The Leader Evolves: Financial to People Allocation

With the transition from the industrial age to the internet age, the iconoclasts will come in their ability to allocate people.

In William Thorndike's Outsiders, great iconoclastic CEOs are portrayed as amazing financial allocators (i.e. Henry Singleton of Teledyne, John Malone of TCI/Liberty Media, Warren Buffet of Berkshire Hathaway).

They knew what to do with capital. They knew how to use the 5 options for allocating capital (i.e. Organic growth, acquire for growth, pay liabilities, pay dividends, repurchase shares).

Then vs. Now.

This was essential in the industrial age. Companies and business models were a certain way. It was a time of single groundbreaking innovations followed by massive efficiency and mass production to elevate our status in life. Strictly speaking about North American companies as a reference point.

I would say that we are now in the internet age, and with it come different business models. There might be a more technical term that I'm not aware of so forgive me.

Innovations of the past have led to the creation of tools that have considerably decreased the marginal cost of everything and have produced somewhat of an egalitarian environment.

You don't need a full film production crew with film and all sorts of gadgets and equipment to make a movie. You just need a phone.

You can hire people from all over the world and work together globally as a 100% remote teams. Location, air travel costs and communication tools are no longer restrictions that require large capital financing.

Transportation is more accessible than ever before. You can start websites, produce all kinds of content and own mountains of data with minimal cost.

To put it bluntly, the cost to create, whether it be starting and/or operating a business, has decreased. By a lot.

Much of the innovations of the past were enablers and it's these enablers that now allow us to do more of what we can do as humans. To be creative.

Evolution of leaders

Hence, allocating financial capital isn't the big task anymore. Don't get me wrong, prudence with financial capital is essential. However, with capital becoming less of the single factor to create, the focus must change.

In the industrial age, it required a lot capital to start, operate and thrive. But now, not so much.

Most of the capital cost is for the people who use their creativity to create their own "art". Whether it be a wonderfully written line of code, a podcast episode, an app design or logistics sequence.

With that, the focus of the company has turned to creating an environment where their top asset, the people, can thrive.

It's not merely a financial allocation problem of just throwing $xx at people. No, it's about creating an environment where the right people are doing the right things. It's about helping people figure out who they are and what they should be doing through constant iteration and feedback. It's about constructing amazing teams and communities.

All in all, it's the allocation and development of people.

If William Thorndike's "Outsider" CEOs were thought be amazing financial allocators, the next generation of iconoclastic CEOs will be amazing people allocators. We've already seen what these CEOs can do in companies like Google, Zappos and Netflix. All approached people allocation differently as it pertained to their business model but there is not doubt that people allocation was a focus in these organizations.

Though there are many examples of such companies it still seems like this is only the beginning as we are still in the early rounds of the internet age.