FORTUNE — Of all that Steve Jobs’ achievement has taught us, the importance of courage is especially relevant now.
I don’t mean his courage in facing his health issues, though that will be a story in itself if we ever learn the details.
I mean his extraordinary courage as a business leader. Time and again, as the CEO of Apple (AAPL), he introduced products, services, and entire business models completely unlike anything in existence. He disdained market testing (thus keeping his plans secret), he could not be sure he would succeed, and he risked significant losses and ridicule if he failed.
Yet his batting average was one of the all-time best, and as a CEO, he was the greatest wealth creator ever. No one else comes close. None of it could have happened without off-the-charts courage.
The topic was hot even before the Jobs news because the economic chaos of the past few years has paralyzed managers with fear. They keep seeing events that are supposed to be impossible, such as a U.S. debt downgrade, and the uncertainty of what may happen next leaves them frozen, afraid to do anything.
It’s no coincidence that a business book called Uncertainty: Turning Doubt and Fear Into Fuel for Brilliance will be published next month. A consultant named Bill Treasurer has built his practice on teaching courage to managers (before consulting, he made a living by diving into water from 100 feet while on fire). The Americas Business Council held a Courage Forum last year. Articles and blog posts on the subject seem to be on the upswing.
Nothing suggests the business world is getting any less chaotic. So what does business courage mean right now? A few things.
Committing significant money
The number one way most business leaders respond to uncertainty is by pulling back expenses, sometimes radically. Trouble is, sometimes those expenses are actually investments that will pay off in the future, like R&D, marketing, and plant expansion. Cutting them will result in higher reported profits today but lower profits later.
Pusillanimous managers complain that they’re forced to make these cuts by short-term oriented investors. But research by New York University’s Baruch Lev and others shows that it isn’t so. Investors can tell the difference between spending that builds value and spending that doesn’t.
Brave managers keep making value-creating investments in uncertain times. DuPont (DD) maintained R&D spending even through the Great Depression, inventing nylon, neoprene, and other products that would earn billions for decades thereafter. Warren Buffett’s recent investment in Bank of America (BAC) is a great example of managerial courage. Putting $5 billion of Berkshire Hathaway’s (BRKA) capital into a scorned stock with the economy in peril takes guts. That’s what has made him rich.
Mass firings seem irresistible in uncertain times — after the company takes a charge for severance costs, the savings are immediate. Huge layoffs were everywhere in the last recession, and they’re definitely in fashion again. Look at banking: HSBC (hbc) will lay off 30,000, Bank of America 3,500 to 10,000, UBS (ubs) 3,500, ABN Amro 2,350.
Sometimes layoffs are truly unavoidable. But brave leaders know that the long-term costs of layoffs, and the long-term benefits of keeping employees through tough times, are often far greater than any near-term savings from firing workers.
Here again, managers claim Wall Street forces them to whack expenses through layoffs, and again it isn’t true. Investors might reward a firm for firing people as it combines with a recently bought company, says Bain & Co. research. But if you’re laying off employees strictly as a cost-cutting measure, like many companies today, Wall Street will likely see it as a sign of trouble and send your stock down.
What fearful leaders often do in perilous times is nothing. Worried that any action is risky, they sit still. But they aren’t safe. The winners in uncertain times are the bold, and the losers are often the cautious hedgers.
Maybe you’re committed to continuing to spend on value creating projects, even if reported profits take a hit — that’s great. Or maybe the tough times have awakened you to your company’s insanely bloated spending, and you’re seizing this opportunity to slash costs deeply and rationalize the whole organization — that’s great too. McKinsey research shows that in past recessions, companies that followed either path did best. It was the timid middle — those that cut just enough to get by without forming a larger strategy — that did worst. The lesson: Decide what your business needs now, and be brave enough to go big.
Aristotle called courage the first virtue, and Samuel Johnson called it the greatest. Their reasoning was the same: It makes all the other virtues possible. Courage means taking risks, and that becomes much more difficult when the environment itself becomes dramatically riskier, as it is now. That’s why times like these so violently separate winners from losers.
Taking risks now is frightening. But as Jobs, Buffett, and other business champions keep showing us, it’s your only hope.