The Stockdale Paradox

Admiral James Stockdale was a fighter pilot

While flying a combat mission, he was shot down over North Vietnam and sent to the infamous ‘Hanoi Hilton’ POW camp. He was imprisoned there from 1965-1973. During that time he was tortured more than 15 times, spent 4 years in solitary confinemnet and two years in leg irons. He lived out the war without any prisoners rights, no set release date and no certainty of survival. As the highest ranking officer in the camp, he shouldered the burden of command. He made it his responsibility to increase the chances of survival of his men unbroken. This included defining a code of conduct to help his men deal with torture, setting up an elaborate communications system that included tap codes and the swish-swashing of a mop and most importantly setting up realistic expectations for his men.

Jim Collins, the writer and management researcher, was contemplating the question of optimism with regard to turmoil faced in the business world, while researching his book Good to Great. The question that troubled him was how do you maintain an optimistic outlook without giving in to false hope?

A couple of coincidences brought Adm. Stockdale and Jim Collins together. A researcher on Collins' team happened to have written a paper on Stockdale. And Stockdale happened to be teaching at Stanford across the street from Collin’s office.?

At their meeting Collins asked Stockdale how he dealt with it all - the imprisonment, the torture and especially not knowing when it would end and if he would get out.

“I never lost faith in the end of the story”, he said,?“I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life which in retrospect I would not trade.”

Collins then asked,?“Who didn't make it out?”

“Oh that's easy”?Stockdale replied,?“the optimists. The optimists were the ones who said we're going to be out by Christmas..and Christmas would come and Christmas would go. Then they’d say ‘we're going to be out by Easter’..and Easter would come and go. And then thanksgiving, and the Christmas again..and they died of a broken heart”

After a pause Stockdale continued,?“this is the important lesson. You must never confuse faith that you will prevail in the end - which you can never afford to lose - with the discipline to confront the most brutal facts of your current reality, whatever they might be.”

The Stockdale Paradox (as defined by Jim Collins) is framed as:

Retain faith you will prevail in the end regardless of the difficulties AND AT THE SAME TIME confront the most brutal facts of your current reality whatever they might be

Reality Bites ?

• “The quality of prints from electronic images will not be generally acceptable to consumers as replacement for prints based on the science of photography,”?
• “The consumer’s desire to handle, display, and distribute prints cannot be replaced by electronic display devices.”?
• “The incompatibility of electronic-imaging systems to the full range of VCR and video disc devices in the market will be a barrier to widespread amateur acceptance of those systems.”?
• “In-home, personal electronic print systems will not be competitive in terms of price and quality with commercial print-making services.”?
• “Electronic systems (camera and viewing input device for TV) will not be low enough in price to have widespread appeal.”

The above is taken from an internal memo that was sent by executives at Kodak to their employees and supply partners. At the time, Kodak was the bluest of the blue chip companies. They were devoted to print photography and with good reason..Kodak reached a peak market capitalization of $31 billion in 1997.?

But the writing was on the wall..

At the time there was incremental progress in digital photography and digital cameras. In a tragic irony the first digital camera was developed by Kodak. J.Sasson an engineer who developed the prototype at Kodak labs, told the New York times that his bosses were dismayed at what he invented,?“it was filmless photography”?he said “so management's reaction was, thats cute - but don't tell anyone about it”

Clayton Christensen, the Harvard professor who first introduced the theory of disruption says that one of the reasons that successful companies flounder is that they are so caught up in their Resources, Processes and Values that they refuse to acknowledge a disruptive threat. Kodak's executives were trapped in autopilot, they were riding the coattails of past choices. They were comfortable and the facts of the progress of digital technology were uncomfortable. But reality did catch up with them, the technology got smaller, cheaper, better and eventually coalesced to erase the advantages of traditional film.?

And when cell phone cameras came into existence it was game over for Kodak. They filed for bankruptcy in 2012.?

Contrast this with Steve Jobs who a couple of years after the launch of the iPod saw that everyone had a cell phone in their pocket and it was only a matter of time before cell phones would be able to store music. After his initial idea of partnering the iPod with Motorola fell through he invested in the development of the iPhone..knowing full well it would cannibalise the sales of the iPod and in the short term put a dent in the profits of Apple. And he was right in that the iPod was eventually discontinued..but Apple is now a $2T+ company?

Obama O’s and Captn’ McCains

The origin story of AirBnB would almost make for an unbelievable fiction. While not discounting the various aspects of luck that contributed to their success, the story does highlight an important aspect of the Stockdale Paradox i.e when to have the belief that you will prevail in the end. Brian Chesky, one of the cofounders of the company has talked about how during the early days of Airbnb, they were barely getting by. They had folders of maxed out credit cards racking up tens of thousands of dollars in debt. AirbnB had its initiation during the 2008 presidential election campaign. In a last ditch effort to raise funds and leaning on their design background, Chesky and his co-founders bought a whole bunch of generic cereal in bulk and designed themed cereal boxes, Obama O’s and Capt’n McCains and sold each box for $40 on ebay. They ended up selling a thousand boxes and got a cash injection that saved the company (it was this story and not the idea that led to Paul Graham of Y Combinator to invest)

But why jump through all these hoops? Why not pack it in after the 11th credit card maxed out..or the 18th? What gave them the faith that they would persevere in the end? The answer was that in the early days of AirBnB the founders of the company themselves connected travellers with hosts, they were the ones who made sure that travellers were comfortable, the worries of the hosts were abated and they saw first hand what this experience meant. What it meant to connect, for one culture to be introduced to another, the pride of the hosts in their home and hometown and what it meant for a stranger in a strange land to be welcomed and to feel at home. They saw what it meant to connect on a very human level. So they knew..they knew that they had created something and that it would take perseverance to get to the other side. They created the perfect experience (with minimal technology)..now they just had to scale that experience.?

Conclusion

This essay is about Optimism. The Stockdale Paradox is about the importance of Optimism. It is of vital importance that you maintain the belief that you will prevail in the end. But there is a caveat? The caveat being that you might not be out by Christmas or next Christmas or the one after that. And that's a brutal fact! And that means having the disciple to confront those facts. Prevailing in the end entails two disciplines: to quit or to persevere. It could mean that a disruptive threat is on the horizon and your business needs to make some tough decisions on fighting that threat, which could mean ‘quitting’ the status quo..or it could mean persevering on a course of action because you see that what you are doing affects someone else on a deep human level.?

On a personal level, how do you know when to quit? Seth Godin makes a distinction in his book ‘The Dip’. He says that you need to know the difference between a cul-de-sac and a dip. A cul-de-sac is French for dead-end. It’s a situation where you aren’t learning, you aren’t growing, things are a bit too comfortable. You look into the horizon and there is nothing there. There is a feeling of ennui rather than excitement. If you recognise that the situation you are in is a cul-de-sac, then quit. ?I knew I was in a cul-de-sac in my old job after 4 years, but I stuck with it for another 3 because I was comfortable.

A dip, on the other hand, is different. A dip is a setback or a series of setbacks that can be overcome with grit and persistence. It’s knowing that just because a person rejects you that doesn’t mean that the market rejects you. That in an entrepreneurial journey (or in any journey) you are going to take plenty of hits, financially, emotionally, psychologically. That an idea is worth pursuing is if your ‘early adopters’ absolutely love what you are doing. As Paul Graham has said?“it is more important for 10 people to absolutely love your product than 10,000 people to go ‘meh’”. And even if the venture isn't ‘successful’ at the end of it is growth and learning, if nothing else.?

As leaders and managers the Stockdale paradox is a balance. Successful leaders set up a culture where the Truth is heard..they do not set up false hopes that could be shattered by reality.. while at the same they do not capitulate to despair.?

References: ?- The Story of Adm.Stockdale was taken from Jim Collins book Good to Great and Courage Under Fire by Adm. Stockdale ?- The Story of Kodak was taken from Billion Dollar Lessons by Carrol and Mui ?- The Story of AirBnb was taken from Various interviews like this and this

Rahul Soans is the founder of The Disruptive Business Network