52 min read

Carl Liebert: Radical Optimism
Out of the Crisis Podcast Transcript

Carl Liebert has been in leadership positions during multiple crises. He oversaw Circuit City stores in New York during 9/11, led Home Depot in New Orleans when Katrina hit, and took over a major role at 24 Hour Fitness during the 2008 recession. Prior to all this business experience, Carl was an officer in the Navy.

These experiences and hardships would make some into cautious leaders with warnings about the dangers of a crisis. However, when I talked to Carl, I was surprised to hear his radical optimism. Carl and I discussed the lessons he learned in his various roles, advice for other leaders during this time, and the importance of staying positive, no matter what.

Show Notes

Panelists

Producer: Ben Ehrlich

Editor: Jacob Tender

The original audio can be found on Breaker, Apple Podcasts or wherever you listen.


Eric Ries

This is Out of the Crisis. I’m Eric Ries.

We are still in the early days of the pandemic, and we don’t really know what’s to come. We’re all grasping for information. We’re all trying to make sense of this reality. And it can feel like these are the darkest days. But if you look at the data, if you study the experts, it’s actually going to get darker before it gets better. The human and economic toll of what’s about to unfold is unprecedented in our lifetime. And yet, when I talked to leaders, who are in the midst of this right now, who are trying to lead us out of the crisis, are feeling optimistic. They have their eyes set firmly on what the new normal will be on the other side. And that sense of optimism that sense that now is the time to roll up our sleeves and get busy. That is a precious Simple antidote to despair, as we see this darkness envelop our society. One of the special obligations of leadership in a crisis like this is both to take the long term view, but also to recognize we have an obligation to take action. Now, we have to act quickly and decisively to set ourselves up for where we want to be as an organization, but also as a society in that new norm. And it’s precisely because the future is uncertain that we have to take a long term view. We can’t make a five year plan or a 10 year forecast right now. But we know there are investments we can make today that will set ourselves up for success in the future.

There are some parallels between what we’re experiencing and crisis of the past. Even some crises that have unfolded in our lifetime, although the magnitude and the devastation here is likely to be different and greater. Yet I still think it’s worth trying to figure out what can we learn from past crises? And how can that allow us to be optimistic about the future. That’s why I wanted to talk to Carl Liebert. He has been a leader through many different crises. He was at Circuit City on 911. He led Home Depot through their response to Katrina, was a 24 Hour Fitness during what we used to call the Great Recession, and lead USA as CEO and president, starting in 2014. He has worked at iconic American companies, public and private, large and small. And he’s someone that many companies now are calling for advice. I wanted to know, what can he tell us about those special applications that leaders have during a crisis and I frankly expected some more stories that were pretty somber, but as you’ll see, Carlos in that class of leaders who is radically optimistic call thinks that although we don’t know where we will be a year from now, we can still take steps right now, that put us in the right direction. We can have our eyes firmly fixed on what that new normal might be. And like a lot of leaders I’ve been working with on relief efforts, Carl believes that a time of crisis is also a time of opportunity. The consistent theme that he stressed to me was, we have to take a long term view, we have to understand that things will get better. as dark as things get, there will be a recovery. But the actions we take now will determine the path both for ourselves as individuals for the organizations that we’re members of, and for our society as a whole. The future is not yet written. We don’t know what kind of recovery we’ll have. We don’t know what that new normal will look like. We don’t know what values will be embedded. The choices we make today will reverberate for a long time. And if we sow the seeds, we will reap a harvest of plenty and broadly shared prosperity The new normal to come.

Here’s my conversation with Carl Liebert.

Eric Ries

So first of all, Carl, thank you for coming on. You want to introduce yourself a little bit and and just you know, this is not your first crisis. So show us a little bit about your background and some of the things you’ve you’ve seen before.

Carl Liebert

Well, sure, Eric, thanks so much for having me. And it’s great to be here, especially with everything going on in our world. So I’ve been through a few of these. This one is extraordinarily different and have some experience but in a lot of cases, I’m learning just as other leaders are, as we as we go through this. I spent early days. Once I graduated from the Naval Academy in the United States Navy, then spent eight and a half nine years at General Electric in the 90s. Working for jack welch and significant other leaders there. From there, I went to Circuit City in Richmond, Virginia and was there for four years and in the throes of battle against BestBuy and all those things. From there, I was fortunate enough to go to Home Depot and be a part of a rather large transformation at Home Depot as well as navigate through lots of I’ll call it natural disasters between hurricanes and tornadoes. And obviously Hurricane Katrina went down while we were there. And then from there, I was running a fitness company on the west coast by the name of 24 Hour Fitness, which was a private equity backed and quite a bit of debt and have our clubs in the state of California in 2008. So was a very interesting time to be a CEO and learned a lot and then from there, I got to go spend some time at USA which is probably one of the finest companies in the world its member own. We wake up every day thinking about our members. Our customers first and our team members employees are right in that conversation and really think about this long term value conversation that that organization brings. And then I did a pre stint at auto nation, America’s largest automotive retailer in Fort Lauderdale, Florida. So now I’m home based in Austin, Texas, and spending a lot of time with a lot of startups and a lot of CEOs that are trying to scale their companies and, and Lately, I’ve been working with a lot of former leaders who were on my team that are either CEOs or senior leaders and companies trying to help them navigate this COVID-19 crisis. So hopefully, I hope that gives you a little bit of background.

Eric

That’s great. And it’s just I think it’ll be really helpful for our listeners, many of whom are going through something like this for the first time to hear from someone who’s who’s seen a lot of this kind Well, a lot of devastation and difficulty. I don’t know what exactly is comparable to what we’re going through now but but certainly some difficult times in the jobs that you mentioned.

Carl

Yeah, I think one of the first one was I was running, I was the division president for the Northeast division on 911. And all the stores in New York, New Jersey and obviously all the East Coast stores for Circuit City were mine. And we had decisions to make in the matter of seconds to what we were going to do and how we were going to show up and you make those decisions they’re really for when you’re leading is, you know, start with your customers first and how do you protect them and take care of them and how do you take care of your employees and I remember the decision in our Union Square store which was just up from you know, kind of where the the barrier was to get to lower Manhattan that lower Midtown and we made a decision right away. We were closing the store, and we were going to put all the first responders were going to be able to sleep in our stores and it wasn’t about getting the store reopened or anything to that effect. It was about having public environment sleep in a store, heck, who had more TVs in one place than we did. And we started feeding first responders. And after the we opened the store, one of the things that you know, some of the pictures I have, that I cherish the most are out in front of the store with families and leaders of many of the firehouses that lost their their brothers in some of those fights in the fires and the towers, and we launched message from America with Sony, where you could come in and and take the DVD and send it to your soldier or sailor or marine that was being deployed, which we know for the holidays, we were ramping up a campaign and we said how can we participate? What a great way to reopen the store and work with Sony to play offense again, come in through that but you start with your customers and your employees and if you if you if you ground yourself around taking care of them you’re you can do no wrong if you start with that.

Eric

That’s such an interesting example. And It’s so resonant with the current crisis because, you know, that was one store that you had to shutter. We have companies now who have every store, you know, globally or in a whole country shuttered, their, their offices are shuttered, all these facilities are shuttered. And so I think, you know, someone who is more narrow minded might say, well, if I can’t keep my store open, there’s nothing I can do for my customers. And yet, you took a very expansive view about who your customer is, and who you could use that facility to serve you. I think there’s some lessons in that for for folks who have idle capacity idle, idle employees right now.

Carl

Well, and I think this is the conversation around, you know, the customer experience, can can be no greater than your team member or employee experience. And, and you have to really think about when you’re when you’re, you’re building a brand for the long term in this you know, called built to last or scaling excellence is you’re in a perpetual state of, you know, really thinking about what you need to do. differently and I can’t tell you how many leaders who I’m spending time with that are in the gym space that are utterly devastated with basically your mothballing your gyms. And you are thinking about trying to put content online to serve your members and take care of them. Meanwhile, they’re canceling their membership because that content is not what people want or it’s not how they want to consume that content. And you really have these assets that are sitting in shopping complexes with empty parking lots that are really mothballed to use a enable term. Those are really frightening and difficult decisions. And you know, what you can do now in businesses like that is to think about a day when we move from where we are to let’s call it a modified social distancing where gym where your treadmills have to be 16 Apart where your class sizes have to be six feet apart where they’re a third of what they used to be. And you’d have to actually count how many people come into your gym and you have to keep people separated for a while until we really get to a vaccine. Those are the things that you should be testing with trying now and figuring out taking pictures getting your photography ready, because when we do get the, we can go back to a modified position, which is what I think will end up going to, what you would want to be able to do is quickly share the game plan for what that looks like with your team. And that includes what you know what the treadmill areas would look like, what your classes would look like what your cycle room or spin room would look like. Those are the kind of things that you can be doing now for when we get on the other side of this and we will get on the other side of this to help your team stay focused on you know, outcomes be very outcome driven In the world, we’re going to and I think, how you think about that, whether you’re a restaurant owner that didn’t invest in curbside pickup, what can you do to? I’ll call it packet or in an agile mindset? How do you how do you think about bringing away to be able to do curbside and do that? Well, and not just rely on the delivery folks to be able to support you. I think all of that is connected to a rapid learning period that you should be taking advantage of, in your business with your teams as much as humanly possible.

Eric

You know, so many of the examples that you gave, and remind me of, I don’t know how many hundreds of conversations I had with companies during the boom times, in especially big public companies, where there was this conversation about is it is now the time to invest in business agility, digital transformation, building these new capabilities and how many companies were complacent, but Well, we’ll get to that eventually. I’m sure you know, it’s not especially urgent. But we’ll do it. It’s a nice to have. And let’s spend the money on share buybacks or something else, you know, it just doesn’t seem that important. Now the companies that were farsighted and made those long term investments now are able to respond so much faster to these new opportunities and the ones that don’t, they must all be feeling this incredible sense of regret. Are you seeing that in the conversations that you’re having with the

Carl

well in this is book, this is the hard part? Because I guess you do see it. If you’re, if you’re a CEO or leader of a company, you’re, you’re in a pet perpetual state of second guessing yourself, you’re usually your own worst critic. And the truth is, is that’s yesterday, and you don’t really have the ability to change what you did yesterday, but you do have the ability today is is is to kind of lean into this. I kind of you know, and, you know, I’m a big fan of Professor Bob Sutton who wrote the book scaling excellence and he’s a mentor. It’s one of the books that I share. And Bob and I debate this idea that every company has three types of debts there is processed debt, there is technical debt and there’s human capital debt and as you’re scaling a company and as it’s continuing to grow there’s always your company’s in a perpetual state of this process technical and human capital debt where you’re constantly trying to scale those and you know, always come back to is whether it Home Depot or 24 hour or USDA, you know, really thinking about the customers experience and just because if you were great this year in this is the way you did it. Next year, you have to be even better. So how are you investing in being even better? And this rapid prototyping thing when your backs against the wall and your your revenue models gone from 100% to 10%, if you’re a small business restaurant owner or you’re already You’re running a small curbside, even a consignment store that I’m trying to help a leader, understand how we can serve. This is a really good time to rapid prototype through an Instagram through Twitter through all it really gather your followers, but you can’t, you can’t beat yourself up because you didn’t have good email addresses before you started it or you didn’t have their social media accounts, go get them find a way to go hack that and go get them and then realize that on the other side, this new normal you’re going to be in is that these channels are going to be business channels for you. And you’re actually going to use this for six 810 12 weeks to actually learn and put some of these new processes in place in your company and then decide that we’ve got to invest differently going forward.

Eric

So what about someone who says it’s too late? You know, I should have made those investments before but I do Did it so now? You know now it’s two lakh cats just start hacking stuff today. I’m already too slow. It’s I missed my moment. What would you say to someone like that?

Carl

Oh, I just tell them. It’s never too late. If you if you if you lean in and understand this, these are this is a brilliant time to play off and it’s you know, I kind of think about this in customers and protecting your poison customers always protect your p&l, your revenue, try to understand where your largest revenue streams that are at risk and how you can minimize them if you can see that new normal. And then how do you play offense? And what I sense is there’s there’s always a way to play offense. You know, there’s a there’s a bike shop here in Austin that you know, was every morning. I’m practicing social distancing, but I’m a retailer and a customer person. So I’m constantly shopping. We have a great retailer in Texas called a cheapy. And they They’re just they’re one of the best grocers in the world. And I’m such a fan of their business and, you know, Walmart and what they’re doing and I’m in a Target store and then, but I see a bike store in downtown Austin that is, you know, quasi if it’s deemed essential or not. And, and Austin’s a very fit town, it’s it’s it’s an innovative town and the bike store is they put a tent out in front of the bike store. And it’s basically we’ll fix your bike, you can’t get out of your car, we’ll get your car out, you’re almost doing like NASCAR style pitstops. With this tent, you don’t get out of your car, you don’t interact with anybody. You’re on the phone and they pull it out, and they take it into the shop and they change your flat tire. They adjust your gears and they bring it out and put in the back of your car. And I’m just like, That’s such a great hack. Because when you go back to a new normal and I just want my bike fixed Should I really have to go bring it into the shop all the way to the back where the mechanic is leaving? Right? Or should I’m

Eric

sure I’m sure a couple months ago, if you’ve gone to the CSI Listen, I think you should add this extra feature. And they were like, well, I guess we had a few months to work it out. You’re like, No, no, I need it done in a week would have seemed impossible. And now here it is.

Carl

If you can’t do it, right. I mean, this is the this is the beautiful, I, gosh, I really want people to not put their heads down, but keep their heads up. And to really raise the this is, you know, it practicing an agile mindset in this idea that we can all try new things today and probably none of them will work. But because of what we tried today, we will learn some things and we can apply those for something tomorrow. And you know, I remember us at USAID, you just it’s a dynamic customer driven business and we were down with coast with when the Hurricanes hit South Texas and Rockport and it was just devastating and the whole area was quarantined. And we were talking to some members. And Eric, the member said, I know you have aerial footage of my home. And can I have access to that? You know, and it’s Saturday, we’re all down there. But you know, like, hold on, let’s go, you know, so we went back, got our agile teams engaged. And in, you know, 48 hours, we could put up aerial of people’s homes, they literally couldn’t get to their houses, but then they could see our footage either through the drone videos, we were flying or our aircraft videos and they could see their home to see just from a picture how much damage they so they can anticipate what they needed. And then a couple of them said, Well, you’ve got the footage is there any way you can open up to my neighbors, they aren’t USA members, but my days, we would like to see this too. And, and, and really, we were running nice You know, they were 90 minute, I’ll call it sprints. And we just they the team started screaming really soon as we got back on Saturday night. And by Monday, we were able to put the footage out there in a in a secure way in a way to share it with our members. We still couldn’t get into their homes yet because we weren’t even allowed to get there from an insurance perspective. But our members could see Oh, I’ve got some roof damage. Oh, oh gosh, my carports caved and they could actually see what we were seeing but we’d none of us could get to the to the to the home and you start to recognize what kind of loyalty and and you know this idea of connecting back with your customers. Like I’m convinced this bike shop in Austin like on the other side of this, people are going to say thank you so much for finding a way to stay open because without my bike, and I don’t like the exercise any other way I needed that fixed and I’m hoping Really growth opportunity for them to take to take.

Eric

You know, I got to admit, I find it almost a little bit jarring to hear your optimism here. And I’m usually the rah rah, you know, business transformation and startups guys. So even I feel like I’ve been infected by the sense that we’re in a really dark place. If you go on social media, the mistake of going on social media right now you will see nothing but death and devastation. The news is incredibly bleak. Maybe tell us a little bit about where that why do you have that sense of optimism about this? Why do you see it as an opportunity? When all the rest of us are feeling like it’s it’s such a devastating tragedy?

Carl

Well, okay, I think probably I’m an optimist at heart. And, you know, it is believed that this idea of being positive and getting everybody’s in the game is leads to create outcomes. And you know, I you asked for some c stories. So as a Navy naval officer, I can share one but I was 48 hours after Katrina, Bob Nardelli, the CEO of Home Depot at the time and myself, I was the head of stores worldwide and we were flying over Katrina. And if you remember, we were being shot. helicopters were being shot at people were cutting through the roofs of their homes because they wanted to be rescued Coast Guard was flying over. All of our stores were underwater or without power. And and we basically said, Okay, what are we going to do? We had a stated strategy to keep every store open in 48 hours after a catastrophe this was not a home improvement problem. This was a survival problem. And I remember we we always set up a warm room that we manage. We met twice a day we broadcast it out to not only the stores were infected, but all the leaders in the field and the company. Everybody participated. And, you know, I remember listening to the district manager in New Orleans going this is what what do we need? He goes, why the diapers, we need formula, we need water. And I remember looking at the merchants and merchants, we’d never carried diapers or formula. And like, Well, why can’t we have a great relationship with PHP let’s let’s make some phone calls and let’s and literally within 48 hours we were, we were delivering those two are stores and by the way our stores were underwater weren’t open. We were doing it out of a back of a truck which guess what we we had no point of sale system. We were literally taking IO us in a cigar box from people for stuff like that because there was no electricity to actually run a cash register and we didn’t have mobile registers back then in 2005. And and in Look, it was a scary time our loss prevention folks were worried we weren’t going to get paid that we were going to get I was

Eric

I was just going to ask you about that because I the fear flashed into my head is what were your compliance people.

Carl

They were they were crazy at us. And we said, this is this is a brand building moment for us and we’re going to figure out some some new things that we can do that we hadn’t do with all our cleaning products. We were We were good on cleaning product products, but we weren’t great on cleaning products. I’m telling you go into Home Depot now. They’re great on cleaning products. I don’t know if we were great before this catastrophe that happened and it’s and it’s serving Home Depot today extraordinarily well. I think the compliance and loss prevention people thought I had lost my mind. But I had great merchants and great teammates that said, you know, do the right thing and it usually works out in these kind of situations. And I said, Well, if it’s what’s the worst could happen? How much could we lose? And so surely I had my CFO model how much we could lose. But how could I model what we gain through all that? And I think a little over 98% of the people that wrote us I’ll use I still remember going back landing the helicopter and slide l store. We had a store manager and a cashier that for seven days without power escort, escorted customers in one at a time to get what they needed to get the generator to get, and then escorted them out and took I’ll use and I remember him saying, Carl, like a little over 98% of our customers came back and pay this and, and you know, you’re just I said, Well, what do you need? He said, Well, my cashiers taking my clothes home and washing them at her house and she lives 45 minutes away, and I said, Would you like a mobile trailer we can put here and you just sleep in the trailer and with a washing machine to wash your Close shit this time because, yes, we like that. So you know the word How soon can we get it there for him so so I share that with you, Eric that created a hustle factor that changed the organization. You know, at the time, we had, you know, 250,000 employees and 2000 stores and, and before we were done, the culture of Home Depot had, you know, kind of, you know, the I’ll call it the foundation had been riveted even deeper than ever and built to last and how to serve customers and just thankful for, you know, the leaders that helped us pull that off and make that happen. And, and I’m hopeful that if CEOs and leaders see this as an opportunity, and it’s difficult to do that, in some industries more difficult than others, that they’ll play offense with their teams because when you get your teams playing offense, it’s amazing how they’re actually Turn to turn from the skies falling the world’s coming to an end to well, job Oh, I have to figure out how we’re going to get this ship started back up again on the other side of this, oh, I have to have a whole playbook bill. Oh, I have to figure out how to bring furloughed employees back without touching it with paper and doing it digitally so that HR doesn’t have to go validate these things. And you know, you think about how hard it is to hire a normal employee in any business. If your benefits team now and your HR team are thinking about, okay, how do we bring these people back on? And how do we bring them back on with that with it with a person knows it doesn’t touch a single piece of paper, you’ll be able to use that on the other side with everybody you hire going forward. And it was an it was something you never invested in before. But it’s something if you do now you’re going to get your your business started up faster. It’s a little bit like lemons, you’re going to run the car and the car you’re going to get in and you’re going to be able to go and and if you’re Going through the normal bureaucracy it takes to hire an employee the call it the slow line, then everybody else is going to beat you to the punch on how to bring people back on. And and so as we’re thinking about this optimism, the leaders role is to inspire and bring everybody along. So you should be bringing your furloughed employees along what your plans are, where you’re going, tell him how valuable they are that you’re going to need them on the other side of this. Tell him the things you’re working on to make bringing them back on. easier and simpler tell them the things you’re working on to prepare the company for the other side of this. And I know some some employees, some CEOs gone to daily blogs where they’re sharing their their issues from bookmarking a website on their laptop to, to not using zoom down to to moving around and using various things. But it’s a it’s a beautiful moment for leaders to get closer to Their teams and you should never squander that moment.

Eric

One of the things you’re saying it’s so important, and I really want to underline this because inner inner recession, like the thing that turns a recession into a depression is as a shock like this. We’re all afraid for our business, our balance sheet, and the thing you said that really hit me was, you know, we can see the problems of the crisis, there’s, they’re really obvious, you can’t really see the opportunities until you’re on the other side. So companies are afraid, they start cutting costs, they start squeezing their own vendors to save money. But of course, the macro economic lesson of the depression is that your spending is my revenue, vice versa. So if everybody cuts back, everyone’s revenue goes down. Everyone’s got to cut back more. And it’s a vicious cycle. And so part part of the path out of the crisis from an economic point of view has got to be for the farsighted businesses, to say, wait a minute. This is not just a crisis. It’s also an opportunity and there are these moments to make these investments In people in technology in things that lay a foundation to take advantage of the recovery when inevitably comes

Carl

just beautifully said, Eric. And I think one of the leaders of mentor mine and dear friend, General Stanley McChrystal wrote a book called team of teams and it’s one of my favorite favorite leadership books because it It talks about how to get everybody in the game and it’s, it’s, it’s about getting everyone’s talents to the table, but, you know, he would talk about this idea of a common enemy and it’s really something that you just said is, you know, I started this crisis so like everybody thinking the common enemy was Coronavirus, or COVID-19. And, you know, very quickly use the word pivoted to fear and panic is the common enemy and what I think we as leaders owe to our teams and to our customers. And really to our communities and our families, by the way, is this idea that the common enemy we’re fighting against is fear and panic. And the best way to fight against that is to have a plan, execute a plan, communicate with confidence, and be willing to, you know, try new things, fail at new things, being transparent about that. But celebrating this idea that there is going to be a new normal on the other side, it’s going to be dramatically different than what all of us are used to. Let’s celebrate the fact that we’re going to be ready for that new normal and let’s go in this together. And it’s just so much about how everybody’s, if you’re in panic a spread is, it’s a little bit more of a difficult virus to your point moving from a recession to a depression. And that’s what if you studied the 1920s and 30s. There was quite a bit of that, as we all know.

Eric

One of the ideas that I’ve been trying to promote I just want to get your feedback on is the idea that this is the moment for long term investors to step up and go long on America, you know, we all have this tendency to pull up, pull back our investment dollars in a crisis like this as the markets crash, we’re afraid. So we make we make less investment. But this is actually the moment when cost, you know, cost of capital is going up, the cost of everything else is going down. So all the inputs to production that allow us to make long term investments are about to get relatively more attractive. So how about a deal where long term investors agree to make non liquid investments into private and public companies as they listen, we’ll we’ll make an investment we’ll take a discount because everything’s down right now. But we’ll commit to hold the stock for a long time. You as a company commit to spend that money on r&d and not financial engineering, and we try to finance the recovery, you know, with all the long term investors who really should have a multi generational timeline and that’s not just pension funds and family offices, but I was thinking about every ordinary American who saved for retirement, if you’re a young person, and you don’t have money in the market, so you took money out of the markets during the good times, when the markets are down when there’s a crisis, that’s the best time to make those kind of long term investments.

Carl

Yeah. And you’re touching on it, you know, it’s, it’s,

it’s the coach once shared me it’s, it’s the pain of discipline versus the pain of regret. And as you as you start to lean into this, this conversation is is how you think about, you know, your balance sheet, right. You, you touch on, you’re seeing the companies that have run their, their businesses with a bulletproof balance sheet, that are going to come through this and do extraordinary well because they, they plan for this, they, they don’t, you know, insurance companies, you you never Want to plan for 100 year event, but that’s what insurance companies that are triple A rated like USA have to do. And so you’re constantly stress testing your p&l, you’re not just doing that in crisis, you’re constantly thinking about liquidity and doing this and, to your point. This, this is going to be a brilliant moment. We’re all going to be a little gun shy for a while it just happens. You know, I think about what happened to millennial millennials and Gen Z is coming out of the Great Recession, the GFC. And, and, and I think about this next group and how they’re going to really behave and think about, you know, social distancing and all this activity. What I believe is this is going to generate a next period of growth for innovators in our country. We can’t even, we can’t even fathom and when I say that is to see the medical community, beginning to do rapid prototyping to to explore bringing potential vaccines to test at the pace they’re doing. I’m on the Jimmy v foundation for cancer research. And, you know, it takes eight to 10 years to get a relevant cancer drug to the marketplace. And you know why that is, but I think about the innovation in technology of what we’re able to do now, if we can turn use this virus as an opportunity to now turn this on medicine, how we care for people, both long or medium and long term care. The innovation that is potentially going to come from this is it’s going to change society for the better because these are the things We’ve been, I’ll call it the constraint. Another one of my favorite books is the beautiful constraint. And we’ve had this constraint that Well, no, we can’t do it that way. Well, right now you’re listening to Dr. Fauci and, and and the doctors and they’re pushing the limits to the constraints that they’ve long time established. And when we break those constraints, and by the way, good things are gonna happen, and potentially bad things are gonna happen. But overall, I think more goodwill will come about, then then we’ll be have a new norm and a new level of innovation that I believe some of the long term capital that’s out with, with both individual investors as well as some of the investors that are most famous that we know about, are gonna really, really benefit from it. And and you just have to believe that this is going to drive a whole new level of innovation to go along with it.

Eric

You know, my conversation with Sam Altman, he was talking about his just marveling at the fact that the entire biotech sector has just instantly put on a dime, everyone is working on COVID treatment, no matter what they were working on before, when he said, the clock cycle or biotech is going to get reset, people are discovering that things that they thought had to be slow for some reason before just that’s the way it was always done. They’re breaking those boundaries, and they’re going fast and that’s gonna pay incredible dividends on the other side.

Carl

Oh, you know, one of the ones I was chocolate about a little bit, and please don’t you know, I always kind of laugh is this idea that your mortgage is 1000 pages long. And when it gets done, you have to go sit with a closer and you’ve got to sit in at the title office and it all has to be in person and like most of the states in the United States, and and you’ve got this whole process that is paperwork and you know, it’s cumbersome, it’s painful to get a mortgage. Well guess what’s happening right now is People are figuring out how to do that. And otherwise the business shuts down. So it’s amazing what to watch. Oh, we can close that over video conference now and have to go sit in the title office and go through that process and go through the paperwork. Now we can close digitally now. Wow. So So tell me why were we couldn’t break through that? Well, we couldn’t break through that. Because it was it was just a constraint that there was a rule or a law that now we’re looking at it from, well, why don’t we do it that way? And I think your point on biotech, you know, those are innovative people. And, and but but we, we put parameters around there were constraints. And we said those constraints are aren’t movable. And the truth is, is when you’re in a crisis like this, those constraints become that just beautiful.

Eric

Yeah, I’ve been talking to research labs and science based startups about how they’re raising funding and, you know, people are still trying to use the conventional grant making and investment process, which was incredibly slow and inefficient, you know, has always been, and that’s been a perennial source of complaints. And that’s not going to get it done now. So we’re going to have to invent new funding mechanisms, new grant making facilities, we’re going to have sure as you said, well, we’ll run into problems too. But it seems like this could be an opportunity to really question a lot of these assumptions and say, hey, why didn’t you know a question? Why didn’t we do it differently before? And I think a lot of times the answer is going to be well, complacency. We didn’t really have to so we just were lazy about it. And now, now we’re going to see, you know, this no longer an option.

Carl

Yeah, and that’s, I’m hopeful that we embrace that as healthcare, how we do healthcare. How do we bring everybody along? This is a it’s a brilliant time and, and just as, as is all great crisis’s expose these things. I’m actually you asked me why I’m optimist. I’m I think We’re going to get better on the other side of this and it’s going to be horrific. For the folks that are affected. I have a family member back in Indiana and she’s my aunt and she’s been on a respirator for today is Day 10 she’s never been sick a day in her life. You know, I you know what she’s gonna make it she’s a fighter and, and I and we live in a small town area. There’s I think there’s 250 beds in our county in southern Indiana and I think there’s 22 respirators and she went in and fortunately got one and and she’s fighting like crazy, but she you know, she bought tears at the church five days a week and who knows what how it happened but she did. You know, I’m, I’m, I’m optimistic because I have to be but the other side of this is, is is we’re going to figure out, we should have, we should have done more broad testing, we should have understood the antibodies a little bit better. But we can’t beat ourselves up because we didn’t. Let’s make sure that when the next thing happens, we’re a lot better going forward. And and I think it’s going to, you know, it’s going to change how we think about safety and how we think about, I’ll call it cleanliness, how we think about taking care of one another. All those things are going to be different on the other side, and it’ll be better for society and better and their long term is going to do great things worse.

Eric

There’s going to have to be a truth and reconciliation style commission, probably to look at all the mistakes and misdeeds that that were done. And yet, I’ve been surprised how many people working on relief efforts have all said, Look, this is not the time for recriminations. It’s not the time for blame, like we’ll get to that, but right now, the need is too urgent. And so I hope hope everyone will be able to maintain that attitude, but then not put it down the memory hole. When the crisis does pass. Like there will be a time to examine and to learn from those mistakes and hold those responsible, accountable, but most importantly, to make those investments so that we’re better prepared next time.

Carl

Oh, you know, and the military is pretty good at this. We certainly practiced it a lot at USA this idea of after action reviews. And I’ll tell you, when you’re a field leader, you’re a leader and you’re doing the after action review, and there were things you’d look back at you could have done differently. The one of the most important things you have to practice is humility, because, boy, there’s, there’s lots of things that we can all be second guessed for each and every day of our life. But when the stakes are this high, what we want our leaders making the best decision that they can at the moment that they can make that decision and ensuring that on the other side of this will go review those decisions and say, Okay, how could we have made a better time What could we have done to be more prepared? You know, that’s that’s comes back to that process debt, technical debt, human capital debt, what were our debts before? And how do we shore those up so that we have something similar to this or, like this happens again, that we can respond with, you know, much more alacrity. I can only imagine the IRS and running the query to go say, we’re going to send checks to 300 million Americans. And we can get that done in two weeks. It would take a programmer with some of the code and the technology. I can’t imagine what that conversation looked like with the technology debt. We have a lot of those places and I’m hopeful that on the other side of this, we’ll say, Wow, the Federal Reserve, you know, we need to be clearing more frequently. We can’t just batch process five nights a week and a seven day market and suddenly We have a technology stack that allows us to do those kind of things if we want to move with agility, so I don’t know, I think there will be lots of inquiries just like the word of 2008 and 2009. And, and, and Michael Lewis will write a book about it or the big sure he’ll do whatever it’ll be. But we’re all going to learn from it. And we won’t repeat those same mistakes. They’ll be different but but I do say, Eric, you know, this is because of what we did after the financial crisis to our banks, and it was painless, haven’t run a big bank at USA, the stress testing and balance sheet liquidity requirements, but golly, you know, if it wasn’t for the banks being ready, right now, there is no way we could be moving on the really the $2 trillion to get out there, and it’s probably going to need to be more but if you think about the balance sheets of JPMorgan Chase it Think about it a city or BFA or Goldman, and even all the midsize banks. Because of the changes that came out of the financial crisis, those banks are equipped to deliver liquidity loans and much needed money to business leaders and consumers. And without the financial crisis, there’s no way those banks would have been ready to do this.

Eric

Reminds me of historical parallel when we’re talking about the great recession, I remember learning in school that people called world what we call World War One was called the Great War. And then, you know, something much worse came along and they realize I had to, you know, have to think about it in a different way. And I wonder now, how that will change our relationship to the Great Recession. You know, will we will we see that more rather than as a earth shattering crisis in its own right, but rather as a prelude to something much more dramatic that that is happening now. One of the one of the other questions parallels Do you see between what we’re going through now and some of these past crises?

Carl

Well, look, I think,

how we think about the new norm on the other side and what will be different, right? You know, clearly 911 changed air travel for all of us and with TSA and the security requirements and all the things in it changed it forever. I think about what the new normal will look like and in until you can guarantee my safety. You know, will I go to an NBA basketball game or will I just watch it on TV? Will I will I go to the Eagles concert? Or will I just play my Eagles album? Because I don’t know who’s got it. I don’t know who doesn’t have it? And I don’t know. You know, it really if I’m at risk. More so than someone else. I think all that connectedness of, you know, we check temperatures before you get on an airplane, we check temperatures before you walk into a Walmart, how to think about where that’s going and this idea of, you know, in the court the confluence between privacy and health, and what this is likely going to mean, as you start to think about with some of the things that went into play and move on and those things, I believe, it’s likely we will have to give up some privacy for the better good of everyone else, and I’m not sure how that’s going to how that’s gonna play, play itself out. And, and I think there’s a lot of people a lot of people much smarter than me, but I but I know if you’re If you’re in these businesses that are service oriented, that, that bring people together, and they’re revenue generating, and they’re important, you’re gonna have, we’re gonna have to figure out a new way to, to be able to ensure our people safety, just like we said it was safe to fly again, it’s safe to fly again, because we put TSA there. We put all these rules in place, and you can’t bring this on planes. And so therefore, it’s safe to fly. Tell me when it’s safe to go back to a gym. Tell me when it’s safe to go to a concert or an athletic event. And I think how we think about what those new norms are going to be, or are going to be the really some of the largest changes in our lifetime to, to what we’ve seen.

Eric

Do you want to talk a little bit about some of the organizations that you’re either helping or talking to, that are grappling with the crisis and again, direct way, are there any specifics you can share with people either who have impressed you or who, you know are grappling with in an interesting way.

Carl

I mentioned I was working with an NBA franchise do that, you know, we’re really thinking about how they’re going to come back what that looks like. They have resisted a furlough eating and getting rid of their people. They’re working diligently I think most of their leadership team is going to forego a significant portion of their income in order to ensure they keep their team and their franchise healthy and keep as much of the employees that work in the stadiums and work in the gift shops and and run the program on on this side. Because they believe they’re a part of their culture and they do not want to lose that culture on the other side and what that looks like so they’re they’re navigating some some tricky decisions with what the NBA is gonna likely do or not do. Are they? Are they going to play in Las Vegas and quarantine the players and bring everybody back? Are they going to play in their current stadiums and just social to social quarantine or quarantine the players in their hometown? I think these are, these are really, really big conversations. And you know, you have a tendency, you want to wait for the league to tell you what you want to do. But at any rate, what they’re doing is okay, if we had to play in our own stadium without fans, how many people would it take to open up the stadium run the stadium, how many people to player so we’ve got to have several scenarios of what that looks like and what it would take. So we would know the impact on the other side into a net. So that’s one and it’s really tricky. As you as you start to think about that. Another is a global manufacturing of appliances company, and they are they manufacturer around the globe. So they’ve been they’ve been literally affected from their manufacturing sites in China to their they have a big presence in Italy, their European brand and their us business in there trying to understand how to navigate this. If you follow a lot of the appliance manufacturers, you’ve got unions that are trying to close factories down because they don’t believe in safety. They’re worried they’re not safe. They’re struggling with keeping their plants open. Oh, by the way. A lot of people want an extra deep freezer freezer or refrigerator now because they’re there. They put in one garage to add extra. Yeah. So they, so they need it. And what was really great, I really applauded the CEO in this case is we talked about, you know, well when we have what’s going to happen when somebody tests positive in one of your factories, and our plan is to close the factory down, send all the employees home and we’ll clean it and we’ll take a week to do that, then we’ll bring it back. And I said, Well, why a week? Does it take you a week to completely clean the factory? And he said, No, how long does it take? We’ll find out and and once once we figured out that, you know, basically it’s an 18 to 24 hour, deep clean and they had a company that would come in and do it.

Then it was okay, so, so, alright, how are you telling your employees this? Um, well, you should tell them. We know there’s going to be someone test positive in our factory. When this happens. Everybody will go home We will pay you for that day, we’ll tell you when we’re going to start back up. Here’s the firm we’re using to clean and sanitize the every piece of equipment in the factory. And we will do that five times a week if we have to, but our customers really want our products and our job is to create a safe working environment for you. Your safety is every bit as important as our customers. And so we’re not going to hesitate if someone tests positive, but once we’re clean, we’re coming back to work and we’re getting you know, we’re getting into it and it was it was just a really good moment because I think it caused the leadership team to really say, okay, you know, I gotta bring my employees along on the journey with me, right? I want them to know what I’m thinking that I’m thinking about their safety, and that I’ll do whatever it takes to protect them. But we are going to go back to work. Because because the world needs these products in order so that people can maintain social distancing and not have to go to the grocery store each and every day. Yeah. So I thought that that was a that was interesting the other one was a fitness club chain I call it medium sized well over 50 fitness clubs and and and you know they’re caught it’s probably one of the most difficult because having a distance platform with fitness and creating content and doing all that these are these these companies like Beachbody and Les Mills you know they they’ve done that for years it’s it’s it’s it’s it’s in their nature but to take a fitness company and then have them start working to develop content to engage their their members and treat their members with respect frees their dues so the billing your credit card if the club’s not open, really for go there. Read revenue model, how to think about you know, furloughing several thousand employees. But telling them you want to bring them back as soon as this is done and you want them back. How do we engage with them? But, you know, suddenly if you’re if you’re running a fitness company, and you’ve got zero revenue coming in and you’ve got rent, do you know the panic starts to come in? It’s like, No, your next call is gonna beat all your landlords and you’re gonna call them and say, hey, can can we not? Can we forego Can you help me? Can you do something for me over the next six or eight weeks that allows me to, you know, come back in a sustainable way and we’re in this together. And when this is all done, we’ll sit down and work on it together because I know you want me as a tenant in your in your retail area. And I want to be in where you are. And these are just conversations that you know, we’re working to help them formulate and start Along the way, and then I’ve got several entrepreneurs here, Eric that that are here in Austin that are looking on that are looking at anything from financial services to supports performance. And I’ve got a seed round and Abraham before how feet group of folks that I’m just trying to help them and, and all of them are just really keeping an upbeat, positive attitude. It depends on where you are, the most important thing is keep your shareholders in the loop of what you’re doing and how you’re reacting to these things. And especially your investors and and i know as a CEO, you want to put your head down and the founder and go execute. Well, this is a moment where you everybody’s executing via their home or through a zoom or a call like that. You’ve got to be engaging with your investors and reassuring them that of how You’re leading the company through this period and what you’re learning and what are the kind of things you’re doing. And, to his credit, one of the CEOs was so great. He started doing Friday afternoon. It opened it up to his investors saying, I’ll tell you how things are going you can dial in and and you know, you always worry about letting people to inside your business but in this case, it’s it’s created an enormous amount of transparency and trust. And the CEO, if anything, the investors have more confidence and I think when, when they when he gets to the B round, these investors are going to say, Man, I’m you know, a lot of times you’re betting on the leader and I think in this guy’s gonna have a huge leg up as he starts that process because his investors have just utter tons of confidence in him because they believe he’s going to tell them the truth and create transparency and that’s it. You can’t buy you can’t buy That kind of trust from an investor you earned that trust trust

Eric

is such a vital currency in a crisis like this.

Carl

It is. So I’m so proud of him. So hopefully that’s a that’s a brief synopsis of some of the things people are battling and what they’re doing and, and, you know, just trying to keep people hopeful and positive right now and keep them keep learning and thinking is are the things that we’re talking a lot about.

Eric

So, Carl, who do you think are the real heroes of this crisis?

Carl

Well, you know, this is the first responder conversation I, I daughter in law. She works at the Stanford pediatric hospital, she’s a nurse, and every day I start with a call with my son video call who’s out there in tech and he’s taking his wife to work and and I kind of see things through their shoes in a whole different way. These nurses, doctors, paramedics, People that are in long term care facilities that are taking care of loved ones that we care about, that we can’t even see or get to anymore because it most hospitals, you can’t go visit heroic stories and I reflect on them greatly from 911 were the firemen and police officers that were the first responders today are medical, the folks that are supporting the frontlines of fighting this virus. I’m just I’m so thankful. And I think on the other side of this, we are all going to have a much better appreciation for what it takes to be a doctor what it takes to be a nurse and what it takes to be a caregiver.

Eric

Let us hope that this leads to a resurgence in faith in science facing faith in our medical experts and a respect for the people who do the actual work that keeps our society functioning. And you know, obviously we’ve spoken a lot this conversation about business leaders and their obligations in this in this time of crisis and I think that is important, but I think we all got to Keep in mind that that we who are in a leadership position are acting in service of in support of the people who are literally on the frontlines fighting against this invisible enemy.

Carl

Right. And you know that there’s a simple phrase we always talked about it. I’m not sure where I stole it from because I know I didn’t invent it is you either serve people or serve than those who are serving people. And I used to talk about this you serve customers or serve those who serve your customers. It’s really great to walk around Austin and and see us, Austin apart, but we’re still supporting our first responders and there’s signs popping up everywhere. It’s it’s a lot like after after 911 when people were supporting first responders in the military. what’s really great is to see people embracing and supporting, you know, that medical field and having a whole new appreciation for you know, what it takes to take care of people that aren’t You know, in peril like, like nurses and doctors and caregivers, awesome.

Eric

Before we go any COVID relief efforts or things that you were involved in, that you’d like us to talk about or to link to?

Carl

Well, I what I’m trying to encourage for us is education and find something there’s a there’s a big piece for every company is what is your thing, right? What is what is what is your company and your employees or team members going to rally around? And there are national programs, there are local programs, they are community based programs. And you know, for for us, you know, the food bank is something that’s always been near and dear. We got involved with it. We were in San Antonio, it is one of the most it’s such a terrific Food Bank. It serves seven counties in South Texas and this is It’s a crisis in so many ways. Shut ins, my wife’s big believer in Meals on Wheels. And so we’ve, we’ve added up, like, our ability to support those who can’t help themselves. Because if we can help those to social distance and to stay in their homes when they’re most at risk, then it’s a great opportunity for them not to become somebody that a first responder that’s in a hospital has to take care of. So, Amy, and I just kind of said, that’s how we’re going to fight this battle. But for individual companies, I’m hopeful that they’re rallying around their community and opportunities, and they’re bringing their whole employee base with them. Mm hmm.

Eric

So one final question. Where do you think we go from here? How do we get out of the crisis?

Carl

Well, I’m optimistic as I said, I, you know, it’s

Look, I’m proud of our country for us. We’re not perfect at everything. thing I know, there were videos of Spring Breakers and, and various things but our country is I believe this is the greatest country on earth and we’re used to freedoms and and i believe for the first time maybe maybe since the 1940s when you when you think about what was going on in Europe and and the things Churchill was fighting and and what we were trying to figure out, but there was a galvanizing moment when Pearl Harbor happened where we stopped fighting each other, and we started playing for one team and this idea of one team and and so I’m hopeful that through this and we demonstrate that we can flatten the curve and that we can all do this. It’s painful, it’s inconvenient. I don’t like not, you know, going out or doing these kind of things, but I’m not doing it for one team, the our team. And what’s interesting, Eric is this is not a moment for nationalism, right? You could say we’re doing it just for the USA, but we’re doing it for the world. And there’s a brilliant opportunity here to say that, you know, we’re all of this together. And I’d like to see it kind of starts to morph into this idea that we’re going to share information a little bit better. We’re going to work together a little bit easier and and and then go create a more globalism environment and the tendency I think, will be to contract and close borders and all those things. But if you really think about what happened after World War Two, after this moment where America finally came together as one team, from then on it, it launched a whole wave of globalism that we were able to navigate with Whether it was segregation in the 60s, or all the things that we were able to navigate in the 70s and the 80s, I am, I’m hopeful that we’re going to come out of this with a renewed sense of self, and a renewed sense of our neighbors and the people around this, and that what I do actually affects them, and what they do affects me. So let’s work together for a common good for both of us. So little, little pollyannish. But But I’ll take that in.

Eric

This has been Out of the Crisis. I’m Eric Ries. Out of the Crisis is produced by Ben Ehrlich and edited by Jacob Tender. Music composed and performed by Cody Martin. For more information on the COVID-19 crisis and ways you can help visit help with covid.com or PP coalition comm if anyone has ideas or is working on a project related to COVID-19, please reach out to me. I’m @ericries on Twitter. Let’s solve this together.

I'm building products that build the next generation of companies at LTSE. This blog is where I share my personal thoughts.

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