The Power of Habit: Chapter 4 Summary & Analysis

In 1987, investors met with the new CEO of the Aluminum Company of America (Alcoa), the former bureaucrat Paul O’Neill. To everyone’s surprise, instead of promising to increase profits, he spoke about worker safety, which he said would show the company’s devotion to excellence. All the investors told their clients to immediately sell Alcoa stock—which was a huge mistake. O’Neill made Alcoa’s profits and share price skyrocket while its injury rate fell to almost zero. His secret was to change habits. Specifically, he started with one small but powerful habit, which created a chain reaction across the organization. Such keystone habits are valuable because they can help people “shift, dislodge, and remake” other habits.

At first, O’Neill wasn’t sure if he wanted the CEO job at Alcoa. After rising through the Veterans Administration, he moved to the Office of Management and Budget, where he eventually became deputy director. He realized that lots of government spending was based on institutional routines rather than deliberate decisions. For instance, cities kept building new hospitals they didn’t need because a government program funded the construction and local politicians benefited from them. In contrast, other organizations built more effective habits. For example, to celebrate risk-taking, NASA scientists cheered every time a new rocket design blew up. In this way, O’Neill learned that agencies’ habits were the key to their success. 

When O’Neill joined Alcoa, the company was struggling—quality was suffering and its workers were inefficient. But O’Neill couldn’t just force his workers to work harder. In order to change how the organization worked, he first needed a priority that everyone could agree on. He chose safety—his goal would be zero injuries.

After taking over at Alcoa, O’Neill faced opposition from Wall Street, the workers’ unions, and the company’s vice presidents. But he kept talking about worker safety, and nobody could disagree with him about that. To improve safety, managers needed to determine what was going wrong—which allowed them to streamline the production process. O’Neill made the company’s unit presidents immediately report all injuries and develop plans to prevent them from recurring. This gave them a strong incentive to open communication channels with workers and lower-level managers.

O’Neill’s focus on safety also changed other parts of Alcoa’s culture. Unions agreed to measure individual workers’ productivity, and managers agreed to let individual employees stop the production line. Both of these measures would improve safety. Alcoa executives even started telling local construction workers (who didn’t work for Alcoa) to use better safety equipment. By fixing the causes of injuries—like inefficient processes for pouring molten metal or the use of old, broken machines—Alcoa also improved its products’ quality.

Keystone habits also make a difference in people’s lives. For instance, people who start exercising tend to start improving other habits, and families that eat dinner together tend to raise more successful children. By identifying and changing keystone habits, people can learn to improve throughout their lives.

During the Beijing Olympics, Michael Phelps jumped into his routine as soon as he woke up. He ate breakfast, stretched for a half hour, warmed up in the pool for exactly 45 minutes, and then put on his bodysuit and listened to music until his race. Phelps’s childhood swimming coach, Bob Bowman, instilled key habits in him. Bowman showed Phelps how to focus before each race and taught him to “watch the videotape”—or visualize an ideal race—every morning and night. Over time, Phelps developed other solid routines, like his diet and sleep schedule.

Phelps’s keystone habits were successful because they offered small wins. Small wins convince people to keep trying by showing them that success is possible. For instance, in the 1970s, the gay rights movement built momentum by first getting the Library of Congress to reclassify books about LGBT issues.

Similarly, Bob Bowman taught Phelps to treat his warm-up as a series of small wins—they go exactly like he plans when he visualizes winning. However, when his race started that morning during the Beijing Olympics, he realized that there was a problem: his goggles were leaking. By his final lap, they were totally full of water. He couldn’t see at all. But he stayed calm: he had already run through this scenario countless times before. He confidently kept going—and he set a world record.

Six months into his job at Alcoa, Paul O’Neill learned that a young worker in Arizona had jumped over a safety wall to try to repair a piece of equipment—which hit him in the head and killed him. O’Neill spent the next day reconstructing the accident with other executives. He blamed company’s own “failure of leadership” for the man’s death and focused on reworking safety policies. Injury rates declined in a matter of weeks, and O’Neill congratulated his workers on this small win. This snowballed into other changes. Workers started calling O’Neill not just with safety recommendations, but also with ideas for helpful changes across the manufacturing process.

When O’Neill was analyzing infant mortality data for the government, he learned to get to the root of the problem by continually asking questions. He realized that improving college curriculums would improve high school biology teachers in rural areas. Better biology classes would help young mothers improve their nutrition, which would in turn reduce premature births. And reducing premature births was the key to reducing infant mortality. O’Neill’s insights helped dramatically reduce the U.S.’s infant mortality rate. They show that beyond providing small wins, keystone habits also create “structures that help other habits to flourish.”

People can also apply keystone habits to their lives. For instance, doctors used to ask obese patients to lose weight by changing almost all of their habits at once. But a 2009 study showed that by simply keeping a food log once per week, people with obesity can learn to gradually notice and improve their eating habits.

At Alcoa, O’Neill used safety as a justification for building a company-wide email network. This happened in the early 1980s, long before corporate email was standard. Eventually, everyone in the company started using this network for almost all of their communication. This change to the way they communicated allowed them to coordinate much faster than their competitors.

In 1996, a nun attended a shareholder meeting to report dangerous working conditions at an Alcoa plant in Mexico. While this was inconsistent with O’Neill’s records, he sent a team to Mexico to investigate. They learned about an unreported accident a few weeks prior—and O’Neill quickly fired the executive who failed to report it. This demonstrates the third and final benefit of keystone habits: they change organizations’ culture. For instance, the greatest predictor of success at the U.S. Military Academy is “grit”—or working hard to overcome difficult challenges. Cadets foster grit through group habits, like meeting with like-minded peers every morning.

In 2000, O’Neill left Alcoa to become the U.S. secretary of the treasury. Other companies have adopted his focus on keystone habits, and Alcoa’s safety record continues to improve because of O’Neill’s inspiration.