Most corporate values statements (e.g., "integrity") are unactionable and don't change internal culture. Effective leaders codify specific, observable behaviors—the "how" of working together. This makes unspoken expectations explicit and creates a clear standard for accountability that a vague value never could.

Drawing on Charlie Munger's wisdom, investment management problems often stem from misaligned incentives. Instead of trying to change people's actions directly, leaders should redesign the incentive structure. Rational individuals will naturally align their behavior with well-constructed incentives that drive desired client outcomes.

Courage cannot be demanded or simply listed as a corporate value. A leader's key role is to be a 'context architect,' creating the organizational conditions for brave behavior. This includes allowing for failure, resourcing experimentation, and embodying courage personally, thereby enabling the entire organization to act bravely.

Traditional accountability is often a fear-based tactic that backfires by killing creativity. The leader's role is not to be an enforcer, but a facilitator who builds a system where people willingly hold themselves accountable to meaningful, shared goals.

Focusing on "bad to great" is more effective than "good to great" when scaling. Bad behaviors and destructive norms are so corrosive that they make it impossible for excellence to take root. A leader's first job in a turnaround or scaling effort is to eliminate the bad—like dirty bathrooms or incompetent employees—before trying to implement the good.

A kind culture must be actively protected. How a company handles high-performing but unkind employees reveals its true values. Prioritizing cultural integrity by addressing or removing these individuals sends a powerful signal that kindness is non-negotiable, even at a potential short-term cost.

Honesty alone is insufficient for leadership because day-to-day realities can be volatile. Effective leaders provide stability by being consistently honest. This creates a predictable environment, manages expectations, and allows team members to know exactly what they are signing up for.

A company's culture isn't its mission statement; it's the worst behavior it's willing to accept. High-integrity employees will leave a toxic environment, while transactional, self-serving employees who tolerate anything for a paycheck will stay. This selection process causes a continuous erosion of culture.

Allowing a high-performing but toxic employee to thrive sends a clear message: results matter more than people. A leader's true impact and the company's real culture are defined not by stated principles, but by the worst behavior they are willing to accept.