Webb Lecture: Transformational Leadership

Delivered by
Newt Gingrich
Former Speaker, U.S. House of Representatives
CEO, The Gingrich Group

The James E. Webb Lecture
November 21, 2003
Washington, DC

I am delighted to join you this evening. I remember speaking with some of you in Atlanta several years ago. But I must say this is a more prestigious field tonight-being here at the Ronald Reagan Center and being this year's James E. Webb Lecturer.

I chose to focus my remarks tonight on improving governance overseas. I want to start by suggesting a couple reference points. One is an article in Science Magazine from October 1964 entitled "Strong Inference" by John Pratt. Pratt made the argument for why microbiology and high-energy physics were making progress at a faster rate than many other aspects of science. His essential argument was that there had become areas in which the cost of the experiment was so expensive that you actually had to have thought through what you were trying to learn and that you had to force a strong inference, which was testable. Therefore, you were simply getting a very rapid branching of information flow.

This is captured differently in Thomas Khun's The Structure of Scientific Revolutions, which essentially argues that very large-scale change tends to be generational. If you go back and look at most of the physicists available in 1895, almost none of them believed in quantum mechanics or relativity. They died believing that Einstein and Plank were nuts. But the younger physicists actually looked at the evidence and overwhelmingly selected the ideas of Plank and Einstein. The Structure of Scientific Revolutions is a very interesting and thoughtful book, but it is overdone to some extent. For example, when plate tectonics were proven by the research of the International Geophysical Year, virtually all of geology accepted the change in a year because the evidence was so overwhelming. This discovery was a profound change, because plate tectonics-the idea that the continents floated on these plates-had been soundly repudiated when Wegner first proposed it in 1915, and was considered lunatic. Interestingly, paleontologists had always assumed plate tectonics were true, because they couldn't explain certain patterns of fossil distribution without assuming that the continents fit together. But standard geologists all thought it was nuts. Yet, once the decision was made, the migration was stunningly fast.

I should mention one example that is worth considering: the last chapter of Richard Dawkins' book The Selfish Gene, in which he essentially argues that the purpose of genes is to reproduce themselves-and really successful genes have more descendants than unsuccessful ones.

The last chapter makes the argument that humans have invented a cultural adaptation to biology. Then, Dawkins writes about the concept of a mean as a way of describing culture; for example, Mozart out-competed all other cultural patterns of music in his generation. Therefore, you are likely to listen to Mozart in more places today than you are to listen to any of his contemporaries. That was an example of an exact parallel to genetic competition being done inside cultures.

From my vantage point, Jim Webb confronted the challenge that we do not have the same kind of structured pattern of information for human organizational behavior that we have for what we think of as science-partly because there's a lot more variability and partly because we don't spend nearly as much energy on it. If you think about the total number of people in America working on a theoretical model of how people organize compared to the total number of people working on traditional science, the number in the investment base is radically different. So, we get about what we pay for.

What I want to suggest tonight is what I think Kuhn would have called a paradigm shift or scientific revolution. To understand the best of the last century of management, you can start with Drucker's The Effective Executive, and then go to Alfred Sloan's works on how he redesigned General Motors, and then study how George Catlett Marshall organized the Second World War. Then, you have a core model of stunningly effective decision-making and implementation that actually worked. I am a historian in the pragmatic sense: I like to study history because I think imitation is cheaper than invention. Any time I face any kind of problem, I try to figure out who solved that one previously and how.

My first assertion this evening is that the world will experience four times as much change in the next 25 years as it did in the last 100. I would argue that this is a literal-not hyperbolic-number. The number one driver of that rate of change is the sheer number of scientists. Take the following equation: number of scientists currently working times the rate of exchange of information. It's a duality. There are more scientists alive today than in all of previous human history combined. That's an actual number. And because of the Internet, the cell phone and the jet airplane, they are swapping information at rates that far transcend what Darwin could have done. There is this double multiplier: more scientists working times more rapid information exchange. Therefore, it strikes me that the burden of proof should be on those who argue for less than this rate of change

I think there are five primary drivers of the change in science and technology. They are information technology, communications, nanoscale science and technology, quantum mechanics, and biology. These drivers are to the next 25 years what physics was in 1935. By physics I include x-rays, radar, radio, and all the different things that were so important to us in the Second World War.

The emerging genuine world market is a major driver. India and China today are the reserve margin of production on the planet. This has several fascinating implications, but let me suggest that it's really important to understand that if the United States is in the world market, many of our economic assumptions change. For example, if you have a consumption-led strategy to come out of a recession, a true world market in which India and China are the marginal producers means that a fair amount of your tax cut and spending increase are actually going offshore. New factories would be built-just not here.

On the other hand, you have dramatically lower prices and more choices. Being the most open market in the world, we routinely have lower prices than any place else because the lowest marginal producer will show up here. But, that's a different equation than a national model of how you manage this economy, and it requires rethinking what we mean by a competitive American economy.

The impact of science and technology, which is inherently deflationary, and the impact of a larger world market with low-priced marginal producers creates very similar patterns to the period from 1873 to 1896 when the standard of living went up every year but price deflation was obvious. It's a very tough world for producers and a pretty good world for consumers, and I think that's the right analog. We don't currently have any problem with a 1929 kind of deflation. But I think we have a real challenge for an 1873 kind of deflation, because we are a real estate-leveraged debt society. And real deflation in the 1873 to 1896 model, if we tilt it over, would become really expensive socially as much as economically. So I find myself-as somebody who authored the first four large balanced budgets since the 1920s-actively cheerful about a four or five hundred billion dollar deficit, because I think you want to err on the side of running the risk of inflation rather than err on the side of being too tight and tipping into deflation, which has horrendous middle class implications in terms of pricing.

I also think you have to confront the reality of 24/7 communication worldwide. We now live in a global web, which is a combination of 24-hour television, cell phones, regular telephones, satellite phones, and Internet in such a pattern that the world never goes to sleep. The decision cycles of the past are totally obsolete, because information moves so much faster than they could cope with. In terms of the challenge to us worldwide, there is the spread of democracy, human rights, and a very profound notion that every person on the planet deserves good health and health care. The way I describe it, the American mission is to help everybody in the planet in the next half-century achieve safety, health, prosperity, and freedom. That is an enormous challenge. But in the age of worldwide television, it is sort of the minimalist state-especially if you're going to accept Franklin Delano Roosevelt's model of being a good neighbor on a planet-wide basis.

If you take the notion that we're going to have four times the rate of change in the next 25 years as we did in the last 100, you can take 1903 to 2003 and that's your analog. If you took that ruling literally-no commercial radio, no television, no microwave, no air conditioning, no mass-produced car-we're still a month away from the Wright Brothers flying for the first time. The first flight, by the way, was shorter than the wingspan of a Boeing 747 and averaged 10 miles an hour. So take that scale of change: literally in the lifetime of most of the people in this room, that's what you're going to live through.

This may surprise some of you: I am a Theodore Roosevelt Republican. I believe in free markets within a regulatory environment. So I like having McDonald's and Wendy's compete, but I want the water to be drinkable and the hamburger to be beef. And I'm prepared to sanction the government to ensure that.

Information technology is another driver. I often discuss people getting cash out of ATMs, using self-service gas stations with credit cards, and using Travelocity to order airline tickets. My goal with audiences is to immerse people for about 10 or 15 minutes in the core idea that most of the changes that I advocate in health care represent the recent past. They are not futuristic. If I suggest to you, for example, that bar coding really works, this does not represent the future. One hospital, which belongs to our Center for Health Care Transformation, is going to a bar coding system where patients have a bar code on their wrist. The nurse has a bar code on her badge, and there's a bar code on the medicine. They believe they will save $300 million a year in avoiding patient medication errors. That's just in 47 hospitals. Take that kind of a model; that is real change, and all it is doing is adapting health to systems that are somewhere between 20 and 40 years old.

I'm a disciple of Edwards Deming. I really believe in a culture and system of quality. I also believe in an individually-centered system of knowledge, finance and choice. In that sense, I very much believe in Adam Smith's The Wealth of Nations, in the context that it was written after The Theory of Moral Sentiments. Smith assumes a moral world within which there is capitalism. And it's a mistake to only read Volume II. Welfare reform in that sense worked. The core to welfare reform was a moral issue: Are you better off being passive and receiving money for doing nothing, or are you better off getting a job or an education? And the country made a cultural values decision, not an economic one. In fact, we've had better than a 60 percent reduction in welfare recipients as people moved off [welfare]. In general, their incomes have gone up and family stability has increased.

When you look seriously at weapons of mass murder, biological weapons are more dangerous to the 21st Century than nuclear weapons. If American society really gets shattered it will not be, I think, because of a nuclear attack. It will be because of a sophisticated expert system of biological [weapons]. In order for us to cope with the biological threat, we must profoundly transform our health system. And our model is Eisenhower's 1955 proposal for an interstate highway system. Originally, it was the National Defense Interstate Highway System, designed to evacuate cities in case of nuclear war. I think we need a similar substantial federal investment in information technology for health, recognizing the same challenge we are going to face with biologicals. All the things I'm describing are transformational, not managerial. These are not, "Fix a little of this, and fix a little of that, and it's going to work." These are really large changes.

There is a model I use, which is based on the mountains in Washington State. In this model, the clouds come in off of the Pacific, go up the mountains and become rain. There is a temperate rain forest on the west. This creates a rain shadow on the other side of the mountain, where there are three to five inches of rain per year; it's a semidesert. The point is: Which side of the mountain you're on is a big deal, because they're not marginally different. That's what I mean by transformation. You actually have to manage in both situations, but getting across the mountains involves a kind of leadership that is profoundly different.

In a traditional system there is a critical mass that is resistant to transformation and explains obstacles. One of the favorite phrases is either "no because" or "that's impossible because." When you cross over to a transformational system, people understand every day that if we're not transforming, we're losing ground. So, there's a perennial focus in favor of,"yes," "how can we solve it," and "what will it take." This is a totally different attitude. This attitude toward the future-this attitude toward stability versus change-is at the heart of whether you can build a transformational system or whether you're trapped in defending the past.

When you deal with really large-scale change, there is a biological principle that often is overlooked. It is the biological principle that lions cannot afford to hunt chipmunks because even if they catch them, they starve to death. I've used this example for about a year, and my colleagues were shocked this week when Science Magazine referenced a study of very large dogs that lived in North America 30 million years ago. The study didn't use chipmunks-it used mice. Lions cannot afford to hunt mice because they literally will starve to death, even if they catch them. Lions and all large carnivores have to hunt game large enough to justify the investment, so they have to hunt antelope and zebra. Why is this important? Because most senior executives are really big on chipmunks.

The person who taught me this was George Schultz. I was at the Hoover Institution talking with him about what it was like to work for President Reagan. Schultz essentially said that Reagan had an amazing knack for focusing, and that people didn't get it. As letters get published, it's increasingly obvious this was a very subtle, sophisticated man. He had a deliberate persona of being pleasant and simple in public but, in fact, he was doing all sorts of things for literally a 50 year period.

The way I characterize it is that Reagan would get up in the morning and say, "I'm leading the free world. I'm the President of the United States. What are the antelope I'm
hunting?" He had three:

o The new belief in American civic culture, so people were proud to be American again.

o Cut taxes and regulation so the economy would grow.

o Defeat the Soviet empire.

Reagan would walk into the Oval Office and a chipmunk would run in. And you can be a $10 billion federal chipmunk. Reagan was very pleasant. He'd listen very carefully, he'd smile and say that you are a terrific chipmunk…"Have you met Jim Baker?" Baker became the largest collector of chipmunks in American history.

Schultz's point was that when Mikhail Gorbachev took over the U.S.S.R., Reagan studied almost every night for a year. When Reagan and Gorbachev had their first meeting, Schultz suggested to the senior staff that it should be only the President, Gorbachev and a translator. They were all horrified. Schultz said: first of all, he [Reagan] knows what he believes; second, he was a labor union negotiator who led a strike in the forties; and third, he's been studying Gorbachev for a year and he understands him better than the rest of the staff. And that's how he got through the very first meeting. It was just the two of them.

To show you Reagan's ability to focus on little things that add up to a big animal, some of you may remember this meeting. It's winter. Reagan arrives first and is the host. He's inside. There's a nice fire. Gorbachev is coming up in a motorcade. Reagan steps out to the door; it's a very brisk day in Geneva and he's wearing only a suit. He comes down the stairs to greet the Russian President. Gorbachev gets out in a Russian overcoat and cap. Reagan embraces him for a moment. The world picture is: lean, brisk, confident, suit versus a clunky, wrapped up, very unconfident Russian. Reagan took him by the arm and escorted him up the stairs, as though Gorbachev was the older guy and Reagan the younger guy. And then, having biologically established the appropriate relationship, they started talking.

That had been thought through by some people who were really clever at focusing on what mattered. It may not seem like a big deal, but in starting out a relationship like that, it was enormously helpful for moving in the right direction.

So, when you go back to your organization, it's simple. You walk around, have five ideas and see how many times people say,"no, because," or "that's impossible," or "we couldn't possibly do that." And see how many times they say,"well, maybe there's a circumstance in which we can get this done" or "yes, we could do that if." You'll know which side of this you and your organization are on.

As an initial language thought, if we take everything from the rise of public administration-and here you can argue that we're talking about the Confucian system translated through Austria and Germany to the West and then codified in the 19th Century, or you can argue that it is civil service from the 1880s on, or whatever-I am suggesting that we want to consciously think about a transformation to what I would call entrepreneurial public management. We want to be very self-aware and say that this is going to be different. So when it sounds different, feels different, looks different, it's because this is different. We're crossing the watershed. I think that is very important in language.

I've done this five or six times in my career, such as when I created a Republican party in Georgia and when I walked around the Congress before I was even sworn in as a freshman saying,"You know, we got to think about being the majority," which all of the minority Republicans thought was crazy.

I am suggesting that unless you change the words, unless you're self-aware, unless you're explicit, you can't get people up over the mountain because they'll redefine what you're doing back to what they're already doing, and tell you,"You know, we've been doing that for years." All of you have been through this in your careers-whatever the newest slogan is, you cut and paste the old stuff, paste the new slogan on it, and reannounce it.

I want to give you a couple more examples. Our policies towards sub-Saharan Africa make no sense at all- and by the way, it's no longer a lack of money. President Bush is actually standing up and saying that we should spend billions of dollars, for example, on AIDS. If you took the total amount of money that we're directly or indirectly shipping to sub-Saharan Africa, it's a significant program. But it's not a program, because it dribbles out from this bureaucracy and that bureaucracy and it dribbles to this country and that country. There is no coherence for trying to design a strategy for sub-Saharan Africa.

Yet all the modern technologies are regional. For example, you could afford to put up an African satellite that gives you a footprint for every country in sub-Saharan African if you divided the cost among all the poor countries. The first thing you'd run into, such as when I went to the World Bank with this idea, is the fact that there are local "kleptocracies" in many of those countries that own the local phone system, and they are shocked at the idea you'd actually lower the price. They have an absolutely obsolete worldview that charging a lot for a little bit is better than charging a little bit for a lot. It is a pre-industrial worldview, and we're now in the Information Age.

You could design all sorts of patterns that are system-wide. If you're going to spend $3 billion a year on AIDS, you ought to do it in an information-rich, highly sophisticated mode. Cell phone tests in Korea and Japan involve 100 megabits of information. That is, you could run a full movie on your cell phone-a totally different model, which allows you to do totally different things. But it means you've got to think out here. You've got to be like Eisenhower who said we need to connect the entire continent with highways. In the secular world we thought as big as the challenge, and then we grew to the size of our thought. So take Africa as an example of how you could rethink it.

Another example is that I feel sorry for current ambassadors. This is a 16th Century, written note, personal courier, sterling ship model. "I am the ambassador. I am the personal representative of the President and I didn't know he called you this morning. Was it a good call? Did you enjoy the call? And what did he tell you?" How often would you guess that happens? Alternatively, "I'm right in the middle of writing my memo to the President which, by the time it goes through the various levels of bureaucracy, should arrive at the White House no less than three days after CNN's live coverage." Guess how much that's going to get read? I'm suggesting to you that we actually have to rethink: What do we mean by real time worldwide communication? What does that do to the nature of being an ambassador? What should an ambassador do in the modern world? How should we organize embassies in the modern world? It's a totally different model.

I recently looked at continuance of government, which is a major Defense program perfectly designed for a 1958 potential threat of a Soviet first strike. And you start talking about,"Well, what if we just bought really good satellite programs for everybody? What if we allowed all the combatant commanders to be alternative headquarters so that we'd actually have six or seven of them around the world?" If you think you're going to be in a war where you lose six or seven combatant commander headquarters at one time, you're in a nuclear spasm exchange with somebody. But instead we still spend a fair amount of money doing things like we did in the 1950s.

It is important to rethink "how would you do it today," not "how do I modify what we've been doing?" The minute you say,"Let me modify what we've been doing," I'll guarantee it's wrong. Given this level of information flow and pattern of human reaction, this will totally change education the morning we get it. We'll quit fighting over vouchers. We'll quit trying to reform an 1840s model of public school with an 1870s model industrial structure with an agricultural era schedule-that is what we currently have.

There is a reason that kids think education is a mess. At every high school I visit I ask,"How many of you know somebody who cheats?" Every hand goes up every time in every class. It's all a game. It's not about learning. It's about meeting the state curriculum, filling out the paperwork, making sure the teacher looks okay when the scores come in. So kids think, "Fine-this is a game. This is not about learning; this is about a game. I know how to do games." But if you asked,"How would you learn?" At eight 55-minute units at the convenience of the professor? Not if you could possibly get out of it. If we simply took how the people in this room learned for three months, and then said,"What would a system or even a society look like that organized its young to learn based on how you all learn," you'd have a stunningly different parallel system that would be 24/7.

Don't try to fix what we have. Try to figure out:" How would you do it today?" There are two different ways to think of it. One is a great Drucker rule, that once a quarter you should walk around for a day and ask yourself, "If I wasn't already doing this, would I start it?" If the answer is no, why are you still doing it? The other is, instead of trying to start where you are and fix the future, go out on a blank piece of paper and design 2015. Then come back and figure out the bridges. This is a totally different way of thinking about things.

We currently have foreign aid as a functional process in bureaucracy. One of the reasons I gave a speech in the spring at the American Enterprise Institute taking on the State Department publicly was because I had just learned that after a year and-a-half in Afghanistan we had managed to pour [zero] miles of road. There had been a quote in The Washington Post where somebody said the Afghans need to understand the American AID [U.S. Agency for International Development] application process. This was not a bad human being; this is someone immersed in his or her own world.

So we're saying,"We're in the middle of a war on terrorism; we're desperately trying to get enough resources to Afghanistan for President Karzai to survive; we're trying hard to create a broad-based governance in Afghanistan. And, by the way, the paperwork will take approximately ninety days to process, and then we'll have to decide whether or not we can actually have the committee meet in order to decide whether or not we can cut the check."

I went to the White House on a very major issue just before the Iraq War, and I had been told by some layers down in the system that there was a congressional problem. I went in to say, "What can I do to break this loose?" They just said,"No. We have people at the White House who get up every morning and call the appropriate agencies and say to them, 'Cut the check.'" In six weeks they couldn't get the check cut. That is just mindless, but perfectly normal because there will be a GAO report; an IG report; a congressional hearing; five articles in The Washington Post- all if you don't follow the process. And if you try to change the bureaucracy, at least three of the people who are opposing it will leak information on you. So,"Do you want me to cut the check and save a country or do you want me to avoid all that pain?" "My choice is simple. I want to survive here. I'm not in Kabul. It's not my problem." That is a major challenge.

A retired Air Force General made a great point the other day. He said we still talk in the military about stability operations, and that language is exactly wrong. We're not trying to stabilize Iraq-we're trying to change Iraq. We're not trying to stabilize Afghanistan-we're trying to change Afghanistan. Change operations are very different from stability operations. They require different levels of resources, different attitudes, different psyches. There is a great story that a man told: He's a merchant banker from Texas who is closing a deal. He gets a phone call from his boss who says one Friday, "I have just accepted a job for both of us helping the President organize the financial community for war. You will show up here Monday." The merchant banker walks in Monday morning. The guy says,"We're a dollar a year people. The paperwork won't be done for sixty days. This is our only desk. You have that side; I have this side. Go to work. Assume you actually already have the job. Use the President's name. Just get
things. We'll work it out later."

That would be legally impossible to do today. But we won the Second World War because we got it done, and then explained it. We didn't slow down long enough to figure out how we could explain it before we got it done. I'm arguing that is actually a better model on most days. In entrepreneurial public management, you want to hold people accountable for mistakes, and hold people accountable for theft and corruption who understand the context in which they're exercising power. Don't allow them to get so mired down in process that you can no longer remember what the product was.

A couple more examples: As I said earlier, I think you'll see a dramatic shift from traditional, on-site education to 24/7 learning-as needed, where needed, and when needed-which is how I think people are going to operate in the Information Age. You want to know, you need to know now. You don't want to know it a day early and you don't want to know it a day late. You'd like it organized in a way so that you can learn it now.

One of the things this does is to eliminate the term "remedial education," which assumes a hierarchical structure: If you didn't get X when you should have gotten X, you now must be in remediation. If you think about it, if I went to you and said, "I hate to tell you this, but you need six hours of remediation." Most of you would say,"I don't think so." On the other hand, if this is the year you decide to learn about quantum mechanics, going through a basic course introducing quantum mechanics is perfectly reasonable. Going through the remedial quantum mechanics course will be very offensive. It may not seem like a giant distinction, but culturally it is very, very profound.

The number one thing the U.S. Commission on National Security/21st Century (known as the Hart-Rudman Commission), of which I was a member, said threatened America in March 2001 was a weapon of mass destruction going off in an American city, probably from a terrorist. And we called for a homeland security agency. It wasn't noticed much in March, but on September 12, 2001 we thought we were very pressing.

At the same time, the Commission found that the number two threat to the survival of the United States is the failure of math and science education. Seven Democrats and seven Republicans unanimously agreed to the following sentence: There is no conceivable conventional war in the next twenty-five years that is as big a threat as the collapse of math and science education. That's how profound I think this issue is. I was very pessimistic about how to solve it before I began to realize that if we focus on learning, not on teaching, it will all work. Because if you get to be thirty-seven and you need to learn it, the truth is that Americans will learn it. We're a stunningly pragmatic people. We could then design 24/7 convenience systems that enable you to learn.

You see this if you look at how many people over the normal age are back in college and graduate school. So it's actually happening, but we haven't thought through the implication: in a system of lifetime learning, if the National Science Foundation organized brilliant online ways to learn math and science, people would take them. The "brilliant" in part means entertaining and interesting. So this is a way of thinking-a totally different model.

Also notice that in the 20th Century and earlier, when we talked about diplomacy, it was government-to-government. It was my state talking to your state. But in the 21st Century, when you have worldwide television, you have worldwide non-governmental organizations, you have worldwide democracies, people-to-people gets to be really important. This is a much more complex model of relationships between nations than the one that just said,"My ambassador will talk to your foreign minister, and your ambassador will talk to my secretary of state, and that is what we mean by relations."

I think one of the greatest challenges of the next decade is to figure out,"What would entrepreneurial public management be like, and how do we redesign the government and congressional oversight in order to migrate to that kind of a system?"