The Pitfalls of Smart Leadership

Smart leaders are an eclectic bunch that includes brilliant strategists and functional experts as well as superefficient tacticians and gifted managers of people. They may be start-up entrepreneurs or high up in the ranks of large, global corporations. They can be quite diverse when it comes to their perspectives, actions, and motivations.

For the purposes of this book, we’ll divide smart leaders into two broad categories according to their primary area of strength, which we refer to as functional smart and business smart. To generalize, functional smart leaders excel in one field or function, such as R&D or operations, and tend to dig deep to establish their expertise in the domain that they have chosen. Effective execution is their forte. They tend to be cautious in risk taking, think carefully before they act, and when they act, they tend to stick to what they know best. Whereas functional smart leaders go deep, business smart leaders go broad. They tend to be big picture thinkers who are risk takers at heart. They are prone to taking action quickly and generally have a competitive temperament. (You might not identify yourself strongly with either category at first, but as you read further, keep looking for patterns of behaviors that match yours.)

We’ll discuss these differences more in depth later in this chapter, and we’ll also examine a quality nearly every smart leader we’ve met or studied has in common: a powerful and ever-increasing tendency to play to their own strengths. As they succeed and move up, smart leaders tend to become increasingly attached to their particular type of smartness and show themselves less able to exhibit or appreciate the other type of smartness. This makes sense: most people build their skills and expertise on their existing strengths and temperaments; success breeds success. But this consolidation can exact costs—personal, professional, and organizational—that the otherwise very smart leader doesn’t see coming.

We’ll talk about this peculiar kind of blindness shortly, but first we turn to an example of an exception to the rule: a leader whose actions over time have shown an evolution from a highly consolidated style of smartness into wisdom.

Bill Gates is an exemplar of the kind of smart leader we call “business smart.” Gates was only twenty years old when he cofounded Microsoft with Paul Allen. Despite his unassuming appearance and apparent shyness, Gates, a Harvard dropout, was a determined and ambitious businessman who used every opportunity to outsmart the competition with great strategic moves that helped Microsoft reach a market capitalization of over $616 billion in December 1999.¹

That supremacy took a blow in May 1998 when the U.S. Department of Justice filed suit against Microsoft, accusing the company of abusing its alleged monopoly power on Intel-based personal computers in its handling of operating system and Web browser sales. A number of European countries followed with similar lawsuits. All of a sudden, a company and a business leader who were riding high faced a formidable threat.

Gates appeared by video at Microsoft’s antitrust trial, a decision that was widely interpreted as a snub to the Department of Justice. Under questioning, he appeared combative and defensive. He told the media that the lead government attorney was “out to destroy Microsoft.” When the deposition was read in court, Gates’s condescending attitude toward his accusers and the legal system in general stood out. According to CNN, that testimony helped turn public opinion against Microsoft and Gates. Microsoft settled the case in 2001, but in the aftermath of the lawsuit, Microsoft lost its momentum in the marketplace. Its market capitalization dropped from $616 billion in 1999 to about $260 billion in 2012.

While Microsoft was contending with scaling back its operations, Gates made a major course correction in his life journey. In early 2000, while awaiting the court decision, he stepped down as Microsoft’s chief executive to focus on his passion for software, becoming the company’s chief software architect and chairman of the board. Being a great strategist, Gates probably realized that it would be better to have a different CEO representing Microsoft to the outside world. In the same year, he and his wife established the Bill & Melinda Gates Foundation; by 2008, Gates had completed his transition to foundation and philanthropic activities (he remains the nonexecutive chairman of Microsoft).

As cochair of the Gates Foundation, Gates has awarded billions of dollars in grants to various charitable organizations and scientific research programs. While some people initially accused Gates of using his charitable activities to sugarcoat his image, his foundation is respected and appreciated for its compassionate and highly effective approaches to combating global problems ranging from infectious diseases to lack of education. Gates, the successful but polarizing figure for his ultracompetitive strategy, has become a more righteous and moral figure in the eyes of many people.

From what we can understand through observation and a study of his career, Gates’s actions in his business and personal life suggest that he evolved from a smart leader to a wise one. He moved beyond his corporate role at Microsoft and explored how he could use his wealth, smarts, and leadership skills to contribute to the common good. We see this as a reflection of how Gates shifted his perspective and broadened his approach beyond building a business empire to solving big problems facing the global community.

We have never discussed this book with Gates, and our view of him as a leader who broadened his approach from smartness to wisdom is based on inference. But our analysis of his actions suggests that Gates managed to transcend his particular style of smartness (in which he had remained fixed for a long time) by shifting his perspective, an ability that this book is designed to foster.