A classically trained philosopher with degrees in philosophy, physics, and theology from Stanford, Harvard, and Boston University, Koestenbaum has spent half a century pondering the questions that give most of us headaches: Why is there being instead of nothing? What is the ultimate explanation of the universe? What does it mean to be a successful human being? After fleeing pre-World War II Germany with his parents, Koestenbaum was raised in Venezuela; later, he emigrated to the United States to pursue his studies. He taught at San Jose State University for 34 years, and during that period he focused on creating a "practical philosophy" -- a philosophy that is linked to education, psychology, and psychiatry. His many books include "The Vitality of Death" ( Greenwood, 1971 ), "The New Image of the Person" ( Greenwood, 1978 ), and "Managing Anxiety" ( Prentice Hall, 1974 ). One of his books, "Leadership: The Inner Side of Greatness" ( Jossey-Bass, 1991 ), has been translated into several languages, and Koestenbaum is now at work on a new book, tentatively titled "Diamond Reverse Engineering."

More than 25 years ago, Koestenbaum traded the cloistered halls of academia for the front lines of the global economy. It's not unheard-of for this philosopher, now a tireless 71-year-old with thick glasses and a flowing beard, to visit clients across three continents in a single week. His agenda: to apply the power of philosophy to the big question of the day -- how to reconcile the often-brutal realities of business with basic human values -- and to create a new language of effective leadership. "Unless the distant goals of meaning, greatness, and destiny are addressed," Koestenbaum insists, "we can't make an intelligent decision about what to do tomorrow morning -- much less set strategy for a company or for a human life. Nothing is more practical than for people to deepen themselves. The more you understand the human condition, the more effective you are as a businessperson. Human depth makes business sense."

Koestenbaum's wisdom makes sense to leaders at such giant organizations as Ford, EDS, Citibank, Xerox, Ericsson, and even one of Korea's chaebols. All of these companies have welcomed him into their offices to roam free as a resident sage, company therapist, and secular priest. His involvement with them ranges from one-on-one coaching sessions to decade-long engagements featuring intensive leadership seminars. At Ford, Koestenbaum contributed to the company's 2,000-person Senior Executive Program throughout the 1980s. In more than a decade at EDS, he led seminars and coached hundreds of top executives, including then-chairman Les Alberthal. He also coached Alexander Krauer, a prominent Swedish industrialist, when Krauer was chairman of Ciba-Geigy. Picking up on that momentum, another leading Swedish industrialist, Rolf Falkenberg, founded the Koestenbaum Institute to disseminate the philosopher's teachings across Scandinavia.

"Everything I do," says Koestenbaum, "is about using themes from the history of thought to rescue people who are stuck." His logic: Change -- true, lasting, deep-seated change -- is the business world's biggest and most persistent challenge. But too many people and too many companies approach change by treating it as a technical challenge rather than by developing authentic answers to basic questions about business life. "We've reached such explosive levels of freedom that, for the first time in history, we have to manage our own mutation," declares Koestenbaum. "It's up to us to decide what it means to be a successful human being. That's the philosophical task of the age. Nothing happens unless you make it happen. As a leader, everything is your responsibility, because you always could have chosen otherwise."

In an interview with Fast Company, Koestenbaum explains how age-old questions apply to the new world of work.

Why does being a leader feel so hard today?

Because reckoning with freedom is always hard -- and the powerful paradoxes of the new economy make it even harder. We're living in a peculiar time: It's marked by a soaring stock market, the creation of tremendous wealth, an explosion in innovation, and the acute alienation that occurs when the global economy hits the average individual. What I call the "new-economy pathology" is driven by impossible demands -- better quality, lower prices, faster innovation -- that generate an unprecedented form of stress. People feel pressure to meet ever-higher objectives in all realms of work, wealth, and lifestyle -- and to thrive on that pressure in the process.

This condition is exacerbated by the pornographic treatment of business in media and culture. The message is, You're living in the best country in the world at the best time in history; you have an amazing degree of freedom to do what you want, along with an unprecedented opportunity to build immense wealth and success -- and to do it more quickly than ever before. Of course, the average individual has as much of a chance of launching a skyrocketing IPO as he or she has of becoming a movie star.

What's even more disturbing is that the ascendancy of shareholder value as the dominant driving force in business has resulted in a terrible insensitivity to basic human values. That's the real "stuck point" for leaders: How do we cope with a brutal business reality and still preserve human values? How do we handle competition without becoming either the kind of fool who allows it to crush us or the kind of fool who forgets people?

Resolving that paradox requires something like an evolutionary transformation of who we are, how we behave, how we think, and what we value. We've reached such an incredible level of freedom that, for the first time in history, we have to manage our own mutation. It's up to us to decide what it means to be a successful human being. That's the philosophical task of the age.

In some sense, of course, that has been the task of every age. There's nothing in today's economic disruptions that equals the horror of World War II. According to some estimates, nearly 100,000 people were killed during every week of that war. In 1935, when I was a seven-year-old boy, I once stood in the Alexanderplatz, a square in Berlin, and watched Hitler parade by in his Mercedes, just a few feet away. I'll never forget the mothers with babies in their arms, the children holding up swastikas. That leaves a mark on you that can't be erased -- and it leaves you with questions that you have to confront: Who am I to have witnessed such acts? How am I to live meaningfully in a world such as this?

The new economy just happens to be the form that our existential challenge takes today. As always, the real obstacle is existence itself.

That's a heavy burden to place on leaders. They must not only guide organizations but also wrestle with basic philosophical questions.

There's a terrible defect at the core of how we think about people and organizations today. There is little or no tolerance for the kinds of character-building conversations that pave the way for meaningful change. The average person is stuck, lost, riveted by the objective domain. That's where our metrics are; that's where we look for solutions. It's the come-on of the consulting industry and the domain of all the books, magazines, and training programs out there. And that's why books and magazines that have numbers in their titles sell so well. We'll do anything to avoid facing the basic, underlying questions: How do we make truly difficult choices? How do we act when the risks seem overwhelming? How can we muster the guts to burn our bridges and to create a condition of no return?

There's nothing wrong with all of those technical solutions. They're excellent; they're creative; they're even necessary. But they shield us from the real issues: What kind of life do I want to lead? What is my destiny? How much evil am I willing to tolerate?

Reflection doesn't take anything away from decisiveness, from being a person of action. In fact, it generates the inner toughness that you need to be an effective person of action -- to be a leader. Think of leadership as the sum of two vectors: competence ( your specialty, your skills, your know-how ) and authenticity ( your identity, your character, your attitude ). When companies and people get stuck, they tend to apply more steam -- more competence -- to what got them into trouble in the first place: "If I try harder, I'll be successful," or "If we exert more control, we'll get the results we need."

The problem is, when you're stuck, you're not likely to make progress by using competence as your tool. Instead, progress requires commitment to two things. First, you need to dedicate yourself to understanding yourself better -- in the philosophical sense of understanding what it means to exist as a human being in the world. Second, you need to change your habits of thought: how you think, what you value, how you work, how you connect with people, how you learn, what you expect from life, and how you manage frustration. Changing those habits means changing your way of being intelligent. It means moving from a nonleadership mind to a leadership mind.

What are the attributes of a "leadership mind"?

Authentic leaders have absorbed the fundamental fact of existence -- that you can't get around life's inherent contradictions. The leadership mind is spacious. It has ample room for the ambiguities of the world, for conflicting feelings, and for contradictory ideas.

I believe that the central leadership attribute is the ability to manage polarity. In every aspect of life, polarities are inevitable: We want to live, yet we must die. How can I devote myself fully to both family and career? Am I a boss or a friend? A lover or a judge? How do I reconcile my own needs with those of my team? Those paradoxes are simply part of life. Every business interaction is a form of confrontation -- a clash of priorities, a struggle of dignities, a battle of beliefs. That's not an invitation to wage an epic battle of good versus evil or right versus wrong. ( Chances are, your boss is less of an SOB than he is an agent of the cosmos. ) My point is, you have to be careful not to bang your head against the wrong door. Polarities are in the nature of things. How we act, how we respond to those polarities -- that is where we separate greatness from mediocrity.

That doesn't mean that we don't have to make decisions. Tough choices are a daily requirement of leadership. Leaders have to hire and fire, to sign off on new strategies, and to risk investments -- all of which can lead to stress and guilt. The presence of guilt is not a result of making the wrong choice but of choosing itself. And that is the human condition: You are a being that chooses.

A young, ambitious guy whom I worked with at Amoco got a double promotion that required a transfer to Cairo. He went home to his new wife and young baby and said, "Great news, we're moving to Cairo." Appalled, his wife said, "You're moving alone. I'm going home to my mother." That was the first test of leadership in that family. There was no viable compromise: If he relinquished his promotion, he would resent his wife for ruining his career; if she just went along with the move, she would hate him for squashing her ideals for her baby and herself. What to do?

After some discussion, they might have been tempted to believe that maturity required them to deny their feelings and to sacrifice on behalf of each other. But that actually leads to illness, depression, and the end of affection. Instead, they went back to the fundamentals: Is it my career, or is it our career? Is it your baby, or is it our baby? Are we individuals, or do we operate as a team? What are our values? That marriage had to grow up by the equivalent of five years in about two weeks. They ended up going to Cairo, but their relationship had been transformed: She understood that his career was important to her; he recommitted to his values as a participant in the family. What matters is not what they ended up choosing, but how. They took the courageous step to redefine, from the inside out, who they truly were. The how is what gives you character. The what, which at first appears paramount, is ultimately of no emotional significance.

Managing polarity teaches us that there are no solutions -- there are only changes of attitude. When you grapple with polarities in your life, you lose your arrogant, self-indulgent illusions, and you realize that the joke is on you. To get that message makes you a more credible human being -- instantly.

It's one thing for a leader to embrace the contradictions of the new economy. But how does he or she persuade colleagues to go along with this kind of thinking?

The best leaders operate in four dimensions: vision, reality, ethics, and courage. These are the four intelligences, the four forms of perceiving, the languages for communicating that are required to achieve meaningful, sustained results. The visionary leader thinks big, thinks new, thinks ahead -- and, most important, is in touch with the deep structure of human consciousness and creative potential. Reality is the polar opposite of vision. The leader as realist follows this motto: Face reality as it is, not as you wish it to be. The realist grapples with hard, factual, daily, and numeric parameters. A master in the art of the possible, the realist has no illusions, sees limits, and has no patience for speculation.

Ethics refers to the basic human values of integrity, love, and meaning. This dimension represents a higher level of development, one ruled not by fear or pleasure but by principle. Courage is the realm of the will; it involves the capacity to make things happen. The philosophic roots of this dimension lie in fully understanding the centrality of free will in human affairs. Courage involves both advocacy -- the ability to take a stand -- and the internalization of personal responsibility and accountability.

The real challenge of leadership is to develop all four of these often-contradictory modes of thinking and behaving at once. Leaders tend to operate on two dimensions at most -- which has more to do with a lack of insight into human nature than with corrupt intent. Reality dominates, and the second-most-common attribute is ethics: Consider the statement "People are our most important asset." Unfortunately, those are often empty words -- not just because too few people make the connection between profits and human values, but also because there is no adequate understanding of what it means to be a human being in a brutally competitive environment. "Vision" might be one of the most overused words in business, but in fact vision -- in the sense of honing great thinking and fostering the capacity for ongoing inventiveness -- is rarely practiced. And courage is demonstrated even more rarely.

When we talk about courage, we usually mean having guts or taking risks. But you talk about courage as if it were an almost mythic quality -- one that lies at the heart of leadership success.

It goes back to the beginning of our discussion. Aristotle believed, correctly, that courage is the first of the human virtues, because it makes the others possible. Courage begins with the decision to face the ultimate truth about existence: the dirty little secret that we are free. It requires an understanding of free will at the archetypal level -- an understanding that we are free to define who we are at every moment. We are not what society and randomness have made us; we are what we have chosen to be from the depth of our being. We are a product of our will. We are self-made in the deepest sense.

One of the gravest problems in life is self-limitation: We create defense mechanisms to protect us from the anxiety that comes with freedom. We refuse to fulfill our potential. We live only marginally. This was Freud's definition of psychoneurosis: We limit how we live so that we can limit the amount of anxiety that we experience. We end up tranquilizing many of life's functions. We shut down the centers of entrepreneurial and creative thinking; in effect, we halt progress and growth. But no significant decision -- personal or organizational -- has ever been undertaken without being attended by an existential crisis, or without a commitment to wade through anxiety, uncertainty, and guilt.

That's what we mean by transformation. You can't just change how you think or the way that you act -- you must change the way that you will. You must gain control over the patterns that govern your mind: your worldview, your beliefs about what you deserve and about what's possible. That's the zone of fundamental change, strength, and energy -- and the true meaning of courage.

Does developing the will to transform mean that you can actually will others to change?

Taking personal responsibility for getting others to implement strategy is the leader's key polarity. It's the existential paradox of holding yourself 100% responsible for the fate of your organization, on the one hand, and assuming absolutely no responsibility for the choices made by other people, on the other hand. That applies to your children too. You are 100% responsible for how your children turn out. And you accomplish that by teaching them that they are 100% responsible for how they turn out.

So how do you motivate people? Not with techniques, but by risking yourself with a personal, lifelong commitment to greatness -- by demonstrating courage. You don't teach it so much as challenge it into existence. You cannot choose for others. All you can do is inform them that you cannot choose for them. In most cases, that in itself will be a strong motivator for the people whom you want to cultivate. The leader's role is less to heal or to help than to enlarge the capacity for responsible freedom.

Some people are more talented than others. Some are more educationally privileged than others. But we all have the capacity to be great. Greatness comes with recognizing that your potential is limited only by how you choose, how you use your freedom, how resolute you are, how persistent you are -- in short, by your attitude. And we are all free to choose our attitude.

Polly LaBarre, a Fast Company senior editor, is based in New York City. Contact Peter Koestenbaum by email ( pkipeter@ix.netcom.com ) or on the Web ( http://www.pib.net ).

Sidebar: Fear and Trembling in the New Economy

You don't need a philosopher to tell you that anxiety is one by-product of what Peter Koestenbaum calls "the brutality and promise" of the new economy. But you do need a philosopher to explain how anxiety rules the human condition -- and how it can serve as a powerful, productive force in your life. The best thinker for the job, says Koestenbaum, is Soren Kierkegaard, a Danish philosopher who did as much for the analysis of anxiety as Freud did for the analysis of the subconscious. Here's a short course from Koestenbaum on the value of anxiety.

Anxiety generates knowledge. "As Kierkegaard explains it, anxiety is the natural condition. It's a cognitive emotion that reveals truths that we would prefer to hide but that we need for our greater health. In an essay called 'The Concept of Dread,' Kierkegaard draws a connection between anxiety and free will. We cannot prove that free will is true -- because we freely choose the meaning of truth in the first place. But our anxiety tips us off to the existence of our freedom: It reminds us of our huge responsibility to choose who we are and to define our world."

Anxiety leads to action. "Kierkegaard wrote that the most common form of despair occurs when one does not choose or 'will' to be oneself -- when a person is 'another than himself.' The opposite of despair is 'to will to be that self which one truly is.' That's the experience of anxiety. It is choosing life in the face of death; it is the experience of thought becoming action, reflection becoming behavior, and theory becoming practice. Anxiety is pure energy."

Anxiety makes you a grown-up. "Anxiety is the experience of growth itself. In any endeavor, how do you feel when you go from one stage to the next? The answer: You feel anxious. Anxiety that is denied makes us ill; anxiety that is fully confronted and fully lived through converts itself into joy, security, strength, centeredness, and character. The practical formula: Go where the pain is."