Dick Fuld and The Difference Faces of Charisma-Part Two-
New York Magazine talks about a moment when Dick Fuld, the former CEO of Lehman Brothers, was confronted by half a dozen Lehman senior investment bankers. It was during the first year of the financial crisis back in 2008, back when the big banks were starting to hemorrhage money, but the rest of America hadn't caught onto their griff yet. But Lehman investment bankers had a pretty good idea what was coming. After all, they were the ones who had dug the ground out from under us. They just couldn’t be sure how big the financial sick whole would be or how many banks it would suck in along with the rest of the American economy.
To try to salvage Lehman Brothers before it went under with the other big five banks, investors went looking for executives to sacrifice to the streets, especially after Lehman suffered a second-quarter loss of $2.8 billion - something that hadn't happened at Lehman Brothers in nearly 15 years. In their minds, someone had to be punished publicly. They weren't looking to fire Dick, not yet. They didn't know how big the collapse would be and that they'd soon be looking for new jobs. They just wanted Dick’s right-hand, Lieutenant Joe Gregory. But Dick Fuld, sitting across the table from senior investment bankers, wouldn't back down. He rallied, “I’ve given you 14 years of earnings. I have one bad quarter. This is how you respond?” Dick Fuld was not about to apologize. 13 years later, 10 million foreclosed American households later, Dick Fuld is still rallying, and he is still unapologetic.
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This is part two of our two-part series about charisma. In part one, we discuss theories about early man and why both charisma and storytelling might have been the real reason we dominated the planet. If you haven’t heard that episode yet, you should definitely go back and give it a listen. Because on this episode, we'll discuss modern functional myths about charisma. We want to know that when we meet someone convincing, we will know if we found a Steve Jobs or just another gorilla. We want to know how we become as charismatic and convincing as Jobs to reach our persuasive heights. And we have a few myths – myths like:
Is charisma really just beauty and charm? Can we learn charisma? Can we teach it? And our final myth, do we even need charisma or would our society function better if we stop voting and paying people based on popularity? Instead, what if we relied solely on performance metrics?
Joe: In our last episode, you told us about how Lehman Brothers was 150 years old as an organization. AIG wasn't that old, and the government bailed them out and a bunch of other companies of the big five. Why didn't Lehman get bailed? Also, why did they think they were collapse-proof?
Todd: It would have been an educated guess that they're going to be bailed out too. I would have thought the same thing. AIG was a lot bigger, so they had more real estate risk. But them going out of business would have caused a lot bigger wave effect in Europe. So, the government had to think of that as well, and Lehman did not have as big of a foothold there. More importantly than that, a lot of Lehman’s mistakes were self-inflicted. It was said that they didn't really have a good risk management system in place even after they got burned on things. They just seem to never learn from it. So, their bailout was a tougher sell to the government.
Joe: Okay, so they kept taking risks that made them come near collapse before.
Todd: Now, why do you think Dick didn’t change directions?
Joe: I'm going to say just pure arrogance.
Todd: I think you're onto something there. He acted for a long time as a CEO and a president. Now, there's a reason the corporate structure has two different people. I think he became so insulated with “yes” people because he was so persuasive and charismatic, that he didn't have the right amount of pushback to make hearing “no” something to swallow well.
When we opened our first episode, we talked about if you have a very charismatic CEO and heading towards success, they sail you towards success faster. The same goes for CEOs steering you into failure. This is what can happen if these leaders are not being challenged or others to help make decisions. Dick kept trying to keep this boat going and out to the profits when all their net worth is evaporating daily. In the last episode, it was found that 50% of their income was from stocks. So, Dick is yelling, paddle harder and they're all feeling water around their ankles. Can you imagine watching all the other big five investment companies putting on the brakes, and your CEO is the one saying paddle harder?
Todd put in our episode notes something that we ended up using, which is the phrase that life is a popularity contest that we are always selling ourselves in some way. Everything is really just about interviewing our way through life. So, let's start at the barest of barest; how do we ace every interview as charismatic? How do we have that warm smile? Have that warm handshake? Make people want to meet us again? For this, I will harken back to a Yale study that we have covered a couple of times. Yale did a study where they played recordings of people trying to get hired to 274 experienced hiring managers and recruiters. They were asked how much they would give them for their starting salary? How much would you give them for a signing bonus? What is their perceived social class? Something in the study that popped out is that it only took like eight seconds. So, within eight seconds, a hiring manager can usually spot what socio-economic background you come from just from your language and how you speak. They can tell how educated you are and what your social background is in just eight seconds.
Now, why are we talking about socio-economic class on a charisma episode? It's because we are more apt to trust the information coming from an educated person with a wealthier background. We think their information is good because their education must be good, which is really just how charisma and the power element of charisma works. If you want to sound charismatic, you have to educate yourself. You don't necessarily have to go to Yale.
We're saying that if a charismatic representative of the people emerges in life, all these leaders that we hold up on a pedestal came from educated backgrounds. They may not have come from wealth, but they were educated. They educated themselves. They oftentimes bootstrap their way through college. They got the ability to speak. They got the knowledge. They trained their minds. It doesn't matter how you do it, but doing it how you see fit can help you convey competency and be taken seriously. In short, if you can sound educated and competent in an interview for eight seconds, your set.
Now there is a moral question here that I want to bring up. It may sound dishonest doing this - trying to be someone not exactly yourself. The idea is that you try to sound more educated than you are or sound like you come from a different socio-economic class than what you actually come from. Is there dishonesty to that? Are you being charismatic at the cost of morals? I can't answer that for myself. The only thing I can say is that I believe being able to communicate on somebody else's level isn't dishonest. It just means you're using a language they will understand. It's not that you smarten yourself up or dumb yourself down in your language. You are simply making your words more accessible. If you build a tapestry out of simple parts, it will be understandable to everybody, and that's when you are truly making your thoughts accessible to other people.
Believe it or not, there are several things we can do right now that can make us more charismatic minute by minute. They are easy and be used every day. For reference, this all comes from an Atlantic article on the charisma effect.
You must sleep. Fatigue saps charisma. The funny part is that if your audience is sleepy, they will think you're less charismatic.
A little bit of mystery may boost your charisma. They mentioned in the study that when a CEO’s success was attributed to intangible factors (i.e., vision and dreams) rather than effort and long hours, they were rated as more charismatic.
Taller people are seen as more charismatic by subordinates. You can't control how tall you are, but you can always buy slightly taller shoes.
Subjects with speedy answers to general knowledge questions. These people were considered quick-witted, funny, and charismatic by friends. In fact, mental speed was a stronger contributing factor to charisma than IQ or personality.
Using storytelling metaphors and gestures. When we watched a clip of Dick Fuld in his prime, he was at his most charismatic, and he used a lot of metaphors and gestures. We talked in part one about how good stories hijack, aka the kinesthetic cycle. If you tell somebody that they're seeing or smelling something, their brain starts to access those systems, leading to storyteller hypnosis. So, if you want to be a charismatic leader, learn simple metaphors and gestures. If you want to be a supervillain CEO, talk about selling toxic assets to banks in the Caymans.
Branching from that last point, there's a Forbes article called What Is Leadership Storytelling. It's a little bit of an old article, but leadership storytelling is effectively something that I've heard Todd do. It’s a story with sensory information. That is exactly the sort of tribal storytelling that makes people a leader others want to follow. Leadership storytelling is powerful; it primes people in a way that facts and figures don't. Honestly, I'm starting to think that charisma and social conscientiousness would be the two skills we absolutely should teach in class.
When we talk about people with soft skills, something charismatic people will do is know when to say an apology. It humanizes them. We want a leader who can show guilt and take responsibility for it. As for Dick Fuld, nobody stood next to him while he was labeled the villain because he never showed guilt. In fact, if you go through our past episodes, all these people who we hold up and say this is a villain in their field seem incapable of guilt. Their ego is too big, and for Dick specifically, he was too insulated. He would have gained more respect if he had just stepped up and he was sorry. Instead, he kept defending his actions even when it was over.
Joe: I don't like to end an episode this angry. I'm not an angry person in general, but hearing Dick Fuld be fully unapologetic and walk away with 250M…well, I guess the question is, do we need Dick? We started all of this with that question in mind. We want charisma personally, but do we need the sea captain? Do we need the Dick Fuld at the front of the ship pounding the drum?
Todd: Let me make you a little bit madder. When the shit was really hitting the fan and they were showing his mansions, and the one in the Hamptons was being defended by the programs saying it as a modest house. It was a freaking castle. It looked like something you couldn't even imagine.
Joe: So, now I am changing my question to how do we get rid of Dick and all his charisma.
Todd: Replace them with AI, right?
Joe: Yeah, that's the question. Do we need to be more careful and only allow Steve Jobs to lead our companies, or will we eventually get rid of all Dick Fuld’s and only have artificial intelligence? I'm going to read from this is a Sloan review article called Why Good Leaders Don't Need Charisma. Their study looked at the best charismatic leaders of Germany. They found out that 6 out of 18 had almost crippled their own company. So, when we talk about Dick Fuld crashing his ship into the rocks and everyone following him, 6 out of 18 who won Manager of the Year crashed their ship. Basically, the simple answer is we don’t need charismatic CEOs. When looking at hundred-year-old European corporations, they found the high-performing companies often did not have charismatic leaders. In fact, they were considered less than average charismatic. In short, the problem with charismatic leaders is that exceptional powers of persuasion make it easy for them to overcome resistance and opposition to their chosen course of action. A CEO is more likely to succeed if they spend more time learning and listening than cheerleading.
Todd: With that being said, there is a CNBC article that talks about Dick Fuld’s speech. This was seven years after the collapse. They said that Dick didn’t even attempt to show any empathy for the thousands of people who lost their jobs and money. He referred to Lehman employees as ‘my people’, like they were possessions or indentured servants. He repeatedly bragged about the great institute he built at Lehman, but he refused to recognize where the culture failed. Dick preached about how great Lehman Brothers was under his leadership and how he developed a culture that was the premiere of Wall Street. He kept saying that the biggest success was the culture and how Lehman Brothers was one of Wall Street's great investment banking houses. And guess what? He is still delusional. He still thinks they built something amazing. But guess what? On the list of the worst American CEOs of all time, Dick Fuld was number one on all of them. On CNBC, they ranked him the worst American CEO of all time as well. He was by far number one and said that Dick was belligerent and unrepentant his whole life. Even Bernie Madoff said he was sorry.
Joe: What's the difference between Bernie Madoff and Dick Fuld? Bernie Madoff did time.
Final Thoughts
In the civilized world, we overvalue charisma. We worship CEOs, entrepreneurs, and motivational speakers who can rally the troops in their corner. We hire people based on their ability to speak and fit into our corporate culture more than for their ability to move numbers around a spreadsheet. We'd like to think we're past our primitive tribal days of doing business. We're probably not going to war with clubs when Wall Street opens on Monday, and most companies have software helping them make their risky financial decisions. Yet, we still gravitate toward the Steve Jobs and Dick Fulds.
Lehman followed a charismatic tribal leader, literally called the gorilla, who talked about eating the competition's heart and having ribs for breakfast. As we evolve past blindly following charismatic CEOs, we can still utilize charisma in our own lives. Charisma is a combination of power and warmth, along with being quick and witty, which requires good sleep/self-care. However, charisma is at its most powerful when it's coupled with good storytelling and strong metaphors. But most importantly, good leadership comes from in-depth knowledge of your field, good listening skills, and the ability to network and connect with other people.
In short, if you want to topple the 800-pound gorilla, don't match him in aggression. True charisma isn't persuasiveness. It's getting your tribe to rally behind your story and making the tribe richer, all while leaving the gorilla with a temper problem alone to starve on his own.