 I'm thrilled to invite on the stage our next speaker, keynote speaker, Doug Kirkpatrick, who is a writer of Amazon Buzz Seller, Beyond Empowerment, the Age of Self-Managed Organizations book, and also the other book, I guess the more fresh one, From Hierarchy to High Performance. Except writing books, Doug has also joined Forbes as a writer. He is a senior professional in human resources and a director of the Association for Talent Development, which is an international network operating in 120 plus countries with over 40,000 members. As a person, he likes to travel to rough places to learn about new perspectives, and during the break he said that the roughest place he has been to was Tongo in Africa. He's also engaged with Morningstar Self-Management Institute and other vibrant organizations and leaders to co-create the future of management. Please, everyone, help me to welcome Doug on stage. Volatility, uncertainty, complexity, and ambiguity. We all live in a buka world. It's pretty important to remember, though, before we feel too special or too precious as we go through this age of blockchain, artificial intelligence, virtual reality, nanotechnology, robotics, and genetic engineering, where things feel a little disconcerting. It's important to remember that we have never not lived in a buka world. So in the Middle Ages, we had a little thing in Europe called the Black Death, and it killed by some estimates 100 to 200 million people, 30 to 60% of the population of Europe, including right here in this area. And it created mountains of rags that were used to wash bodies and bathe people and help them through their sickness, and it was a terrible tragedy for the world. But then if we fast forward to the year 1439, a very brilliant inventor, Johannes Gutenberg, invented movable type, the printing press, and we were able to create pamphlets and documents, bibles, and books. And somebody looked at those mountains of rags and they said, you know what, we can reprocess those rags and turn them into paper for Gutenberg's printing presses around Europe, and they catalyzed a movement called the Renaissance. It was the biggest explosion in music, art, literature, and science that the world had ever seen. From the greatest tragedy to the greatest goodness in a span of a few years, we have never not lived in a buka world. We will never not live in a buka world. We will always be there. And how are we going to cope as human beings? Well, we're going to adapt. That's what we've always done, that's what we're always going to do. But as we heard from Dave Snowden's presentation, organizations in which we live and work can hinder us or they can help us. And that begs the question, are they going to help us in this adaptation to this disconcerting world of change? I'd like to suggest that human beings can manage themselves. You know how England likes to call some of its intersections, circuses, and it doesn't make any sense? Well, here's one roundabout that actually deserves the title, even if it doesn't get it. Your first thought upon seeing Swindon's magic roundabout might be, man, the Brits are really off their rockers lately. But this thing, which is actually seven roundabouts in one, has been working for 60 years. In a regular roundabout, traffic moves in one direction. In Swindon's circle, cars move both ways. Also, drivers can move from point A to point B without having to drive all the way around the circle. But they do have the option to use different routes to get to the same exit in order to avoid traffic. It may look chaotic, but it's actually pretty efficient because it means less fighting for space. You just point your vehicle toward where you want to go, yield to cars already in the midst of the magic, then Brexit on the other side. Many Americans may hate roundabouts, but they can actually cut serious crashes by 30%. Swindon says its roundabout has only seen one fatal crash in the past five years. So to celebrate a town anniversary, they paraded over 60 vintage cars through this feat of traffic engineering. Is this madness? Nope. It's Swindon. Human beings can manage themselves, even in organizations. Does anyone know what this is? Bent lines. If you guess two bent lines, you'd be absolutely correct. It's very interesting. A roundabout has two simple rules. One is you yield to the cars inside the roundabout and you get in the proper lane to exit the roundabout. Really simple constraints, very simple. And these two bent lines are kind of interesting, too. They represent, when they're encoded with the right genetic material, the entire genetic structure of a fern. And it's called a fractal. So wherever you look inside a fern, at every degree of magnification, you see the exact same shape of two bent lines. It's very simple. And whether that fern becomes a single leaf, or a front, or an entire forest primeval of ferns depends on its ecosystem. Depends on the nutrients in the soil, degree of sunshine, the water available to the root system. Very simple, two bent lines. And the simplicity can apply to human organizations. And human organizations also help humans thrive, or not, depending on the ecosystem, the environment in which they operate. And the natural world asks us some very fundamental questions about human organizations, questions like these. Can we create human organizations where every single individual has a voice in matters that affect them? Can we create organizations where women don't have to lean in because they're already in? Where people are free to thrive and do their best work? Where innovation and leadership can come from any point at any time? Where the entire organizational ecosystem itself is agile, where we can manage extreme complexity with great simplicity? Can we outvoka the VUCA world? I'd like to suggest the answer is yes. I think it's possible. And the reason I suggest this is because of an experience that I had in my early business career. In California, a young entrepreneur named Chris Ruffer had pulled together a core team of individuals to help him build a state-of-the-art food processing factory. The reason I know about it, I was part of the core team. I was a financial controller. And we came together. We were working out a little tiny farmhouse in Northern California. And our mission was to build a state-of-the-art food processing factory. And so this was March of 1990. We had a core team of 24 people. And one day, our founder came into the farmhouse and said, I'd like to have a meeting and talk about how to organize this company. And we said, sure. So we all met together in a construction trailer on the job site. And we sat around on steel folding chairs in a circle. And he passed around a document called the Morning Star Team Principles. And they boiled down to two things. Just like a roundabout, just like a fern. Two core principles. Number one, human beings should not use force or coercion against other human beings. What a concept. It's the foundation of all law everywhere in the world. Every law against assault and battery and theft and burglary and kidnapping and murder and all the rest is predicated on the principle that people should not use force against other human beings. And the second principle was that people should keep the commitments they make to each other. What a concept. It's the foundation of civil law, especially contract law which would be meaningless if parties didn't do what they say they're going to do. So we sat around in the circle and we discussed and debated and talked about these principles for a couple of hours. Finally, at the end of the evening, we looked at each other and said, we can't really think of any reason not to adopt these principles as the governance of the enterprise. And so we did. Those became the constraints. Those became the principles. Those were the entire governance of the enterprise. We went out into the night air and we were a self-managed enterprise. So we had a lot of work to do. We had hundreds of hectares of tomatoes coming up out of the ground, up and down the state of California. We had to hire hundreds of employees to operate the factory and drive the trucks. We had vital equipment on ocean cargo freighters in the middle of the Atlantic Ocean. We had hundreds of contractors on the job site 24 hours a day, seven days a week, constructing, fabricating, welding. And finally, on July 16th of 1990, we threw the switch and we produced 90 million pounds, which I think is 44 million kilograms of industrial tomato concentrate for the world market. And we changed the cost structure of an entire industry virtually overnight. And we did it without a single human boss. The only boss was the mission statement of the enterprise. And the company went on to grow. So we added another factory and then another factory. We expanded operations up and down customers in remote warehouses across North America and toward our supply in terms of farming and harvesting and transplanting and trucking. We became the largest tomato processor in the world. And everyone I believe in North America has eaten our product. I believe all of you have eaten our product because we export worldwide. And this goes into everything you can think of in the grocery store from ketchup to salsa, pizza sauce, barbecue sauce, taco sauce, steak sauce, bloody Mary mix, Thousand Island dressing, tomato soup, and myriad other products. We did it all without a single human boss. We only had two constraints. Don't use force. Keep your commitments. Just like around about, just like a fern. We were able to manage great complexity with great simplicity. So how does all this possibly work? It just seems almost impossible. Gary Hamill, a well-known business author came out in 2011, 2010 I should say, in 2011, December of 2011, Harvard Business Review wrote a story about Morningstar. We were on the cover described as the world's most creatively managed company. And since that time, people have been kind of interested to find out how do you manage all this complexity with great simplicity? So there are some key things that are very important. And the most important key thing, and Dave Snowden alluded to this, is we started with principles. Everyone wants to jump to tools and techniques and processes and ways to do things. We think it's important to start with principles. If you think about the two core principles of self-management, imagine a world where everyone aligned their behavior with the principle of not using force. You wouldn't need armies or navies or police or locks on your door. We know that's not reality, but that's not the point. The closer we approach that ideal state, the better off we are as human beings. And the greater harmony, happiness, and prosperity we can experience as people. Imagine a world where everyone aligned with the second principle, where everyone did what they said they were going to do. What an amazing world that would be. We know that's not reality, but again, that's not the point. The point is the closer we get to that ideal, the better off we are. If I can drive to this store and I know for a certainty, 100% certainty that that store is going to have a carton of milk that I want to buy every single time I go to the store, that is extremely valuable. Integrity, commitment, extremely valuable, economically valuable. So we start with principle and I say to companies, look, if you've got better principles than not using force and keeping commitments, that's fine. Go ahead and put a stake in the ground and own those principles. Have a worldview. Start somewhere. Believe in something. You have to have a starting point and you should start with principles. We see human beings as the ultimate reality. Teams are concepts. Organizations are concepts. Companies are concepts. Nations are concepts. Only human beings are real. Human beings make decisions. Human beings take actions. Human beings are the ultimate reality. Organizational self-management based on simple, clear principles recognizes that. We want to always align with technological and social drivers. I alluded to the tech drivers earlier, but technological and social drivers are really crucial. The literal dictionary definition of the word employee in English is someone who works for another person for pay. How many millennials find that inspiring? Nobody. Industry after industry is being upended because they don't understand the needs of the people working inside the organization. In the U.S., millennials will not stay in the investment banking industry four years on end waiting for a shot at a big deal. If you don't engage their hearts and minds within 12 months, they're gone. That's it. Organizations have to find a way. We manage extreme complexity with great simplicity. Morningstar grew from zero to about 5,000 people. Most of them are seasonal people. About 500 people a year around, the rest are seasonal people. They only work three months out of the year. We've had years where we've had a 100% return rate of seasonal people from one year to the next where they've been laid off for nine months. That's engagement. That's engagement of hearts and minds because they like what they do and they like the environment in which they work. They like the ecosystem. How many have heard of the management tax? Gary Hamill wrote about it in the HBR article. The management tax is quite interesting. We want to look at a bureaucracy and figure out what are the indirect and direct costs of management. And it turns out they're quite stunning. The management tax if we imagine a company that has say 10 workers and those 10 workers are making say $30,000 a year then generally speaking we have worldwide management span of control of 1 to 10. That's the average. Generally speaking for every 10 workers there is one manager. And managers are always paid more than the people they manage. So, if we have 10 workers making $30,000 a year they probably have a manager making $90,000 a year. What we say is we say that everyone is already a manager in his or her own personal life. Because management is not rocket science. Management is planning, organizing, controlling, selecting, and coordinating. Planning is strategy. Organizing is leadership. Controlling is budgeting. Protecting is hiring and firing. Coordinating is teamwork. Everyone does that already. We all make gigantic life-changing decisions in our own personal life without a boss. We decide who to date, who to marry, where to go to college, what to do for a living, whether to buy a house, buy a car, whether to have children. Gigantic life-altering decisions. Somehow we make these decisions without a boss. It's only when we enter the portal of the workplace that we're considered incompetent to manage ourselves. So what we say is we can take these 10 workers who are already managers of their own personal lives. We can infuse some commercial management skills. We can amplify their existing management skills. And suddenly we don't need the boss. And if the boss is making $90,000 a year we've just saved ourselves $40,000 a year every year. And if this little company has a start-up and it grows by a factor of 10 and we have 100 people making $30,000 a year how many bosses do they have? At a ratio of 1 to 10. How many? They have 11. Because once you get 10 bosses those 10 bosses need a boss. And that boss is probably making $200,000 a year. So if you amplify the commercial management skills of the 100 workers you can give them all a $5,000 a year raise and you don't need the 10 bosses and you don't need the boss of the 10 bosses and you've just saved yourself $600,000 a year every year. So the net present value of that over 10 years is about $3.5 million. All things being equal a company that figures out how to slash the management tax competing against a similar company that pays the management tax, which one's going to win? Gary Hamill suggests that the American economy could save $3 trillion a year by slashing the management tax. By eliminating bureaucracy. By eliminating unnecessary permission steps between layers of management and the unnecessary delays. It's more than an economic question it's also a moral question. When you subject people to unnecessary bureaucracy that adds zero value to their lives and the lives of customers you are literally wasting human life. This is a serious problem. Self-management simplicity, simple rules gets at the management tax. There's some really important corollaries this idea of self-management. One is there's zero command authority. When we say you can't use force and coercion against other people that's literal. That is a real constraint. Zero means zero. It means no one has any authority to walk up to another person and tell them what to do. It means no one can unilaterally fire another person. Everything is accomplished through request and response. It's not about democracy or authority vote. It's about protecting the voices of each and every individual in the ecosystem. This leads to what we call natural leadership. In a true self-managed organization there is no position power because there are no titles and there's no command authority. Everything's done through request and response. So one earns the mantle of leadership by developing trust respect and communication. That's natural leadership. That builds stronger leaders. Command authority causes leadership muscles to atrophy. It creates weaker leaders. If I can just walk up to someone and tell them what to do and expect my edicts to be obeyed, that's not really leadership. That's just telling people what to do. In a self-managed enterprise based on simple rules, everyone can be a leader. Everyone can innovate. Morningstar had a mechanic who looked around and saw a better way to handle materials and to handle chemicals. He sketched out some engineering diagrams. He found some funding. He implemented a project. He saved millions of dollars in 90 days. Everyone can lead. Everyone can innovate. It opens up the possibility of blue sky innovation throughout the entire enterprise. Not just limited to a small cohort at the top. And work is play. We try to gamify everything. So when you don't have a boss walking around telling you what to do, you have to be able to tell yourself. So people develop their own scorecards. They identify how they're going to play the game of work. They have a voice in what those scorecards look like. They're not handed down from the manager. And told that these are your KPIs and we're going to metrify you. We're going to watch your numbers. People figure out what their numbers should be. By themselves in conjunction with their fellow colleagues. Believe in the concept of total responsibility. And total responsibility means that if I become aware of something that falls into my scope of awareness, I own that issue. I own that problem. It's not okay for me to say that's not my department. I'll let somebody else handle it. People own whatever comes into their scope of awareness. It's like a husband and wife with a child. Maybe my job to take the child to school every day. But if I get sick, my spouse is going to have to pick up the slack because we have a concept of total responsibility. Believe in real competition. The Latin root word of competition is compater. It means seeking together, learning together. It's not about beating the other guy. It's not about winning versus losing. It's about creating an organization that's an entire platform of continuous learning and development and growth. That's the true meaning of competition. And that's what happens in the company. We never talk about empowerment. We don't believe in empowerment. When people come to work at morning start, they have all the power they need. From the first day, they start work. The power to build relationships. The power to acquire resources. The power to do their best work. The problem with empowerment is that empowerment generally means someone with power lends his or her power to someone who has less power, a subordinate. What has been loaned can be repossessed at any time. That's not empowerment. Self-management is beyond empowerment. Self-management is power itself. I mentioned commitment keeping. Commitments are one of the two core principles of self-management. People are expected to keep the commitments they make. Commitment keeping is a real important thing. Fernando Flores, really some people regard him as the godfather of artificial intelligence, studied speech acts. He identified the structure and the function and the life cycle of commitment making and commitment keeping is very serious business. If someone can't keep a commitment they're expected to renegotiate the commitment. Commitment keeping is one of the two pillars of the foundation of self-management. How do we instantiate the self-management concept and we moved from one factory to three factories and far-flung operations up and down the state of California. We realized we had to have some coordination mechanisms in place in order to help people communicate and collaborate with and develop what we call a colleague letter of understanding. It's a contract between peers and essentially what it says is what is your purpose in being here? What is your why? What is the meaning of you being here? Why are you here? Why do you come to work here every day? What does excellence look like in your role? How does what you do support the overall mission of the enterprise? We call this a personal commercial and it's your why. We expect people to figure that out. If it takes you six months to figure that out, that's perfectly fine. Take all the time you need. Make sure you come up with something that resonates with you and with your fellow colleagues. Make sure it makes sense and then come up with the what? So what is the content of your work? What is it you're responsible for? What is it that you are taking full accountability in the workplace? What are your processes? And associated with that what is the scope and quantum of your decision making authority? We want to know because it's about accountability, it's about clarity, and it's about transparency. So are you the decision maker for a particular process? Are you making decisions for a process based on input from other people? Are you merely making recommendations to other decision makers for a process? When the regular decision maker is on vacation? We want to know. We want to be very, very clear so you understand your role and how you relate to other people in the ecosystem. And we talk about stepping stones. Stepping stones in most companies are called KPIs. But these are the measures. These are your scorecards. This is how you gamify work. This is what you've identified as important to you to tell yourself how you're doing at work. Why do we call them stepping stones? Because we consider them stepping stones for perfection. We don't benchmark other companies, other sectors, other industries. We benchmark perfection. And perfection in a cost metric is zero. Perfection in an efficiency metric is 100%. And the reason we benchmark perfection is it liberates blue sky innovation. People are always thinking about how to eliminate a cost altogether. Or how to achieve perfect customer satisfaction. Or perfect quality. It's incredibly liberating. Especially when someone comes up with a radically disruptive innovation like our mechanic that figured out how to handle chemicals in a better way. It's an amazing thing. We think that this company, Morningstar, that I'm describing is some kind of a crazy one-off radical case that we could never see replicated or duplicated or show up anywhere else. I'd like to suggest that we're in the middle of what we can think of as a camera in explosion of new age companies that are doing very radical things. And organizing in a self-managed way in giving people tons of autonomy and agency and freedom to do their best work. Not all organized in exactly the same way with the same two core principles. But organized very radically nonetheless. How many know the hire group? Hire is the world's largest appliance manufacturer in Shandau, China. They have a very visionary CEO named Zhang Ramin and he studied Morningstar. He sent his president and contingent over to California to be with us for a while and I was able to visit them a couple of times. Hire has a global workforce of 70,000 people and they created 4,000 self-managed teams. And many of those teams are interdisciplinary teams that are innovation platforms. So if someone can come up with a new product or service they can sell the idea to the mothership and acquire funding. They can develop the new product or service and spin it off into an entirely new company. Which they then know. They've already gone into cattle ranching video games and health care. They just bought general electric appliances in Louisville, Kentucky and they're implementing their philosophy there called Rendan Hay which is zero distance the customer based on the internet of things. They're an amazing company. I think their competition is somewhat afraid of them and then they should be. It's an incredibly vibrant innovative self-managed organization. Freshville is a new company it's in the same town as Morningstar. They are going to disrupt the convenience store industry. I don't know what convenience stores are like in Sweden but in the United States they're kind of dingy. They have bad coffee and stale donuts and dirty aisles and bathrooms. But Freshville has disrupted that model completely. So you walk into a gleaming white store there's a fruit and vegetable bar, a raw natural juice bar, a craft beer cave solar power, electric car charging, beautiful gleaming bathrooms. They've completely disrupted the entire convenience store industry. And if you walk up to a clerk behind the counter at Freshville and ask them who is your boss they will say I'm the boss and they are. And by the way they're paid more than employees at the competition because they don't pay the management tax. So they can afford to pay people more and give them better benefits. It's an amazing thing. Self-management plays well with Agile. If you look at the Agile manifesto the Agile principles if you look at self-management principles they align very nicely self-management plays well with everything. It plays well with TQM and Six Sigma and Lean I don't think there's anything it doesn't play well with. The only thing it doesn't play well with is command and control and bureaucracy and hierarchy and management of others. It's very well aligned with the Agile world. So we want to get to a place and I think we can get to a place where there are many simple clear principles where we get beyond Agile teams doing great work but being suffocated by stifling bureaucracies and hierarchies. We can create entire organizations that are Agile that are networked that allow great agency autonomy and freedom and beings to be vibrant and to do their best work. We took a little video time lapse video of the colleague letters of understanding for our first factory and we created a little movie to show what it looks like when people self-organize and come together to meet the needs of customers to meet the needs of the business without being told what to do and without command and control. So that's what this looks like. I'm the blue dot in the middle. It's completely dynamic. We're configuring our relationships in real time as we need to to meet the needs of customers. We're bringing new people into the ecosystem. Some people are exiting the ecosystem. We're realigning and rearranging our roles and responsibilities dynamically as the needs of the business change. We're not waiting for bosses to tell us what to do or to structure our movements or our relationships. Everything is completely dynamic. This is the org chart of Morningstar. There's no up or down. This is a snapshot where we digitize the colleague letters of understanding at a computer lab at the University of California and this is what it looks like. It's like a spider web. A spider silk by weight is five times stronger than steel. It's extraordinarily resilient, strong and it may bend but it doesn't really break. People are free to enter and leave the ecosystem as they wish. If someone leaves or even a few people leave, it really doesn't matter because the people that remain will quickly reconfigure their roles and responsibilities to fill the roles that have been vacated. So it's an extraordinarily robust and resilient system of organizing. There's no command authority. There are no human bosses. It depends on people keeping commitments to each other, the two core principles just like a fern, just like a roundabout. So here's my challenge to organizations. If a sprawling noisy dusty agricultural related manufacturing company can figure out how to organize like this around two core principles and allow people to manage themselves, which they're perfectly capable of doing. Why would a startup or a tech company or even a bank or a pharmaceutical company or a finance company or any other kind of company want to organize the way we organized 150 years ago when information moved the speed of Morse code, one character at a time is it time to bring organizations into the 21st century is it time to figure out how to outvoke the VUCA world. Thank you very much.