WEBVTT

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Hey, what's up, Toby? We have made it to another

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week of the Processed It podcast. You did. I

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know. Another one in the books. Here we go. Today

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is your topic. It is. It is. And I'm excited

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to dig into this. Thanks for entertaining me.

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As you and I've talked a lot about over the years,

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there is the how we work, but also so much of

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the why we work. Yeah. And behind the why is

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always all these hearts and minds and people

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that are showing up every day. our most notable

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asset walks out the door. So it's not just the

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human capital piece, but it's also what those

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humans do together. And so the musing that we

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were just touching on before we launched those,

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it's ultimately this idea of another form of

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process debt. And it's something that I would

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describe as cultural debt, the way that we all

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come together to interact. And I think a bit

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of this goes back to what is the relationship

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between how we work together and those norms

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that we develop, and whether those create healthy,

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vibrant process, or we get into that world of

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all the myriad of reasons why process doesn't

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work, but it probably has less to do with the

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transactions and more to do with how we work

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as humans. Let me just pause there first. What's

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your thought? It's really interesting because

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if you think about just deep cultures in in organizations,

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right like one of my favorite interview questions

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is Tell me who you'd rather work for in their

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heyday. Oh, yeah Facebook move fast and break

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things right that was their culture right Apple

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design everything to the T's. Yes the apples

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take care of the customers or Google engineer

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things to its max, like to the technical max.

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And those cultures, right? Like those companies

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are different today, but like those cultures

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drops up. Do you know the other one is Amazon?

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Where they have a culture of don't ever do a

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PowerPoint. Yeah, very pragmatic. Let me ask

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you, so. And then I'll share mine, but of the

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ones that you just listed, five great recognizable

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organizations that most of us have some real

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familiarity with as consumers. Yep. Which one

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of those would you have rather worked at in its

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heyday based strictly on culture? Which one of

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those resonates with you? I would go, I would

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probably go Google. Most likely because I have

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a deep fascination in how they've strategically

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engineered everything. to have the systems do

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the systems. Even like think about what have

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we, like if you had a problem with your Gmail,

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what would you do? How long would it take to

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get to a human? And I don't even like, so that's

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a really, it's a really interesting cultural

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decision that they made, but that to me, that's

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very elegant because they've thought through

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a lot of things. And then, and then the next

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is, you know, the next is, you know, Apple. And

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I do like Facebook's move fast and break things.

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I just despise the computer. Well, and there's

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always a little bit of that. So I like the framing

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of in its heyday. You know, for my part, I was

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really taken. I had an opportunity to see Tony

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Hsieh, you know, What's Upon Time CEO of Zappos

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present down in Austin at South by Southwest

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Tech Fest. I think it was, I think he was 0809.

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I'm a buddy and I were going down there. We did

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it a couple of years. And he had, he was really

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just starting to reveal their culture. And, and,

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um, I think implicit in your response was there's

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a trade off to some of these things, right? Engineering

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everything to the ends means there's a long time

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before it sees the light of day. And then with

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Zappos, this idea of one of the stories he shared

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was he was hanging out with some buddies and

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they're like, no way, nobody's customer service

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is that good. And he's like, yeah, yeah, they

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weren't even in, you know, Zappos was headquartered

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in Las Vegas at this point. They just finished

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the move or were in process of moving. And he

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said, well, why don't you just call up the number

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and see if they'll order us a pizza, get us a...

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For anybody that doesn't know Zappos, like they're

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all about shoes, right? Zapatos. So sure enough,

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Tony Hsieh and his guys are sitting there and

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one of the guys gets on the phone. He's like,

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hey, I'm in the Bay area and I need a pizza.

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And they're like, what part of the Bay Area?

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Do you like Chicago? You like New York? What's

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your pizza jam? So over the course of, I may

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not remember this right, but within a half hour

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though, this guy who has nothing to do with pizza

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delivery takes their order and gets them a pizza,

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doesn't even know that Tony's in the room. And

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that is what insane customer service is about.

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And so what I love is that all of these are remarkable

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companies. each one of these is gonna have a

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place where it shines and then it's gonna have

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costs. And I think the idea of cultural debt,

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it's not that it's much like process debt. It's

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not good or bad. We all carry some. By putting

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our heart and soul into one very clear mission

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and aligning the talent to deliver on that mission,

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we're gonna have blind spots. We're gonna have

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some hiccups. And so I think at the heart of

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it, The idea of culture debt, though, is really

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about what are maybe the unknown costs that we

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don't always appreciate. And so it's delightful.

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It's a great story that I can call a shoe company

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to get a pizza delivered. But it also means that

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a legitimate customer couldn't access that resource

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for a half hour. Now, there's certainly going

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to be, you know, I'm retelling that story 15

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years later because I was so impressed and I

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didn't even get a slice out of the deal. But

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I think that some of cultural debt is like, what

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does it mean for us to manage as an organization?

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Yeah, yeah, yeah. Yeah, yeah. Well, and let's

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pull it back, right? Because we just told great

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stories of positive culture, right? How does

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that culture degrade? Totally. There's the famous

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stories of Enron, right? Where it's a culture

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of greed. Right. In complexity. But also of innovation.

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It led with innovation. They were made at Darling.

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This is how you get on the cover of Businessweek.

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And the cultural cost was challenging people

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at an individual, curricular, and moral level

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as this became a pervasive norm and expectation.

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It was bad habits of shredding documents that

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are subject to public audit and accountability.

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Making phantom companies and You know, pocketing

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the bonus as you buy an island in the Caribbean.

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Well, we've also talked, you know, we've also

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talked about Wells Fargo. I mean, they're in

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the news for for setting up like like it's interesting

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when you have when your culture goes away from

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the story and the humans. Yes. It's so easy to

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just point a finger and just be like what like

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how did like it almost becomes like this gut

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-wrenching pain. Yes. Of. I want to go and hurt

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someone at that because they didn't take care

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of their fellow humans. It's an interesting question.

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I think a little bit of the exploration that

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I want to be sure we touch on is a lot of this

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comes down to what are the habits that both reinforce

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how we achieve our mission, but also what are

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the habits that provides checks and balances?

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So it's not just how do we drive revenue or how

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do we go fast and break things? It's also How

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do we go slow and fix things once we decide we're

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going to keep them? You know, innovation unfolds

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quickly, but we have to harden it if it's going

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to be persistent. For Gmail to work for decades,

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right? I don't know. There's a handful. There's

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probably something that comes to mind for you

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too, as you think about like, what strikes me

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and sometimes I, you know, I love these conversations

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because we spin off into, you know, these rabbit

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trails. But what's, what Greg's been here is

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like, when you're talking about culture debt,

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you're almost like, when you're talking about

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culture, you're almost always exposing something

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that's great or something that's, that's, that

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really went very wrong. Right. Yeah. But there's

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little fundamentals, right? So do we have habits

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that are important enough to be rituals? Do we

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have a way of always chopping wood? Do we, what's

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the day to day expectation? You know, like, we've

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got to, you got to show up at work. You got to

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move work forward. You got to dot your I's and

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cross your T's before you hand it to the next

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guy and make it their problem. Those are just

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foundational. They're not unique to a culture,

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but if your culture doesn't value those things,

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go fast and break things has a whole bunch of

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broken crap. Right? For sure. I also think about

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there's this inherent assumption, and we navigate

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through the world as individuals with assumptions,

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but organizations are just big organisms. And

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when we move too far, too fast and never clarify

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assumptions, and have explicit conversation,

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those unspoken assumptions mount. And so I thought

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Chris was going to double check it. And Chris

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is like, well, I feel like it goes the Enron

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world. That's funny. Well, it's interesting,

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right? So like on both sides, you know, like

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with culture oftentimes comes story, right, comes

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art, comes like all these things that come with

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that we expect from a culture. Absolutely. Yeah.

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And yet, you know, like thinking about cultural

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debt, you end up with the victim's story. Yeah.

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Right. Like it's not something, it just doesn't

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sell well. Yeah. Over the long haul, right? Yeah.

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Yeah. Who wants to say, yes, we have cultural

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debt. That sounds like we're deficient, you know,

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but I think if we recognize that it's a real

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cost of starting something, whether it's a new

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product line, brand new venture. Yeah. Any of

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these debt elements, I think it's just, how do

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we, how do we move a little faster than we could

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otherwise afford? And so move fast and bring

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things is fine. When is it that we're going to

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come back though, and put in place the practices

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of clean it up and harden those things that are

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are worth keeping. Yeah, what's interesting as

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we're sitting here today, last week we ran the

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podcast on Tesla that we did earlier as we did

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a rewind. It's interesting to think about what's

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happened, their cultural debt. Oh my gosh. Right?

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So if you think of Tesla as being like this super

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impactful brand. Yes. That basically is take

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just basically made major swings at the ball

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and hit many many home runs and Yet at the top

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you have a person that is the CEO who will remain

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Nameless who you know start name starts with

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E and ends with long. Yeah And he what's funny

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is He's gone on record and he has said that he

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was the one that invented Tesla. Yeah which y

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'all know to be contrary. Which is not true.

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He has gone on record to say many things. Now

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he has done some great things for Tesla and Tesla

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would not be what it is outside of him being

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in that leadership role and yet they have some

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culture debt and that culture debt is the principle

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is due. It absolutely has. Well, think about

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when the tone at the top allows you to lay claim

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to work that's not yours. When the tone at the

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top speaks in these, these really broad, you

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know, generalities, it's really hard to feel

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like you're connected to all of your own good

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work or that it's important to be honest and

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accountable and transparent. I think Charismatic

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leaders in particular lose sight of that. You

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know, a healthy culture allows everybody to have

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some fingerprints on it and also has some shared

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accountability. And I think that idea of visible

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accountability, maybe that's really at the heart

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of what makes cultural debt so slippery. Processed

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debt blows up in our face. Invoices didn't go

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out. We have no cash. Nobody gets paid. Well,

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shit. Cultural debt, though, is invisible. And

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I think that's what makes it tricky. And so when

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you couple an invisible debt that's going to

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come due, like a ticking time bomb, those who

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don't know it, with a lot of unspoken assumptions

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or bad habits, then it's a dangerous game of

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hot potato. Well, what makes cultural debt so

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hard is that it's invisible and it's very hard

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to predict. The end. Because if you're the one

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on the line in one of the gigafactories and you're

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doing stuff, you might know what's going on.

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There might be rumblings of like, what is Elon

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doing with the president? There might be these

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rumblings, but to be able to predict what's going

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to happen is so hard. Because let's say his robo

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-taxis worked. Game over. Right, like all of

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a sudden stock takes off, you know, they're,

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they just gained a couple billion in market cap.

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Easy peasy. That's right. But if you miss on

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Robotexi, which it looks like they have, right?

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And you miss on, you know, I saw another thing.

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What's interesting is you start to see, like

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what I've started to notice is you see the Robotexi

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come out. You're like, oh, Elon got in trouble,

00:14:31.600 --> 00:14:35.590
right? Stock started to slip. Yeah. Push timelines

00:14:35.590 --> 00:14:40.350
on this. Right. Robo taxi hits a parked car.

00:14:41.409 --> 00:14:45.470
Oops. Right. That's a problem. Okay. And then

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you start to see what the next thing is. Right.

00:14:48.009 --> 00:14:50.029
And so what's interesting is you start to see

00:14:50.029 --> 00:14:53.490
these pushing of timelines. Yeah. And that culture

00:14:53.490 --> 00:14:57.490
is eventually going to implode. Now. That flywheel

00:14:57.490 --> 00:15:01.190
is moving so fast and they're throwing up so

00:15:01.190 --> 00:15:06.250
much cash that it is a slow cultural demise.

00:15:07.529 --> 00:15:10.649
I think what's interesting is you have this cultural

00:15:10.649 --> 00:15:15.149
issue where long -standing norm is people making

00:15:15.149 --> 00:15:18.070
claims that aren't true and that just kind of

00:15:18.070 --> 00:15:20.070
passes in the public, even if internally it's

00:15:20.070 --> 00:15:23.129
debated, I wouldn't know. But then you also have

00:15:23.129 --> 00:15:26.230
products that don't deliver on what they said.

00:15:26.460 --> 00:15:29.860
And now the underlying business model of, you

00:15:29.860 --> 00:15:31.720
know, it's not about the cars they sell as much

00:15:31.720 --> 00:15:34.019
as the green credits that they can sell in the

00:15:34.019 --> 00:15:37.860
secondary market off carbon emissions. And I

00:15:37.860 --> 00:15:41.159
think that's often lost in the public eye that

00:15:41.159 --> 00:15:44.539
it's not about the vehicles. It's about energy

00:15:44.539 --> 00:15:46.639
management and consumption that one of the biggest

00:15:46.639 --> 00:15:51.340
industries in the world. And so the revocation

00:15:51.340 --> 00:15:55.539
of the EV tax credits is going to drive down

00:15:55.539 --> 00:15:58.309
new acquisition. I can't imagine it being anything

00:15:58.309 --> 00:16:01.750
other than that, which has the very indirect

00:16:01.750 --> 00:16:04.769
cost then of wiping out this enormous revenue

00:16:04.769 --> 00:16:08.230
stream. So what feels today like an impossible

00:16:08.230 --> 00:16:10.610
company that is going to be here forever. And

00:16:10.610 --> 00:16:13.330
I'm sure folks thought the same about Sears and

00:16:13.330 --> 00:16:16.690
Roebuck and Cayman and Toys R Us for different

00:16:16.690 --> 00:16:21.129
reasons. But there's a wealth of companies that

00:16:21.129 --> 00:16:23.529
have gone by the wayside for a myriad of reasons.

00:16:24.220 --> 00:16:26.940
I think maybe today's argument is that it's not

00:16:26.940 --> 00:16:31.740
always bad finance. It's not always about, you

00:16:31.740 --> 00:16:35.159
know, political will or legislation that moves

00:16:35.159 --> 00:16:39.139
against or even one bad product launch. But when

00:16:39.139 --> 00:16:41.580
the cultural foundation is weak and that invisible

00:16:41.580 --> 00:16:44.240
layer is fraying or falling apart underneath,

00:16:45.399 --> 00:16:47.220
there's a host of things that just simply aren't

00:16:47.220 --> 00:16:49.899
going to react to help solve when the other problems

00:16:49.899 --> 00:16:52.659
show up. Yeah, you end up and we can kind of

00:16:52.659 --> 00:16:55.139
end it here, but you kind of end up with a black

00:16:55.139 --> 00:16:59.039
swan event. I love that. Well said. Where literally

00:16:59.039 --> 00:17:04.019
the risk is outsized in comparison to the rest

00:17:04.019 --> 00:17:07.039
of the market. Yeah. And it's unpredictable.

00:17:07.480 --> 00:17:10.359
It's not, you can't predict it. Like we can guess,

00:17:11.500 --> 00:17:14.460
but it's just, we're putting a flyer out there.

00:17:14.900 --> 00:17:17.200
But at the end of the day, at the end of the

00:17:17.200 --> 00:17:22.299
day, the more, Kind of moral decline, the more

00:17:22.299 --> 00:17:25.519
cultural debt we have, the more probability that

00:17:25.519 --> 00:17:30.059
we have of these large 2008 events where Lehman

00:17:30.059 --> 00:17:33.160
crashes. That's right. Where Enron dies, right?

00:17:35.160 --> 00:17:41.460
Because we've lost sight of taking care of other

00:17:41.460 --> 00:17:45.769
humans. Yeah, Nassim Taleb. I wanted to call

00:17:45.769 --> 00:17:48.069
that out. Black Swan is a super interesting idea.

00:17:48.230 --> 00:17:51.690
We're not getting into it on this. I'm 100 %

00:17:51.690 --> 00:17:54.190
in alignment that I would dare say a number of

00:17:54.190 --> 00:17:59.890
Black Swan events probably track back to unmanaged

00:17:59.890 --> 00:18:03.990
practices, weak tone at the top. That was certainly

00:18:03.990 --> 00:18:10.880
the case in 08 and lack of accountability. It's

00:18:10.880 --> 00:18:13.259
a rather the debt family. I'm glad we could talk

00:18:13.259 --> 00:18:16.700
about it today This is great. Thanks, Toby. It's

00:18:16.700 --> 00:18:18.859
a deal. Have a great week. See you man. Take

00:18:18.859 --> 00:18:19.200
care