This article is an excerpt from the Shortform book guide to "Great by Choice" by Jim Collins and Morten T. Hansen. Shortform has the world's best summaries and analyses of books you should be reading.
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What distinguishes 10X companies from the average? What are some of the key characteristics of businesses that manage to stay afloat through a crisis?
Dispelling an entrenched myth, the research suggests that ultra-successful 10X companies are not more creative, more ambitious, or more visionary than the average. What sets them apart are these three behaviors: 1) fanatic discipline, 2) empirical creativity, and 3) productive paranoia.
Keep reading to learn about the three core characteristics of 10X companies.
What Makes a 10Xer?
“10Xers” (pronounced “ten-EX-ers”) are people who built companies that beat the industry index by at least 10 times. What’s interesting is that 10X companies aren’t all cut from the same cloth: they come from different backgrounds—with some growing up privileged, others poor—and have different personalities—some are flamboyant, others reserved, but what sets 10x companies apart is these three behaviors:
- Fanatic discipline
- Empirical creativity
- Productive paranoia
Fanatic Discipline
While people normally associate discipline with compliance with rules and obedience to authority, the 10Xers’ brand of discipline is more about sticking to their guns, no matter what. They adhere consistently to their values, long-term goals, standards, and methods, even if it means being nonconformist and going against what society expects.
- Example: In the late 1990s, Peter Lewis, CEO of Progressive Insurance, faced a dilemma. Progressive was experiencing wild fluctuations in its stock because Lewis refused to let analysts in on the company’s expected earnings—a widespread practice that enabled analysts to “predict” and “manage” earnings every quarter, thereby keeping markets steady. Lewis thought the practice was a dishonest and lazy shortcut that circumvented deep analysis and research. Giving into it would go against his principles, but not giving into it would leave his company vulnerable. He thus decided to do something no other SEC-listed company had done before: Progressive would publish monthly financial statements so that analysts could more accurately predict the company’s earnings using real data. Lewis refused to accept what seemed like the only options and found a way to keep Progressive secure without compromising his values.
Empirical Creativity
People tend to think that leaders of successful companies make especially bold moves, yet the research revealed that 10Xers generally weren’t more daring than their comparison leaders. The difference lies in the process leading to those bold moves.
While most leaders rely on conventional wisdom, expert opinions, or even untested ideas, 10Xers rely on their own creative instincts backed by empirical data. Their decisive actions are evidence-based, coming only after extensive observation and experimentation. This allows them to make bold, creative moves while also managing their risks.
- Example: After a routine checkup, Intel chief executive Andy Grove learned that he might have prostate cancer. He didn’t leave his treatment plan up to the doctors and instead spent all his free time on research. He read everything he could find that was related to the subject, dove deep into all the studies, and found that there were conflicting opinions in the medical world regarding treatment. After considering all the data, he decided on his own treatment plan. Because the medical world itself hadn’t come to a consensus regarding the best course of action, Grove had to learn everything he could about it before coming to his own evidence-based decision.
Productive Paranoia
10Xers have one constant thought: “What if?” They consider every kind of nightmare scenario so that they can remain vigilant and prepare for the worst. Even when the skies are clear and conditions are perfect, they are always preparing for a storm.
- Example: Bill Gates has always been guided by fear, whether Microsoft was just starting out or already a solid player in the industry. In the beginning, he wanted to make sure that Microsoft had enough cash to last an entire year without revenue. This kind of worst-case-scenario thinking would continue as Microsoft grew; in 1991, his “nightmare memo” was leaked to the press, listing all sorts of threats, even though the company was fast becoming a major player. Such memos were his way of outlining potential threats so that he could prepare for them. A year after the memo was leaked, Gates said, “If I really believed this stuff about our invincibility, I suppose I would take more vacations.” In contrast, his counterpart over at Apple, John Sculley, went on a nine-week sabbatical after Apple had one really good year. While Sculley may have also had a great work ethic, Gates was always on, always thinking about keeping the company secure, no matter how many good years Microsoft had.
Level 5 Ambition
10Xers are unyielding and ultra-disciplined, obsessive about evidence, and incredibly paranoid. It all seems like a lot to handle and yet 10Xers constantly attract talented people who want to work with them. That’s because 10Xers aren’t on a quest for personal greatness. Their core behaviors are driven by something greater than themselves, a relentless passion with a purpose: the ambition to build a great company, make a difference in the world, and leave a legacy behind.
- Example: Peter Lewis of Progressive Insurance had one goal: to make Progressive great. He accomplished this and did it so well that the company continued to prosper even after he handed over the reins to his successor.
The succeeding chapters explore how Level 5 ambition together with 10Xer core behaviors—fanatic discipline, empirical creativity, productive paranoia—all come into play when building a 10X company.
Example of a 10Xer vs. a Non-10Xer
In 1911, two teams set out on a historic journey to reach the South Pole. The first team, led by Roald Amundsen, would successfully reach the Pole and make it back to their home base according to schedule. The second, led by Robert Falcon Scott, reached the Pole 34 days later and would die on the return journey. Both teams started their trips within days of each other, facing the same distance and the same brutal temperatures and winds. The difference? Amundsen’s 10X mindset:
- He was disciplined. He anticipated the endurance needed in an unforgiving environment and so trained long and hard, at some point biking 2,000 miles. He even apprenticed with Eskimos to learn what worked in polar conditions (dogs instead of ponies to pull sleds, for example).
- He used empirical data creatively. Amundsen read through notes and journals from previous expeditions to help him decide on a stable base camp location—a place no one else had considered before.
- He was productively paranoid. He thought of disastrous scenarios and left nothing to chance. He stored three tons of supplies for his team and clearly marked the way to supply depots in case they went off course.
Meanwhile, Scott didn’t go through rigorous training, used untested motor sledges that failed in the extreme polar conditions, and brought the bare minimum of supplies. In the end, he and his team tragically paid the price.
Exercise: Behave Like a 10Xer
Prepare your company for challenging times by adopting 10Xers’ core behaviors.
10Xers are hyper-disciplined, adhering to their values no matter what. But you can’t be consistent with your values if you don’t know what they are. Reflect on your values: What’s important to you? What are your most important goals?
Come up with your own “nightmare memo” by listing down the threats to your company. What do you need to do to safeguard your company against these threats?
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Like what you just read? Read the rest of the world's best book summary and analysis of Jim Collins and Morten T. Hansen's "Great by Choice" at Shortform .
Here's what you'll find in our full Great by Choice summary :
- How you can make the choice to be great, no luck needed
- Why certain assumptions about great leaders are actually myths
- How some companies are 10X more successful than their competitors
