Newsletter No. 151

Deep Dives Articles

DEEP DIVES ARTICLE — EMOTIONAL INTELLIGENCE

Emotional Bravery: How Brené Brown’s Wisdom Can Help You Master Emotional Intelligence​

This is a sneak peek of this week’s Deep Dives article — published today! ​Become a Deep Dives Member​ to get access to the full article.

What if the key to becoming a stronger leader, better partner, and more grounded human isn’t found in a boardroom — but in your own emotional courage? In this exclusive Deep Dive, “Emotional Bravery: How Brené Brown’s Wisdom Can Help You Master Emotional Intelligence,” we unpack the most powerful lessons from Brené Brown’s groundbreaking work — and show you how to turn vulnerability into a superpower, shame into resilience, and empathy into influence. Available only to Deep Dives Members. ​Subscribe today to unlock the full article​ — and start leading from the inside out.

---

DEEP DIVES ARTICLE — PERSONAL DEVELOPMENT

Productivity Meets Purpose: Applying Elon Musk’s Efficiency Principles to Personal Growth​

This is a sneak peek of this week’s Deep Dives article — published today! ​Become a Deep Dives Member​ to get access to the full article.

What if you approached your personal growth with the same ruthless efficiency Elon Musk brings to rockets and electric cars?In this exclusive Deep Dive, “Productivity Meets Purpose: Applying Elon Musk’s Efficiency Principles to Personal Growth,” we break down Musk’s exact framework—first principles thinking, bottleneck obsession, time compression, and more — and show you how to apply it to your daily life for exponential progress. Only available to Deep Dives Members. ​Subscribe now to unlock the full article​—and start engineering your evolution with intention and precision.

---

DEEP DIVES ARTICLE — LEADERSHIP

AI-Integrated Leadership: Navigating the Future with Intelligence and Integrity​

This is a sneak peek of this week’s Deep Dives article — published today! ​Become a Deep Dives Member​ to get access to the full article.

AI-Integrated Leadership: Navigating the Future with Intelligence and Integrity AI is reshaping the way we lead — but are you evolving with it, or being left behind? In this forward-looking Deep Dive, we break down what it means to be an AI-integrated leader, why emotional intelligence is more important than ever, and how to lead with clarity in an increasingly automated world. Exclusively for Deep Dives Members. If you want to make smarter decisions, build future-ready teams, and stay ahead of the curve, ​unlock the full article with your Deep Dive membership​.

---

Deep Dives Book Summary

---

Quick Reads

quick read — Emotional intelligence

When Schools Fail Our Children: Why Emotional Intelligence Must Be a Core Requirement for Educators

The other day, I read a story that broke my heart—and lit a fire inside me.

A school had banned a student from attending a field trip. Not because of behavioral issues. Not because of safety concerns. But because the child is autistic.

As the father of an autistic son, I can’t begin to describe the disgust, anger, and sadness I felt. What kind of message does this send to our children? To mine? That they’re too complicated to include? That their differences make them less deserving of experiences every other child gets to enjoy?

What happened wasn’t just a failure in policy. It was a failure of empathy. A failure of leadership. A failure of emotional intelligence.

And it’s time we talk about it.

My Son, My Teacher

Parenting a child with autism is one of the most profound emotional journeys anyone can undertake. My son has taught me more about presence, nuance, patience, and human connection than any book, degree, or job ever has.

He sees the world differently—not incorrectly, just differently. His brilliance doesn’t always fit inside traditional lines. And that’s not a flaw. It’s a gift. But it’s one the world too often overlooks or mishandles simply because it doesn’t take the time to understand.

Early on, I realized that in order to truly connect with him, I couldn’t parent from a place of control. I had to parent from a place of awareness. I had to tune in—not to what I wanted him to say or do—but to what he was saying, with his body language, his silence, his patterns, and yes, even his meltdowns.

What allowed me to do that wasn’t some parenting manual or therapeutic technique. It was emotional intelligence.

What Is Emotional Intelligence—and Why Does It Matter?

Emotional intelligence (EQ) is the ability to recognize, understand, and manage our own emotions, as well as recognize, understand, and influence the emotions of others. It’s empathy, self-awareness, emotional regulation, and social skill—all in one.

In my life as a father, EQ has been the bridge between confusion and connection. It’s what allows me to:

• Pause instead of react when something is hard or unexpected.
• Listen with empathy, even when the message is hard to interpret.
• Regulate my own stress so I can show up calm, grounded, and supportive.
• Speak to his needs, not just his behavior.

These are the same skills I expect from the adults charged with guiding and teaching our children every day.

The Problem in Our Schools

Most educators I’ve met are well-meaning. They care deeply about kids. But the system often sets them up to fail. They’re overwhelmed, under-resourced, and pressured to focus on test scores over human development.

And most of all—they’re under-trained in emotional intelligence.

It’s no wonder, then, that when a student like mine enters the picture—a student who may not fit the mold, who may have sensory needs or communication differences or anxiety in unfamiliar environments—some educators don’t know how to respond. So instead of leaning in, they pull away. Instead of including, they exclude.

But exclusion is not a neutral decision. It is a trauma.

When you tell a child they can’t come on a field trip because they’re autistic, you’re not just denying them a day of fun. You’re telling them: You don’t belong. You’re reinforcing the lie that their challenges make them lesser.

We cannot allow that.

A Call for Emotional Intelligence Training in Education

We need to formally embed emotional intelligence training into the heart of teacher education and professional development.

This isn’t a nice-to-have. It’s a must-have. Here’s what that could look like:

No. 1 — Pre-Service Training

Teacher credential programs must include robust coursework on neurodiversity, trauma-informed education, and EQ. This should be mandatory, not optional. Teaching is emotional labor. We must equip educators accordingly.

No. 2 — Ongoing Professional Development

Workshops on emotional regulation, empathy, communication strategies, and inclusive classroom management must be regular and practical. Let’s stop sending teachers to passive, compliance-based trainings and instead immerse them in real-world scenarios with role-playing, coaching, and feedback.

No. 3 — Emotional Intelligence Benchmarks in Performance Reviews

We measure test scores and lesson plans. Why not EQ? Teachers should be evaluated on their ability to build relationships, respond empathetically, and create safe environments for all learners—not just the neurotypical ones.

No. 4 — Partnerships with Parents

Parents of neurodiverse children are experts in their child’s needs. Schools must create open, non-defensive channels of communication. This means regular check-ins, IEPs with heart—not just compliance—and a willingness to adjust when things aren’t working.

Leading With the Right Heart

Being emotionally intelligent doesn’t mean you’ll always have the right answer. But it does mean you’ll ask the right questions.

It means when a child is overwhelmed, you wonder what they’re experiencing—not just what rule they’re breaking.

It means when a parent expresses frustration, you don’t get defensive. You get curious.

It means when a field trip is being planned, you think: How do we make this inclusive? How can we ensure every child has access—not just the easy ones?

Emotional intelligence is how we turn policy into practice—and practice into compassion.

The Cost of Ignoring This

Make no mistake: failing to train educators in emotional intelligence has a cost. And that cost is borne by our most vulnerable children.

Children who internalize the idea that they’re too much. Or not enough. Or that they’ll never be accepted.

Families who have to fight tooth and nail just for basic dignity and inclusion.

Teachers who burn out because they don’t have the skills or support to navigate complex classroom dynamics.

This is preventable. And it’s fixable. But only if we stop looking the other way.

The Hope I Hold

Despite the heartbreak, I remain hopeful. I’ve seen what’s possible when just one teacher leads with empathy. I’ve seen what happens when a school welcomes my son—not as a problem to solve, but as a person to embrace.

Those moments change everything.

My son isn’t broken. He doesn’t need to be “fixed.” What he needs—and what so many children need—is a world that meets them with understanding, not fear.

It’s time our schools catch up.

It’s time we raise the bar—not just for academics, but for humanity.

Let’s demand emotional intelligence as a requirement, not an afterthought.

Because the measure of a truly great educator isn’t how they treat the easy kids. It’s how they rise to love the ones who stretch them.

And until we build a system that honors all children, we are failing the very mission of education.

Let’s do better.

Our kids deserve nothing less.

---

quick read — Personal development

Embrace Failing Forward: Why Emotional Intelligence Matters More Than Ever in Leadership

In the high-stakes world of leadership, failure is inevitable. But what separates reactive managers from transformational leaders isn’t whether failure happens—it’s how they choose to respond to it. The most forward-thinking organizations aren’t the ones that avoid mistakes at all costs, but the ones that embrace failing forward—treating missteps not as liabilities, but as leverage for growth.

But doing that well requires more than IQ. It demands EQ—emotional intelligence—the ability to reframe, regulate, and respond from a place of wisdom rather than ego. Because sometimes, your team’s most expensive mistake might just be their most valuable moment of transformation.

The Tom Watson Story: A Masterclass in EQ

Let’s start with a true corporate legend.

Years ago, a senior executive at IBM made a business decision that resulted in a $10 million loss. Expecting to be fired, he was called into the office of then-CEO Tom Watson. Instead of the pink slip he was bracing for, Watson said:

“Fire you? I just spent $10 million educating you. Why would I do that?”

That single moment has become a masterclass in what it means to lead with emotional intelligence. Watson understood what so few leaders do: failure, when handled right, creates irreplaceable wisdom. And loyalty.

If he had fired the executive, he would’ve lost not only the money but also the lesson, the trust, and the future potential of someone who now deeply understood the cost of a bad decision. Instead, he chose to fail forward.

The Reframing Shift: From Judgment to Curiosity

At the heart of failing forward lies a powerful mental skill: reframing.

Reframing means choosing a new lens. Instead of “What went wrong?” we ask, “What can we learn?” Instead of “Who’s to blame?” we ask, “Where was the breakdown?” Instead of “This is a disaster,” we ask, “What’s the opportunity in this mess?”

Reframing isn’t about sugarcoating reality. It’s about using emotional intelligence to separate ego from evaluation.

That reframing starts with the leader.

If your gut reaction to failure is to criticize, punish, or cut ties, you’re operating from fear—not strategy. But if you can pause, regulate your response, and engage from a place of calm inquiry, you unlock one of the greatest accelerators of team growth: psychological safety.

Psychological Safety and the Permission to Fail

Psychological safety—the sense that one can take risks or admit mistakes without punishment—is the secret sauce behind the most innovative companies in the world. Google’s landmark Project Aristotle study found that the highest-performing teams weren’t the ones with the most talent or structure—they were the ones where people felt safe enough to speak up, own mistakes, and try again.

That doesn’t mean we excuse recklessness or lack of accountability. But it does mean that our first instinct shouldn’t be the axe. It should be the mirror and the microscope.

• What processes failed?
• What assumptions went untested?
• Where was the breakdown in communication?
• How can we prevent this next time?

Every failure has roots. Emotionally intelligent leaders know that surface reactions don’t solve anything—deep analysis and compassion do.

EQ > IQ in Crisis Moments

Let’s break down exactly what EQ looks like in the context of leadership failure moments:

No. 1 — Self-awareness

Can you recognize your own emotional reaction (anger, fear, embarrassment) and separate it from the situation?

No. 2 — Self-regulation

Can you manage that reaction so it doesn’t cloud your judgment or hijack the conversation?

No. 3 — Empathy

Can you step into the shoes of your team member, see their intent, and understand their experience—even if the outcome was bad?

No. 4 — Social skill

Can you navigate the conversation in a way that preserves dignity, draws out learning, and rebuilds trust?

These four pillars of EQ aren’t soft skills. They’re strategic advantages. Especially in a world where team performance, retention, and innovation hinge on how safe and supported people feel under pressure.

Real-Life: Spanx, Airbnb, and the Mistake That Made the Company

Sara Blakely, founder of Spanx, famously said that at her dinner table growing up, her father would ask: “What did you fail at this week?” If she had nothing to report, he’d be disappointed.

He taught her that failure wasn’t shameful—it was proof that she was trying something new.

That mindset led her to build a billion-dollar company. Not by getting everything right, but by getting enough things wrong that she could finally figure out what worked.

Airbnb’s early days are another case in point. Co-founders Brian Chesky and Joe Gebbia had countless failed attempts at monetizing their “air bed and breakfast” concept. They racked up debt, launched awkward cereal box marketing campaigns, and heard a thousand no’s. But they treated each failure as data. And they kept going.

Today, Airbnb is worth over $100 billion.

These leaders didn’t avoid failure. They leaned into it—and reframed it as feedback.

What It Looks Like to Lead Through Failure

Let’s ground this in reality. Say a senior team member makes a costly mistake—maybe it’s a pricing error that results in lost revenue, or a miscommunication that leads to a client walking.

You have two paths:

Option A: The Ego Route

• React with blame or anger.
• Use the mistake as justification to remove them.
• Signal to the team that perfection is expected and failure is punishable.

Option B: The EQ Route

• Acknowledge the mistake clearly and directly.
• Ask open questions: “Walk me through your thought process.” “Where did things break down?”
• Extract the learnings, adjust the systems, and coach through the moment.

Here’s the punchline: Option B almost always leads to better long-term performance.

Why? Because people who feel trusted after a mistake tend to become fanatically loyal. They work harder. They grow faster. They become the culture carriers you never knew you needed.

When It Is Time to Fire

Let’s be clear: failing forward doesn’t mean tolerating repeated incompetence, lack of accountability, or toxic behavior.

But it does mean that a single honest mistake—especially one followed by accountability and remorse—should not be a career death sentence.

Fire someone if they don’t take responsibility. Fire them if they make the same error five times. Fire them if they erode the culture. But don’t fire them just because they failed once.

Fire someone for the right reasons, not to soothe your frustration.

The Cost of EQ? Patience. The ROI? Loyalty.

Failing forward is not the fastest path. It takes patience, reflection, and a willingness to sit in the discomfort of uncertainty. But the return is exponential.

It builds a team that thinks, that grows, and that stays.

It signals to everyone watching that your leadership isn’t about punishing failure—it’s about using it to build something stronger.

Failing Forward Is a Choice

You don’t control the mistake. But you do control the moment that follows.

Will you use it to teach, build, and inspire? Or to judge, react, and retreat?

Embrace failing forward—not because you want failure, but because you want resilience.

Because when you lead with emotional intelligence, failure stops being something to fear… and starts becoming your most powerful tool for transformation.

---

quick read — LEADERSHIP

Bullets, Not Cannons: Why Testing Small Beats Going Big (Too Soon)

There’s an old military adage that’s surprisingly relevant to modern business strategy: “Fire bullets, then cannonballs.” In other words, don’t blow your entire arsenal on an untested aim. First, shoot small—see where it lands. Adjust. Recalibrate. Then, when you know you’ve got a lock on the target, unleash your big guns.

This concept, made popular by Jim Collins in Great by Choice, has become a guiding principle for companies who want to innovate without imploding. In today’s fast-paced world of tech launches, rebrands, product rollouts, and operational changes, the difference between a strategic test and a full-blown disaster often comes down to one simple choice: bullets or cannons.

The Case for Bullets

Let’s start with the obvious: bullets are small, cheap, and low-risk. They’re experiments. Trials. Prototypes. They allow you to test your assumptions in the real world without betting the farm.

Cannons, on the other hand, are big, expensive, and irreversible once fired. They’re full-scale launches, sweeping redesigns, complete overhauls. And if you’re even a few degrees off in your aim, you don’t just miss the target—you blow a hole in your own ship.

In business, we often confuse urgency with scale. We feel pressure to act quickly, decisively, and boldly. But speed and smart sequencing aren’t mutually exclusive. In fact, some of the most effective companies are the ones who bake experimentation into everything they do—from product development to marketing, from web design to internal operations.

Sandboxes and Simulations: The Bullet-Firing Range

A powerful way to test your bullets is in a sandbox environment—a controlled space where you can simulate real-world conditions without real-world consequences.

Think of a sandbox like a dress rehearsal. Whether you’re about to launch new booking software, roll out a guest communication system, or overhaul a pricing structure, you don’t throw it live on day one. You stage it. You break it on purpose. You invite friendly fire. And you do it all in an environment where mistakes are data points, not disasters.

For example, in the hospitality industry, launching a new property management system (PMS) without simulations is asking for chaos. Guest data could disappear, bookings might double up, housekeeping schedules could collapse. But a sandbox version of the PMS lets you test every process—from check-in workflows to refund protocols—before a single guest sees the interface.

The same goes for web design.

One Variable at a Time: The Scientific Method of UX

Ever launched a new website, only to find that engagement drops, bounce rates spike, and no one knows why? One of the cardinal sins of web design is changing multiple things at once.

Maybe you update the layout, tweak the call-to-action copy, and introduce a pop-up form—all in one go. And suddenly your conversion rate plummets. But now you’re stuck asking: Was it the new layout? The copy? The pop-up? You don’t know, because you fired three bullets at once—and can’t tell which one missed (or hit).

This is why great UX teams operate like scientists. They isolate variables. A/B testing becomes their weapon of choice—changing one thing at a time and watching how users respond. Maybe they change the headline on a landing page, or the color of a button. Then they measure. Learn. Iterate.

This practice isn’t about being cautious—it’s about being smart. Without isolating variables, you’re flying blind. With them, you gain clarity and control.

Business Models That Embrace Bullet-Firing

Let’s explore a few frameworks and models where the “bullets before cannonballs” approach is embedded into the DNA of execution:

No. 1 — Lean Startup Methodology

Eric Ries’s Lean Startup methodology is the ultimate bullet-firing playbook. It emphasizes:

• Build-Measure-Learn loops: Start with a minimum viable product (MVP)—a bare-bones version of your idea.
• Continuous iteration: Each version incorporates learnings from the last.
• Validated learning: Use customer feedback to adjust course, rather than assumptions.

Dropbox famously began as a bullet—a short demo video. Before writing a line of code, they gauged user interest and feedback through that video. Once they saw strong demand, then they built the product.

No. 2 — Agile Development

Agile software development breaks big projects into small, manageable sprints. Instead of shipping a massive, monolithic app, teams release small features incrementally.

Each sprint is a bullet. It allows developers to gather user feedback early, fix bugs fast, and pivot before the cannonball goes live.

Agile isn’t just for tech teams anymore. Operations, marketing, even HR are adopting agile principles to stay nimble and responsive.

No. 3 — Design Thinking

In design thinking, prototyping is the bullet stage. You build low-fidelity versions of a product or service and test it with real users. What works? What confuses them? What needs to change?

IDEO, the global design firm, often builds scrappy cardboard prototypes or paper wireframes to simulate a user experience. It’s not about polish—it’s about proof of concept. Only once a solution passes the prototype test do they scale up.

No. 4 — Amazon’s “Two-Way Door” Decision-Making

Amazon famously classifies decisions into two types:

• Type 1 — One-way doors. Irreversible. Require heavy deliberation.
• Type 2 — Two-way doors. Reversible. Can be tested and rolled back easily.

Type 2 decisions are bullets. Amazon encourages teams to move fast on them—test, learn, pivot. This keeps innovation flowing without paralyzing the company with risk aversion.

Real-World Failures (Cannonballs Gone Wrong)

We don’t need to look far for examples of what happens when companies skip the bullet stage:

• Healthcare.gov launched in 2013 without adequate testing. The site crashed immediately, with over 6 million people unable to sign up. The fix? A months-long, bullet-by-bullet rebuild.
• New Coke (1985) was a sweeping rollout of a new formula based on flawed taste tests. Coca-Cola ignored other variables like brand loyalty and emotional connection. Consumer backlash was swift and brutal, and they had to reverse course within months.

These weren’t failed products—they were failed processes. Skipping the sandbox. Firing the cannon first.

Don’t Just Test —Track

Testing without tracking is like throwing darts blindfolded. Whether you’re working in a sandbox or A/B testing a new landing page, the only way to know what’s working is with clear, intentional metrics.

Track outcomes, not opinions. Track what guests do, not just what they say. Set benchmarks. Capture screenshots. Record Loom walkthroughs. Make documentation part of your testing rhythm so you don’t just avoid disaster—you actually build a repeatable process for success.

Wrap-Up: Fire Smart

In any business—whether you’re launching new software, updating a website, or introducing a new guest experience—the temptation to fire the cannon is real. It feels bold. Decisive. Impressive.

But smart leaders know that precision beats bravado. Bullets give you intel. Bullets give you control. Bullets help you turn learning into leverage.

Then, when you finally light the fuse on that cannonball—you’ll know it’s going to land exactly where it’s supposed to.

---

Quotes of the Week

QUOTE — EMOTIONAL INTELLIGENCE

---

QUOTE — PERSONAL DEVELOPMENT

---

QUOTE — LEADERSHIP

---

Reframe

Why EBITDA Is Overrated—And Free Cash Flow Is the Metric That Really Matter

For decades, EBITDA—Earnings Before Interest, Taxes, Depreciation, and Amortization—has been treated as a sacred metric in business valuation and performance tracking. It’s concise, clean, and easy to compare across companies. But here’s the hard truth: EBITDA is not the most important number in your business. Free Cash Flow (FCF) is.

As Warren Buffett famously said:

“Does management think the tooth fairy pays for capital expenditures?”

And his longtime business partner Charlie Munger added:

“I think that, every time you see the word EBITDA, you should substitute the word ‘bullshit’ earnings.”

Their criticism isn’t just rhetorical flair—it’s grounded in decades of real-world investing and business wisdom. EBITDA may be useful as a starting point, but it’s dangerously misleading if used as a proxy for actual performance or value. Leaders and operators must learn to reframe their thinking around Free Cash Flow, the ultimate measure of a business’s health, resilience, and investability.

What Is EBITDA—and Why Do People Use It?

EBITDA is a financial metric that attempts to show a company’s operating performance without the “distractions” of financing structure, tax strategy, and non-cash accounting charges.

In simple terms: EBITDA = Revenue – Operating Expenses (excluding interest, taxes, depreciation, and amortization)

It was originally popularized in the 1980s during the leveraged buyout (LBO) craze. Investors needed a quick way to assess how much cash a company could generate to service debt, so they removed all the “noise.” Since then, EBITDA has become a staple in pitch decks, investor reports, and executive dashboards.

The problem? It’s a financial illusion.

The Pitfalls of EBITDA

No. 1 — Ignores Capital Expenditures

EBITDA treats maintenance and growth investments—often in the form of capital expenditures—as if they don’t exist. But in the real world, businesses require ongoing investments in equipment, technology, infrastructure, and repairs just to stay competitive.

No. 2 — Disregards Working Capital Needs

EBITDA doesn’t account for changes in working capital—such as inventory buildup, delayed receivables, or upfront cash commitments. A company can show strong EBITDA while being starved of cash.

No. 3 — Masks Debt and Financing Risk

Because interest is stripped out, EBITDA ignores the reality of a business’s capital structure. Two companies with identical EBITDA can have wildly different risk profiles depending on their debt levels.

No. 4 — Enables Bad Decision-Making

Focusing on EBITDA can encourage management to underinvest in long-term assets (to artificially inflate short-term profitability) or take on dangerous levels of leverage, assuming cash flow will be there to cover it later.

No. 5 — Provides No Real Insight Into Liquidity

EBITDA tells you nothing about whether a company can pay its bills, invest in growth, or survive a downturn. It’s a “paper number” not a “bank account number.”

Why Free Cash Flow Is King

Free Cash Flow (FCF) is the cash a business generates after accounting for operating expenses and necessary capital expenditures. It’s what’s left over to pay dividends, reduce debt, reinvest in the company, or build cash reserves.

In formula terms:

Free Cash Flow = Operating Cash Flow – Capital Expenditures

Unlike EBITDA, free cash flow reflects the actual economic reality of the business.

It answers questions like:

• Can we fund growth from operations?
• Do we need external financing to survive?
• Are we truly profitable or just paper-profitable?
• Is this business compounding value over time?

Buffett has repeatedly emphasized the importance of owner earnings—a concept closely aligned with free cash flow—stating that it’s the best measure of a company’s ability to deliver value to shareholders.

Reframing Leadership Thinking: The Case for FCF-Focused Strategy

EBITDA may make your business look good on paper. Free Cash Flow makes it healthy in reality.

Here’s how leaders must begin to reframe their strategy:

No. 1 — From Vanity Metrics to Viability Metrics

EBITDA can be manipulated. FCF is harder to fake. Leaders must resist the urge to chase inflated EBITDA numbers to satisfy short-term investor expectations. Instead, they should zero in on FCF as the ultimate litmus test for business sustainability.

No. 2 — Capital Allocation Discipline

Great leaders understand that every dollar of FCF is a decision point. Reinvest it? Return it to shareholders? Pay down debt? Hoard it for optionality? Free cash flow discipline creates clarity in capital allocation.

No. 3 — Growth That Pays for Itself

Chasing revenue at the expense of profitability is a fool’s game. Growth that doesn’t generate free cash flow is fragile. Leaders should aim for FCF-positive growth, where the business funds its own expansion without relying on outside capital.

No. 4 — Resilience in Downturns

In economic uncertainty, EBITDA offers false comfort. FCF, on the other hand, determines survival. Companies with strong FCF weather storms. Companies without it, regardless of their paper profits, struggle or fail.

No. 5 — Incentive Alignment

Many executive compensation packages are tied to EBITDA targets. This creates misaligned incentives, rewarding decisions that look good short-term but harm long-term value. Aligning incentives to FCF—or FCF per share—keeps management focused on real value creation.

Real-World Examples: FCF Wins, EBITDA Fails

No. 1 — WeWork (Pre-IPO)

WeWork was once hailed as a tech unicorn based on massive revenue and strong EBITDA-adjusted metrics (conveniently redefined by their own standards). But when capital markets turned, the absence of free cash flow revealed a business burning cash at an unsustainable rate.

No. 2 — Amazon

For years, Amazon was dismissed by traditional analysts because of its slim margins and lack of “profit.” But Jeff Bezos focused relentlessly on free cash flow, knowing that cash—not accounting profits—was the fuel for innovation, scale, and market dominance.

No. 3 — Private Equity Discipline

Top-tier private equity firms use FCF as a gating metric. They understand that value is created not just in financial engineering, but in generating cash that can be reinvested or returned. It’s why firms like Berkshire Hathaway focus on FCF-rich businesses like See’s Candies and Apple.

What Business Leaders Should Do Differently

If you’re an operator, investor, or executive, here’s what to shift:

• Educate Your Team. Ensure your finance, ops, and product teams understand the difference between EBITDA and FCF. Make it part of the internal vocabulary.
• Report Both—but Prioritize FCF. Show EBITDA if required, but spotlight FCF as the north star in board reports, investor calls, and internal dashboards.
• Align Incentives. Tie bonuses and executive comp to improvements in FCF, not just top-line growth or EBITDA margins.
• Use FCF for Decision-Making. Let free cash flow guide investment decisions, hiring, expansion, and pricing strategies.
• Forecast Cash, Not Just Profit. Build cash flow forecasts alongside traditional P&Ls. Understand your runway and plan for multiple scenarios.

Real Businesses Run on Real Cash

Warren Buffett put it best when he said:

“The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.”

Free Cash Flow is that simple behavior. It’s not sexy. It’s not inflated. It’s not easy to manipulate. But it’s real.

So the next time someone throws out their sky-high EBITDA number, ask them one question: “How much of that hits the bank account?”

Because in the end, it’s not about the number on the slide—it’s about the cash in the business. And that’s the difference between companies that look good and companies that last.