IQ, EQ, Drive: It’s all about people

I often reflect on the lessons my father taught me in my youth. One lesson he shared early on was the importance of investing and financial prudence. I grew up knowing to ‘spend less than you earn’ and ‘learn to make money grow’.

As I learned about investing in my youth, I studied how to read and interpret financial data when making investment decisions. Yet, as I grew older, I was puzzled that more importance in the investment process wasn’t given to non-financial data. Shouldn’t it matter what the leaders of the company are like? Was it purely about numbers? Or shouldn’t it be more about people – their dreams, their aspirations, their integrity, and their drive?

To date, one of my best investments is a seven-fold return in Sony. I had followed the company for a while, but it wasn’t until Kaz Hirai took over as CEO in 2012 that I decided to buy. What attracted me to Kaz was his proven track record within the company, his global background (having been educated in North America), his people skills, and his focus on innovation and growth.

A key proof point of Kaz's dedication was when he moved to Los Angeles to lead the turnaround of the Media division personally. Activist-investor Third Point was calling for Sony to divest the unit, yet Kaz stayed true to his conviction and strategy. Third Point sold out of Sony and bought in again a few years later, missing out on some golden years.

Now, there were other factors and some luck that took place – but Sony’s success under Kaz’s leadership was legendary.

Another example is Nokia. As a long-time investor, when Stephen Elop was appointed as CEO in 2010, I got nervous. His ‘burning platform’ note to all staff, blaming the organisation for missing the boat on smartphones, turned into a self-fulfilling prophecy. His lack of emotional intelligence and misplaced communication style (even if well-intended) lost my trust. I reduced my exposure to Nokia, and the share price tumbled 60% during Elop’s tenure.

The most recent example is Wirecard. The darling of the German DAX has been on the buy list of most analysts for many years – and it had a great run. Yet, I never invested; my instincts told me to stay away. Markus Braun seemed to lack a genuine love for his company and passion for the product – a quality we find in so many great leaders and entrepreneurs (think Elon Musk and Jack Ma). Now, amidst a global accounting fraud, the company is collapsing and Markus has been arrested.

These lessons of appointing the right people are essential at all levels of an organisation, all the way down to graduate hiring. I have found that most of my successful investments had CEOs who spent their full careers with the company and understand at a deep level the company nuances and dynamics at play.

This begs the question – how do you pick the right people, from graduates to the CEO?

I believe the answer can be boiled down into three areas: IQ, EQ, and Drive.

These are people with a combined skillset of intellectual rigour (IQ), emotion insight (EQ), and intrinsic motivation for success (Drive). For the remainder of this article, I will dig deeper into each topic and share some tips on how to develop these areas further.

IQ

I’m cheating a bit with my definition of IQ – I don’t just mean someone with a high score on an IQ test (although that doesn’t hurt!). I mean people who know how to think and make sense of complexity.

Here’s a quiz for you – come up with your answer before you scroll past the image.

• A bat and a ball together cost £1.10 – the bat costs exactly one pound more than the ball. How much does the ball costs?

Did you answer £.10? If yes, you answered like many people, and unfortunately, you’re wrong.

The correct answer is £.05.

The point of this example is that figuring out the right answer isn’t difficult, but people often take shortcuts and make assumptions because thinking is uncomfortable, it takes effort. Learning how to think properly is one of the most essential life skills any of us can acquire.

Without getting too scientific, let’s spend just a minute on the brain.

Daniel Kahneman is one of the most respected psychologists and economists in the world. He helped form the widely used model of the Brain called ‘System 1 and System 2’.

System 1 is “fast, instinctive, and emotional” – it uses heuristics to make split-second decisions. When you read the bat and ball question, if £.10 popped in your head without you doing the math, this was System 1.

System 2 is “slow, conscious, and effortful” – it has to use novel complex reasoning to make decisions. If I asked you to calculate 243 x 23 by hand, reasoning the answer would be with System 2.

The lesson here is to train your brain to use more of System 2 (and less of System 1) on important matters. Take time to connect the dots between ideas, create new ideas through original thinking, and work to underpin your choices with data. This learning agility is like a muscle, and you will get better and better the more you do this.

So often, mistakes can be avoided, and good decisions can be made when we ‘think, think, think, do, do, do’ in precisely that order.

EQ

The second critical skill set is EQ: emotional intelligence.

In Daniel Goleman’s groundbreaking book Emotional Intelligence: Why It Can Matter More Than IQ, he explained the importance of emotions in our life and how they either help or hurt our ability to navigate the world. He argued that through neuroplasticity, anyone can increase their EQ through practice.

But what does EQ mean exactly? Goleman breaks this down into four areas:

1.    Self-Awareness: Understanding your feelings and knowing where they come from and understanding your strengths and limitations. One sure way to check your self-awareness is to undergo 360-feedback and compare how you evaluate yourself against the opinions of others. The further away the answers are, the more work you probably have to do.

2.    Self-Management: The ability to stay calm under pressure, recover quickly from upsets, and persevere in the face of setbacks. The key here is changing your automatic reactions to emotions you feel to conscious responses. Mindfulness, breathing, and taking a walk are good ways to get in tune with yourself.

3.    Empathy: Reading another person’s feelings accurately and understanding their perspective and communicating in a way that is sensitive to others. This kind of social awareness lets others know they are being listened to and creates a virtuous cycle of openness.

4.    Relationship Skills: Making others feel comfortable and relaxed around you and communicating in a way that motivates others. By building strong, trusting relationships, you can influence, coach, and work with others much more effectively.

In the corporate world, high EQ translates into practical examples such as:

• being able to ‘read a room’ and react with the right emotional dynamics
• knowing the appropriate level to engage with others
• knowing what to filter when you speak
• being able to disagree without being ‘disagreeable’
• the ability to find win-win situations

The fact is that people are people – and in the workplace how you treat others will have an emotional impact on them and will change (for good or for bad) the way they consciously or unconsciously work with you.

Drive

The third critical skill set is Drive, or in other words, high ambition for holistic success (a topic I recently wrote about). The key is this drive does not come at all costs – it’s being driven with unwavering personal integrity and deep humility.

My favourite business book is Good to Great by Jim Collins. In the book, Collins explores a leadership model called 'Level 5 Leadership'; he defines a Level 5 leader as:

• “…leaders [who] display a powerful mixture of personal humility and indomitable will. They're incredibly ambitious, but their ambition is first and foremost for the cause, for the organisation and its purpose, not themselves.”

This definition aligns with what I’ve witnessed in the best leaders. They’re less interested in their ego, self-realisation or public praise, and more interested in the team’s success. They’re the first to applaud others when things go well.

These leaders also have deep integrity and a very clear understanding of the 'red lines' they will not cross. There are plenty of examples of ambitious people and companies who let their drive override what’s right. Enron is one of the most prominent examples, with Wirecard as the most recent.

The last point I want to make on Drive comes from one of Jim’s core messages: purpose.

Purpose itself is the intrinsic motivation that fuels us to achieve our most ambitious goals. Importantly, it is primarily rooted in serving the needs of others, not only oneself. A great example of drive and purpose is exhibited by the ever dreaming, Elon Musk. When asked what drives him to succeed at Tesla and SpaceX, he replies with the following:

• “For Tesla, it is to accelerate the world's transition to sustainable energy and for SpaceX, we wish to make spaceflight accessible to everyone”.

That is bold indeed – no wonder he has amassed an army of loyal followers.

Back to the beginning

I want to end with another lesson that my father taught me. Growing up, he repeatedly exclaimed, “Helmut, es geht nur um Menschen!” – “Helmut, it’s all about people!” I would nod and agree, but deep down, I never quite knew what he meant.

As I grew older, I started to get it.  

He told me when you engage and work with others that you first need to get to know them well. This is what helps to build trust and form rapport. If trust is built, a virtuous bond of loyalty and mutual respect can then flourish. He summed it up succinctly when he would say: “Sei kein Schmetterling, sie sehen vielleicht hübsch aus, aber sterben schnell” – “don’t be a butterfly, they may look pretty but they die quickly”.

It was many years later that I finally grasped the significance of my father’s words. Ever since then, his lesson has served me well and has acted as my people compass. In the world of business, investment and friendship, the ‘IQ – EQ – Drive’ test is exactly that – a compass for navigation. Along the way, you may need to make compromises. For me, I will always trade EQ for IQ and IQ for Drive. That’s what suits me well!

I’m privileged to work in organisations that put people at the centre of the agendas. I gain daily inspiration from our great leaders, teams and people where I witness passion, integrity and deep thinking – every single day. Companies are formed around great people and we can never forget that.