Mindset: The New Psychology of Success

enough to “get it.” When a co-CEO with superb management skills was brought in to help Skilling during a hard time in his life, Skilling was contemptuous of him: “Ron doesn’t get it.” When financial analysts or Wall Street traders tried to press Skilling to go beyond his pat explanations, he treated them as though they were stupid. “Well, it’s so obvious. How can you not get it?” In most cases, the Wall Street guys, ever concerned about their own intellect, made believe they got it.

As resident genius, Skilling had unlimited faith in his ideas. He had so much regard for his ideas that he believed Enron should be able to proclaim profits as soon as he or his people had the idea that might lead to profits. This is a radical extension of the fixed mindset: My genius not only defines and validates me. It defines and validates the company. It is what creates value. My genius is profit. Wow!

And in fact, this is how Enron came to operate. As McLean and Elkind report, Enron recorded “millions of dollars in profits on a business before it had generated a penny in actual revenues.” Of course, after the creative act no one cared about follow-through. Thatwas beneath them. So, often as not, the profit never occurred. If genius equaled profit, it didn’t matter that Enron people sometimes wasted millions competing against each other. Said Amanda Martin, an Enron executive, “To put one over on one of your own was a sign of creativity and greatness.”

Skilling not only thought he was smarter than everyone else but, like Iacocca, also thought he was luckier. According to insiders, he thought he could beat the odds. Why should he feel vulnerable? There was never anything wrong. Skilling still does not admit that there was anything wrong. The world simply didn’t get it.

Two Geniuses Collide

Resident geniuses almost brought down AOL and Time Warner, too. Steve Case of AOL and Jerry Levin of Time Warner were two CEOs with the fixed mindset who merged their companies. Can you see it coming?

Case and Levin had a lot in common. Both of them cultivated an aura of supreme intelligence. Both tried to intimidate people with their brilliance. And both were known to take more credit than they deserved. As resident geniuses, neither wanted to hear complaints, and both were ready to fire people who weren’t “team players,” meaning people who wouldn’t keep up the facade that they had erected.

When the merger actually took place, AOL was in such debt that the merged company was on the brink of ruin. You would think that the two CEOs might work together, marshaling their resources to save the company they created. Instead, Levin and Case scrambled for personal power.

Levin was the first to fall. But Case was still not trying to make things work. In fact, when the new CEO, Richard Parsons, sent someone down to fix AOL, Case was intensely against it. If someone else fixed AOL, someone else would get the credit. As with Iacocca, better to let the company collapse than let another prince be crowned. When Case was finally counseled to resign, he was furious. Like Iacocca, he denied all responsibility for the company’s problems and vowed to get back at those who had turned against him.

Because of the resident geniuses, AOL Time Warner ended the year 2002 with a loss of almost one hundred billion dollars. It was the largest yearly loss in American history.

Invulnerable, Invincible, and Entitled

Iacocca, Dunlap, Lay and Skilling, Case and Levin. They show what can happen when people with the fixed mindset are put in charge of companies. In each case, a brilliant man put his company in jeopardy because measuring himself and his legacy outweighed everything else. They were not evil in the usual sense. They didn’t set out to do harm. But at critical decision points, they opted for what would make them feel good and look good over what would serve the longer-term corporate goals. Blame others, cover mistakes, pump up the stock prices, crush rivals and critics, screw the little guy—these were the standard operating procedures.

What is fascinating is that as they led their companies toward ruin, all of these leaders felt invulnerable and invincible. In many cases, they were in highly competitive industries, facing onslaughts from fierce rivals. But they lived in a different reality.

It was a world of personal greatness and entitlement. Kenneth Lay felt a powerful sense of entitlement. Even as he was getting millions a year in compensation from Enron, he took large personal loans from the company, gave jobs and contracts to his relatives, and used the corporate jets as his family fleet. Even during bad years at Chrysler, Iacocca threw lavish Christmas parties for the company elite. At every party, as king, he presented himself with an expensive gift, which the executives were later billed for. Speaking about AOL executives, a former official said, “You’re talking about men who thought they had a right to anything.”

As these leaders cloaked themselves in the trappings of royalty, surrounded themselves with flatterers who extolled their virtues, and hid from problems, it is no wonder they felt invincible. Their fixed mindset created a magic realm in which the brilliance and perfection of the king were constantly validated. Within that mindset, they were completely fulfilled. Why would they want to step outside that realm to face the uglier reality of warts and failures?

As Morgan McCall, in his book High Flyers, points out, “Unfortunately, people often like the things that work against their growth.… People like to use their strengths … to achieve quick, dramatic results, even if … they aren’t developing the new skills they will need later on. People like to believe they are as good as everyone says … and not take their weaknesses as seriously as they might. People don’t like to hear bad news or get criticism.… There is tremendous risk … in leaving what one does well to attempt to master something new.” And the fixed mindset makes it seem all that much riskier.

Brutal Bosses

McCall goes on to point out that when leaders feel they are inherently better than others, they may start to believe that the needs or feelings of the lesser people can be ignored. None of our fixed-mindset leaders cared much about the little guy, and many were outright contemptuous of those beneath them on the corporate ladder. Where does this lead? In the guise of “keeping people on their toes,” these bosses may mistreat workers.

Iacocca played painful games with his executives to keep them off balance. Jerry Levin of Time Warner was likened by his colleagues to the brutal Roman emperor Caligula. Skilling was known for his harsh ridicule of those less intelligent than he.

Harvey Hornstein, an expert on corporate leadership, writes in his book Brutal Bosses that this kind of abuse represents the bosses’ desire “to enhance their own feelings of power, competence, and value at the subordinate’s expense.” Do you remember in our studies how people with the fixed mindset wanted to compare themselves with people who were worse off than they were? The principle is the same, but there is an important difference: These bosses have the power to make people worse off. And when they do, they feel better about themselves.

Hornstein describes Paul Kazarian, the former CEO of Sunbeam-Oster. He called himself a “perfectionist,” but that was a euphemism for “abuser.” He threw things at subordinates when they upset him. One day, the comptroller, after displeasing Mr. Kazarian, saw an orange juice container flying toward him.

Sometimes the victims are people the bosses consider to be less talented. This can feed their sense of superiority. But often the victims are the most competent people, because these are the ones who pose the greatest threat to a fixed-mindset boss. An engineer at a major aircraft builder, interviewed by Hornstein, talked about his boss: “His targets were usually those of us who were most competent. I mean, if you’re really concerned about our performance, you don’t pick on those who a performing best.” But if you’re really concerned about your competence, you do.

When bosses mete out humiliation, a change comes over the place. Everything starts revolving around pleasing the boss. In Good to Great, Collins notes that in many of his comparison companies (the ones that didn’t go from good to great, or that went there and declined again), the leader became the main thing people worried about. “The minute a leader allows himself to become the primary reality people worry about, rather than reality being the primary reality, you have a recipe for mediocrity, or worse.”

In the 1960s and ’70s, the Chase Manhattan Bank was ruled by David Rockefeller, an excessively controlling leader. According to Collins and Porras in Built to Last, his managers lived day-to-day in fear of his disapproval. At the end of each day, they breathed a sigh of relief: “Whew! One more day gone and I’m not in trouble.” Even long past his heyday, senior managers refused to venture a new idea because “David might