustomerSat. NICE Systems, a leading provider in call center recording systems, wanted new ways to measure the customer experience, which CustomerSat provided. While venture firms’ primary focus is financial return, corporate investors are fully as interested in gaining market knowledge and new products to re-sell. Corporate capital is often overlooked and deserves more attention than it gets from entrepreneurs, in my view.

Kaizen: Who were your early clients? How big would they have to be to be attractive to you? And how did you market yourself to those companies?

Chisholm: Early on, most of our clients were technology companies like AMD, HP, Microsoft and AT&T, because they were the ones who consistently had email addresses for their customers. A company or business unit would ideally have revenues of $250-$500 million or more to be a good prospect for us. Seminars at industry conferences were particularly effective marketing vehicles for us—they let us show qualified prospects the entire customer feedback solution we offered, from survey design to IT system integration to generation of real-time survey results.

Kaizen: How did you weather the dot-com bust?

Chisholm: The economic downturn of late 2000 through 2002 was by far the hardest time of any in my career. The bust hit CustomerSat in the first quarter of 2001, causing our quarterly revenues, which had been on a healthy growth curve, to drop quarter-over-quarter by almost 20%. One of the hardest things was to cut salaries of employees and management by 20% and lay off 30% of our staff in a 90-day period.  We factored receivables at considerable expense so we had enough cash to make payroll. Quarterly sales declined again slightly in the second quarter. No one knew when it would end.

These were the times I would wake up at 2 a.m. in sweat-soaked sheets wondering whether CustomerSat would make it. Our sales finally stabilized in the third quarter and were slightly up in the fourth quarter. We broke even in the third quarter—the infamous September 11 quarter—and made a small profit in the fourth. The going stayed tough for the next two years, through 2002 and the first half of 2003—we didn’t hire a single new employee for 18 months—but we made it through. Few companies of our cohort survived. I feel I earned my executive stripes during the dot-com bust. Among the team members who went through this ordeal with us, there was very little turnover—very strong employee loyalty—for many years. It was as if the crucible of the dot-com bust had bonded us all together.

Contrary to conventional wisdom, I believe that having raised less money may have actually helped CustomerSat make it through the dot-com bust. First, if a company has millions in reserve, it can be hard to persuade employees of the need for pay cuts and other reductions in benefits. We did not have that problem. Second, with little in reserve, you have to respond to market conditions immediately. Some of our competitors who had deeper pockets postponed the tough actions of cutting costs, thus burning through capital and forever diluting everyone’s interest, both financially and otherwise, in their companies. Third, if the company is owned primarily by outside investors rather than by employees, there can be a feeling that the problem is not ours, but the investors’, and they should fix it. Not a winning strategy.

Kaizen: How did you get back on a growth track?

Chisholm: Many factors contributed. In 2002, we introduced Action Management, the ability to use business rules to open and assign cases when high-value customers indicated in surveys they were dissatisfied with our clients’ products and services. We collaborated with one of our best clients, Honeywell, to develop this unique differentiator. Action Management enabled our clients to close the loop between customer experience and follow-up with that customer, and helped fuel our growth for several years.  Interactive dashboards of satisfaction analytics and metrics also became key selling features.

Dickey Singh, Jonathan Clay, Tulsi Dharmarajan, and Scott Williams all brought superb leadership and/or innovation to our software development efforts.  In Sales and Professional Services, execs like Harry Rich, Russ Haswell, Josh Lamour, Annette Gleneicki and Greg Rich—I could go on and on—articulated the benefits of our solutions, built long-term relationships with clients, and helped us expand into vertical markets like financial services, pharmaceuticals, and health care.  CustomerSat succeeded because of them.

Kaizen: By 2007, CustomerSat had been in business and grown profitably for a decade. What then?

Chisholm: Selling CustomerSat was an unnatural act for me. It had been over seven years since we had brought in investors. Ernie Pomerantz, a member of my board and a 22-year former partner at Warburg Pincus, the world-famous private equity/venture capital firm, said, “John, you can’t keep your investors waiting indefinitely. You have to give them liquidity at some point.”

I started the M&A [mergers and acquisitions] process somewhat reluctantly. It is hard to both run a company and sell it at the same time so, as we had done at Decisive, we hired an investment banker to manage the process for us. Brian Mutert at Stratagem brought great financial insight to the process and knew the SaaS space intimately. In March, 2008, after negotiations with several potential acquirers in market research and business analytics, we closed the deal with MarketTools.

Kaizen: Right before the economic downturn?

Chisholm: The deal was well-timed. No one knew the downturn was coming.

Kaizen: How did the merger process start—who approached whom?

Chisholm: Our dealings with MarketTools had actually started three years before the merger, when Beth Rounds, a highly-regarded market research executive whom I had known for a decade, introduced me to Amal Johnson, MarketTools’ chairman. During that initial meeting, Amal indicated that MarketTools was interested in acquiring CustomerSat. We were not ready to sell then, but we entered into a reseller agreement that enabled both companies to get to know the other, which was a factor in our going with MarketTools.

Kaizen: Understanding that the exact terms are confidential, how much were Decisive and CustomerSat valued at when they were acquired, if I may ask?

Chisholm: Yes, exact terms are confidential, but between the two companies, the total was well above $50 million but less than $100 million combined.

Kaizen: What are the major factors that determine valuation?

Chisholm: They are many, including profitability, revenues, growth rate, technology, brand equity, customer loyalty, and scalability, i.e., how much incremental revenue growth can be achieved by injecting a specified amount of capital into the company.

Kaizen: Was it difficult to decide whether to stay on with the new parent company?

Chisholm: You work out those details as part of the merger agreement. I was expected to stay on to run CustomerSat as a business unit, was incentivized to do so and learned a great deal by doing so. Market Tools was larger and had more mature financial reporting and accounting controls than CustomerSat. Helping align and integrate CustomerSat’s systems with MarketTools was good experience.

Kaizen: So your management priorities changed after the merger.

Chisholm: Yes. Before the merger, they were sales, marketing and products; after the merger, they were finance, accounting and revenue recognition. Not my favorite areas, but necessary. As a result of this experience, I’ll likely put these processes and controls in place from the outset of my next venture.

Kaizen: Were non-compete agreements part of the process?

Chisholm: Yes, as is typical. First, during negotiations we agreed to a non-compete called a “no shop” agreement. This means that once we received a term sheet—a formal offer—we couldn’t talk or “shop” the company to other potential acquirers for a period of time. Later, we agreed that selected execs could not directly compete for specified periods of time.

Kaizen: Was it hard to let go of CustomerSat, having founded and built it up successfully?

Chisholm: At times, absolutely, especially early in the M&A process. Later, when I started to plan what I was going to do next, including taking some time off, it became easier.

Kaizen: What are you doing now?

Chisholm: Taking some time off before my next venture. I’ve traveled around southeast Asia and volunteered with the MIT Venture Mentoring Service where I get to help bright, young entrepreneurs who have great ideas and knowledge but limited experience. And I bought a new place in San Francisco with dramatic views of the bay and bay bridge.

Kaizen: You’ve climbed to the tops of Mounts Rainier, Whitney, Shasta, St. Helens, even a live volcano in Chile. Was that as dangerous as it sounds?

Chisholm: More exciting than dangerous. Like Rainier and Shasta, Volcan Villarica was a snow climb requiring crampons (boot spikes) and ice-axes. At the summit, you looked down into a boiling, bubbling, splashing lake of red-hot lava 200 feet below you. The crater had collapsed in some places and looked like it was about to collapse in others, so you stayed away from those parts.

Kaizen: Looking back on the last twenty years, what has been the best thing about being an entrepreneur?

Chisholm: Creating something of value out of nothing, and the camaraderie of fellow team members. Two milestones in a start-up’s life are particularly exciting: 1) when you realize that even if you disappeared today, the company has enough momentum and people committed to it that it will continue without you; and 2) when you realize that it has genuine value and others want to acquire it.

Kaizen: Entrepreneurs have to have creativity, initiative, guts, resourcefulness, perseverance, the ability to recover from setbacks, and so on. Which of those is the most important?

Chisholm: Any of those strengths could be the key to success, but overall I would vote for perseverance. Having an idea, not letting go of it, developing it, bouncing it off other people, and refining it. With time, you can turn an amorphous idea into a practical solution to a real need.

No new technology is better than all existing technologies for every application, but any new technology can be better than existing ones for some application, e.g., a certain user type, geographical area, or IT environment. The entrepreneur needs to figure out what specific market needs can best be addressed by new technology. I mentioned the process I use: unique advantages minus competitive strengths times size of target market to which the unique advantages are applicable. That whole strategic process can be thrilling and lead to unexpected results—I’m helping some new companies with this right now.

Kaizen: Who and what else have helped you be successful as an entrepreneur?

Chisholm: All of the friends and colleagues I have already mentioned. Bill Hewlett, Jerry Peterson, Fred Gibbons, and Bill Krause at HP; Ernie Pomerantz and Norman Nie at CustomerSat; Dave Hanna of Hanna Ventures; Bob Metcalfe of 3Com; Roy Rood of Rood Landscape; and Lee Hill of Dale Carnegie are among the execs who encouraged and/or inspired me.

Having loving and supportive parents is the greatest asset with which any individual can be endowed in life. I have enjoyed that asset in spades. Also a large network of friends to draw on for advice and encouragement.

Years ago I took Dale Carnegie, a 14-week course which challenges you to apply human relations principles in everyday life, then give talks to the class a few weeks later about what happened. As a result, you get experience applying the principles, organizing your thoughts, and speaking publicly. Principle #1, for example, is “Don’t criticize, condemn, or complain.”  You can get very far in life on that one principle alone. Others are, “If you make a mistake, admit it quickly and emphatically,” and “Show appreciation and do it sincerely.” I’ve often said that Carnegie was more valuable to me than my Harvard MBA, because you use Carnegie’s principles every moment of every day that you are with another person.

Over the years, consistently applying these principles elevates you to a position of leadership. I think of myself as a point on the carpet below our feet. If I grab that point, I can’t lift it very far unless all the points around it also rise. We are all like points on that carpet.

A truly courageous person merely acts courageously consistently. Similarly, a truly noble person is one who acts nobly consistently. I may not be able to change who I am, but I can control the way I act. So anyone—even I—have the potential to be courageous and noble. That is an inspiring thought.

Kaizen: How do you come up with ideas for new ventures?

Chisholm: Find or ideally experience first-hand a need that current tools or solutions do not adequately address. If you are passionate about and have high aspirations for any activity or group of people—your work, a hobby, a team, or your family — finding such needs will come naturally.  At the same time, place yourself where you’re exposed to ideas that could suggest new solutions. The TEDx conferences and MIT Clubs around the world give you access to thought leaders and innovators—a constant flow of ideas. Most of their events are open to everyone. I go to trade shows outside of my field, for example, to conferences on embedded systems (microprocessors and computers embedded in devices like digital cameras, toasters, and refrigerators) and online social games. Ideas from those fields may be applicable to other fields. Burning Man (annual art festival in Nevada) is an incredible, wild and crazy, exhausting 24×7 inspiration for out-of-the-box thinking. Don’t miss the chance to experience it at least once in your life. Books are also a great source. The Evolution of Cooperation and The Selfish Gene are two of my favorites.

Here is a technique for generating ideas: think of two or more separate markets, currently non-overlapping, that are growing rapidly. As they grow, they will likely overlap. That overlap will start very small and grow very fast and likely harbors good entrepreneurial opportunities. Streaming video on social networks on mobile devices is an example. Use of cams, microsensors and GPS are growing rapidly; what new applications might be found that combine these?

Kaizen: How has being gay affected your career?

Chisholm: It’s no big deal. Every year, sexual orientation becomes more of a non-issue. I came out late, in my late-30s. Being gay has been an asset for me in two ways. First, because it was not socially acceptable when I was growing up, much of the time and energy I might have put into dating went into studying, sports, and career. Second, being in a group against which many still discriminate has sensitized me to the challenge of being in a minority. Of course, a key to success is to view any aspect of yourself that you cannot change as an asset, so I am biased. For the under-30 crowd nowadays, being gay more and more is just not an issue, like eye color or left- or right-handedness. That is a good thing.

Kaizen: How do you think coming out should be handled in the workplace?

Chisholm: I think being “out” can be helpful, especially for those who work in teams. If your co-workers don’t know anything at all about your life outside of work, that can affect their trust in you, your teamwork, and your opportunity to assume leadership.  With trust, anything is possible; without it, anything can be an obstacle.

I don’t much talk at work about being gay, but I believe everyone knows; people talk. I was in a relationship for five years with a wonderful guy, Mike Beasley, still my best friend, who would come to our company parties with me. A good general rule is: Don’t tell people; show them.

Kaizen: Is there anything distinctive about the way gay issues are treated in corporate culture, or should we just treat them like religious or political differences?

Chisholm: The issues do seem broadly similar to me. I wonder which is more generally acceptable today: abortion or same-sex marriage? I would guess abortion, although same-sex marriage is rapidly gaining wider acceptance. Nonetheless, I wouldn’t be inclined to start a discussion at work on either topic. A big part of success is focus, and that may mean not bringing up things aren’t relevant to or may distract from the company’s mission.

Kaizen: In reflecting on your CEO experience, what do you see as the CEO’s most important role?

Chisholm: Depending upon circumstances, it may be any position on the field: cheerleader, referee, quarterback, offence or defense. Overall, the way I can best help team members, or anyone else, for that matter, is to look for and find good qualities in them—strengths, skills, or knowledge—let them know that I see those qualities, and help them visualize how they might apply them. In other words, help them see their potential. The more specific and tangible I can make that potential, the better I can help that person do great things. The willingness to look for and ability to find the good in people and build on that good is a quality I look for and deeply value in executives.

The CEO and his or her team also have to choose which battles to fight—battles that build and strengthen the company and its human capital; and avoid those you are likely to lose.

Kaizen: Judgment matters, since CEOs can make big errors?

Chisholm: Absolutely. You can err by underestimating or misconstruing the resources needed to penetrate or dominate a market—and conversely, by not being ambitious enough. You don’t want to avoid a battle you can win, because then you forfeit market share and profitability and deprive your team of the growth, exhilaration and invigoration of winning a battle. You don’t want to leave a battle on the table. So you want to take on battles, go after new markets, win over new customers, develop new channels of distribution, and come out with exciting new products. But you want to say “no” to the ones that you cannot win.

Kaizen: Any of these “no” decisions that stand out from your experience?

Chisholm: One was opening a data center in Europe. In 2003, several major prospects wanted us to host their data there. This would have been very expensive, but several of our execs favored the idea, and we went long down the road of investigating it. Along the way, we asked, “What is Salesforce.com doing?” Salesforce was the most successful company and a role model for us in SaaS. They were easily 20 times our size with major clients in the EU. As it turned out, they were hosting all of their worldwide clients’ data in North America. If Salesforce could do major business in the EU without hosting there, why couldn’t we? We finally decided not to do it. That was a tough, important, and right decision.

Another example: several large prospects wanted us to license our software to them, in addition to making it available as a service. This also would have been very expensive, to develop, test, install and support our software in many different IT environments. In this case, “no” was a particularly good call, because the rest of market gradually moved and continues to move away from licensed software to SaaS. Even Oracle and SAP’s revenues are shifting from licensed software to SaaS. More and more, non-IT companies don’t want to have to run their own data centers, which is helping drive the shift to SaaS.

Kaizen: Another CEO job is managing the culture of a company?

Chisholm: I don’t think a CEO can control culture directly, but he or she hugely influences it. Culture emerges from how people treat each other and how decisions are made. The CEO’s behavior is critical, because people look to that example and copy it. Genuinely believing that people are important is necessary for any organization’s success. If you do, people will recognize, appreciate and respond to it; if you don’t, they will recognize and resent it. You cannot fake it.

CustomerSat had a company-wide meeting every Friday morning at 9:30, to make announcements, of course, but primarily to celebrate good things that people had done or had happened. Unlike most company meetings, people enjoyed attending them. All CustomerSat employees have received hand-written, personal notes or postcards from me over the years acknowledging and thanking them for something they have done. I also like to connect employees who don’t normally work together. I’ll try to guess which pairs of our employees know each other least well and encourage them to contact and get to know each other. Those new links can strengthen the social fabric of our company.

Kaizen: In closing, John, what advice would you have for young professionals?

Chisholm: Become passionate about something. Stick with it. Then have fun making it happen!

This interview was conducted for Kaizen by Stephen Hicks.

Also featured in Kaizen are: this semester’s Introduction to Philosophy student essay contest winners – Bronson Garcia, Mona Khalifeh, and Erica Price; Guest Speaker William Kline; and news about our professors.

A PDF version of Kaizen is available here. We will soon post separately the full interview with Mr. Chisholm.

If you would like to receive a complimentary issue of the print version of Kaizen, please email your name and postal address to CEE [at] Rockford.edu.

Watch Parts I & II of the interview below.

Part I:

In our latest issue of Kaizen we feature an interview with David Checketts, former CEO of New York’s Madison Square Garden, and now Chairman of SCP Worldwide, which owns the St. Louis Blues of the NHL and the Major League Soccer team Real Salt Lake.

Also featured are a course-development project by Professor Bill Lewis, a paper given by Professor Shawn Klein at a sports ethics conference, and an international conference organized and hosted by Professor J. J. Asongu.

A PDF version of Kaizen is available here. We will soon post separately the full interview with Mr. Checketts.

If you would like to receive a complimentary issue of the print version of Kaizen, please email your name and postal address to CEE [at] Rockford.edu.

Also featured in Kaizen are CEE guest speakers David Mayer and C. Bradley Thompson, an interview with Steve Kadamian on his entrepreneurship course, and a report on the 2009 High School Entrepreneur Day.

A PDF version of Kaizen is available here. We will soon post separately the full interview with Mr. Mariotti.

If you would like to receive a complimentary issue of the print version of Kaizen, please email your name and postal address to CEE [at] Rockford.edu.

The abstract:

“Entrepreneurship is increasingly studied as a fundamental and foundational economic phenomenon. It has, however, received less attention as an ethical phenomenon. Much contemporary business ethics assumes its core application purposes to be (1) to stop predatory business practices and (2) to encourage philanthropy and charity by business. Certainly predation is immoral and charity has a place in ethics, but neither should be the first concerns of ethics. Instead, business ethics should make fundamental the values and virtues of entrepreneurs — i.e., those self-responsible and productive individuals who create value and trade with others to win-win advantage.”