His gun misfired. It was 1801 and Éleuthère Irénée had gone hunting with his friend Major Tousard – who was employed by the American government to procure gunpowder. Irénée realized that he could use his chemistry knowledge and make better gun powder!
With his fathers blessings, he started a gunpowder mill. And learnt a hard lesson. Gunpowder factories tend to explode. Frequently. Irénée experienced two fires in his factories, one of which ended up killing 45 people. After which, he decided to adopt a zero tolerance policy: he made it his goal to have zero accidents in his factories.
And Irénée solved that hard problem. Because of which, Éleuthère Irénée du Pont’s company became huge. The best skilled people wanted to work there because it was safe! Because of which, his product became better and better than the competition!
By the time of the American civil war, Du Pont was providing the Union army with 40% of their gunpowder. A century after that, the government had to step in and ask them to break up and divest – because they had become a monopoly! There was no one to compete against them when it came to explosives!
On this foundation Du Pont became one of the largest conglomerates the world has seen! But how did Éleuthère Irénée du Pont end up making his gunpowder factories safe?
The one rule that led to safety
Irénée du Pont made a lot of rules. No strangers allowed in the yard. No tobacco. If anyone came intoxicated he would be fired on the spot. No sharp metals objects that could cause sparks.
He even modified the work buildings where gunpowder was manufactured. Three walls of the building were made of strong granite. The forth wall was made of light wood and faced the water stream. This way. Any accidental explosion would have the least damage.
But other gunpowder manufacturers had done these things too, and they still faced accidents. So what made Irénée du Pont’s ideas work?
He made one rule. And everyone called him insane for that rule. He made it a rule that the director had to live inside the premises – within the blast zone!
Later on, he also decided that every new machine had to first be operated by someone from the top management. If anything would go wrong, the leaders would be the ones facing the consequences.
It was a very badass move. Akin to why soldiers followed Alexander the Great from Europe to Asia. Because Alexander didn’t command his soldiers to march towards the enemy from a shaded tent. He led them by being the first in the line of fire.
By making sure that the leaders had skin in the game, Irénée du Pont made his factory the safest factory in America!
Why does your attitude change when you have skin in the game?
No factory owner wants to see his factories go boom. But that intention doesn’t lead to action. Until he is directly under the line of fire himself. Isn’t it funny how personal consequences change peoples attitude?
By being forced to directly face the consequences, you end up paying a lot more attention. You end up being a lot more careful. You commit more fully. You don’t let your guard down. But why is that so?
Our brains are wired such that it’s easier for us to opt for short term pleasure over long term gain. Being constantly vigilant is hard in the short term. It’s not pleasurable and so we don’t follow through well.
One of the surefire ways of flipping that is by having skin in the game. Make it costly in the shorter term to mess up.
How to build short term consequences: using commitment devices
Stephen Dubner and Steven Levitt of the Freakonomics fame coined a term: commitment device. It’s a way of tricking your brain. To lock yourself to follow through with a plan of action.
One of the things they recommend is: have something to lose. Announce your goals publicly, so if you don’t end up doing it, you’ll lose respect and reputation. Or, pledge a bigger loss.
For example, Alice Wu was struggling to finish writing the screenplay of her movie “The half of it.” She knew that she needed to write it. But yet she procrastinated. Procrastination provided short term pleasure.
She flipped the switch in her brain by writing a $1000 cheque to a political organization she hated. And asked her friend to mail it in if she didn’t complete the screenplay in 5 weeks. And what do you know? Suddenly her procrastination went on a holiday!
- Our brains are funny. They won’t do what needs to be done. Because there is a fight between short term and long term preferences.
- You can tilt the battle by having skin in the game. By making it so that you lose something precious if you don’t follow through on what needs to be done.