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This is a critical piece of information for the exponential entrepreneur. Starting any business is hard. Starting a business with the intention of disrupting an industry—now, that's downright terrifying. But Locke and Latham's work shows that there's hidden leverage available. Because the practice focuses attention and increases motivation, by setting big goals, we're actually helping ourselves achieve those big goals.

Yet for these high, hard goals to really work their magic, Locke and Latham found that certain moderators—the word psychologists use to describe “if-then” conditions—need to be in place. One of the most important is commitment. “You have to believe in what you're doing,” continues Latham. “Big goals work best when there's an alignment between an individual's values and the desired outcome of the goal. When everything lines up, we're totally committed—meaning we're paying even more attention, are even more resilient, and are way more productive as a result.”

This is another key point. When Kelly Johnson created the original skunk works, the goal wasn't to build a new plane in record time—that was just one of many things that happened on the way to the main big goal: saving the world from Nazi peril. This is the kind of big goal everyone can get behind. It's why the engineers agreed to work horrific hours in a foul-smelling circus tent. And most importantly, because this alignment between core values and desired outcomes jacked up performance and productivity, it became one of the fundamental reasons that plane was delivered in record time.

At the Lockheed skunk works, Kelly Johnson ran a tight ship. He loved efficiency. He had a motto—“be quick, be quiet, and be on time”—and a set of rules.
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And while we are parsing the deep secrets of skunk, it's to “Kelly's rules” we must now turn.

Wall the skunk works off from the rest of the corporate bureaucracy—that's what you learn if you boil Johnson's rules down to their essence. Out of his fourteen rules, four pertain solely to military projects and can thus be excluded from this discussion. Three are ways to increase rapid iteration (a topic we'll come back to in a moment), but the remaining seven are all ways to enforce isolation. Rule 3, for example: “The number of people with any connection to the project should be restricted in an almost vicious manner.” Rule 13 is more of the same: “Access by outsiders to the project and its personnel must be strictly controlled by appropriate security measures.” Isolation, then, according to Johnson, is the most important key to success in a skunk works.

The reasoning here is twofold. There's the obvious need for military secrecy, but more important is the fact that isolation stimulates risk taking, encouraging ideas weird and wild and acting as a counterforce to organizational inertia. Organizational inertia is the notion that once any company achieves success, its desire to develop and champion radical new technologies and directions is often tempered by the much stronger desire not to disrupt existing markets and lose their paychecks. Organizational inertia is fear of failure writ large, the reason Kodak didn't recognize the brilliance of the digital camera, IBM initially dismissed the personal computer, and America Online (AOL) is, well, barely online.

But what is true for a corporation is also true for the entrepreneur. Just as the successful skunk works isolates the innovation team from the greater organization, successful entrepreneurs need a buffer between themselves and the rest of society. As Burt Rutan, winner of the Ansari XPRIZE, once taught me: “The day before something is truly a breakthrough, it's a crazy idea.” Trying out crazy ideas means bucking expert opinion and taking big risks. It means not being afraid to fail. Because you will fail. The road to bold is paved with failure, and this means having a strategy in place to handle risk and learn from mistakes is critical.

In a talk given at re:Invent 2012, Amazon CEO Jeff Bezos
⁷
explains it like this: “Many people misperceive what good entrepreneurs do.
Good entrepreneurs don't like risk. They seek to reduce risk. Starting a company is already risky . . . [so] you systematically eliminate risk in those early days.”

This is exactly where Kelly Johnson's final three rules come into play.

All three of these rules are ways to increase rapid iteration—which is one of the best risk-mitigation strategies ever developed. If you're looking for a quick and dirty definition of the term, try the unofficial motto of Silicon Valley: “Fail early, fail often, fail forward.”
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Bold ventures—especially the world-changing type we're advocating here—require this kind of experimental approach. Yet as most experiments fail, real progress requires trying out tons of ideas, decreasing the lag time between trials, and increasing the knowledge gained from results. This is rapid iteration.

Take software design. The traditional methodology involved creating a product in secret, usually over a number of years, then bomb-dropping it on the public with one massive launch. Unfortunately, in a world of increasingly rapid change, spending a few years separated from one's customers can mean bankruptcy.

Enter agile design, an ideology that emphasizes fast feedback loops.
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Instead of launching a finely polished gem, companies now release a “minimum viable product,” then get immediate feedback from customers, incorporate that feedback into the next iteration, release a slightly upgraded version, and repeat. Instead of design cycles that last years, the agile process takes weeks and produces results directly in line with consumer expectations. This is rapid iteration.

“We saw this with Gmail,” says Salim Ismail.
¹⁰
“Instead of sending designers off to spend years coming up with the best twenty-five features anyone would ever want in an email program, Google released a version with around three features and asked their customers what else they wanted the program to do. It was very fast feedback and completely iterative. That's why LinkedIn founder Reid Hoffman famously said, ‘If you're not embarrassed by the first version of your product,
you've launched too late.' ”

Up to now, our exploration of skunk has focused on big goals, isolation, and rapid iteration as strategies for tuning psychology and increasing productivity. This section will do more of the same, only instead of examining these strategies in isolation, we'll blend them together, exploring the additional and significant psychological boost that comes from employing these ideas in aggregate.

To understand this boost requires dipping back into the science of motivation. For most of the last century, that science focused on extrinsic rewards—that is, external motivators, “if-then” conditions of the “do this to get that” variety. With extrinsic rewards, we incentivize the behavior we want more of and punish the behavior we dislike. In business, for example, when we want to drive performance, we offer classic extrinsic rewards: bonuses (money) and promotions (money and prestige).

Unfortunately, an ever-growing pile of research shows that extrinsic rewards do not work like most suppose. Take money. When it comes to increasing motivation, cash is king only under very specific conditions. For very basic tasks that don't require any cognitive skill, money can effectively influence behavior. If I'm nailing together boards for five dollars an hour, offering me ten will increase the rate at which I nail. But once tasks become slightly more complex—such as shaping those nailed boards into a house—once they require even the slightest bit of conceptual ability, money actually has the exact opposite effect: It lowers motivation, hinders creativity, and decreases performance.
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What's more, this isn't the only issue with money as a motivator. Money, it now appears, is only an effective motivator until our basic biological needs are met, with a little left over for discretionary spending. This is why, in America, as the Nobel laureate Daniel Kahneman recently discovered, when you plot happiness and life satisfaction alongside income, they overlap until $70,000—i.e., the point at which money stops being a major
issue—then wildly diverge.
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Once we pay people enough so that meeting basic needs is no longer a constant cause for concern, extrinsic rewards lose their effectiveness, while intrinsic rewards—meaning internal, emotional satisfactions—become far more critical.

Three in particular stand out: autonomy, mastery, and purpose.

Autonomy is the desire to steer our own ship. Mastery is the desire to steer it well. And purpose is the need for the journey to mean something. These three intrinsic rewards are the very motivators that motivate us most. In his book
Drive
,
¹³
author Daniel Pink explains it like this:

The science shows that . . . typical twentieth-century carrot-and-stick motivators—things we consider somehow a “natural” part of human enterprise—can sometimes work. But they're effective in only a surprisingly narrow band of circumstances. The science shows that “if-then” rewards . . . are not only ineffective in many situations, but can also crush the high-level, creative, conceptual abilities that are central to current and future economic and social progress. The science shows that the secret to high performance isn't our biological drive (our survival needs) or our reward-and-punishment drive, but our
third drive
—our deep-seated desire to direct our own lives, to extend and expand our abilities, and to fill our life with purpose.

To take on the bold, we need this third drive. Leveraging exponential technology to tackle big goals and using rapid iteration and fast feedback to accelerate progress toward those goals is about innovation at warp speed. But if entrepreneurs can't upgrade their psychology to keep pace with this technology, then they have little chance of winning this race.

And this is another secret to skunk—it provides the full upgrade. Combine the rules for isolation and rapid iteration discussed in this section with the value-aligned big goals from the last and you end up with a great recipe for autonomy, mastery, and purpose. Walling off the innovation team creates an environment where people are free to follow their own curiosity—it amplifies autonomy. Rapid iteration
means accelerated learning cycles, which means putting people on the path to mastery. And aligning big goals with individual values creates true purpose.

Most importantly, you don't need to be running a skunk works to take advantage of these intrinsic motivators. Google taps “autonomy” on a company-wide basis with their 20 percent time—engineers are encouraged to devote 20 percent of their time to projects of their own design—and the resulting boost in motivation explains why Googlers often joke that “20 percent time should really be called ‘120 percent time.' ”
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Tony Hseih, CEO of Zappos, helped disrupt the retail space by emphasizing mastery, making the “pursuit of growth and learning” central to his corporate philosophy and famously saying: “Failure isn't a badge of shame. It is a rite of passage.”
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And Toms Shoes CEO Blake Mycoskie harnessed the power of purpose by deciding to give away one pair of shoes to a child in the developing world for every pair sold.

With this kind of psychological core, it's no surprise that Google, Zappos, and Toms all became industry leaders in record time. Creating a company with autonomy, mastery, and purpose as key values means creating a company built for speed. And this is no longer optional. In a world of increasing rapid change, tapping our third drive is an absolute fundamental for any exponential entrepreneur. Yet, unlike big companies, which often have to go skunk to tap this drive, bold entrepreneurs can get ahead of the game, baking autonomy, mastery, and purpose into their corporate culture from the get-go, rather than bolting them on later.

Astro Teller is tall and lean, with a thick goatee, rimless glasses and long hair, usually tied back in a ponytail. He's the grandson of two different Nobel laureates, including Edward Teller, the father of the atomic bomb. He's also the kind of
guy who wears T-shirts. Usually the shirts say something pertinent yet ironic. A few years back, for example, when he gave a talk about the importance of innovation to a group of eighty Fortune 200 executives at Singularity University, he was wearing a T-shirt that read: “Safety Third.”

Teller heads GoogleX, the Internet giant's skunk works, though his technical title is Captain of Moonshots. The title comes from a conversation he had with CEO Larry Page not long after he was hired. “In the early days,” explains Teller,
¹⁶
“Larry and Sergey's interests guided GoogleX. But when I joined, they decided they wanted more definition behind the lab's purpose. I asked Larry if he wanted me to build a research center.”

“No,” replied Page, “too boring.”

“How about an innovation incubator?”

“Boring too.”

So Teller thought for a while and finally asked, “So, are we taking moonshots?”

“That's it,” answered Page, “that's exactly what we're doing.”

And that is exactly what they're doing. Over the past few years, Google has repeatedly made headlines with the audacity of their moonshots, dedicating their skunk works to everything from space exploration and life extension to AI and robotics. In other words, as of right now, there is perhaps no other company in the world playing the skunk game at such an elevated level.

Over the next few pages, we're going to examine exactly how Google takes moonshots, giving you an inside look at their skunk methodology and paying attention to which of Kelly Johnson's initial ideas they've kept, which they've changed, and—from a psychological perspective—why.

Let's start with what they've kept the same.