Momentum Podcast: 177
A Legacy Of Losing
by Alex Charfen
I’ve been teaching CEO’s how to create a legacy of winning for a long time now. We need to defend against putting our teams in situations where they’re encouraged to lose. If your team is consistently losing, you’ll have to teach them to lose gracefully. It can become demoralizing and team members are left feeling defeated. Let me show you a real life example of why we should never allow our team to start losing.
Full Audio Transcript
I'm Alex Charfen and this is The Momentum Podcast made for empire-builders, game-changers, trailblazers, shot-takers, record-breakers, world-makers and creators of all kinds, those among us who can't turn it off and don't know why anyone would want to. We challenge complacency, destroy apathy and we are obsessed with creating momentum so we can roll over bureaucracy and make our greatest contribution. Sure, we pay attention to their rules, but only so that we can bend them, break them, then re-write them around our own will. We don't accept our destiny, we define it. We don't understand defeat because you only lose if you stop and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few who are willing to hallucinate there could be a better future. Instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real. We are the evolutionary hunters, clearly the most important people in the world because entrepreneurs are the only source of consistent positive human evolution and we always will be.
A legacy of losing. One of the things that I try and do with every entrepreneurial company I coach is to teach the CEO how to create a legacy of winning, how to create a habit of winning, how to show the team to win over and over again. Here's what that means: Setting realistic outcomes, having a clear plan, understanding everybody's role, measuring the right things and then hitting the goals that you set repeatedly, making it the norm that your team accomplishes what they set out to do, not that they miss by a little bit, not that they miss by a lot.
The reason is, if your team starts losing, you are going to have to teach your team how to lose gracefully and this can create a legacy of losing. There's a reason why sports teams and company teams and individuals who start losing keep losing.
Here's why: Let's just say you have a million dollar company and you set a ten million dollar goal for the next year, which I've seen entrepreneurs do all the time. In fact, some of my clients tried to do that. They had one to two million dollar companies, more than one, wanted to set the next goal of ten million dollars because they saw that as the next horizon, but the challenge is this: If you set a ten million dollar goal and you don't have a clear path to get there and you don't know how you're going to do it in the first month of the year in January, if you don't sell $833,000 worth of product, you're behind and then you have to tell your team, "Hey guys, we're behind. It's okay. We're going to do better next month. Let's make up for it. We still have this huge goal. We're really excited."
Then, in February, if you don't hit $833,000 plus whatever you missed in January, you're now behind again. What do you do? You have to go in and tell your team, "Hey guys, it's okay. We really tried. We put a lot in. Next month is going to be amazing."
Then, in March, if you don't hit $833,000 plus what you missed in February plus what you missed in January, you're having the same presentation, same talk with your team. "Hey guys, we're going to get it. Next quarter is going to be huge. This is going to be awesome."
But, I want you to know something, by that time, your team is upset that they are losing because here's what we need to understand as CEOs: The people who work with us see winning or losing at their job as a massive part of their lives. This is where they put their creativity, their energy, their effort, their focus, their time and in a lot of cases, their love, their commitment, their undying commitment to making your business grow. If you hire true believers, they're emotional about it and that's all you should hire. When you teach a true believer to start losing, it is demoralizing. It can cause a legacy of losing.
There's a legacy of losing in the only sport that I really watch, formula one. This a real life example of what it looks like when a team starts to lose and the wheels really come off. Pun intended because it's F1. Formula one is just this incredible sport. I don't watch a lot of the races, I watch the highlights of the races, but I love to read about it. It's just for anybody who loves numbers and statistics and intrigue and corporate competition and partnerships and seeing them play out in real life, F1 is amazing because every F1 car is a work of engineering cutting-edge science.
If you took an F1 car and turned it upside down and could drive on a road upside down, it generates enough down force, the wings on the car pushing into the ground enough that if you turned it upside down and could drive it at speed, it would stick to the ground. These cars are absolutely insane. It's like flying a car, not driving the car. The teams and the organizations put together to build these cars are crazy. It's a nine-figure ticket to get into F1. You're spending over $100,000,000 a season to do it. The really good teams spend $250,000,000-$300,000,000 a season.
In F1, there's a legacy of teams who win. The most winning team right now is Mercedes. The most winning team of all time is, of course, Ferrari. Then, the second most winning team of all time is Maclaren. Maclaren is this anomaly in the automotive world. They only make super cars. They're this company that makes these incredible machines that people pay hundreds of thousands and sometimes millions of dollars for. They essentially make race cars that are street-legal. For years, Maclaren has been struggling in F1. In fact, they haven't won a world championship since all the way back in 2008. I think they've created a legacy of losing and they're blaming everyone around them, but themselves.
In fact, this year, there was a dramatic example of what happens when you create a legacy of losing because for the past few years, Maclaren has blamed their losses on their engine manufacture. F1 is interesting. Typically, one organization like Maclaren builds the car and the chassis and the aerodynamics and the control systems and all the sensors and everything else that it needs. Every piece on a F1 car, every single thing is handmade, up to and including the steering wheel, the gauges, everything. Then, most organizations partner with another company to provide engines. In the case of Mercedes, they make their chassis and engine. In the case of Red Bull, they make their chassis. They buy their engines from somebody else. In the case of Maclaren, they make their chassis, but they've been buying engines from other companies and for the last few years, they've been getting their engines from Honda and they have blamed Honda for years that they were not winning because they had these Honda engines.
In fact, it's been pretty dramatic. Maclaren has two cars in the F1 field. Some of the larger companies, Mercedes, Red Bull, Maclaren all field two cars so they have a better chance at winning. For the last few years, one of Maclaren's cars has been driven by arguably one of the best drivers in F1 history, Fernando Alonzo. He is a hot-tempered Spanish guy, incredible driver. When he's put in the right car, he can do incredible amazing things with them, but for years, he just hasn't had the right ride.
In fact, two years ago at the Japan Gran Prix, he was in his Maclaren car with a Honda engine and was having so much trouble catching up to people, he actually, on his intercom back to his pits, which everybody in the world can hear, criticized the engine in his car and called it a "GP2 engine."
Now, if you don't know anything about F1, that doesn't mean anything, but I'll explain it. He went live and said the engine in his car was an entire racing class down, like it wasn't even an F1 engine. It wasn't even worthy of being on the field. He did that in Japan where Honda had all of their VIPs and let everyone in the world hear it. Fernando has not been happy about the issues at Maclaren.
Last year, 2017, Maclaren made a big deal out of switching away from Honda engines. In fact, they even did a huge documentary about it. Maclaren has been losing. They've lost for over 10 years. They're completely frustrated. They wanted to have this breakout year so they fired their engine manufacturer, Honda and they switched to an engine manufacturer, Renault. Now, it's Maclaren-Renault and Red Bull, Toro Rosso, picked up the Honda engines.
Here's what happened, this curious thing happened, Maclaren partners with Renault and they immediately have the same problems that they had last year, this year. They can't get the car to run. They start having problems. The wheels literally come off. One of the first practice days that they took the car out, Fernando Alonso took the car out and no joke, a wheel came off the car and he ended up spinning out [inaudible 00:09:13] and went off of the track. Thankfully, he didn't destroy the car and he wasn't hurt. Most of the time in cars like this, people aren't hurt, but it just demonstrates that they switched engine manufacturers and they're still struggling. In fact, Maclaren has failed to complete most of the test days. They've had a hard time getting up to speed. Fernando Alonso has turned in terrible times. They really expected them to be doing well this year because they changed engine manufacturers and they're barely holding it together. In fact, recently, one of the directors admitted that they didn't know if they would have a car ready for the first race of the year because things are so challenging right now.
Remember, they got rid of Honda. It was supposed to make everything better. Honda went to Red Bull, another team, Toro Rosso and that team is killing it. In fact, they're incredibly happy with their Honda engines. They work. They're doing well. They're fielding a car. They're making progress. Maclaren got rid of this engine manufacturer that was supposed to be the root of all their problems, they took on a new engine manufacturer and they continue to have the same problems.
Here's what happens: When you create a legacy of losing, when you get used to losing, it doesn't really matter how many of the different elements you change, your team still has a tendency to continue losing. When you look at this world of F1, Maclaren as a car manufacturer, has the responsibility to work with their engine manufacturer, figure everything out, make it so that everything goes together so that it fits right and field a car that's going to win, but when you've been losing for as long as they do, everything becomes difficult, or for as long as they have, everything becomes difficult because Maclaren is one of the most winning teams in history, the second most winning team in history. They're expected to win, but for 10 years, they've taught their team how to lose gracefully. They've taught their team how to get over engine issues. They've taught their team how to get over not finishing races.
For the last couple years, a lot of the races they haven't even finished, not due to accidents or crashes, but due to Fernando or one of the other drivers having to pull the car over and just park it and walk back to the pits. It's actually become a pretty common scene to see Fernando Alonso walking back to the pits. In fact, at one F1, his car failed and he went back to the pits and then walked out into the center area of the track and was sunbathing, opened up his track suit and was sunbathing because, or his fire suit, because he had nothing else to do. It became this big thing that Fernando Alonso was sunbathing instead of driving because Maclaren couldn't put a car underneath him that would actually work.
This year, what a challenge because there was a documentary series that Maclaren put together last year called "Gran Prix Driver". It was supposed to be this celebration of Maclaren and how they've changed their CEO. By the way, company has made so many changes. It's probably hard to keep track of what's really going on over there. They've changed their CEO. They changed their engine manufacturer. They changed their process in manufacturing. They changed the way that they set up their goals. They changed their project management system, all in an effort to get away from this constant and consistent losing that they've been doing. What did really do for them? Nothing.
They've taught their team to lose. They've had a hard time showing them how to move in the right direction. They did this partnership with Renault, but the problem was, it doesn't matter what engine you bring into a losing team. It doesn't matter what promotion you bring into a losing team. It doesn't matter what you come and tell your losing team. It is like turning around a freight carrier in order to get a losing team to start winning.
When you look at Maclaren, everything is there. They have the money. They have an incredible team, one of the biggest teams. On F1 cars, teams have anywhere from about 400 on the smaller, really not well-funded teams up to 1,000 people or around 1,000 people work on these teams. There's engineering and manufacturing and fabricating and people who do just about every part of this car. Maclaren has one of the largest teams in the field. They have a history of winning in the past. They've fielded some of the fastest cars in history. They've worked with some of the best drivers that there's ever been in F1. They have the pedigree of being a winning company, but for the last 10 years they've lost and now it appears from the outside that no matter what change they make, they are going to continue to lose.
I share this, not because I want you to get interested in F1, but because it's a real life example of a company that has won 12 driver's championships in F1, all the way back to the 1970s. It's worked with some of the most famous drivers in history, Emerson Fittipaldi, James Hunt, Nicky Lauda, Alain Prost, Ayrton Senna, Mikka Hokkinen and Lewis Hamilton who is the reigning world champion for the last, for three, I think, of the last four years were all drivers for them. They have a history of winning, but all it takes is to get into a losing stance. All it takes is to get into a place where you lose over time. As a CEO, it can be near impossible to turn it around.
Here's how this applies to you and me and every other entrepreneur: We have to defend our teams from being in a losing situation. We have to be completely and totally protective of our team's focus of ever being put in a situation where they will be encouraged to lose. We have to make sure that we give our teams realistic outcomes with clear plans and very finite accountability and measurements so that they know that they are winning over time.
The challenge with Maclaren from the outside looking in, it's hard to know exactly what's going on in that organization, but I can tell you from working with companies that lose over time that when you're not winning, especially in a competitive world like formula one where what you do each weekend determines how you feel for the next week, when you consistently lose, fail to put a car on the track, have a tire come off in practice, you're not able to finish practice because the engine and the transmission won't work together, your car sounds terrible because there's some type of an engineering spec that's off between how you connected things together, that's where Maclaren is right now.
Their team has been in this free fall of losing on a weekly basis and in a competitive team, when you go out to win and you learn to lose, you give up all momentum. It goes away and no one in your team feels that drive, that push, that focus, that energy, that invisible force that gets us out of bed early in the morning, that drive that tells us, "There's more here. Let's do more. Let's be more.", that momentum that gets us physiologically, cognitively and chemically boosted. You know when your in momentum, you can do more. You actually have more stamina. You can think faster. You actually make better decisions and you actually feel the chemical high of momentum.
When a team is in that place, when a team is in the state of momentum, when they are winning, they keep winning because momentum gives us more momentum, but when we lose, when we teach our teams to lose, even a world champion multi-billion dollar company with one of the largest most-experienced teams in the history of F1 is losing in an embarrassing way, there are weeks with less than half of the funding and less than half of the team size that Maclaren has had are finishing ahead of them. There have been weeks where the least funded team, like the team that barely is holding together their entries into the F1 races is ahead of Maclaren. This is a company that focuses exclusively on making the fastest cars in the world.
I think that they continue to lose because they've been in this place where they've taught their team to lose gracefully. I don't think that Maclaren will continue to lose forever, but I think it's going to take an extraordinary effort to turn things around.
For you, I don't ever want to see you get yourself or your team into this situation where you've lost gracefully for so long, you don't remember what winning was like, when you set outcomes that are so huge that you can't get back to just winning on a weekly basis, then a monthly basis, then a quarterly basis, then every year because when you put your team into a place where they're winning and they know it, everyone gets better.
The next time you're setting outcomes, make them realistic. Ask yourself: What can your team really do? Put them together and create a clear plan. Make sure that you have clear outcomes, accountability for every person and scoreboards that you're going to check along the way and you will put your team into momentum and go out and crush those outcomes and you can make the next one bigger because entrepreneurs like us, we like to fight from behind sometimes. We like that huge, big, hairy, audacious goal that is looming off in the future and kind of scares us. We all appreciate that feeling.
Like a lot of us, that's what we live for, but I want to make something very clear to you. That's how you are wired, but it's not how your team is because for your team, the most important thing is making it right for the company. For your team, the most important thing is: How do you feel about what's going on? For your team, winning and being able to win for you is everything. When you look at your team, I want you to understand that whether they win at work or not, influences and impacts the rest of their lives.
I guarantee you, there's been some domestic dispute that have probably been spurred by Maclaren losing. I guarantee that there's been guys, men and women on that team who have ended up getting divorced because they've been so upset, so depressed, so frustrated around their jobs for so long that they couldn't see daylight and it ended up affecting their relationships. I assure you that there is people on that Maclaren team that are not taking care of themselves, probably drinking a little too much, not doing everything that they know they should do in their lives because they're starting to feel like losers and it's totally demoralizing because if you make someone lose for long enough, you have to understand, they will start acting like a loser.
I think this real life example shows us as entrepreneurs why we should never, ever allow our team to start losing because I don't know that Maclaren made any mistakes, I don't know that Maclaren made any identifiable mistakes 10 years ago when they started this legacy of losing. I don't know that Maclaren is one of those companies that we can say, "Hey look, here's what really happened", but what I do know is that they're one of the most winning teams in history and they've consistently won throughout the entire history of the F1 sport and now they can't, for the life of them, field a team that can put a car out on the track and put a driver in it that can actually finish the entire race and win.
That's the entire goal is just getting out there and winning the race and Maclaren hasn't been able to do it in forever. They're certainly not winning championships and right now, this year, we don't even know if they're going to be able to field a car at the opening race. Don't let yourself create a legacy of losing. It will destroy you. It will destroy your team and it will destroy any momentum you have. The lift it takes to get out of a legacy of losing is overwhelming compared to what it takes to just create realistic outcomes, coach your team's success along the way and get massive leveraged results.
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