Edward J. Kelly

Edward: Charles could we start by talking about your latest book The Second Curve and how you came up with the concept?

Charles: It has been around in my mind for quite a long time and I wrote about it originally 20 years ago. I was always intrigued by the first curve, the sigmoid curve, which people use. Well, particularly in business, they use it to describe the product life cycle. And then it seemed to me it was a life cycle of everything: time of investment, time or money, or anything in our personal or business lives. Then you grow and then ultimately you decline. I thought, “Well, this is a bit depressing. How can you stop that?”

There was the journey through the Wicklow Mountains. It’s a funny story I tell, do you want me to?

Edward: Yes.

Charles:  I stopped to ask directions when traveling through the Wicklow Mountains and this man said to me, “Well, you go down the road for 2 miles and cross over a bridge and you’ll come to a red building called Davy’s bar. You want to turn right a ½ mile before you come to that bridge.” And of course while it sounds a bit too quaintly Irish, there was a reverse logic to it. When I passed the turn in the road I needed to take, the right road, I was so content in going straight that I missed it and as I reflected on that I thought that’s what often happens in life. We are so busy following one path that we fail to see the signs that we must change, until of course it is too late. We have gone too far. Most people don’t change in time and most organizations don’t change on their way past the top, by which time they have depleted their resources and energies and it’s too late.

Edward: Could you give some examples from your book?

Charles: Let’s think about the Do It Yourself (DIY) society. This is a real problem. It’s exciting what technology is enabling us to do for ourselves and what technology is doing for us actually without us often being aware of it. Things switch themselves off when they’re supposed to without us doing it. My stove, if the sauces boil over, switches off. The trouble is you get rather careless actually.

So the second curve is needed in this new society we’re entering to take responsibility for one self. Whereas before, we’ve always trusted institutions to look after us and to regulate us, for example regarding health and safety. It may have come too far in many ways, but it does actually protect us from ourselves. Now we’ve got all these technologies that do it for us. Actually, we’re handing over ourselves to these tools that look very useful. We have got to take back some responsibility and make sure the tools work for us, rather than work against us. People are not sure how to do that because we’re not used to it.

Edward:  You also speak about the need for a second curve in lots of other areas of society. Could you say something more about that?

Charles: I’m not wise enough to know what the second curve should be in every case. I can make suggestions. But surely there’s got to be one. I mean, we have exhausted the corporate world of capitalism. It just isn’t working for everybody. We are just using corporations to extract value rather than to create value. That’s very dangerous. There are a few people who are benefiting from it, but most of us aren’t.

Once capitalism doesn’t work for the majority of people, then it becomes discredited. So, it’s got to change. I’ve got ideas as to how it can change. Other people have other ideas. But we want to be thinking about it. Unfortunately, those in power and control, are not thinking about it at all. Similarly, we are overburdened with debt as a society and as individuals. This just gets terribly worrying as we get older. Most of us are not making adequate provision for the next 25 years, for The Third Act, if you like.

Governments are incapable of doing it for us. They won’t have the resources. So we’ve just got to do something about it before it’s too late. Nobody is really thinking about it. What I wanted to say and I didn’t say in the book, is that if government’s can’t do it, you have to do it yourself.

If governments aren’t going to set up a system, rather like Singapore where they collect money from us and from our organization for us and then use it as our personal pension or capital asset, then we’ll have to do it ourselves. And so that’s where the self-responsibility kicks in again. If organizations aren’t going to change the way we’d like them to change, then if you’re a member of an organization you have to make the change yourself.

We just had a young German here. He’s 24 years old. He’s terribly fascinated by this concept of ownership and how it’s gotten wrong. He’s setting up a whole string of family businesses in which he’s trying to separate ownership from control. So he’s saying the investors can have the right to draw money out of it but they don’t have any control. The people who have control are the people that work in the organization. I think that’s an interesting device. But there are many other devices in which control is passed back to individuals who are in the organization rather than the people who are outside of it.

Edward: That brings us to another related issue about how organizations treat people as things, as resources. That’s the influence of engineering language in organizational life. Could you say a little bit more about that, the notion of an organization being a thing, a property, as opposed to a community of people?

Charles: We now have ownerless corporations, don’t we? The people who are supposed to be owners are not aware that they have even got a stake. The shareholders are entitled to a stream of dividends but that’s all they’re really entitled to. They certainly have no responsibility for the strategy of a company. That doesn’t work actually when they are in charge. What part, legitimately and morally, do they have over the people in it? It seems to me that they have bought their time, which then seems to entitle them to tell people what to do with their time. This is a form of voluntary servitude, isn’t it? There is a difference in wages and fees, where wages buy you only a person’s time. With fees, you pay them for a product or a service. That’s very different. It’s an adult-to-adult relationship. When you buy time, you have a parent-child relationship. That’s very demeaning.

If you have a community like a village, you can own the houses in the village. But that only entitles you to own the buildings. It doesn’t entitle you to tell the people in the village what to do. They want to make up their own lives. If you want them to work together, you need to give them a purpose and a project for them to work together. I don’t see why an organization shouldn’t be the same. You can own the fabric of the organization, but you can’t own the people.

I saw Prince Phillip at some event the other day and he said to the head of HR of this organization, “It’s a ridiculous idea, isn’t it?” He said, “People aren’t resources.” And somebody said to the girl, “Weren’t you a bit insulted when he said that?” And she said, “No, that was an interesting idea.” She said, “I have to think about it.” I mean, for goodness sake, she’s responsible for the people in the organization.

Edward: She hadn’t thought about it.

Charles: No. Nobody wants to be a human resource. It’s a ridiculous title. Words have connotations. It’s very dangerous to use that. People are not things, are not objects, are not resources. You cannot buy them. You can bribe them, of course, but you can’t own them.

Edward: What would you do to make organizations more human-centered?

Charles: I would separate out the finances from the ownership. It’s personally okay in my view to bet on the success of the organization and to buy the right to a stream of dividends, but that should give you no power over the organization at all. I would make it quite clear that company shareholders have no power. The people who have power to influence the directors are people who work in the organization.

There is a German organization that has given votes to the people in the organization and no votes to the shareholders. They can bet, but they don’t have any votes. That would be one way of doing it. But as always, it’s so difficult to change the status quo. So I want the managing directors to go back to company law, which basically says that the responsibility for the company as a whole is not for the shareholders. They have to be taken into consideration, because they are due a stream of some dividends.

I think that that’s what you do structurally. But managerially and in leadership terms, you have to create a sense of emotional ownership amongst the work force. They should feel totally committed to the purposes of the organization and feel very proud to belong to it, very proud to be part of what they’re doing and want to make it even better.

It’s that emotional ownership that we’ve lost to the traumas of financial ownership. A lot of people, 80%, say they have no commitment or engagement with the organization emotionally.

Edward: Yes. I was reading that in a recent Gallup survey. It’s shocking, isn’t it?

Charles: It’s shocking. Are they happy or unhappy? They say they’re happy, but they’re not engaged emotionally. These are people who spend their whole lives turning up just to get paid, but without really any commitment to what they’re doing. As a result, they do the minimum that they have to, to get the money. It’s not optimizing.

Edward: What other effects do you see from the first curve maturing and declining?

Charles:  The more talented, aspirational people won’t stick with the organization. They’ll split off and run their own thing or do their own thing. That will be a great shame because we need these large organizations, these great elephants, as I call them, to maintain society. I mean, they are big pillars of society. Unfortunately, the talented ones are not going to be there.

We went to see a little hub in London called Second Home up in the East End, this whole Silicon roundabout area. This chapter created big spaces centered at the Lundy Restaurant. They sell spaces to little companies and to individuals to come and work there, but also to make sure that they mingle with each other. In the evenings, once a week, there is a lecture. It is free and open. They also have a coffee hour and share their stuff. This creates a creative buzz in the community.

The place is teaming with creativity and imagination. You can actually feel it when you go in there. But none of these people are going to work in big organizations. Even if the organizations that they’ve created get bigger, they’ll leave because, like all entrepreneurs, they like creating but not running things. My worry is that the big organizations will crumble, because they are too big – too big to be something that you belong to or are proud to be a part of, really.

The big organizations got slimmed down, like HSBC – which was my local bank in Singapore. Then somebody got all grandiose and bought the Midland Bank and various other banks and became a World Bank with all these different cultures. I don’t think anybody at the Swiss Bank of HSBC ever thought they were really working for the great Hong Kong and Shanghai Banking Corporation. I want organizations to slim down and get back to their core business, back to the core customers, and to concentrate on being better but not bigger.

Germany seems to do so many things right. They’ve got these family businesses, which have their problems. Not everybody wants to work with family business. But I was just hearing today there are 4,000 family owned businesses in Germany, which are owned by foundations rather than by shareholders. The foundations are committed to keeping the businesses going. Maybe that model will grow.

My favorite organization is a company called Camellia, a tea company in India, Africa, and South America built by a Canadian businessman. He has very strong values and he’s created a foundation that owns 54% of the shares so it will never be sold. It can’t be bought. But 46% of the shares are available on the market. So there is some pressure on it to be economically successful. You go to the AGM and some angry shareholders there will say, “If the company is doing so well, Mr. Chief Executive, why does my dividend not keep growing?” And the Chief Executive replies, “Well, our principal shareholder prefers to invest in the company rather than in you.”

Edward: Short-termism then becomes a real problem compared to the German family owned businesses that have a long term timeframe.

Charles: Yes. And the devotion to the company is different, because for most of them, 100% of the profits go back into the company. These families don’t live richly. They are committed to the products they produce, usually tiny bits of engineering. And I think that’s an interesting model! Again, that sort of ownership is divorced from the management. In the foundation structure, the same thing happens. I want to give the villagers of the community much more say in the running of the community so that they have an emotional ownership, even if they can’t have a theoretical or legal ownership.

Edward: Thinking of other organizational models that you have been influenced by, I liked one of your references to how the theatre works.

Charles: Yes. In the theatre the management are in the back and the actors out front. The producer/manager is the guy who puts the money together. But all the control is actually with other people. That’s an interesting model. We can learn from other kinds of organizations.

Edward: This issue of company size is also interesting given Dunbar’s 150 (the upper limit of effective group size).

Charles: Yes, it’s interesting in terms of at what point do you grow an organization or department beyond your capacity to manage it? I’ve said, “You know, you just really want to grow because you believe you have a secret. Create another organization doing the same thing, but separate.” Financially, I suppose you could have a stake in both businesses and let it be separate. So don’t make it bigger. Make a new one and keep it small. I had set the limit at 100 before I read Dunbar’s book.

Edward: Could we move on to discussing when do you know that you need to start a new curve?

Charles: Every time I talk about it, people would say, “Well, how do I know?” I always say you only know for sure once you’ve gone past it. So we need some kind of prod for us to start before we are ready. One prod is a sense of complacency. Do you feel you’re settled?

Edward: Plateauing.

Charles: Yes, you feel you’ve got it all under control. But you need somebody to tell you, because often you won’t know yourself. There’s always an outsider who says, “You’re flying too close to the sun.” And so you need a friendly reminder or a trigger.

In the different curves in my life, and I guess there’d be about four of them, my wife has been a very useful trigger. She knows very well when I’m getting above myself.

I’ve told the story many times that when I joined Shell the curve was clear. There was a line, which didn’t dip down much, until I came to the end of my career and left Shell. It had all these possible job titles going on in ascending order until I was boss of the company. They said that you will then retire and live for 18 months. After that your widow will be very rich. This was a secure career for life.

I married Liz and she was going with me around the world until they said they wanted me to go to Liberia. She didn’t want to go to Liberia. Furthermore, she said, I don’t think I want to be married to a man who seems to have sold his life to an organization that is going to tell him what to do and where to go. So it was clear that it was either Liz or Shell. I wanted to stay married and so I had to leave Shell.

I didn’t know what I was going to do. I just knew that I had to leave, so I resigned. Liz said, “I think you really secretly want to be a teacher.” She approached my former boss in Shell, who by then had retired and had become head of the Foundation for Management Education, which was financing the first two business schools in the UK. She approached him through his wife. He said, “Well, Charles wants to be a teacher. He wants to teach business people.” I was introduced to the new principles of The London Business School. Then he financed me to go to America and attend MIT and get my MBA.

Edward: Liz was your wake up call.

Charles: That’s right. There was a period of about two years when my income just went down and I had to reinvent in myself – but luckily with help. She was very instrumental in starting the second curve. I resigned and then entered this dip.

Edward: That’s the key thing it seems to me. People intuitively know that they have to go back before going forward, but they don’t want to do that, do they?

Charles: That’s right. That’s the most difficult thing. And then you see it happened again for me. Another new curve but this is the story of my father.

Edward: Yes, that’s a wonderful story.

Charles: I was very successful, I thought, in my academic career. My dad never had a second curve. I thought his life was a failure. He just continued along on the same old job. Then I realized when I attended his funeral and all these people came up to me and told me how wonderful he was, “My god, he matters to people! And I don’t matter to anybody! I better do something dramatic.”

I went back and realigned. There was an interim period though. I took a job that I thought was going to be more important and the salary was one-tenth of what I’d been earning. I really became poor. I meant to do five years, but I got tricked into resigning after four. It’s a funny story in itself. Suddenly, I had nothing to do. I mean, I resigned again and no money. We were really very poor. All we had was this house. Liz said, “Well, this is your opportunity. You always wanted to be a writer.” I had written one book. “Now, you’ll be a full time writer.”

Edward: If I recall, that second curve was in your early 50s?

Charles: I was 49.

Edward: I love the way you describe in your book how, “I came into myself. I came into my own”. But to do that, you had to let go of much of what you were.

Charles: Absolutely! direct cut off. I was so excited that I would be a writer. I had written this first book that had gone well and so I called my agent, “Come and have lunch,” I said, “I have great news for you.” So he came down to Windsor and we had lunch and he asked, “Well, what’s this great news?” And I said, “I’ve resigned. I now get to write full time.” And his face fell. He said, “Oh my god, you’ve given up your day job? Get another one quick!” He said, “Don’t rely on me to provide you with an income.” Writers don’t make money. But I had already resigned.

Edward: Your father’s funeral seems to have been a real watershed in your life and career and really caused you to let go of much that had defined you; the professor’s title, the honorary doctorates,

Charles: That’s right. It was like shedding all your clothes. I had to let go. I just waited and nothing happened. I realized you have to start letting people know. Luckily, while I’m very bad at that, Liz was very good at it. She started letting the word be known that I was available, as it were. Then I started going to conferences as a way of networking.

Everybody else had an organization affiliation. I said this is stressful. I mean, I must get myself a title to belong to something. Liz said, “I don’t see why.” She said, “I’m Elizabeth Handy. Just Elizabeth Handy. Can’t you just be Charles Handy?” I said, “Who?” It would be very funny, just Charles Handy, with a blank.

Edward: But I think that’s a very brave move.

Charles: I didn’t intend it to be brave, but it really was like taking off the uniform. I know so many people who leave the institution, having been managing director or founding director or whatever, are shadows of their former selves, because they have no uniform anymore. It is as if they had been stripped naked and they don’t like their naked body.

We were talking the other day with a chap. Four years ago when I met him he was a junior judge who very proud of the legal system. Now, 18 months later he was retired. He came along with his wife and he was shattered. He just had nothing to say. He’s an empty vessel. That’s very alarming, actually. He doesn’t know how to start again. He was interesting because he said “I went into a primary school locally to help the children with their reading. I thought that was something I could do. And I find myself describing the justice system to these nine-year olds.” He said that they were fascinated. I said, “But that’s wonderful. Why don’t you do more of that?” He said, “I couldn’t. I couldn’t do that.” But he could have done it. He could do it.

Edward: It is very frightening to let go of what defines you and yet that seems to be a necessary step in one’s development.

Charles: Very frightening. But that’s the problem with the way we structure society. We rely on everybody to think that some institution rather than themselves will take care of them.

The first curve is thinking and education. The second curve is doing and the third curve is being.

I think that the first curve is all about education, but education unfortunately does not prepare you for life. It really doesn’t. There’s a lot of stuff that doesn’t turn out. I mean, the head of the Oxford career system in the Times last week was saying the trouble with the Oxford education is it produces incredibly talented people who are absolutely useless and I can’t find them jobs. So then you have ten years or so in the real world working. You’re learning some life skills. That’s just like graduate school. Then you graduate after ten or 20 years and you want to do something else. I think that’s the second curve.

The third curve is when you really are on your own because you’re too old to work in an organization, yet you’ve got another 25 years to go. What are you going to do? An Indian chap sent me his autobiography recently and he’s had a very exciting life. He announced that “Now, I’m 60 and I’m retired.” I wrote back and said by my calculation he has another 27 years and that I was looking forward to seeing what he would do. I don’t know if he’s given any thought to it. He’d been a very active man running big companies, jetting around, being very important. Now he’s just a suburban chap in Melbourne, Australia.

Edward: Human longevity has really created a whole new third act in life.

Charles: Yes, and you can’t escape it. Its such an interesting phase as you can now combine all your thinking and learning, from the first phase, with all your going and experiencing from the second phase, into your third act. And that’s the core of the third act. You discover who you really are and then are free of obligations to anybody except yourself. That’s a challenge!

Liz and I work together producing these photo documentaries. It’s a totally different form of work, but very demanding and interesting. We’re having an exhibition in Dublin. It’s work. It doesn’t make money. It doesn’t get fame. But it’s work. And I think one of the necessities of the third act is work. There are different forms of work: Homework, the home, looking after the parents, aging parents or grandchildren.

Edward: In the example of the guy you are mentioning who’s retiring after a successful career, do you think he is thinking about becoming an Elder?

Charles: He wouldn’t initiate it. He’s used to working in an institutional framework. Remove the institutional framework from a lot of people after 40 years and they really struggle.

Edward: But that seems to be the necessary thing developmentally. I mean, that’s the dropping down on the curve.

Charles: Absolutely. It’s very difficult. I think you need two sorts of help. One is a conceptual help. I mean, I do think you need to get into your brain that this is going to happen (the third act) even if you don’t really believe it’s going to happen to you. When it does happen, you would say, “Yeah, I remember.” But then you need the practical help. I mean, in my case, it’s Elizabeth. But I think it’s also so emotional. I’m not sure how well outsiders can help. They can give you advice and tips, but it’s emotional support that you need.

I think we need to get rid of the word retirement. It assumes that your third age is a life of pleasure. We really should dump that word. I mean that’s why the third act is a much better phrase. A, it’s an act. I mean, you’re supposed to be doing something. And B, it is a stage in life. It’s not an end of life, not in the waiting room for death. You’ve got another life. It’s an exciting life. There are some great advantages to having white hair or being bald.

Edward: People listen to you.

Charles: Yes, and you don’t have to pretend to be anything. You just are. You can get away with murder. Older people get away with murder. People say, “Oh, well. He’s old. He doesn’t know.”

Edward: The other question you posed in the book was, what are we all striving for? And I couldn’t help but think that you might have a view on that now.

Charles:  Well, I don’t think it’s fully formed. I do believe that you should do the best of what you’re best at. I’m pretty sure that I know what I’m best at, which is a form of writing, teaching, and words. I’m really a wordsmith, interpreting words to other people. But that’s not enough. You still have to remember what Aristotle also said in accordance with virtue that you have to do it in service of others as well.

I am trying to end the last stages of my life by being as true to myself as I can be. I don’t pretend to be anything that I’m not. I try to be decent in everything I do and not to cheat people and so on. I try to be excellent, beautiful and, in a sense, fit for purpose. That’s what I wanted to do. I think it all should look beautiful, but beauty is more than what it looks like.

I try and make that the basis of the way I live. But is that an overall purpose? I’m not sure I can go beyond that a. I mean, I didn’t want people to talk of legacies and so on. In the end, your legacy are the values you hope children have inherited from you – and your grandchildren, too – and that comes back to excellence, decency, and truth, in all these things.

I am trying to live a life that might be an example for the people who come after me in my own network, I suppose, this is the best I can do now really. My grandchildren, they’re so young. I don’t really want to teach them anything. I just want them to be in a way that they can sort of, in retrospect, draw lessons from me. But I don’t think one has an overriding purpose. I don’t want to change the world anymore. I did want to change the world once.

Edward: But you’ve written 20 books, and they are like Golden Seeds for many people.

Charles: Well, it’s nice, isn’t it? But the trouble is that’s not a purpose I set after. The other day, one of my former pupils from long ago gave £5 million pounds to the London Business School to create a chair in my name because he said I changed his life and he’d gone on to be the first Chief Executive of Alibaba’s new Chinese company. When it went public in September and was worth $250 billion, he was quite rich. He said, “I have some money.” And he said that he used thoughts of mine in Alibaba’s. I had no idea. So that’s nice. But I never set out to do that. If you run a good firm, you make money. If you live a good life, maybe you influence other people’s lives. But that’s not the reason we’re doing it.

Edward: So it’s about being?

Charles: Being fully yourself. I think to be fully yourself, you need to be in touch with some kind of qualities, something else. To be better than you would normally be, you need to be uplifted somehow. I do find I need spiritual stimulation, music, beautiful places, church sometimes. We go to a place called St. Bride’s Church where the music is absolutely wonderful The atmosphere, the ritual, and the scene are comforting, uplifting, and soulful, rather than the actual words. But I don’t find the need to believe in anything myself.

Edward: Thank you, Charles, for a rich conversation.

Charles: It has been a pleasure.