Founder Characteristics (aka The Chosen One(s)?)
By Arie van Gemeren , CFA – Principal @ Rising Tide VC
Why lead this article off with a picture of the great Julius Caesar (or feel free to sub any historical figure of import or infamy – Alexander the Great, Genghis Khan, Augustus Caesar, and many others)? It is because humanity (and by conjunction – Silicon Valley and all look-alike regions) is obsessed with this ideal of the “perfect” leader, the character traits that have led to tremendous achievement, to having an Epithet like “The Great”, “The Terrible”, “The Wise”, attached to your name.
We don’t (yet) give our tech founders these names, but then again time has not passed enough for it to happen and we have a similar variant of this anyways. If I say Elon Musk, you – reader – likely think or say any number of epithet-like characteristics for the man. “He’s like Iron Man, only cooler!”. Or he’s a visionary, a driven character, and many other attributes.
This obsession with “traits” and “founder characteristics” is quite important. After all, in early stage investing, you’re often going on the vision or idea as well as your belief in the founder’s capacity to achieve. It stands to reason that understanding the characteristics and traits of your founding team are important. And, I think, the thought process that goes into this is often fallacious. We see notable examples of egomaniacal founders achieving world-turning success and assume that this is a necessary condition for success. We see examples such as Julius Caesar and imagine that the ‘great’ founder must be like this – cast the die, cross the Rubicon, and overthrow the Senate (or some modern-day equivalent). But is it true?
When I was at Goldman we used to talk a lot about analyzing the characteristics of investment professionals – hedge fund and private equity managers, really – to ascertain the “characteristics” that made them most likely to win (aka – to outperform). Surprising insights came out of this exploration. For instance, direct reports (more being worse, less being better) was highly correlated with out-or-underperformance. In other insights, the upbringing of the investment manager was highly influential – surprisingly (and somewhat satisfyingly) those from impoverished or poor backgrounds were more likely to outperform. It’s not that being poor is inherently equal to outperformance, but that those from poor backgrounds had to work that much harder and succeed against that many more obstacles to get to the top. I mention this to say that there are often under-appreciated traits which are overlooked in this obsession with visionary and charismatic leaders.
There are dark-sides to vision and charisma. We are a society that greatly prizes these traits, and yet it seems we have not done much deep analysis on if this is a necessary condition to succeed. We as investors have certainly thought about it – and we all have tales of deeply visionary and flawed founders who have been difficult to work with, and perhaps endangered their own company in the process. Vision and charisma and great drive are great so long as the ship is going straight. What happens if it flounders? What happens if the crew deserts or worse yet mutinies? Here are what I perceive as some of the (potentially) fatal flaws in visionary, charismatic and driven leaders.
They can;
- Ignore evidence that they are wrong (perhaps in as clear cut a case as the numbers or the customer engagement isn’t there and perhaps won’t be), or perhaps not analyze the evidence at all
- Not listen to well-intentioned or wiser advice if it clashes with their preconceived views of the world
- Drive their teams away from them by an obsession with achieving a cherished goal or vision, and thereby hamstring themselves
- Fail to connect with those around them and build a cohesive, successful team
- Worst of all – make prideful or ego driven decisions to support their internal framework and avoid cognitive dissonance, which may end up destroying the company
But I think this all boils down to a belief (and I would term it a belief, or a superstition) that it’s time to put a stake in. The notion that there are a talented few – wunderkinds, marvels, phenoms – that most people cannot aspire to and so if you find one, you should just hang on because it’s going to end up being great. One has only to read the book “Jobs” to see that we (the royal we) clearly believe he was a one-of-a-kind talent. Or as I like to think of it – the Chosen One mentality. This mentality likely perpetuates bad leaders, and keeps would be great leaders from trying or going for it because they may feel they lack the necessary ingredients.
Like most Silicon Valleyer’s, I’m sure we’ve all read Malcolm Gladwell’s numerous books on these topics. I won’t go so far as to say that there are not truly unusual characters of world-making importance. The trouble is picking them! And sure – if you find one (like an Elon Musk, or Steve Jobs) then it probably requires little investment sense to keep backing him or her. The problem – in my view – is that everybody knows these stories, and so there’s an unhealthy fascination with perpetuating the false views of who these leaders were (are).
It seems to me this leads to an abundance of people faking or embodying a bold, visionary, ambitious view that is then corroborated by investors who want to find the next Elon, or Jobs, or you name the entrepreneur. The problem with this view is that while examples do exist of these visionaries, I would be willing to bet that most companies, their outcomes and their leaders are far more nuanced! While we know the story of the legendary visionary founders, we far more often disregard or don’t see the countless more stories of people falling on their face, or failing, while trying to perpetuate this myth. Worse yet, how many companies are dragged down through their founder’s inability to see clearly, or ask for help?
A good family friend of ours recently related the story (a truly incredible story – direct message me on LinkedIn and I’ll send you the article ink) of a family member who bought and turned around a sub-par business to make it an extraordinary success. When I asked what he was so effective at, the man said – he’s incredible at building teams. He has loyalists that follow him and like him a lot, and he is a super effective leader. When we think of exceptional leaders – the royal we, again – we don’t usually think of something as soft as . . . team building? We think of crossing the Rubicon, sword in hand, Rome on the horizon and all running before us!
Which is entirely to say – I think it is time we rethink what makes a “great” founder. Yes – there are visionaries out there, I believe, who are exceptional. Ego will make every founder want to be that specific type. True power, I think, lies in understanding one’s own strengths and weaknesses and advancing as best you can. And our society’s fascination with (and lost money in many cases for investors!) on backing look-alikes is problematic. I’m surprised that I was not able to find it, but as with most matters of psychology the data is hard to source. There should be some manner of evaluation of character traits of successful (and failed) founders to see if we can find commonalities to explain successes and failures.
Here’s a short list of traits I think are equally valuable to find in your leader than vision, ambition and grandiosity (read: ego).
-Honesty
-Transparency
-Humility
-Work Ethic
-Selflessness
-Curiosity
-Wisdom
-Empathy (EQ)
-Impact or Achievement Orientation
-A “Disinterest’ in Titles (perhaps not a trait, but revealing of many other traits)
-And countless others . . .
And what are the myriad benefits of these? Founders with such characteristics may pay more attention to signals, may ask for help more often, may be willing to take advice, may be able / willing to change direction or course correct if the seas call for it, may have more devoted or loyal teams, may be able to close more deals through more effective use of EQ and listening, and much more. I’m not saying that charisma, drive and determination are not valuable. They are incredibly useful traits. It’s just that where there is light there must also be darkness, at least measured by a shadow! And these highly prized characteristics can cast the longest shadow of all. We here at Rising Tide greatly enjoyed this post which I think neatly summarizes the issues with a focus on drive, ambition, and vision being important, but not the only thing to search for.
Over time, and with enough start-ups, I bet you we’d find some interesting trends that have nothing to do with Caesar-like founders. For instance, what if success was highly correlated with drive and confidence, and with selflessness and humility? That would be an unusual mix – which would make it rare, and valuable. And as any investor can tell you – something rare and valuable is the best mix of all.