Rewarding Ethical Behavior, Not Just Results

The Learning Leader Show with Ryan Hawk

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My guest: Tom Hardin was known as "Tipper X" during Operation Perfect Hedge, the largest insider trading investigation in history. After making four illegal trades based on inside information, the FBI approached him on a Manhattan street corner and convinced him to wear a wire over 40 times, helping build 20 of the 81 cases.

Ambiguity is where ethical lines blur. Tom's boss said, "Do whatever it takes," after the hedge fund lost money, and as a junior employee, Tom didn't ask clarifying questions.

The undiscussable becomes undiscussable. Leaders give ambiguous messages, then pretend they weren't ambiguous, employees get confused and don't question the boss, and you end up with a culture of silence.

Making decisions in isolation is dangerous. The information came to Tom and he didn't talk to his boss or his wife (who probably would've slapped him around for crossing ethical lines).

Psychological safety requires muscle memory. You have to practice saying "I'm just going to ask some clarifying questions here" when your boss gives ambiguous orders.

Bad decisions aren't mistakes. Mistakes are made without intent, but bad decisions are made with intent. Tom told himself for years he made "mistakes," but on a drive home from speaking at a keynote, he realized: "There's no way I made mistakes. I made bad decisions."

Never say never. Tom argues you're more susceptible to falling down your own slippery slope when you think "that would never be me."

80% of employees can be swayed either way. 10% are morally incorruptible, 10% are a compliance nightmare, and 80% can be influenced by the culture around them.

Tone at the top means nothing. Company culture isn't the tone at the top or glossy shareholder letters; it's the behaviors employees believe will be rewarded or put them ahead.

Reward character, not just results. You can't just focus on short-term performance and dollar goals without understanding how the business was made and what was behind the performance.

The question isn't "what?" but "how?" If you're just focused on the numbers and not on how you got there, you have the opportunity to end up in a slippery slope situation.

Celebrate people who live your values. Companies that spend millions on trips for people who live out shared values (not financial performance) are putting their money where their mouth is.

Leaders must share their own ethical dilemmas. We've all been in situations where we could go left or right, and sharing how you worked through those moments makes you more endearing and a better leader.

Keep a rationalization journal. When Tom and his wife have big decisions (or even little things), he writes them down in a rationalization journal and reflects on them once a month. He's still susceptible to going down another slippery slope, so checking himself on those passing thoughts improves his character over time.

It's not what you say, it's what you do. Just like kids see what parents do (not what they say), employees see what behaviors leaders actually reward.

$46,000 cost him $23 million. A business school professor calculated Tom would've made $23 million if he'd stayed on the hedge fund path, but he made $46,000 on the four illegal trades before getting caught.

His wife was his rock. 85% of marriages end when something like this happens, and she had every right to leave. They just got married, no kids yet. But she stayed. When Tom interviewed her for the book 20 years later, she said, "All I remember is you accepted responsibility immediately. You didn't make up excuses."

Running pulled him out of a shame spiral. Tom got obese as a stay-at-home dad. His wife signed him up for a 5K race (and beat him while pushing a jogging stroller). Just crossing that finish line lit a fire. He ended up running a 100-mile race.

Doing hard things teaches you that you can do hard things. When Tom had to start a speaking business because they were running out of money, he said, "I can do this" because he'd already put his body through ultramarathons. No challenge is insurmountable.

He ended up with something better. It's not about status or money anymore; it's about who he is with his family and his relationships now.

Windshield mentality, not rearview mirror. Tom can't change the past, but he can look forward instead of backward. A lot of people in their twenties do stupid stuff (maybe not to this degree), but now, in his forties, he can learn from it. Why not embrace it rather than try to scrub it off the internet?

Eulogy virtues versus resume virtues. In his twenties, Tom only thought about resume virtues (how much money, the next job, the next stepping stone) and never about eulogy virtues (what people will say about his character when it's all over).

What will people say at your eulogy? Will they still be talking about those four trades, or will they talk about who you became after?

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#637 - Tom Ryan: Chosen Suffering: Become Elite in Life & Leadership

Reflection Questions

1. Tom's boss gave him an ambiguous message ("do whatever it takes"), and as a junior employee, he didn't ask clarifying questions. Think about the last ambiguous instruction you received from leadership. Did you ask clarifying questions, or did you fill in the blanks yourself? What's stopping you from creating psychological safety to ask next time?
2. Tom argues that 80% of employees can be swayed either way by culture. Look at your organization right now. What behaviors are actually being rewarded? If someone asked your team "what gets you ahead here?" what would they honestly say?
3. Tom asks: "Will people be talking about the resume virtues (money, titles, achievements) or the eulogy virtues (character, relationships, who you were) when you're gone?" What's one eulogy virtue you need to start prioritizing today, even if it means slowing down on resume building?