Ranjay Gulati | Purpose and Performance: The Surprising Connection Between Deep Purpose and Financial Success

Srini Rao: Ranjay, welcome to the Unmistakable Creative. Thanks so much for taking the time to join us.

Ranjay Gulati: It's my pleasure to be here today. Thank you for having me. Yeah, it is my

Srini Rao: pleasure to have you here. So you have a new book out called Deep Purpose, the Heart and Soul of High Performance Companies, all of which we will get into.

But I actually wanna start by talking about something else. And in the dedication of the book, you dedicated the book to your mother, who you said was one of the greatest deep purpose leaders and your wife. And I'm curious, what is one of the most important things that you learned from your mother that have influenced and shaped who you've become and what you've ended up doing with both your life and your career?

Ranjay Gulati: I think one of the things I learned from my mother, which comes from a conversation I had with her when I was young. I was a teenager working in her business. She used to work crazy hours. And I remember telling my mother one day, I was giving her a lecture about work-life balance. And I was like, mom, you need to what It was really was giving her a lecture to say, give me a break and let me not have to work so hard.

And I remember her putting her fork down and saying, son, my wish for you is that you never have to work a day in your life. And I thought she was about to tell me what my trust, 'cause she was very successful businesswoman by then. I'm like, oh yes mom tell me more. And she immediately realized where my brain was going and said, no, that's not what I'm saying.

She says, what a horrible phrase, work life balance. There can be work leisure balance, there can be work family balance, but work in opposition to life. She said, your work needs to be an extension of what you do in your life. And it's part and parcel. It's something you should feel proud of, something you should feel deeply connected to, something that gives you meaning.

And that has been the learning for me was that. The purpose you find your purpose when you're doing something that has coherence in your life. So your work is not a job. And then you live your life on Friday, Saturday, Sunday, or either Saturday, Sunday, and in the evenings after 5:00 PM and I think that was a big gift for me.

So that's

Srini Rao: Unusually self-aware for an Indian parent. That doesn't sound at all. Like I can't imagine having that kind of conversation with my dad. They wouldn't even, like my dad or mom would never be able to put the notion of how are you're gonna find your way in the world into those types of words.

And I can't imagine from what I know about most Indian, I can't imagine that conversation. Like, why is it that your mom was that way? What made her that self-aware to pass on that kind of wisdom to you?

Ranjay Gulati: She was different. I have to admit she she, in 1968, she started doing a master's degree in anthropology at Vanderbilt University.

It was a program for school teachers from all over the world. They met once every year and three months in the summer in Athens, Greece. And then after that she got this idea that she, her master's thesis was about tribal Indian women who made their own clothing using hand printed fabrics with vegetable dyes.

And then she got this idea to start a fashion business to go to Paris in 1972 and convince some fashion houses in France to buy her designs. Hers was not a conventional pathway in India. This is sitting in New Delhi, India in 1972. So she, that was, that she was different.

She was very different. And in some ways, I think ahead of her time. Yeah. Because I'm thinking

Srini Rao: Of that time, and not only is that very progressive for an Indian person in that generation at that time, but extremely progressive for an Indian woman to not only pursue a path like that, but to have that narrative.

Do you think that is the byproduct of the way that she was raised? Like where was she just like a rebel in her family? Like why is it that she was that way and how is it that she didn't succumb to the sort of social programming that surrounded her? Because that is so such a stark contrast to how most Indians are raised, even Indians born and raised born raised in America.

Like my generation, it's only now I'm starting to see like my friends are having kids. That is now starting to change a little bit.

Ranjay Gulati: Yeah. So it's hard to stereotype all Indians, but I was just saying that yes, she was definitely a rebel, but her parents were unusual. Her father was an engineer, a civil engineer, and he worked for.

He had been a civil engineer and my grandmother had a bachelor's degree in English literature from, at that time the only university that admitted women Bernard in the university. She had very, I would say west looking, western looking parents. Who I think gave her the freedom.

But having said that, it wasn't like her other sisters were as non-conformist as she were. I think there was something in her that also made her kind of really run her way or march to her own drum, if I may say. And but I think is my learning in that process was that if I look, and this became part of my research stream afterwards, I did a study looking at 65 successful entrepreneurs who had really built businesses and grown them dramatic.

And I was interested to see how they got, what did they, what animated them, how they got the idea, how they then implemented the idea. And what I came to realize was that they all began not just with an idea, you need an idea, you need a business plan, you need an idea. But they also had an idea of something.

They wanted to have an impact. And I don't mean social impact, it could be economic impact. It was very impact centric. It wasn't for some, a few, it's financially driven. I wanna make money and I wanna be rich and I wanna do this. But a lot of them were driven by, I wanna change the way this market works. I wanna transform the way these customers experience it.

I wanna completely revolutionize how this is done. So they measure themselves around impact and less about I have an idea, I know how to make money. I have customers who are willing to buy this. It was this kind of animating ideal. And that was, I think, a precursor to my entry into studying purpose even because it was this realization that all these venture founders like my own mother, they began with this kind of animating ideal of how they wanted to have an,

The funny thing

Srini Rao: is, so you've had this non-conformist mother, and at the same time, like I, I read about you, you had a degree from MIT, you teach at Harvard. You're as like, my friend likes to joke about my sister. Any Indian parents dream come true, like when we look at credentials. So I'm curious.

Were you encouraged to pursue all these kinds of things? Because I'm sure if I told my parents Harvard MIT, they'd be like, hell yeah. That's amazing. It's funny because I remember when I got my book deal I needed something to tell my dad. I was like, I asked my editor, I was like, how many people get a book deal?

She's I was, what are the odds of me getting here? She's one in 5,000. And I wanted to go back and I was like it's harder to do this than it is to get into medical school. So look, first of all, I have to say I feel very lucky and privileged to be where I am. And and but in, in my instance also I what may look like a linear path to you was actually a non-linear path. I came to MIT to do my masters with a plan to go back to Microsoft when I was working.

Ranjay Gulati: It was the eighties and they had just gone public and it was a very. Desirable place to be for a newly public company. I was one of the I would been there when there was less than a thousand people. And and then I would, I did my, at that time, Sloan required you to do a master's thesis because am I, they didn't give an MBA, they gave an ms.

And so as I wrote my thesis, I thought, I love research, I always love research. And my mother had always wanted to be a academic herself. She was this, that was the other side of her. So when I told her I was thinking about academia and gonna drop out of Microsoft, she was like, yeah, go for it. So it may look like not that deviant to you, but at that time, among my MBA class, it was like a radical thought that I was going do a PhD.

Even though you might say you were gonna Harvard to do a PhD, right? So may not look that radical to you, but it was pretty radical at that time. With my classmates, so I think is that, I think is what I've loved about academia. It allows you to really explore ideas.

And at the same time that you live in the world of ideas in business, school, academia, you're also able to then communicate and share those ideas so you can actually shape the way others look at their business, and you are able to have an impact because business leaders are a force multiplier on the world.

And if you can help them think slightly differently about what they do, I think it has a massive impact. And so business school, academia is distinctive in some ways because it connects theory with practice.

Introducing Wonder Suite from bluehost.com. Website creation is hard, but now with Bluehost, you can answer a few simple questions about your business and get a unique WordPress website or store right away. From there, you can customize your design colors and content, and Bluehost automatically helps you get found in search engines like Google and Bank.

From Step-by-step guidance to suggested plugins. Bluehost makes WordPress wonderful for everyone, go to bluehost.com/wonder Suite. We have a lot going for us in Fall River, Massachusetts. Historic charm, great birdwatching, and an Amazon warehouse. MJ works there. She got healthcare on her first day for me and my kids.

They're a big birding family. Jose is doing a free tech program. His career is about to take off

Srini Rao: in software development,

Ranjay Gulati: full and part-time. Employees are spotting opportunities like these all across the country. Good for employees, good for Fall River, Amazon every day better. We all have somewhere we're trying to get to.

As the largest energy producer in Colorado, Chevron is helping meet rising demand, and we're working to do it responsibly. Our next gen tankless facilities reduce the greenhouse gas emissions of our operations by more than 90% compared to our older designs. Working to provide Colorado with energy that's affordable, reliable, and ever cleaner, so everyone can get to where they wanna be.

You've arrived. That's Energy in progress. Visit chevron.com/tankless. Since 2013, Bombas has donated over 100 million socks, underwear, and T-shirts to those facing homelessness. If we counted those on air, this ad would last over 1,157 days. But if we counted the time it takes to make a donation possible, it would take just a few clicks because every time you make a purchase, Bombas donates an item to someone who needs it.

Go to bombas.com/acast and use Code acast for 20% off your first purchase. That's bombas.com/acast code acast. Worried you'll need to babysit your robot vacuum. Think again. Meet UFI X 10 Pro omni robot vacuum with AI powered navigation to recognize and avoid over 100 objects. It's the winner of five best of CES awards.

And digital trend says it boasts almost all the same features as robot vacuums that cause twice as much. Want to know more? Go to ufi.com. That's EUF y.com and Discover X 10 Pro Omni, the best in class, all in one robot Vacuum for only $799.

Srini Rao: Let's talk about aging. It's inevitable, right? But what if I told you there's a new way to age led by Solgar Cellular Nutrition? They believe, and I do too, that you can transform the way you age, cell by cell with the power of cellular nutrition. As we age, our cellular function declines. Your regular multivitamins and minerals might not be enough to combat these age-related declines.

And that's where Solgar Cellular Nutrition comes in. It's formulated with targeted cellular nutrients that work with your body's natural processes deep inside your cells to help you fight cellular decline and promote cell health across three benefit areas. It supports cell energy repair and vitality, muscle strength, and even glutathione production to help protect cells.

So let's own our healthy aging narrative. Visit cellular nutrition.solgar.com to learn more. Again, that's cellular nutrition.solgar.com. To learn more Solgar cellular nutrition, we go cell deep. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.

It's funny because I come from a family full of academics. My dad's a professor. My all my mom's uncles were professors. Her dad was the dean of a university in Delhi, and I had this business school professor who told me, she's like, Serena, you'd be an amazing teacher. She's you'd be a horrible professor.

She was like, you have serious issues with authority. You. You piss off the administration constantly and you're doing that while you're a student. I was like, okay. Fair enough. But speaking of academia, I, as I told you, was not gonna let you get out of this conversation without talking about education and the future of it.

You're at arguably the most prestigious university in the world. And I wonder when you think about the future of education two, one, if you were tasked with redesigning it from the ground up, let's say that they made you the head of education policy what would you change? What do you think works and how is it out of alignment with where we're currently headed, do you think?

Ranjay Gulati: Lemme just focus on the pedagogy itself first. What's happened in the pedagogy itself was there was a time when education. In America, America was rooted in the liberal arts education experience, right? Even the Ivy Leagues had this kind of liberal arts orientation where it was a place for self discovery.

It was a place to first figure out where, how you saw yourself in this world, and then based on that you figured out what you wanted to study. And through that you discovered also what kind of vocation you wanted to pursue, right? So it began from a place of go figure out, what animates you?

What excites you? What do you wanna be? And in some ways what has happened over the decades is it's gotten flipped where it's, everything is vocational. You're pre something. I'm pre-engineering, I'm pre-med, I'm pre this, I'm pre that. So that space, safe space for exploration. Where you may be trying to see what does that really wanna do is lost.

And I think it's been crowded out by earlier and earlier. You apply to now in many schools, universities, you apply to a pre-professional program. You apply into a school and so I think that's the first piece of the puzzle. There has to be, a way to reconcile the need for getting people to be professionally trained before they graduate.

As I understand the job market is requiring that you need to come in and add value from the get go to also creating the space for exploration. So that's my first observation. My second observation is that pedagogically if you go back centuries, education always was tied to apprenticeship. It wasn't about scholarly knowledge that you kept in your head and then one day when you needed it, it suddenly was accessible to you.

That, and you see some schools that have really run with this idea. If you look at Northeastern with this co-op program, for instance, trying to help people go to school while also trying to see, what is the way to do this? So I think is that, that I think is another piece of the puzzle that I think is like HBS, we now have a field program where students can work on a company problem.

And so while you're going to school, you actually engage with the world of practice. And I think this idea that we can keep people in school, you learn a lot of stuff and guess what? It's all accessible to you whenever you need it. I think that is also another kind of, I would say an artificial construct.

And I think that is something that I think we have to think about. And I think I find that to be another problem here. The other problem I think we are all grappling with is education was always the unlock into opportunity in America, but it also relied on a way to make that opportunity accessible for those for whom it would, may not otherwise have been access.

And this has become a central point of debate and contention today that how do we think about access and affordability? And I think this is, I think we as a society need to, I'm not in a position to say what is right or wrong, but we as a society need to really grapple with this question. I think in a, I would say in a very holistic and thoughtful way because education has always provided the unlock into opportunity for those for whom it was otherwise not easily available.

And I speak for myself. I come to America as a foreigner, an immigrant, and education was my pathway into America, as I'm sure it was for your parents probably, right? You come here for higher education. So I think there's a lot of issues. Affordability is another one, right? How can educational cost be growing twice as fast as inflation?

It's crazy. Some, I forget the exact numbers, but it's like crazy. So there's a lot of issues pedagogically. Economically accessibility wise, that I think we without an infection point. Yeah. And I think we need to think about hard about that. I

Srini Rao: wanna come back to the pedagogical stuff, but I wanna bring back a clip from a conversation I had with Scott Galloway as it relates to affordability.

And you and I were talking about access and the fact that it opens doors when you come from one of these schools, take a listen. Despite the fact that the number of people going to college has increased dramatically the number of seats that have been offered by the top universities has stayed flat.

So Stanford's applications tripled in the last 30 years, but the number of seats that they've increased has, they haven't

increased their freshman class by anything substantial because we, as academics, and I include myself in this, have become drunk with the notion of exclusivity. And that is we no longer see ourselves as public servants.

We are see ourselves as luxury brands and every fall. The head of admissions and the deans brag about how impossible it is to get in to the college. And you can't be at a party without someone joking that they could never get into their alma mater day. That's a bad thing because on a risk adjusted basis, it's likely that your children will be somewhere in your weight class.

So couple of things come to mind for me for that. When you mentioned that comment about not being able to get into your alma mater, my sister and I make that comment all the time when we look at how hard it is to get into Berkeley today versus when we applied. But that idea of educational institutions becoming luxury brands, I think is pretty apt.

As at the same time as we alluded to before we hit record, you and I can't argue against the fact that having Harvard on your resume opens doors that are not open to other people. So look, I think

Ranjay Gulati: there's a I love what Scott does and I appreciate what his point is, but I think there's a conundrum here.

High quality education doesn't scale very easily, so it may sound really easy. Look, the demand has gone up, so increase the supply. Harvard Business School already has like class of 950 in 11 sections, right? So you might say, Hey, come on, add another five sections or 10 sections. You have a long list of people applying, just double the class and you'll earn more tuition.

You can even discount it now, these economies of scale and it just doesn't work so easily. Yeah. And now of course, you might say, with technology, maybe we can have online courses. And so that's the first piece of the puzzle that you know, yes. Demand. And now what is happening is American educational system is feeding, is meeting not just domestic demand, but also global demand.

Everybody wants to come and study here. So yes, we have. Demand, which then creates more competition, which makes it less accessible, which makes it like really hard. And again, a question we have to think about, but I think the answer can't just be, Hey, add more people, I don't think that would work.

Does that make sense? I think it's, yeah, we need to think very carefully about that. Yeah. I don't think that in my mind, I don't think that I think that he was making a point with this notion of exclusivity. I agree. I don't think that you could scale without losing quality. But to go back to the pedagogical piece one of the things that I thought was really interesting and you alluded to this, was this space for exploration.

Srini Rao: And David Epstein, when he wrote his book range, we had him here as a guest, and he said he said to make long-term decisions at that point in your life. Is actually a really bad idea because you're making decisions on behalf of a person that you don't know and that you haven't discovered.

And I I will have people who come to me sometimes. I one of my parents' friend's sons is a freshman at Berkeley. And the amount of questions this kid would ask me, I'm like, dude, you have to go there and find out. I don't know the answer to any of this stuff. Because I think that we try to make these enormous life decisions with very limited data points.

It would be like meeting somebody for five minutes and saying, okay, yeah, I think I'm ready to get married to them. Bad example for two Indian speaking, I realize. But you get

Ranjay Gulati: the point. Look your point is well taken. And I think this is what I was saying earlier, that whole kind of pursuit of exploration that created a safe space for exploring, trying, failing, learning.

And some schools are playing with this, right? They're, they'll have first year or first semester take any classes, no grapes. You don't declare your major till the end of your sophomore year. So there's an effort to build some flex into the system, but the labor market more broadly into which we are now placed is increasingly demanding.

Kids who are very focused what we might call depth over breadth, the pointy headed single dimensional versus I bring breadth. And I bring that breadth in some ways and that makes me, enriches me and allows me to be more creative and so forth. I think this is problem.

I think that we have to understand what we need to do.

Srini Rao: I think that makes a perfect segue into talking about the book itself because in a lot of ways we're talking about purpose as it at that sort of stage in life. So you early on in the book say that the most compelling purpose statements among the hundreds I've reviewed have two basic and interrelated features.

First, they delineate an ambitious, longer term goal for the company. Second, they give this goal an idealistic cast committing the firm to fulfillment of broader social studies. And you make this distinction between convenient purpose and deep purpose as well, which I want get into. But I think so often this to me is one of those things that is so difficult to articulate.

No matter how many books we read on it. You go to, I think people in a lot, it takes us back to that discovery piece, right? Where I think people read a book like Simon Sinek, start With Why, and they think, okay, I'll just do the exercises and I'll know what my purpose in life is. And as I found out from having Simon Sinek, tell me my why.

That actually took 10 years to connect the dots.

Ranjay Gulati: Yeah. Look, you know the thing to ask, I said first of all, the idea of purpose. You, I'm glad you brought up Simon Sinek. Simon did a great job at laying out personal purpose that all of us should stop with the why, right? Why am I here? And then why is it a profound first principle, ground zero question that all of us should be asking ourselves?

The question then becomes, can you apply to a company? Can it be an organization having a purpose? How can you do something that is a why question for me individually, how does it apply to an organization? And in classic organizational theory we always talked about the what and the how.

What are you gonna do? How are you gonna get it done? So we had the what, which is the strategy, the vision, the tactics, what are you gonna do? Then there was the how question, how are you gonna build your organization, your culture, your. Org design the people and all that stuff, how are you gonna get it done?

So it was the what and the how. Question why was never part of kind of the repertoire of what anybody thought about in the organizational part. And I think increasingly there's a realization that the why question actually helps you answer the what and the how question. And I learned this from Satya Nadella actually I had a chance to interview Satya for some research I was doing for my book.

And I asked Satya, tell me about like your, the Microsoft turnaround. And he said, look, we needed to fix our strategy, the what we're gonna do, and we had to fix our organization to implement that strategy, the how we're gonna do it. But what we were missing was the why. And I said, oh, really? I didn't buy it.

I honestly, I thought I don't buy this. But he was adamant, he said, Rangie, without the why, we wouldn't have been able to really think about our strategy clearly. And once we got and. Once we had the why figured out we gotta gain alignment among everybody. So he says, you have to think about purpose as an unlock into strategy and implementation.

And then he also made clear, don't fix on a fixate on a mission statement. Purpose is not just a purpose statement. And I needed to get my head around that because I was so fixated on mission statement thinking, who reads mission statement? Really gimme a break. Nobody reads mission statements. It's just there, right?

So it's like, why would I wanna waste MyPhone? And I think this is the piece of the puzzle that I've learned that it's a little more complicated. And once you have a purpose for an organization, then how do you make it real for the people who work there? And so it doesn't become some artifact that is on the wall.

Introducing Wonder Suite from bluehost.com. Website creation is hard, but now with Bluehost, you can answer a few simple questions about your business and get a unique WordPress website or store right away. From there, you can customize your design colors and content, and Bluehost automatically helps you get found in search engines like Google and Bank.

From Step-by-step guidance to suggested plugins. Bluehost makes WordPress wonderful for everyone, go to bluehost.com/wonder Suite. We all have somewhere we're trying to get to. As the largest energy producer in Colorado, Chevron is helping meet rising demand, and we're working to do it responsibly. Our next gen tankless facilities reduce the greenhouse gas emissions of our operations by more than 90% compared to our older designs.

Working to provide Colorado with energy that's affordable, reliable, and ever cleaner, so everyone can get to where they wanna be. You've arrived. That's energy and progress. Visit chevron.com/tankless. Hey, Dave. Yeah, Randy, since we founded

Srini Rao: Bombas, we've always said our socks, underwear, and T-shirts are super soft.

Any new ideas? Maybe Sublimely Soft or disgustingly cozy? Wait, what? I got it. Bombas Absurdly Comfortable essentials for yourself and for those facing homelessness because one purchased equals one

Ranjay Gulati: donated. Wow. Did we just

Srini Rao: write an

Ranjay Gulati: ad? Yes. Bombas. Big comfort for everyone. Go to bombas.com/acast and use Code Acast for 20% off your first purchase.

Srini Rao: More than 60% of

Ranjay Gulati: sales

Srini Rao: on Amazon come from independent sellers like Sylvia. Owner of you, simply Season Sylvia started her small business

Ranjay Gulati: to help people spice up their meals not to deal with shipping.

Srini Rao: So she turned to Amazon to take logistics off her plate. Now she's sharing her global flavors

Ranjay Gulati: Globally.

Sweet.

Srini Rao: Tuni and Pie Spice. Spice High five. Learn more@aboutamazon.com.

Ranjay Gulati: Worried you'll need to babysit your robot vacuum. Think again. Meet UFI X 10 Pro omni robot vacuum with AI powered navigation to recognize and avoid over 100 objects. It's the winner of five best of CES awards. And digital trend says it boasts almost all the same features as robot vacuums that cause twice as much.

Want to know more? Go to ufi.com. That's EUF y.com and Discover X 10 Pro Omni, the best in class, all in one robot Vacuum for only $799.

Srini Rao: Let's talk about aging. It's inevitable, right? But what if I told you there's a new way to age led by Sogar Cellular Nutrition? They believe, and I do too, that you can transform the way you age, cell by cell with the power of cellular nutrition. As we age, our cellular function declines. Your regular multivitamins and minerals might not be enough to combat these age related declines, and that's where Sogar Cellular Nutrition comes in.

It's formulated with targeted cellular nutrients that work with your body's natural processes deep inside your cells to help you fight cellular decline and promote cell health across three benefit areas. It supports cell energy repair and vitality, muscle strength, and even glutathione production to help protect cells.

So let's own our healthy aging narrative. Visit cellular nutrition.solgar.com to learn more. Again, that's cellular nutrition.solgar.com. To learn more Solgar cellular nutrition, we go cell deep. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.

So make this distinction for me between deep purpose and convenient purpose. Like what is the difference between the two?

Ranjay Gulati: It's I, in fact, my publisher were telling me that I should have a book with a one word title purpose. So I couldn't because I found so many companies practicing what I was calling superficial or convenient, meaning they'd put it out there as a slogan. It was just like a checkbox slogan.

It was posturing, some people have called it BOUs side Hustles Purpose Posturing. It was a pretend I'm a goody person. And it plays into the cynics. It really plays into the cynicism in the world we are in today saying, oh, look at these companies. They're yet again trying to do this purpose posturing, pretending to be good, but they're not.

And so this has been a and that's why I had to describe I had to write a whole section on convenient purpose and different types of convenient purpose. Because if you want to really get the benefits of purpose, so if you look at, for instance, Pepsi, what did Indra, we call it, she called it performance with books.

Purpose drives success. But if you wanna get those benefits, you have to go deep with purpose. Superficial purpose is not gonna get you that, that was the big aha.

I

Srini Rao: think that one of the other things I really appreciate this might be my favorite term in the entire book, is what you call practical idealism. Because I think to your point it can be caught up in slogans. Like people often are idealistic. I see this a lot with aspiring entrepreneurs or even people who want to do things like ideal, like content creators where they are very idealistic, like stupid examples.

Somebody comes to me and it's oh, I wanna sell a million copies of a book. I'm like, do you have any audience? Do you have any credibility at this? Have you done any of this work? And I was like, then no, I can't help you do this at all. But I appreciate this idea of practical idealism.

Can you explain that and how it ties into purpose?

Ranjay Gulati: Lemme start with a very innocent mistake. Some good wishing people made. They introduced the phrase, purpose and profit. Now, that is a disaster because, and implies purpose is logically separate from profit.

It's not a precursor, it's an additive to profit. So it's basically by logical conclusion, purpose equals nonprofit. And so suddenly purpose became this social agenda. It was about the focusing on social goals. It became ESG, it got embraced by the anti-capitalist. And suddenly now you're in a political nightmare saying, purpose is a woke conspiracy.

It's this, it's that, and this. Who doesn't need to have a pur purposes? Why am I here on this planet? What's wrong with that? What's wrong with having an intention that why we are here? And I think this caused a lot of confusion in people's minds. I think the other piece people got confused about is that purpose as a word, forces you to think long term.

It's a long-term question. If you ask that, what's your purpose? Or what's my company's purpose? It inherently forces you to think long. And when you think long term, you have to think of multiplicity of stakeholders, including shareholders, because when you're thinking long term, you have to think about employees, you have to think about customers, you have to think about community.

You might even think about the planet, but the logical arc to get from purpose. Any of this is through this idea of long-term thing that how do we get leaders to imagine the businesses in our long-term perspective? And that's, and so this getting caught in this, am I an idealist solving social problems or am I pragmatist, try to optimize for shareholders?

Or am I trying to navigate through this complex multiplicity of people who expect something from me in the long term and I had to divvy up the resources and profit is part of that story. I'll just share with you a short quote from Peter Drucker who once said, profit for a company is like oxygen for a person.

If you don't have enough of it, you're out of the game. But if you think your life is about breathing, you're really missing something. Yeah.

Srini Rao: Yeah, I appreciate the long-term idea because I remember when Y Combinator made its curriculum available via podcast I went through the whole thing. It's something I go back to every quarter or so to listen to it.

Sam Altman, one of the things, I think it's either in the very last lecture or second to last lecture, he tells people that they're, the, a founder's greatest competitive advantage is a long-term view. Because he said a lot of people come in thinking, I'm gonna do this thing for three or four years. I'm gonna then, after that sit on the beach counting my cash would be ave venture capitalist or some delusional dream.

So

Ranjay Gulati: look the, I, the in, in Eastern, lemme take Indian traditions since both you and I Indian there is a word in Sanskrit called karma. Karma is not karma For those who confuse that with the two. The harma is really loosely, it's hard to translate into English, but it's really around duty, purpose, intent, and the wise person is he or she who is able to operate from a place of that intention and just the way a human being, if they have clarity of intention, they don't, are not confused about the way they make decisions.

They understand how to make trade offs. They know how to navigate through the world, understanding the complexity and confusion that they have to deal with and are able to work their way through that. I think businesses today are in the same boat. They're being pulled in so many directions. They're being asked to weigh in on social issues, on environmental issues.

They're being asked to weigh in on shareholder issues. They're being asked to weigh in on employ employee issues. And so in this complex situation. Having some clarity of a north star or anchor or a direction can help you navigate and make those tradeoffs and say, it doesn't give you the answer to the tradeoffs, but it gives you a rudimentary framework even to think about it, and it gets everybody aligned around those tradeoffs.

So it's, that's the situation I think we have to think about. I think that is why I think this is such an important idea today. Leaders are being pulled in so many directions and having some clarity of purpose, if I may say, is a wonderful tool to be practically idealistic. Because when you're doing that, purpose involves a sense of goals and ambitions, right?

But it also involves duties and responsibilities, and it allows you to think through both simultaneously. That I think is the core idea of purpose.

Srini Rao: You talk about what you call for purpose levers, which are directional, relational, reputational, and motivational. Can you explain those and expand on those?

Ranjay Gulati: Yeah. So you see part of what happened was is the following is there's still a lot of skepticism that purpose is just a distraction. People who think of purpose as ESG say this is a distraction. The economists even cause it anti-democratic, that it's getting unelected officials to use other people's money and redistribute it across social projects, and that's not their business.

That's the job of elected government officials. So you get this kind of radical pull out there. But I think at the same time, I think what, so the question then was I. Is purpose, good for business, financially, good for business even, and that, so I'm now in the midst of a large sample statistical study where we're gonna try to see, there's even a correlation between purpose and financial returns and performance on other dimensions.

But in the interim, I started to ask business leaders is it good for your business for this purpose? Actually, anecdotally I'm asking you anecdotally, does it help your business? How, that was the question that I was asking. So in answer to that question, so you know, is where I got these four dimensions you're talking about.

The first thing I heard from one gentleman I interviewed was, it was Thomas Toon Anderson of Ted, who said, I pity those who think of purpose coming at the expensive perform, or if you take Larry Fink, he said, purpose unifies management, employees and communities. It drives ethical behavior and creates an essential check on action that go against the best interest of stakeholders.

Purpose guides culture provides a framework for consistent decision making and ultimately helps sustain long-term financial returns. So there was all these, I would say, assertions and I was just trying to put some structure to these assertions. So the first one was directional. The Purpose Pro helps leaders discover directional clarity, doesn't tell them exactly where we're going, but at least broadly where we're going.

So they're able to think about the trade-offs and choices they have to make and create alignment. So that was the first. The second was motivational. And motivational was really about what we find is that increasingly employees, especially younger ones millennials tend to find that they wanna work in a place where they feel connected to what the organization is about.

That, that sense of pride, that sense of identity, and how you, that is a draw for some talent and some top talent. So that was another piece of the puzzle. The third. You was, there was reputational where customers seem to care about companies and the last was relational where suppliers and ecosystem partners seem to care about it.

And that was based on this idea, if a company is really deep with purpose, not just superficial, that we can trust them more. So there was an increasing sense of trust and connection that then leads customers to wanna buy more and lead suppliers and ecosystem partners to be willing to collaborate more.

Saying, I can trust these people. So I was simply try to put some structure to the various pathways through which companies, organizations, of all sorts can actually benefit from having a purpose. That was the core thesis of this section that you're. Let's talk about this idea of communicating purpose, because you and I previously just talked about this idea of not being just fancy slogans on while, and you say, in communicating the purpose, deep purpose leaders go beyond slogans and rallying cries, telling a grand foundational story about the company that lends depth meaning, and even poetry to the enterprise.

Srini Rao: What does doing this look like in practice?

Ranjay Gulati: Look, the thing with purpose is if it's a management program or a strategy or a organizational change or some kind of layoff. So whatever you're doing you can communicate those in an email, in a message and say, oh, here's our new strategy for the year.

Here's our vision 2030, here's what we new changes this coming year. Those are I would say factual messages that can be communicated in as a cogent and powerful way as possible. Purpose is emotional. You're trying to get people to buy in. It's not just a left brain activity, it's more than that.

So I found some of the best leaders talked about it in through stories, personal stories, in Nui talked about her own childhood growing up in Chennai without water and why water conservation was so important to her. Or in the case of Legos transformation, Jo Wig Nsra decided to go back to the founder, who was no longer alive, of course, and understand what was the founder's intention.

And the founder was interested in intelligent play and saying, we need to channel that, that into our thinking. So you start to see how a lot of these leaders are trying to find ways to, what I call, saying, you don't want to just be a plumber. You need to be a poet. And that was not my saying, but Jim March, a very famous Stanford academic, talked about poets and leaders as poets and plumbers.

And I think that is the point I think I was trying to make over here. That as leaders, they need to be both poets and plumbers. And that is the part of the story. Okay. Yeah.

Srini Rao: Let's talk about this idea of connecting organizational purpose with individual purpose. Because you say that connecting organizational purpose with the individual's own personal purpose isn't easy.

You might bock it, allowing individuals to be themselves worrying that you're seeding too much control and that performance will suffer. The paradox though is that by seeding control over individuals, you ultimately unlock individual performance. You obtain that high performance, not by compelling or incenting team members, but by firing up intrinsic motivation.

And like I you and I were talking about my backstory and I told you I've been fired from every job. And I can tell you that largely what I discovered was something a mentor told me that if you mismatch somebody's talent with their environment, then inevitably you're gonna get shitty performance.

And we rarely, instead of looking at maybe this person is the wrong job, we either fire them or put them on a performance improvement plan to avoid a lawsuit. So how does this actually happen? How do you get how do you set people up to be intrinsically motivated to begin with?

Ranjay Gulati: Look, that's a great question. Shani asking is,

so what we're trying to understand is there was a time when all of motivation was about job satisfaction. And job set was about giving people a fair wage, giving them decent wages, decent job well-trained and resource them to do their job right? And maybe a bit of bonus to perform well.

We then evolved in the eighties and nineties to engagement where people were like, okay, how engaged are you? And engagement came from being given some autonomy, made part of a team in a positive work culture, supportive boss. Made you feel like you're learning and growing all the time. And that became engagement.

I think we're a third level now, which is about inspiration and inspired workers. People who are getting inherent meaning outta what they do, where work is meaningful, are far more productive and far more intrinsically motivated. So a question people should be asking is. Do I feel a sense of pride in what I do?

Do I feel connected in what I do? Does my work give me meaning? And I think is some of us will say yes, and some of us will say no. And for those of us who are saying no, we compartmentalize our lives and then we call it work-life balance. And, but those of us who do see more coherence in our life, and actually I'll share with you the head of HR at Microsoft, Kathleen Hogan said, once you don't really work for Microsoft until Microsoft works for you.

And how do we help people? Or I'll give you another one. I just wrote a case on Coach Nick Saber. His whole thing is how do you get players to show up and be their best version of themselves? How do you show up and be the best version of yourself? And I would like to submit that when you're inspired, we show up in the best version of ourself.

Wow. Let's finish this up by talking about the metrics aspect of this. Because you say that the truth is that nobody gets a pass on short and long-term final financial performance, whether they are driven to deliver profits for shareholders or not. And certainly strong shared value strategies don't mean leaders can take their eyes off the commercial logic.

Srini Rao: So how do you balance the two? Like how do you not go too far in one direction? It's hey purpose driven and losing money

Ranjay Gulati: every day. So going back to my original statement to you in the beginning was even confused purpose as social stuff. Yeah. Purpose is not social stuff. Having said that, purpose is long-term thinking, and because purpose is long-term thinking and long-term thinking requires you to think about different stakeholders.

So whenever, remember now what's happened is there was a time when a leader could simply optimize their performance around one thing, which was profitability and a possibly short-term profit. We then added long, short term, medium term, long-term profitability, and then that alone time horizon alone complicated the lives of these leaders.

Now we're saying it's not just that, it's also these other things. Now, I just like to submit that some of the leaders I talked to say that profit is a byproduct. It's not a goal in and of itself. It's an outcome that results from your pursuit of goals to pursue excellence in what you. Even back to coach Nick Saban.

It's interesting, he's won seven national championships. He never, ever has talked about winning a championship to his players. Yeah, I've read his book. It's never that

Srini Rao: I've read his book. And I remember that. Yeah.

Ranjay Gulati: And so you see that a lot of, even the late Jack Welsh used to say, prophet is a byproduct.

It's not a goal. And so we have to ask our ourself, like, how do we, another problem for leaders today is that the goals are complicated and there are many of them. So you're thinking, okay, what do I decide? So what it starts, purpose starts to get you thinking of what are those multiplicity of goals, writing them down.

You might not be able to come up with a precise waiting scheme saying, oh, 30% here, 70% there, 40%. It gives you a, again, a rudimentary frame of thinking about the inevitable trade offs and choices that you have to make. As a leader today who is trying to manage an organization for the long, I think that is the crux of the whole issue, and that is true for us individually.

If we individually are trying to say, okay, how do I allocate my time, my family, my athlete, my health, my economics, my friends, my whatever, how do I allocate my time? And having some clarity of intent or a purpose doesn't give you the answer, but it at least gives you a way to navigate your way through those choices a bit better, in a more intentional way.

Srini Rao: Let's finish this up. You say that for capitalism to evolve and make progress in addressing the greatest problems facing humanity, we need leaders and companies everywhere to embrace the purpose. In Sonia. It's funny because as I finished putting my notes together for your book, I've been reading, I had just finished reading another book called the Geek Way, RA The Radical Mindset that Drives Extraordinary Results by Andrew McAfee.

And like I was seeing overlaps in some of what you guys had said and also pieces that connected. And one of the things he talked about was industrial area companies not being able to deal with incumbents simply because of the way that they operate. And I'm curious like where you see this as far as the future goes are there industrial area companies that resist this or will basically resist this to their

Ranjay Gulati: own demise?

So there are two. It's great questions. Renee. There are two related and also independent questions you're asking. Lemme start first with industrial companies, unable to, this is a perennial problem. I've been studying this separately in a separate project. Why did Kodak fail? Why did Sears fail? What happened to Motorola?

What happened to Blackberry? What happened to Blockbuster? What happened to these Companie? These were iconic organizations that defined their very industry. They created industry. Sears Roebuck invented retail. They invented store brands. They invented main order. And what happened to these icons and where did they get lost?

So it's true, many of them fall into a narcissistic self worship success trap. They become so successful that they can't imagine reimagining themselves or what the late Andy Grove used to call, only the paranoid survive, right? How do you create that healthy paranoia in the organization? And then there's a question you're asking about purpose.

Does purpose play a role in this? Now, if you look back at Microsoft again, we began with Microsoft. Let me end with Microsoft. Microsoft had a purpose under Bill Gates, as it did under bomber. But they had stagnated for almost 15 years, and the missed almost the entire tech revolution that had happened until then till 2014.

And so the question was you could revive your strategy, you could revive your organization, but Satya's take was you needed to reconnect to our purpose. Now, when you reconnect to your purpose, he was saying like, let's not just get lost in the past. Let's not get nostalgic. We need to connect to our roots, but modernize them and look forward.

So in, in order to look forward, you gotta look backwards first. Like, where did we come from and where are we trying to go? So purpose gives you a mechanism to really look back at yourself. Where have we come from? Where do we want to go in the short and long term? And the why question forces you to do that.

So it's interesting. Purpose, past, future transforming, refreshing. It's and this is what Yorg Wig TRO said to me. He said, if you want to transform, not just turn around a company, you need to find the essence. And then he says, just like finding out your purpose in life, it's not up to you, not up to management to decide that it's not a rational choice.

You don't decide what your calling is, you detect it. So it was about reconnecting to your roots, but then modernizing that idea into the future. In their case, it was a discovery that the founder had come up with this idea of intelligent play, but what did that mean for the future of Lego? Name the past.

And that's why purpose is such a powerful way to energize ourselves individually, but also energize an organization. In moving it forward in a very crazy, the world where the world is changing on us fast in nanoseconds. Wow.

Srini Rao: I think that makes a beautiful place to wrap up our conversation. So I have one last question for you, which is how we finish all of our nerve at the unmistakable creative.

What do you think it is that makes somebody or something

Ranjay Gulati: unmistakable? What is it that makes something unmistakable? It's a great question. I'll just say one thing on that is what makes something unmistakable is when it's truly authentic, when it isn't grafted, when it isn't a pretend, when it isn't posture.

So I think realist is when you see something and you say that.

So that's what I think is the hallmark of unstick.

Srini Rao: I can't thank you enough for taking the time to join us and share your story, your wisdom, and your insights with our listeners. Where can people find out more about you the book, your work, and everything else that you're up to?

Ranjay Gulati: There's a couple of places. I have a website for the book where I have 25 podcast interviews I did with c after I finished the book, I did 25 CEO interviews from around the world.

I went on and I continued my journey, and that's a podcast on a website called deur.net. Describes the book and also the podcast. And then my own website is ranj.com and also on LinkedIn where I've have a newsletter of sorts going and I periodically will put out a story about a leader or about a concept that I am particularly fascinated by.

So thank you so much, uni. It's been really a pleasure to talk to you. Really appreciated the questions. I can see you as a professor. I can say you did your homework. You really had read my book very carefully, so thank you for that.

Srini Rao: Yeah, absolutely. And for everybody listening, we will wrap the show with that.