Knowledge of failure helps lead to success

Don Keough, the former Coca-Cola president who sits on Warren Buffett's Berkshire Hathaway board, is often invited to speak about business success. But he elected to call his book The Ten Commandments for Business Failure. Keough, 82, spoke with USA TODAY corporate management reporter Del Jones about his backdoor approach to accomplishment. Following are excerpts, edited for clarity and space.

Q: Why did you write about how to fail?

A: I've always been afraid of the word success. People, companies and countries can get into trouble when they start to think they're successful. They get arrogant. I was invited to give a keynote address about "How to be a winner" 20 years ago. I said I wasn't comfortable talking about that, but that I'd be happy to talk about how not to be a loser. Ten years ago, Warren Buffett and Herbert Allen said I ought to put it into a book.

Q: You say that one way to fail is to quit taking risks. Given what's happened with the financial markets, fear sometimes seems a healthy response.

A: It's awfully easy to get to 40 and say, "I'm tired of sticking my neck out. I'm going to play it cool." If you look at the history of a lot of companies, you'll see that they often turn down opportunity. Coca-Cola once resisted going international, which now represents 70% of its earnings. Xerox once decided computers were too risky. Of course, if you take outrageous risk, you get outrageous failure. There's always something to be afraid of. It was overpopulation. Then the killer bees were coming to get you. There's always some bad news out there. There is great concern that China and India are emerging as economic powers. Over the long term, that will help all industrialized countries. It's very easy to be afraid of the future. Don't do it. I'm no economist, but two years from now, the financial crisis will be just a piece of history.

Q: You tell leaders that they must not assume infallibility. Can't that erode the confidence necessary for effective leadership?

A: In corporations, CEO and mistake become a contradiction in terms. If a company's had a bad year, a typical shareholder letter from the chairman will be, "We had a challenging year." That's why I like Warren Buffett's honesty. If you read his annual letters, the first thing he'll point out is mistakes. When New Coke failed, we had two choices. We could tough it out, or say, "We're wrong." I went on television and said, "You were right and we were wrong, and we're bringing back the original Coke." All the anger turned to gratitude, and it worked out perfectly. It was like a Frank Capra script.

Q: Another cause of failure is inflexibility. But the opposite of inflexibility is wishy-washy, right? Mustn't leaders make hard decisions?

A: The first bottle of Coca-Cola was 6.5 ounces. In 1939, Pepsi came out with 12 ounces and a smashing jingle that said 12 ounces was twice as much for a nickel. Coke didn't budge until the mid-1950s. Inflexibility can immobilize you.

Q: You advise leaders not to isolate themselves. You also say that leaders must allow time to think. To think properly, don't you sometimes need to close the door and isolate yourself?

A: It's easy to get in a bubble and have lunch only with associates and staff. If you don't bust out of that bubble, it's hard to get honest and direct information. During (World War II, Winston) Churchill had people whose only function was to give him bad news. Every day, they had to give out the worst-case scenario. Hitler, until he went into the bunker, thought he was winning the war because nobody was telling him the truth. We live in an age of unbelievable data flow. All this information is just stuff that makes it difficult to think. I'd like a holiday when everyone would have to turn off the data-producing toys so that we could all have a day to think.

Q: You say it's a mistake for leaders to put all their faith in experts and outside consultants. But sometimes the consultants are right. When do you listen to them? When do you ignore them?

A: Trust your instincts even when momentum is going the other direction and everyone is on board. You just have to be careful. Once you begin to lose your own judgment, if you believe outside experts know more about your business than you do, the question becomes: Should you be there at all?

Q: You often warn that one way to fail is to love your bureaucracy. How is it possible for anyone to love bureaucracy?

A: Bureaucracies tend to just grow. If you're not careful, your assistant is going to have an assistant. They are usually information gatherers. They keep very busy keeping each other busy. It's a collection of information gatherers who package information and ship it to other places in the corporation. It has no real effect on what happens in the marketplace. Buffett bought a company a couple of years ago. In three months, they eliminated 54 committees and 10,000 man hours of monthly meetings.

Q: Have you ever lost your passion, and if so, how did you get it back?

A: Well, I can remember once when I was in school. I told my mother that I hated one subject. She said, "That's your problem. That material is very worthwhile. You just have to take a new look at it." I've lived a long time, I'm an old man. I've always been curious about the future, never spent a lot of time worrying about the past. Kids in school right now have some of the most exciting days in the history of the world in front of them. You don't learn to swim until you get into the water. People need to plunge into life.

Keough's tips

•Remember killer bees? There's always something to be afraid of, so don't.

•However, fear the word success. Don't assume infallibility.

•Take a vacation from all the data. Use the time to think.

•Trust your gut. If you do everything the experts advise, why are you there at all?

About Donald Keough

•Raised on a farm near Sioux City, Iowa. Bachelor's degree in philosophy, Creighton University in Omaha, 1949.

•Went to work for Coca-Cola in 1950. Retired as president and chief operating officer, 1993. Traveled to 140 countries. Sometimes dreams of crashing in a plane.

•Chairman Columbia Pictures (1985-89) before it was sold to Sony. Presently chairman of Allen & Co., an investment-banking firm.

•Director on the Berkshire Hathaway board. Has also been on the boards of McDonald's, The Washington Post, H.J. Heinz and Home Depot.

•Six children, 18 grandchildren. Took a family of 25 to Italy last summer.

•Favorite new gadget: Kindle book reader.