Summary
Notes
Transcript
Good morning. Good morning. Good morning. Good morning. Good morning. I love that kind of energy. Thank you. Okay, so my name is Baba Shiv. You can call me Baba, it's perfectly fine. I'll give you two sessions, one pre-lunch and one post-lunch.
And the first of my sessions will be on a topic that we've studied for the last nearly 25 years, Ever since I got into academia, I've been on topics related to exceptional leadership. To be an exceptional leader, I'm sure you'll agree with me on this, to be an exceptional leader, to be an exceptional human being, you have to be winning two games in life, to use a sports metaphor. One is the outer gauge.
You have to be willing, as a leader, you have to be willing the hearts and minds of people. Even in the age of AI, there is of course going to be machine-to-machine commerce, there is going to be machine-to-human commerce, but there's still going to be human-to-human commerce. So you have to be willing the hearts and minds of people, your customers, your investors, and very often, key stakeholders within your own organization. You've got to raise the spirits of the people around you, especially when there's so much of turbulence in the environment out there, a lot of chances for mishaps happening.
Your role is to raise the spirits of the people around you. That is the outer thing.
But even more important, I would argue, is to win that inner gate. The inner game is where even in the most trying circumstances, when, pardon me for using the language, the shit is hitting the fan, when everyone around you is flailing and freezing, you're able to rise up to the occasion. You're able to think with equanimity, make decisions, execute on the decisions, and live with those decisions. Remember, I always tell leaders that being an exceptional leader is not about making good decisions.
It's about being able to recover from bad decisions. So you need to have the resilience to build and to be able to handle the turmoil that's going to happen that's ahead of us and so on. And that's what I'm going to focus on. And we do all this through the lens of the human brain, which is where my expertise lies. So I'm an engineer, turned into a psychologist, turned into a neuroscientist, so I'm an odd person out in the business school, in any business school out there.
So let me tell you a little bit more about myself, and give you a sense of where I'm coming from in terms of the two sections of this. Always tell people that I have an accidental academic.
I never planned to be a professor.
When I was in my early 20s finishing my engineering, how many of you are engineers here by the way? Okay, so you are an engineer, mechanical engineer. At that point in time, my vision for myself was to become the CEO of a multinational company by the age of 40. It was a stretch goal, I knew that, but you only live once, so might as well have a stretch goal. And I was asking a lot of my mentors, I was very lucky to have a lot of good mentors, and I asked them how do I get there quite reliably?
Almost every one of them advised me to get there by the age of 40, you need to be at the heart of the revenue generating function in any organization that often happens to be sales. So I got into sales. I was in technical selling. I was selling these, you see these caterpillar machines and construction sites and things. I was selling those. Learned one heck of a lot. In fact, one thing I learned very quickly.
I thought that when I finished my engineering, I thought all solutions in the world are engineering solutions.
By the way, most engineers think that is the case, right? That all solutions are engineering solutions. Very quickly I realized that almost all solutions out there are not engineering solutions, but humans are these. I can be engineered.
But to be able to engineer the solution, we need to really understand what drives human decisions, what drives human behaviors, et cetera.
That was my question at that point in time, and remains my question today. So three years doing that, then I went on to the top business school in India called the Indian Institute of Management at Amdaba. Just to put some perspective here, We are the business school here at the Stanford. It is, you know, arguably one of the best in the world. So what is the acceptance rate of the Stanford MBA program? Any guesses? What is the acceptance rate? 100 people apply, how many people get it? Four.
Five. Yeah, so four to six percent depending upon the year that we're talking about.
What is the acceptance rate of the Indian Institute of Management in Ahmedabad today?
Point one. Point one percent. Okay.
My time it was 1%. So I thought I'll make three attempts at it.
If I don't get it, I'll go to the Harvard Business School. Luckily, I got it in my first attempt. So I was taking a lot of marketing classes because I wanted to understand human behavior.
A lot of marketing classes from a professor by the name of Professor Lafee Bandari. A lot of these classes, and you know, I was in my second year.
I already had my job.
Now I'm getting a regional sales manager.
And the last quarter I'm there, I mean, it's about to graduate, and I have nothing to do out here. I was one of those people who go to classes and all that, and I'm just enjoying life.
I was sitting there in front of the library. So when Dari starts walking in, our eyes make contact and he then starts walking towards me. And I said, what is this? I mean, I know he's walking towards me because there's a door sitting next to me or behind me because it's a ledge I'm sitting on. So I'm kind of like stunned. He walks towards me and he says, you're Baba Shiv, right?
And I say, yes, sir. I mean, for me, it was God himself acknowledging that a person like Baba Shiv exists. I go, I'm stunned. I said, yes, sir. He said, have you ever thought of becoming a professor? I said, no, sir. He said, you should. And he walked away. I'm like, what the heck is this?
Four and a half months, roughly four and a half months after that encounter, unfortunately Professor Bantari dies in an air crash. United States Information Services, and the Duke University brochure looked the best.
Because I end up at Duke University, and Duke University happens to be at that point in timeThe epicenter of this emerging field of research on behavioral accounts.
Because at that point in time, University of Iowa was at the epicenter of this emerging fleet of research called decision neuroscience, led by a gentleman called Antonio De Masi. And I've written a number of wonderful books out there. One of them is called "Beykats Era." So he was studying the role of emotion in decision making, et cetera. That's what he was studying. That's what I got into. And came to Stanford in 2005 with tenure.
I came here with Kelly and we have a sense of, especially to study all these various topics, we don't have a vision patient group here, that's what I was, I retrained myself with the fMRI and so on, but my question is the same, to understand human behavior, all through the lens of the human brain, more specifically the emotional brain, that in my work I've interchangeably referred to as the instinctual brain.
Most of human decisions and behaviors If you ask me to put a number on this paper, all the evidence out there, I would conjecture, similarly conjecture, that something like 90 to 95% of human decisional behavior Constantly being shaped non-consciously. We're not even aware of it. by these instinctual brain-body systems that we share even with the nematodes. How many of you here have had a chance to read the Nobel Laureate, the late Nobel Laureate Danny Kahneman's book, Thinking Fast and Slow?
Anyway, that's the basic premise of this book, those of you who have read the book, right? That most of our decisions are shaped by what he calls our fast-thinking systems. Not by the slow thinking deliberative rational system. Even important decisions, we might think that we are being rational, doing all the pros and cons and doing the modeling and stuff like that. But at the end of the day, if you pitch the emotional brain against the rational brain, Most often, not always, there are bound to be exceptions, most often it is the emotional brain that is going to win.
The rational brain that we pride ourselves as possessing, we possess the rational brain. That rational brain very often is only subservient to the emotional brain. In fact, if you look at all the evidence out there, you'll quickly realize that what the rational brain is good at It's not like being rational. That's not what the rational brain is good at. The rational brain does good at is at simply rational Lising.
In this structure of all these stories and narratives, in support of what the emotional brain is all about, it is not going to do, and we're not even aware of it. Now because the emotional brain, this instinctive brain body system has such a profound impact on human decisions and behavior, It behooves us to open the black box, unravel the workings of these I will refer to as fast thinking systems, what I call these instinctual brain-body systems to untravel the workings of that and then become prescriptive. What does this all mean for various human entities?
can also prevail at the level of the collective, at the level of the organization, because organization is a collection of people, at the level of countries where failure is not tolerated. Failure is ridiculed, sometimes even punished. So in the type one mindset, the system wants to avoid failure because failure is very painful for the system, very shameful for the system. So it's a risk avoidance, a failure avoidance.
That's one state of being. The other state of being is not protect, it is prospect.
It is not threat avoidance, it is opportunity seeking. And this will then give rise to a persona which is a risk-tolerant persona, but not a type one mindset or a type two mindset. Coming from the type two error in statistics, But it's not a fear of making a mistake. It is a fear of mystery. Sensing out on opportunities. FOMO. Asset is off on. And really, it's not a fear.
It basically characterizes Two distinct neural circuits.
Fascinating how evolution did this. Dedicating one circuitry for type one, And a different circuitry for type II each with their own specific neurochemical markers.
which is nothing but the type one pathway representing the type one mindset. This is the circuitry in your mind and body, in your brain and body that is active when your system is in a risk averse type one mindset.
Because turkey, by the way, it's not just turkey. All proteins have this chemical, tryptophan, which is the precursor to cellophane. The other chemical here is the stress chemical cortisol.
And the way you should think about this is serotonin in the numerator and cortisol in the denominator. Symbolically, not literally, you can't assign numbers to this, so just symbolically, in the sense that these two chemicals are working in opposition to one another.
But they've got the type 2 pathway, representing the Type 2 mindset. This is the circuitry in your system that is engaged, where your system is in a Type 2 mindset.
Papa? If at the end of the day it's only about these chemicals like serotonin and dohubin, Can I simply interrupt something? This will solve all my problems, it'll make it very easy, look at it. Excuse me. -If you're taking out any notes, perfectly fine, just put an asterisk out there and say it is science. Because I don't want you to go back a month later or one and a half months later to your notes and say, "That's so expensive, I can't have that." No, no, no, no.
These are very, very dangerous stuff. Very big to the substance use problem. We are seeing patients who kind of get addicted to them. It's crazy to get them out of there. No one should be going near these substances. There are other ways that we can manage levels of these chemicals, which is what we're going to be talking about post-lunch. The importance of meditation. The importance of Tai Chi, yoga, the importance of exposure to sunlight, sleep, fitness, diet, etc.
Not just for health reasons. More importantly for leadership reasons, for winning the inner game.
Yeah, I mean, the thing is that it's not just ADHD. I think entrepreneurs generally are different. They're neurodiverse in a sense. We're all neurodiverse. I mean, we do see a lot of evidence of ADHD and a lot of micro-dosing and all that happens in Silicon Valley. Let's see that. With me so far? Yes. With me so far? Okay. Should I bring it a little bit more granular? But this is too simplistic. We have to get a little bit more granular.
So remember, the system is switching circuitry. Going from time to time to time to time to time, back again, back again, back again. And you've got to remember that at any given point in time, only one circuitry is active. Even though I call it as an X framework, only one branch of that X is active at any given point in time. Initially, it was the type one circuitry. The system was cycling between stress, comfort, stress, comfort, stress, comfort, stable level of comfort.
For the brain to switch from the risk-averse type 1 mindset To the risk-tolerant type 2 mindset, first and foremost, the system needs to be in a stable level of comfort. If it is not in a stable level of comfort, the system will be unable to switch. Thanks a lot. The whole notion of loss aversion that down in Gary Kahneman's Nimbus to Risky documented, the whole notion of losses to gains is the ratio of two is to one.
In the sense that the intensity of the pain that you will experience in losing $100 is twice as much as the intensity of the pressure that you will experience in receiving the same $100. That's loss of risk.
This is nervous. Michael. Master! Being real laughter or fake laughter is one of the fastest ways of alleviating the system's stress, getting it to a stable level of comfort, and switching it into the type you want.
One of the fastest ways of doing that. And we'll spend some time talking about incorporating laughter in our lives in the post-class session, and if you have some time, we'll also engage in some laughter yoga. And the laughter yoga, you've got to pretend first of all you're laughing and then very quickly you'll start laughing.
The brain will simply cherry pick what it wants. This is the classic confirmation bias. And you don't know you're engaged in this because what the rational brain is doing is simply rationalizing. And now you can see what are the implications of this for decision making, decision shaping and all that. For example, I'm sure you all noticed this. This thing about kicking the can down the road. Have you seen this in the real world? It will manifest in the following ways.
Now, when it's getting all of this information out there, some of them in the type one side, some of them in the type two side, where is the system going to sample from?
Inadvertently, because you're in this type 1 mindset, the system will simply ignore the type 2 side of the equation and all you're stuck with is information related to the type 1 side.
There are no successes or failures. Think about it. There are only outcomes.
There are going to be some positives, there are going to be some negatives. If you're in a type 1 mindset after the failure has happened, where is the system going to sample from?
The negative end of the distribution, and that will become a reinforcing cycle.
You're out there, shit has hit the fan. You're kind of in a stress state and you're trying to raise the spirits of the people around you. You think you'll be able to do that?
If you're stressed out there, the people will notice it and they will start, remember, stress and the emotions we experience are very contagious. When we experience stress, others will experience stress as well. So how many of you have had children? And have babies, almost all of you. Remember when your children are young? If you are stressing the child, the child will cry. If you calm yourself down, the child will also calm itself down.
I've been studying, one of the great poker players, like you were saying, world champion poker players, I'm now getting into the study of bridge. Bridge is even more interesting, because you have a partner. And you don't know where the partner's hand is, and you can't even see the partner. In international, how many of you are into bridge? You can't even see your partner. You have a screen that is clear. All you can see is what the person is doing.
So that is when we will start talking about the connected mind.
When the situation is so bad, when the shit is hitting the fan, you want to bring that competence to the table and not freeze up. Right? That is the zone of excellence. To be in the zone of excellence, the necessary condition is comfort. But it is not the sufficient condition. It also needs to have excitement. You can be comfortable out there, but you also need to have the vitality and energy to go.
Any time you're going to have high arousal, whether it is stress or whether it is excitement, it is a stress on the system and that is called acute stress. is actually very good for the system. It activates what is called the fast system.
If this continues for a period of time, and that's what I refer to as stress out there, It becomes prime.
Chronic stress doesn't work in the excitement, in the type two mindset. It's only the type one mindset. This activates the salt system, like the salt in a wound, which is slow acting long term, and this is the hypothalamus,Beat your dreams and dream a life. This is very bad for the system. Cortisol is very, very bad for the system because all I have to do is inject corticosteroids in your system, Neil, if I inject it, and start recording what your thoughts are, your thoughts will all be negative thoughts.
Yeah, breath work is the fastest way, apart from laughter, is to quickly reset the system into a state of comfort. So when I teach students, I just finished teaching a spring quarter course, which is about a retreat that we run for the MBA students. And it's called the Neuro Excellence Retreat. And we start off the whole thing by monitoring your heart rate variability, which I'll be talking about post-lunch.
And most of the technique would be breath work. to get your numbers healthy in a healthy way so that we know that your system is operating closer to comfort, which means that you're going to, more likely, you're going to be operating in the zone of excellence beyond the zone of confidence. So that we can talk about it. Any other questions for this side?
But what we have to understand is that these genetic differences are only predispositions. that are interacting with the environment. And the system is learning over a period of time. to all the interactions happening. Remember, any system out there, any living being is basically asking itself the question, of course it doesn't verbalize that humans do, it is asking itself the question, if I engage in this behavior, Am I going to be rewarded or am I going to be punished?
Right? A CFO. That's the role you're playing. I mean, you've got to run a tight ship. You have to be type one in that particular role.
If you're illegal, you've got to be running a type one out there. But it doesn't mean that you're going to be type one throughout. When you go out of the context, you start exhibiting manifesting types of behaviors because it's the context that is determining the mindset.
Exactly, JP. Dreams. When you think about it, When you're dreaming, when you get into rapid eye movement, see what the system doing, it is transferring all the major emotional episodes during the day, positives and negatives.
It is transferring that into long-term memory. This is what is getting in the long-term memory. So if you do your journaling, before you go to bed at night, inherently, inadvertently, what you're doing is you're reframing the deep negatives and saying, hey, I'm thankful at least I'm here.
I'm kind of still very lucky out here. And look at all the positives I have. So what you're doing before you sleep at night is that you're already tamped down all the negatives. You've boosted up your positives, your net worth gratitude. So what you dream will be all these positives that will get transferred.
So the basic idea here is that nerves that fight to get out, wire to get in. Right? Melt and stop lining together, will stop lining together. So that's the principle you're using up here. Whole range in terms of the effectiveness. There have been, if you're trained in meditation, for example, it'll be much faster. You can see even genetic changes taking place in the session itself. You can take a blood sample before, blood sample after, do a genetic test, you're already seeing the gene expression changing.
and therefore it calms down the system. So every one of these religious practices have embedded within them spiritual practices that is meant for the health of the body, but not just the health of the body, but the health of the body and the mind. But in this framework,It'll come here. So I'll talk about, when we get into the afternoon session, we'll talk about all these practices, what you should be doing, because we have to get into what are the practices that will increase services of attorney.
Which of the practices reduce levels of cortisol? One of them to reduce levels of cortisol is vagus nerve stimulation.
There'll be variations happening out here and on top of it. But generally, they're very stable. You hit this particular age, And there'll be a dramatic drop in the numerator's territory. And that age is roughly 50.
But we think we know why this happens, because the quality of our sleep begins to deteriorate after the age of 60.
That's also important because how we grow up matters and so on. But diversity in terms of your backgrounds is very crucial.
You want to get to the table people who have a lot of experience, but who also don't have a lot of experience in that domain.
They're not specialists in that domain, but they all have a lot of knowledge in another domain that is related to this. Bring them to the table and you're going to see that your meetings go off much better with more of a discussion, more rounded kind of discussion than only having experts.
And what is the most powerful incentive? Is it money? Is it money? Recognition. Social recognition.
The role of the leader is to signal what are the appropriate social norms and values for informing. and to incentivize that with social recognition. If he had said that, then other people would have said, "Oh, this is a different culture now." Now I can ask these questions. The same kind of thing out there. When people are locked up in their way of doing things out there, you just change the incentive structure.
Catch an example out there of someone performing slightly differently, who was a type one, but performed very differently, and say, That's the behavior I want to see. Everyone is going to see the same thing and want to get that social recognition. Keep in mind, if only one person is getting it, I start feeling jealous. And I want to do the same thing. That becomes a very powerful moment. Amazing. So change starts from the top.
I've seen this happen. There'll be a slide deck with 40, 60 slides packed with numbers and charts and so on and so forth.
Not realizing that the rational brain accounts for only about 5 to 10% of human decisions.
How'd we hurt that? How can you get out of your comfort zone if you're not in the comfort zone to begin with? -That's the important thing. I need to get people into the zone of comfort before they can stick their neck out. I can't simply go and present all this excitement, innovation and all that. No, bring about the comfort. So I need to start weaving in the variables that I have, the levers that I have to bring comfort.
One of them is familiarity. The other one is trust.
Other one is validation, safety nets, et cetera. But don't forget the other human characteristics, make the social humans out of the social creatures. Don't forget the importance of status. And don't forget the importance of connection.
Who do you think would be more reluctant to sell the furniture, A or B? A. Who's asking prices likely to be higher, A or B? A. Simply, economic rational, these people put in effort, we need to be compensated for the effort.
You take a Britain hammer And stop. Slant the pitch. And you're looking for the spike. Group A is a little bit more complicated. Group B has the furniture assembled for them. Who do you think will show a bigger spike, A or B? A. In the process of assembling the furniture, that furniture became their own baby. Let's call that a gift. Now, you can leverage the IKEA effect with another phenomenon that I observed teaching at the design school.
When it is a polished prototype, the reaction of the judges often will be, yes, What? I am being skeptical. When it is a rough prototype, it'll be yes and deconstructed. Hmm. That is the basis of this particular quote of mine, which is, is the early stages of an idea. The early stages of an idea. If you present a polished prototype Others will only find flaws. Others will seek potential. So if you're trying to influence stakeholders and get a sale out there, what do you do?
Go to that stakeholder with a rough prototype, just back of the napkin, maybe a name. You'd be ready, of course, with the polished prototype because they will ask you for that, but just start off with that.
They start providing advice, now the idea effect will also begin. Because they are invested in the idea now.
"We observe this going on." Instead, before they issue it, bring all the players out there to the same room, and you say, "Here is the mandate. "You have a year. "You don't have to pull this off. "What are the mandates? "You folks decide what you're gonna do." How are we going to pull this out?
Who's going to be the point person if there's going to be any kind of inquiry, any kind of confusion? You decide that. What has happened?
They all have started working together. Now, it becomes their baby. Die again. And this, what is the competitive kind of nature of the human tendency, will switch that to a conversation.