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Power Sheet – May 11, 2016

This newsletter is called Power Sheet, and this morning’s news invites us to ponder the sources and uses of power.

-Who’s got more power at this moment, Donald Trump or Paul Ryan? To put it another way, which one needs the other one more? We’re watching a fascinating exercise in the use of power, which will continue tomorrow morning when the two men meet in Washington. It began last week when Ryan said he wasn’t ready to support Trump – a startling event considering that Ryan had previously pledged to support the eventual Republican nominee, whoever he was. He didn’t violate his pledge, since Trump isn’t yet the nominee, but he rocked Trump back on his heels, effectively reminding him that Ryan’s support would be extremely valuable. Trump’s response, that he wasn’t ready to accept Ryan’s views, sounded like a childish playground taunt. When Trump later tried to establish dominance by saying he might replace Ryan as convention chairman, Ryan immediately called his bluff and showed his self-confidence by saying he would certainly step down from the post if Trump asked him to.

The most likely political reality is that Trump badly needs Ryan’s endorsement in order to gain stature with conservatives, whose support he must have and mostly doesn’t have. Ryan, by contrast, doesn’t need and probably doesn’t want Trump’s support in boosting Republican candidates for the House. That is, Trump needs Ryan more than Ryan needs Trump. Just as significant, that’s the way it looks to outsiders, if only because Ryan has played his hand better. And as Henry Kissinger wrote, “In Washington…the appearance of power is therefore almost as important as the reality of it. In fact, the appearance is frequently its essential reality.”

-Following up on Monday’s newsletter: Rodrigo Duterte won the presidency of the Philippines, as expected. True to form, he promised in his first post-victory speech, “I will be a dictator, no doubt about it. But only against forces of evil — criminality, drugs, and corruption in government.” He exercised extreme power as mayor of Davao, much of it entirely outside the law as he allegedly ordered death squads to kill hundreds of suspected criminals – allegations he doesn’t exactly deny. He campaigned on promises to do the same at the national level.

-On a much happier note, I’m delighted to recommend a new book about the effectiveness of power that doesn’t seem to be power at all. David Novak was CEO of Yum! Brands – Pizza Hut, Taco Bell, KFC – from 1999 to 2015, and he was stunningly successful. In a period when the S&P increased 61%, Yum stock delivered 637%. Novak has been emphatic from day one about his secret: It’s the power of recognition. I doubt there has ever been a company that recognizes people for excellent performance as freely and as effectively as Yum under Novak. The first thing you noticed when you walked into his office in Louisville, Kentucky, is that there were no pictures of him with politicians and movie stars. Every square inch of the walls, and the ceiling, was covered with photos of him giving awards to employees around the world.

I’ve seen him do it, walking into a workspace unannounced, calling someone into a common area, and giving him or her an award with a handwritten message on it in front of colleagues. So simple, and the power of it is simply astonishing. Novak learned a lot about how to do it in his career, and that’s what O Great One! A Little Story About the Awesome Power of Recognition, published this week, describes. It’s a treatise on power of the best possible kind.

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What We’re Reading Today

Sanders wins West Virginia  

Bernie Sanders claimed another victory over Hillary Clinton. The significance is more symbolic than practical — he still has almost no chance of overcoming her lead in delegates — but the win could build momentum for more victories in Kentucky and Oregon, embarrassing Clinton further. Donald Trump won the West Virginia and Nebraska primaries, but he was the only candidate.  Washington Post

Mitsubishi finds more faulty testing 

The company has discovered that it might have used the wrong emissions compliance tests since 1991 for some vehicles in Japan. It may have used the U.S. standard, which includes more highway driving, because it saved time. While the mistake likely made little difference in the results, Ken Kobayashi‘s company now faces the prospect that the cheating was widespread. Reuters

Chipotle investors to push back against the board

Chipotle investors vote today on whether an investor with at least 3% ownership  for three consecutive years can nominate board members. Chipotle has proposed a 5% level. The vote comes as Steve Ells‘s company faces continued criticism of its response to the E. coli outbreak last year. Some investors have blamed the board’s long tenure, limited diversity and questionable independence  for Chipotle’s missteps. Fortune

Schmidt testifies in $8.8-billion Oracle suit against Google 

The chairman of Alphabet, Google’s parent company, Eric Schmidt testified in the case that involves Google’s use of Java to build Android, for which Oracle claims that Google should have paid. Schmidt sits in an unusual seat; he used to work on Java for Sun Microsystems, which Oracle bought. Google argues it was fair use.  NYT

Building a Better Leader

Struggling startups are turning to…

…the marijuana industry. Some can adapt their business models to find a place in the suddenly booming market.  Bloomberg

Do you really want to lead others? 

It’s a question you should ask before becoming a manager. The implications are deeper than you may think.  Fortune

Allow your company culture to encourage ‘self-governance’

Encourage employees to look long-term and act on company values, not rules. SmartBrief

Worth Considering

Staples gives up on merger with Office Depot

The $6.3-billion deal was called off after a judge granted the FTC’s preliminary injunction to stop it. Staples CEO Ron Sargent argued that the combined companies would still face plenty of competition, particularly from Amazon. But the FTC was concerned about competition in big-business office supply bidding, which is dominated by the two companies. CNNMoney

The UFC is in advanced talks to sell

Owners of Ultimate Fighting Championship are speaking with at least four bidders to sell the mixed martial arts business, according to reports. The bids range from $3.5 billion to $4 billion. Bidding companies include WME/IMG, China Media Capital, Blackstone Group, and Dalian Wanda Group. President Dana White says the reports are untrue. ESPN

Disney misses earnings estimates for the first time in 5 years

Despite releasing megahit movies such as Jungle Book  and Captain America: Civil War, Bob Iger‘s company dropped 6% in after-hours trading after announcing quarterly results. The problem was a series of small missteps rather than any major blunder. In response, Iger is shuttering the company’s video game unit. Fortune

Up or Out

Comedy Central president Michele Ganeless has resigned. She will be replaced by Kent Alterman NYT

Werner Enterprises has named Derek Leathers CEO.  WSJ

Fortune Reads and Videos

Hyperloop One raises $80 million 

And it launched a global challenge to cities to determine where it will build its first hyperloop network. Fortune

Sallie Krawcheck launches a robo-adviser for women

Ellevest targets women by putting their investing needs first. Fortune

Walmart sues Visa…

…over chip cards. The retailer claims signatures aren’t enough to verify user identities. Fortune

What Bill Ackman really thought about Valeant’s CEO

He didn’t much care for former CEO J. Michael Pearson‘s leadership, it turns out, according to emails.  Fortune

Quote of the Day

“We are extremely disappointed that the FTC’s request for preliminary injunction was granted despite the fact that it failed to define the relevant market correctly, and fell woefully short of proving its case.” — Staples CEO Ron Sargent announcing his decision to call off a merger with Office Depot.  CNBC

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Produced by Ryan Derousseau