In a dysfunctional environment, the absence of pushback is a significant warning sign. Humans are highly adaptive; those who can't tolerate the system leave, while those who remain learn to cope. This creates a dangerous silence, where leaders mistakenly believe everything is fine because no one is complaining.

Work expands to fill time, and organizations expand to fill available work. People instinctively want to hire direct reports to increase their status, creating a supply of labor that then invents low-value tasks to justify its existence, leading to bloat and inefficiency.

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.

Effective delegation of decision-making authority is impossible without first ensuring leaders are deeply aligned on organizational objectives. When individuals are empowered to make choices but pull in different directions, the result is a quagmire, not progress. Alignment must precede autonomy.

A study found that CEOs trained to prioritize shareholder value deliver short-term returns by suppressing employee pay. This practice drives away high-skilled workers and cripples the company's long-term outlook, all without evidence of actually increasing sales, productivity, or investment.

Sludge is profitable in the short term. With CEO tenures shorter than ever and compensation tied to quarterly stock performance, executives are incentivized to cut customer service costs now, even if it harms long-term customer relationships and brand loyalty.

Companies intentionally create friction ("sludge")—like long waits and complex processes—not from incompetence, but to discourage customers from pursuing claims or services they are entitled to. This is the insidious counterpart to behavioral "nudge" theory.

A company’s true values aren't in its mission statement, but in its operational systems. Good intentions are meaningless without supporting structures. What an organization truly values is revealed by its compensation systems, promotion decisions, and which behaviors are publicly celebrated and honored.

Leaders are often insulated from the daily operational friction their teams face. This creates an illusion that tasks are simple, leading to impatience and unrealistic demands. This dynamic drives away competent employees who understand the true complexity, creating a vicious cycle.