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We have been hammering on our RE Investment Theme "Eye On Leadership" for most of this year. To some, say 9 months ago, that was a little too “soft” of a Theme … to those who get it now, leadership is going to be a driving factor in solving this financial crisis. Finally, we are seeing consensus fall onto our side of the moral compass balance sheet.

This is a very good thing, for both America, and the next generation of capitalists that this crisis will give opportunity to.

Below is an excerpt from one of our avid readers, who captures the "Stockdale Paradox" from the penmanship of Jim Collins:
KM
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Keith,
"The author is Jim Collins who wrote the book Good to Great. I thought it would be interesting reading for you at a time when great leaders and companies in the Business World are faltering , the economy is believed to be in a full Recession and FNM is no longer as we knew it."
Regards,
-RE Subscriber
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The Forum
A man in his early 20s recently asked me, "So, what's a recession like?" It's 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 Institution 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 and 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."