Message-ID: <31386690.1075860837352.JavaMail.evans@thyme> Date: Fri, 30 Nov 2001 07:48:06 -0800 (PST) From: steven.alexander@us.artemisintl.com To: ken_lay@enron.net, kenneth_lay@enron.net Subject: A Supportive Note Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: steven.alexander@us.artemisintl.com@ENRON COMMUNICATIONS X-To: ken_lay@enron.net, kenneth_lay@enron.net X-cc: X-bcc: X-Folder: \Kenneth_Lay_Mar2002\Lay, Kenneth\Inbox X-Origin: Lay-K X-FileName: klay (Non-Privileged).pst Dear Mr. Lay: I'm writing this note to you as a show of support to you during your dire times. The reason that I share this with you is my respect for you as a CEO, a business leader and a person. My wife is one of your employees who routinely shares stories about you that are nothing less than inspiring. I know that during difficult times, sometimes words emerge that can help people through difficult times. I believe that you are sincere man and know that you must be broken hearted, but I hope that this article can help you lead a dispirted workforce to see things more clearly. My wife, Shelly Pierce, has worked for Enron for the past two years and like many of your employees, has lost a great deal of her life savings. Of course, I accept most of the blame for this for reasons related to this article. I lost my investment discipline and held out the false hope that Enron could not falter. After reading the article to her while I was out of town, I believe that her spirit was a bit rejuvenated and she was ready to face the challenges that lay before you. Mr. Lay, I appreciate the opportunity that you have given my wife and our family and hope that this story inspires you to regain your successes. ------------------------------------------------------------------------------------------------------------------------------------------------------------ From the USA Today, Tuesday, November 27, 2001, page 15A. "In recession, face brutal facts, thrive" By Jim Collins A man in his early 20s recently asked me, "So what's a recession like?" Its an entirely alien concept to him; he'd grown up during the greatest economic boom in modern memory. His question drove home the fact that we haven't faced a severe, protracted economic setback for nearly 2 decades, leaving us terribly unpracticed at dealing with tough times. With this recession - long in coming, perhaps long to stay - now officially upon us, it is imperative that corporate leaders relearn a key lesson about how great companies (and great people) deal with difficult times differently from how they deal with merely good ones. That lesson is the "Stockdale Paradox," a peculiar psychology shown by those who emerge from tough times not just intact, but stronger. Adm. Jim Stockdale was the highest-ranking U.S. military officer in the Hanoi prison camp during the Vietnam War. Tortured many times during his 8-year imprisonment, Stockdale lived without any prisoner's rights, no set release date and no certainty as to whether he would ever again see his family. He shouldered the burden of command while fighting an internal war against his captors and their attempts to use the prisoners for propaganda. At one point, he beat himself with a stool and cut himself with a razor, deliberately disfiguring himself so that he could not be put on video as an example of a "well-treated prisoner." He exchanged secret intelligence information with his wife through their letters knowing that discovery would mean more torture and perhaps death. After his release, Stockdale became the first three-star officer in the history of the Navy to wear both aviator wings and the Congressional Medal of Honor. You can understand, then, my anticipation at the prospect of spending part of an afternoon with Stockdale, who happened to be at the Hoover Institute across the street from my office when I taught at Stanford. In preparation, I read In Love and War, the book he and his wife wrote to chronicle their experiences those 8 years. As I read the book, I found myself getting depressed. It just seemed so bleak - the uncertainty of his fate, the brutality of his captors. And then it dawned on me: Here I am sitting in my warm comfortable office, looking out over the Stanford campus on a beautiful Saturday afternoon. I'm getting depressed reading this, and I know that he gets out, reunites with his family and becomes a national hero. If it feels depressing for me, how on earth did he deal with it when he was actually there and did not know the end of the story? "I never lost faith in the end of the story," Stockdale said when I asked him. "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 that, in retrospect, I would not trade." I didn't say anything for many minutes, and we continued the slow walk toward the faculty club, Stockdale limping and arc-swinging his leg, still stiff from repeated torture. Finally, I asked, "Who didn't make it out?" "Oh, that's easy," he said. "The optimists." "The optimists? I don't understand," I said, completely confused. "The optimists. Oh, they 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 Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart." After another long pause, he turned to me and said, "This is a very important lesson. You must never confuse faith that you will prevail in the end - which you can never afford to lose - with the need for discipline to confront the most brutal facts of your current reality, whatever they might be." My conversation with Stockdale had a profound influence on me, but I never really considered it a business lesson until my research team began to wrestle with the question of why some companies rise from difficulty to become great while others emerge from those exact same difficulties weakened and dispirited. We found that companies that became great embraced a corporate version of the Stockdale Paradox. Fannie Mae, for example found itself in the 1982 recession losing $1M every business day, with $56B in loans under water. Many analysts thought Fannie Mae, which was getting 9% on its mortgage portfolio but paying 15% on the debt it issued, was doomed. But CEO David Maxwell and his team never wavered in their aim to not merely survive, but also to prevail as a great company. Yes, they confronted the brutal fact that the interest-rate problem was not going to magically disappear (certainly not by Christmas). But they used this grim fact as a catalyst for creating an entirely new business model based on asking three central questions of greatness: What can we potentially do better than any other company in the world? What can best drive our economic engine? What best ignites the passions of our people? Instead of reacting to the recession with mindless restructuring, Fannie Mae rebuilt itself based on its answers to these questions. Eventually, it generated investor returns nearly eight times those of the general stock market. When asked how he dealt with the nay Sayers and the analysts who wrote Fannie Mae off, Maxwell said that it was never an issue inside the company. "Of course, we had to stop doing a lot of stupid things, but we never entertained the possibility that we would fail. We were going to use the calamity as an opportunity to remake Fannie Maw into a great company." The sad truth is that most executive teams won't respond that way to these dark days of uncertainty. Instead of using this recession as an opportunity to fundamentally rethink their business and rebuild a culture of discipline, the will simply restructure, lay off a bunch of people and liquidate their cultural equity. Mediocre leaders will hold out false hopes for a quick fix, only to watch those hopes be swept away by events. Their companies will begin to die of a broken heart. It need not be this way. Those who lead with the Stockdale Paradox - those who retain the unwavering faith that they will find a way to prevail in the end, but who also retain the discipline to confront the most brutal facts of reality - will find this an ideal time to rebuild and reinforce greatness. Used correctly, this recession can be a defining time in your firm's history that , in retrospect, you would not trade. Used wrongly, this recession will weaken your foundations and make it that much harder to become great. The choice is yours. Jim Collins, the author of Good to Great, operates a management-research laboratory in Boulder, Colo. ------------------------------------------------------------------------------------------------------------------------------------------------------------ Regards, Steve Steve Alexander Vice President, North American Artemis Consulting Artemis International Solutions Corporation Office: +1 281.338.9616 Mobile: +1 281.830.7430 www.artemisintl.com