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    Freakonomics Radio

    559. Are Two C.E.O.s Better Than One?

    Thu Sep 28 2023
    co-CEOsleadershippartnershipsmanagement

    Description

    This episode of Freakonomics Radio explores the concept of co-CEOs in companies. Research suggests that companies with co-CEOs can deliver higher shareholder returns. The episode discusses the benefits and challenges of the co-CEO model, using examples such as RIM's co-CEOs and successful partnerships like Goldman Sachs. It also examines the practical implementation of co-CEOs and draws parallels with pair programming in software engineering. The episode concludes by highlighting the need for bold leadership and debunking myths about solo CEOs as divinely inspired heroes.

    Insights

    Companies with co-CEOs can deliver higher shareholder returns

    Research conducted by Mark Feigen found that companies with co-CEOs delivered annual shareholder returns nearly 40% higher than firms run by solo CEOs.

    Co-CEO partnerships can be successful

    Historical examples like Rome's co-counsels show that partnerships can be successful. Co-CEOs provide a coaching and collaborative relationship, allowing them to bounce ideas off each other and keep each other grounded.

    Co-CEOs can navigate difficult situations and make quick decisions

    During challenging times, a strong co-CEO relationship can help navigate difficult situations and make quick decisions. However, if co-CEOs cannot resolve conflicts or differences, it can lead to problems and even failure for the company.

    Finding a community is crucial for CEOs' well-being

    Loneliness is often experienced by CEOs at the top, as they may not have close confidants within their organization or personal life. Finding a community where CEOs can receive candid feedback and support is crucial for their well-being.

    Authentic co-CEO partnerships can be disastrous

    Authentic co-CEO partnerships, such as at Nordstrom, have been disastrous. It is important to have clear roles and decision-making authority in co-CEO arrangements.

    Bold individuals with vision, authority, and courage are needed in leadership positions

    Bold individuals with vision, authority, and courage are needed in leadership positions. Committees and task forces do not make effective leaders. The idea of a solo CEO being a divinely inspired hero has fallen out of favor with historians but still persists in business schools.

    Pair programming in software engineering involves constant communication and collaboration

    Pair programming in software engineering involves two engineers working together on a single program, leading to constant communication and collaboration. This parallels the co-CEO model in terms of the benefits of collaboration and complementary skill sets.

    Chapters

    1. Freakonomics Radio Plus Membership Program
    2. The Co-CEO Model
    3. The Case of RIM's Co-CEOs
    4. Benefits and Challenges of Co-CEO Partnerships
    5. Co-CEOs in Practice
    6. Pair Programming and Co-CEOs
    Summary
    Transcript

    Freakonomics Radio Plus Membership Program

    00:05 - 07:31

    • Freakonomics Radio has launched a membership program called Freakonomics Radio Plus, which offers ad-free episodes and a weekly bonus episode.
    • Listeners can sign up for Freakonomics Radio Plus on Apple Podcasts or at freakonomics.com/plus.

    The Co-CEO Model

    07:09 - 14:32

    • The idea of having co-CEOs in companies is explored in this week's episode.
    • Research conducted by Mark Feigen found that companies with co-CEOs delivered annual shareholder returns nearly 40% higher than firms run by solo CEOs.
    • Private companies often have co-CEOs, while they are rare in the public markets.
    • The co-CEO model is gaining attention as the job of running a company becomes more complex and multifaceted.
    • Some readers question why co-CEOs are not more common, but historical examples like Rome's co-counsels show that partnerships can be successful.
    • Co-CEOs provide a coaching and collaborative relationship, allowing them to bounce ideas off each other and keep each other grounded.
    • Sole CEOs can sometimes become too invested in their own ideas and fail to consider alternative perspectives.
    • Co-CEOs may be more cautious in taking risks, but when they do take risks, both partners are aligned in their decision-making.
    • Power-sharing is important for effective leadership, as demonstrated by the dynamics of families with both parents involved.
    • While there have been cases of co-CEO partnerships unraveling and becoming dysfunctional, such as Chipotle and BlackBerry, these instances should not overshadow the potential benefits of the model.

    The Case of RIM's Co-CEOs

    14:06 - 21:36

    • In 2007, RIM (Research in Motion) became the most valuable company in Canada with a market capitalization of $67 billion.
    • RIM's co-CEOs, Mike Lazaridis and Jim Balsley, had a close working relationship and shared responsibilities.
    • The success of RIM was attributed to their partnership and the convergence of mobility, messaging, and internet protocol.
    • However, the competitive landscape shifted with the emergence of Apple's high-end phone and Google's subsidized business model for cheaper handsets.
    • This shift led to a decline in RIM's market position and forced a strategic difference between Lazaridis and Balsley.
    • The board sided with Lazaridis, leading to Balsley leaving the firm in 2012 and Lazaridis leaving a year later.
    • Between 2011 and 2016, BlackBerry's sales fell from $20 billion to $2 billion due to competition from Android phones and iPhones.
    • Despite their differences, Balsley and Lazaridis never raised their voices at each other during their 20-year partnership.
    • After leaving the firm, Balsley has had limited contact with Lazaridis but acknowledges that they move in different circles socially.
    • Research suggests that companies with co-CEOs can perform better than those with single leadership.

    Benefits and Challenges of Co-CEO Partnerships

    21:12 - 28:13

    • Co-CEOs are necessary when there are too many demands for the CEO's presence in different areas of the company.
    • The presence of a CEO is seen as a sign of respect and absence is seen as disrespect.
    • Co-CEOs can ensure the retention of key executives by providing strong leadership and relationships.
    • The partnership between co-CEOs can be compared to a successful marriage, where both sides feel they have gained something valuable.
    • Despite the end of their partnership, there is no bitterness or negative emotions from one of the co-CEOs.
    • Co-CEO arrangements have worked successfully in companies like Goldman Sachs for 25 years, but it depends on willing participants and effective resolution of disagreements.
    • Atlassian, a publicly traded Australian firm with a market cap around $50 billion, has co-founders who serve as co-CEOs.
    • The division of work between the co-founders involves one focusing on product and engineering while the other handles sales and marketing.
    • The co-CEO model allows for breaks and changes in responsibilities, providing flexibility.
    • Some individuals in publicly traded companies rarely take time off due to the constant need to be available for any issues that may arise.
    • Having two co-CEOs with complementary skill sets can be advantageous, as they can work together effectively.
    • Ego can hinder the adoption of a co-CEO structure, as some individuals prefer being the sole decision-maker.
    • During challenging times, a strong co-CEO relationship can help navigate difficult situations and make quick decisions.
    • However, if co-CEOs cannot resolve conflicts or differences, it can lead to problems and even failure for the company.
    • Loneliness is often experienced by CEOs at the top, as they may not have close confidants within their organization or personal life.
    • Finding a community where CEOs can receive candid feedback and support is crucial for their well-being.
    • While there are benefits to the co-CEO model, there are also challenges such as role confusion and decision-making authority.

    Co-CEOs in Practice

    27:55 - 35:08

    • CEOs can benefit from finding communities where they can have off-the-record discussions and receive candid feedback.
    • Co-CEOs often face role confusion and struggle with determining who should be the lead spokesperson.
    • Research suggesting that big public firms with co-CEOs outperform firms with a single CEO by nearly 40% is not believed to be accurate.
    • In practice, companies like Netflix and Salesforce retain talented executives by giving them the title of co-CEO, but it is clear who is actually in charge.
    • Authentic co-CEO partnerships, such as at Nordstrom, have been disastrous.
    • Microsoft's shared leadership between Bill Gates and Steve Ballmer was unclear and problematic, while Satya Nadella's unitary leadership has been successful.
    • Partnership pairs work well in certain domains like scientific research and music, but even famous collaborations like Simon and Garfunkel were not true collaborations.
    • Bold individuals with vision, authority, and courage are needed in leadership positions. Committees and task forces do not make effective leaders.
    • The idea of a solo CEO being a divinely inspired hero has fallen out of favor with historians but still persists in business schools.
    • Pair programming in software engineering involves two engineers working together on a single program, leading to constant communication and collaboration.

    Pair Programming and Co-CEOs

    41:37 - 48:46

    • Williams conducted a study comparing pair programming to solo programming, finding that pairs worked more slowly but made fewer mistakes.
    • Pair programmers reported higher satisfaction and status compared to solo programmers.
    • In a survey of software developers, nearly 30% said they now use pair programming.
    • Co-CEOs can provide deeper insights into company performance and obstacles.
    • Small companies are more likely to have co-CEOs, while larger companies may be hesitant due to the risk involved.
    • Giving co-CEOs time to work together before assuming the role can increase their chances of success.
    • The research on co-CEOs surprised the speaker, who has no commercial interest in advocating for them.
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