It’s natural to want to like the people leading the companies in which we invest. But it may not be profitable.
When I read Jim Collins’ Good to Great, ten years ago, I found it compelling. I loved the mystery novel-ish sense of suspense of the McKinsey-style analytical team trying to figure out what truly differentiates great companies from good ones. Ultimately, they found that a CEO who exhibits Level 5 Leadership was a core differentiator. And, basically, Level 5 Leadership described someone whom I thought I might like: unflinching willingness to face the truth, participative style, and vast humility. I loved that description; it spoke to me.
But, shortly after I read it, I found that I was not finding that type of leader in entrepreneur world, even in very successful entrepreneurs. I then listened to a compelling seminar hosted by ghSmart, the firm that co-owns Topgrading. Their findings were different. They had studied investor-backed company teams, and they found that something called the “lion” profile is best. A “lion” is someone who, in summary, is very aggressive (often considered over aggressive), pushes boundaries, and goes for winning as a top goal. Conversely, their “lamb” CEO -- someone who is patient, participative, makes people feel that they are the best that they can be, etc. -- did not, statistically speaking, generate higher returns.
That jived with what I had seen work more consistently in entrepreneur world. So, at a seminar JumpStart put on a couple years ago to discuss this dichotomy, an audience member raised his hand and said, “But patience has to be a virtue. It simply must be.” A seasoned, nationally known executive recruiter on the panel, one who had no connection to Good to Great or Topgrading, responded firmly and without hesitation. “Our best recruiters,” she said, “always say ‘Patience is not a virtue’.” Why? Because they had found, over time, that the best leadership candidates were not those who were patient and deliberate but rather those who 'pressed' ...for excellence, for results, and for the highest quality in all they do and in what they expect of their teams.
Yet again, recently, this concept that you don’t need to be likeable or patient or any of those things to be a great entrepreneurial CEO arose. At the Angel Capital Association annual meeting earlier this month, Adeo Ressi, of the Founder Institute, sat on a panel. An audience member asked him about entrepreneur profiles. He responded that the Founder Institute has consulted with a number of sociologists and others to try to drill down into what characteristics are truly most correlated with successful entrepreneurship. After discussing a couple of other characteristics, his conclusion was this: “It turns out that you really can be a real [jerk]* and still be a great startup CEO.”
The author, Malcolm Gladwell, semi-reinforced this idea in a recent New Yorker article, “The Sure Thing”. He wrote that great entrepreneurs are predators. He wrote about how they are cold-blooded bargainers and that they time and time again “swooped down, like perfect predators…” on opportunities. So, take your pick: Lion, Jerk, Predator. Each is slightly different, but none is what I would call the humble, participatory-style Level 5 Leader. They’re Larry Ellison, who wants to win at all costs. They’re Bill Gates, who has perhaps grown into a benevolent-ish philanthropist, but he built Microsoft by being an aggressive jerk; you might quarrel with the use of that word, but from what I can tell, he was solidly at some lion/predator/jerk intersection. They’re Ted Turner, who turned raw combativeness, into marketplace competitiveness, into a cable empire.
This all gels with what we have increasingly come to believe at JumpStart, which is that Level 5 leaders don’t quite describe the type of entrepreneurial leader we should invest in, nor do we even need to like the CEO of a company we invest in. Don’t get me wrong. We prefer to actually like the CEO of the company in which we invest. We don’t actively seek to invest in CEOs who are lions/jerks/predators. But, whether we like them or not, whether we want to hang out at an airport bar with them for five hours (a classic test of whether to hire someone), is not much of a criterion. First and foremost, we look for Adaptive Excellence which is, basically, someone who rises to the top of whatever they do.
If they do lack humility and nice-ness and various other people skills that are increasingly required as a company grows and employs hundreds and thousands, then we will still invest. We may, however, look to supplement their non-people skills as they grow. See, it’s one thing to be an investor in a company led by a lion/jerk/predator. But, being a manager every single day at a company with a lion/jerk/predator for a CEO can be demoralizing, and company growth stalls when employees or managers are departing in droves. The predator, it often turns out, needs help building a great and enduring culture, the type of culture that say, Netflix has; a place where employees love coming to work.**
Here’s the point: the CEO of an early-stage company can be a jerk. Take Larry Ellison, Bill Gates, Ted Turner (the list goes on and on). They bent rules, they agitated. Really, they might not have endeared you, at all, if you met them in a presentation in your offices. Investors should look first for individuals who are impatient, non-conformist, smart, and strive to win. Look for predators. Seek the lions and lionesses. Don’t let the jerk turn you off to the possibility of the greatness of their aggressive, non-conformist insight. I have done so a couple of times and I regret it. Because what I believe is that whether I actually want to roam the metaphorical plains with the lion(ess) telling jokes, drinking from the oasis, and being participative and humble together may well be a moot point, when it comes to returns and IRR.
(Note: ghSMART will be delivering a seminar at JumpStart this Thursday - Hiring Smart: How to Hire & Retain A+ Players. Learn more and register now - It's a can't-miss event.)
NOTES
* What Ressi actually said was a word for the male anatomy. Problem is -- I cannot use this word on a non-profit venture development web site. On a related note, Ressi pondered, along with other panelists, why there weren’t more women in entrepreneurship. Several audience members dared suggest that perhaps using male body parts to describe entrepreneurs wasn’t particularly helpful to the cause. Indeed, our entrepreneurship language is almost entirely oriented towards males, and that is a problem, if you ask me. I understand the arguments for it. Trust me, as a person whose first love was linguistics and who spent her senior year of college not hanging out watching Seinfeld and chugging pints but instead writing a 100 page thesis about the pronoun “I” -- I am deeply passionate about language and versed in the arguments about how language simply describes culture. I also am versed in the arguments against this, which is that indeed language does help shape culture. So, one of my dreams for this world is that some nonconformist investors will switch the discourse to using slightly more female words. It’s a risk, because IRR is all that matters, not language, right? But, think about a world where we use much more female language in describing entrepreneurs. “Gals” instead of “guys”. “Lioness” instead of “Lion”. “Queen” instead of “King” (in the Rich vs. King paradigm). Jerkette instead of Jerk. I’ll stop short of suggesting an alternative for Ressi’s actual term (which was not “jerk”), but review the Kinsey Report and you’ll get some good ideas. I haven’t done statistically significant field work, run the Monte Carlo simulation, completed the double blind study, crunched the numbers, or any other such thing, but this I believe: this more female-oriented discourse would be powerful to our daughters, our future generation of entrepreneurs.
** Our Entrepreneurial Talent guy, Robert Hatta worked there. By the way, the use of Netflix culture as a positive is not intended to imply that their CEO is or is not a jerk. I haven’t got the slightest clue about Reed Hastings, though he certainly appears to have Adaptive Excellence.
Becca Braun is a past president of JumpStart Ventures. She founded and led a number of early-stage companies and organizations, as well as worked as a private equity investor and management consultant. She received her MBA from Harvard Business School and her BA in Linguistics from Harvard University. She is keenly interested in the intersection of wealth creation and broad-based regional economic growth.