ADC 2017 Lightning talk: narcissism meets venture capital

This is the transcript I spoke from last night. I might have skipped some of the bits at the end. As a result of last night’s road test, the answers to the personal questions are: 1. definitely; 2. something more irresponsible, like posting the transcript on my blog.


I’m going to read this very quickly from my screen which isn’t my usual style but there are good reasons why. Although this talk is put together at very short notice it concerns ideas that I’ve been researching somewhat longer. I call it simply: narcissism meets venture capital.

My central thesis is this: much of the world of venture funding is useful and prosaic. But what’s new — a kind of disease brought about by a bizarre gold rush — is:

  • That poorly-formed tech companies with grandiose visions,
    are backed by abundant capital with insufficient diligence.
  • This attracts the wrong kind of founders,
    who are encouraged to build the wrong kind of organisations,
    and whether you’re part of them or not, but particularly if you are,
    these companies are bad for the world around you, for your livelihood, and your mental health.

One thing I need to make clear: this is not about my experience at ROLI and it’s not an indictment of anybody I’ve met here. But, working at a new company brings you into the orbit of others, and can expose you to some of that world.

I suggest a need for vigilance: I believe that these dangers are intrinsic in the current climate and can be felt widely.

My personal reason for giving this talk is to answer two questions:

  1. If I were to write a book about this, would you read it?
  2. What would it take to get me fired?

Let’s look back at ancient history. Before the world went mad, Google took eight years to reach a billion-dollar IPO; Apple took five; they had investment rounds that were fairly modest by today’s standards. $25m in Google’s case; Apple’s was in the Seventies so it doesn’t make sense in today’s money.

Today an eight-year timescale to a public offering would barely make Google newsworthy. Last month, a pair of founders obtained VC based on a nine-figure valuation of their company. They’re not old enough to shave and their company, a graduate project, didn’t seem exceptional to me; it will scale only with tremendous luck and exceptional talent. The anecdote can remain anonymous while we still recognise the story. We know what usually happens next.

I started talking about the money, but that’s just the food; narcissism is the organ it sustains.

Beyond name-calling, what actually is narcissism? There is a narcissistic spectrum where a dark personality disorder lies at the extreme right-hand end, but the continuum is more interesting than the endpoint.

Sandy Hotchkiss in her book, ‘Why is it Always about You?’ lists a number of narcissistic traits, including:

  • Shamelessness, and an unwillingness to engage with feelings of shame;
  • Use of other people in order to maintain self-image: reflected glory, obsession with celebrity, diffusion of shame by finger-pointing. Steve Jobs’s legendary hair-trigger dichotomy of his staff into assholes and gods is an archetypical example.
  • A belief that one is exceptional, so that reward is predicated on entitlement rather than merit and hard work;
  • Grandiosity and magical thinking, where the belief in something makes it real;
  • Poor personal boundaries, so expecting people to be on call all hours of the day to buff your halo and heal your wounds.

Narcissists are constantly shopping for the opportunity to exercise power, and this is one thing that attracts them to the startup world.

(While we’re discoursing on personal narcissism, here’s a health warning. Although it’s inferred that narcissism is undesirable here, you can and should possess a healthy amount: the ‘zero end’ of the scale is also dangerous. You need, for example, to look after yourself to avoid being rejected or exploited by others. An acknowledgement of your own gifts is an essential part of the urge to create. And a prerequisite of being self-aware, which is good, is being somewhat self-regarding.)

That’s the background matter.

Thing one: the tech startup culture is like crack to narcissists.

Globalisation of software distribution and social network effects mean that companies can get big user bases fast. A wide reach and a lot of engagement usually results in an exaggerated sense of importance.

The ‘Get Big Fast’ mentality emphasises big gambles: maximising risk-to-return at the extreme high end of both. If you’re a VC with a portfolio comprising many companies, it can be a responsible gamble. For those affected, though, it can over-inflate the ego.

Founders, selected principally by charisma and confidence, can practise their pitch a hundred times in a big market. They have many chances to access a lot of power and a lot of money quickly.

Thing one point five: as well as attracting narcissists, this world protects their delusions.

It is built into to the VC model that you outdo incumbents because you don’t compete authentically. Uber offers cheap taxi rides because it’s bankrolled by Californian investors. It’s called extinction pricing. You can ride a wave of early success because you’re cheating. This lets you extinguish the competition. Then you put the prices up.

Endemic poor handling of negative publicity (and frequent denial that it’s actually happening) is seen as typical and sometimes even endearing. People look at Trump’s pronouncements and say ‘that’s just Trump’; people see misconduct in our industry and say ‘that’s just tech’.

There’s a poor public understanding of risk in capital, so the more irresponsibly you borrow, the more uncritical attention you attract. Listen to John Humphrys on the Today programme interviewing a founder of Improbable after its half-billion-dollar valuation. He is severe with politicians, but is out of his depth when confronted with the ludicrousness beyond this sphere.

The limited company model and bubble mentality means that founders generally walk away without a scratch and start again if it all goes wrong.

Let’s zoom out. We live in a world where shamelessness and grandiosity are feted, everyone’s gambling with someone else’s cash, and accountability is minimised. If you don’t do the same then you can’t keep playing. The messages that are radiated influence us.

Thing two: this is routinely screwing with people’s heads.

Jeannie Yang’s talk yesterday provided an interesting illustration, in Smule’s redefinition of the way they measured their software’s success.

In the early-stage model, the goals were about personal joy: software was plotted on a graph of sounds-good versus easy-to-play. Then the goals became about effective self-promotion: connecting people versus expressivity, and the product took off. Narcissism leverages the network effect. The pretext is ‘I am special, and people have to know’.

Consumers can be creators. We can debate finer points, but this is true. Most people will be rubbish though: taste and talent are things that are part learnable, part innate, and both rare. Not all people who watch football on television want to play it; very few of those who do will end up being good. Football playing, like music creation, is a pyramid scheme when to do it for a living is not a healthy aspiration for the vast majority of people; of those who do, only the top 1% are wealthy, and the top 0.1% are super-wealthy.

Jean Twenge [prounounced ‘Twengy’], author of ‘The Narcissism Epidemic’, suggests that there are four pillars on which our narcissistic society rests. Think about these first in a personal capacity:

  1. Obsession with fame;
  2. Social media, where attention-seeking behaviour is rewarded;
  3. An unhealthy ‘win at all costs’ view of competition engendered by poor parenting;
  4. Easy credit so you can live a fantasy world.

Run through that list again and think of the tech sector, with the venture funder as the parent.

In conclusion

As with any bubble, when the sun is shining, a capitalist will lend you an umbrella, and when it rains, they’ll have it back. Meanwhile money is traded for control, so you’ll have to convince colleagues to work in conditions they didn’t sign up to, and shut them out of conversations.

If you can structure your start-up in the old-fashioned way, staying within a magnitude of your ability to repay until you’re ready to go to market, and otherwise pursue a nice quiet life, then you totally should.

Book Depository: The Grid

The first edition of Matt Watkinson’s book hasn’t been out for long. In this review, I’m deliberately not giving away much away about the model, although you can get more information from his site. The book’s worth a read, though: I’d recommend you find a copy if you’re interested in knowing more.

Spare a thought for managers. After being assailed by the seven habits of highly effective people, they’ve had to learn the five dysfunctions of a team, and how to wear the six thinking hats. They’ve sat exams on the thirty-odd rules for winning friends and influencing people. And that’s before they’ve reached the maze of psychometric systems. Whenever an occupational psychologist or PPE graduate from The Guardian tosses a fresh paperback into the fray, off tramps the executive team to a Home Counties barn to hear all about today’s mnemonic. Management, too, must have its fads.

Those books I flippantly cited share a perspective on how to come together as fallible, sensitive human beings, to engage with emotion but not to be controlled by it, and to cooperate. So much is written about this because ego-driven organisms need constant reminding. What we haven’t yet had, but we desperately need, is a self-consistent guide to untangling the collective insights we contribute into a coherent strategy that is explainable, defensible, and good for our business. The cognitive load of business decisions is enormous. Most people retreat to their own specialisms under such pressure, but this is dangerous: decisions have consequences that affect organisations in ways that we continually fail to anticipate. There are well-trodden books on this pathology in other arenas of endeavour: The Checklist Manifesto, Thinking Fast and Slow, and so on, but the favourite best practices in surgery and aviation are a decade or two ahead of most management skill.

The Grid (uppercase ‘G’ for the title; lowercase ‘g’ for the tool) is an attempt to address this problem. It presents a system for thinking about the business as a whole when making choices. The exposition of the grid is interwoven with real cautionary tales, where complacency or poor groundwork by well-regarded leaders resulted in expensive, high-profile cock-ups. There are also positive lessons: tales of clever but difficult manoeuvring saving companies from disaster. Versions of these stories exist for businesses of every size and kind: the ones in this book tend to be very recent (the bones of Edsel can rest in peace), but it’s clear that failures can be post-rationalised back to the dawn of time. What matters is anticipating them before it’s too late.

Part checklist, part canvas, the grid looks almost too simple. On one axis are the three parties that a decision will affect: customers, the market (in this case, other companies such as rivals, distributors, and suppliers), and the organisation itself. On the other axis are the three categories by which the viability of a business is measured: its desirability, profitability, and longevity. The nine pigeonholes where the categories intersect are the grid, which is all that you need to consider. Each pigeonhole contains a checklist of three items. That’s twenty-seven things in total — a lot to remember, but the idea is that this data is organised. You start in one position in the fully-formed grid, and dance around it until you’ve looked at a decision in terms of every relevant part of the business it could affect. You mark the things that might be problems in red, and work out what to do about them, gradually minimising the amount of red ink until it’s small enough to deal with.

It’s really that simple. Well, almost: the book is nearly 300 pages long, and most of this is commentary about what is meant by the subheadings in each pigeonhole, and how to understand them. These ‘deep dive’ pages concern the clarifications, footnotes, anecdotes, and lessons. They furnish breezy tutorials of the accounting, marketing, and product-related terminology for those who aren’t already generalists. This was clearly a difficult but necessary courtesy: it’s one thing to say ‘look after capital expenditure’ (which Matt does: it sits in the space where ‘organisation’ meets ‘profitability’). It’s of limited use, though, until you’ve satisfactorily explained to an autodidactic marketer what capital expenditure is, and why a company’s books are balanced in the way they are. Matt does this adeptly.

Where some of this material is simplified to the point of absurdity, the author confesses that his cavalier examples are dumb for the purposes of brevity, and then cuts straight to the point. He has enough respect for the subject and the reader to judge this trick about well enough. The examples are well-referenced, and written in the snappy journalistic style familiar to readers of modern management books. While the synonyms for ‘company’ wear occasionally thin, Matt steers just the correct side of Jeffrey Archer when describing a business once again as an ‘icon’, ‘phenomenon’, even ‘behemoth’. However, that I’m judging a management book by its cover-to-cover readability means that he’s already pushing standards that these books rarely set for themselves. Matt’s joy for his subject and his humorous, knowing flourishes impart a refreshing charisma and self-awareness that seldom coexist in much of this literature. His occasional bitchy parentheses are a delight.

The genius of the grid, as with any explanatory system, is its method of abstraction. The effort it took Matt to concoct the grid is explicit in the introduction, and implicit elsewhere. Twenty-seven headings are all you need. That it doesn’t matter that these tabulated things are, in reality, nested, interrelated, recursive, fly out of their pigeonholes, sit behind other things, obscure one another from time to time, and cannot always be fully characterised or understood in a real enterprise, is stated but doesn’t always matter. The central tenet of this book is that all the horrendous complexity of a business decision can be laid upon the grid like a spatchcock chicken, visible at once holistically and reductively. At first, this seems extraordinary and magical. It’s so far withstood my whataboutery, and there is no shortage of better-placed people queueing up to tug at its threads, so we’ll soon learn if anything is misplaced or omitted. I’ve printed out the twenty-seven headings and stuck them on the inside cover of my workbook as an aide memoire, and I’ve never done this with a management manual before. The Grid deserves repeated attempts to attack it. It will get them, and has a good chance of prevailing.

What’s less good about this book? It’s hard to fault its research even in my own area, but specialism is what your company will need. Without trustworthy domain experience, you can’t check the information you put into the grid. You might not otherwise know whether to write on it in red ink, green ink, or no ink at all.

The section on legal compliance, for example, is where an expert can add light and shade. Yes, larger firms have specialist teams that make the demands of meeting a territory’s rules part of their fixed costs; yes, they can even negotiate sweetheart deals with governments if they’re powerful enough both to broker them and to weather the backlash that follows. At the other end of the scale — something Matt doesn’t mention — obscurity is also a strength.

Once upon a time, I was working for a company whose rivals were hit simultaneously by multimillion dollar fines by the FCC for first offences of mislabelling products. We were too small, and our infractions too minor, for them to care. A company will often evade a regulator’s radar until they are big enough. Compliant and appealing product packaging and labelling, for example, are actually very hard for any company to nail. There’s no point in a regulator litigating an upstart into the dust, unless they’re posing a danger to life and limb, the native economy is threatened, or they’re so flush that it’ll make a decent difference to the exchequer. Perhaps it’s in bad taste to publish the advice that laws apply mostly to those in the middle, but it’s been said in print before, and needn’t be seen as a problem. My industry supports hundreds of home-build enthusiasts selling their own little electronic music toys outside product law, because their margins and costs afford no other way of working. The grey market is where innovation often starts, and where tomorrow’s legitimate CEOs come from. If our governments shut down these operations, cultural movements and would-be entrepreneurs would disappear forever. It’s all data that fits the grid, but you still need the right person at the table to hand you the correct colour of felt tip.

Where he’s on his own turf, Matt writes most persuasively and fluently. There are some beautiful set pieces, such as the discussion of power play at the start of the ‘bargaining power’ chapter. His coda on the relationship between running a business and learning to surf assimilates a personal passion without seeming at all indulgent. And now I know that Windows 8’s breaking of the ‘Start’ button is called a strong habit intrusion, I’m going to be using that term every time I see an example of it, until designers scream at me to stop.

My wife, one of the best hole-pickers I’ve ever met, points out a limitation of the grid over untidier table-based systems such as the Business Model Canvas, or the upstart Lean Canvas variant: the grid is a best fit for incremental business decisions, where you understand your position, and can trust your data. Shall we make this product, or that product? Shall we spend on a campaign, or an acquisition? What needs to be in place this year, and who do we need to watch? If your tenure begins, as many do, with a shaky foundation: building a tech company from scratch, merging two disparate organisations, or fixing an old-school enterprise that hasn’t made a profit in a decade, the grid might be too granular, and not the first resort. Otherwise, you’d quickly be overwhelmed with dubious data unless you switched either to intuition, seeing the problem as one requiring a visionary backed up by strong discipline, or by going back to first principles and redrawing the company around the scraps that already function. Only then would the grid make its outing, to confirm the robustness of your next steps.

All this considered, the only thing that’s wrong with The Grid is what’s missing on purpose. As Matt explains at the beginning, the grid determines how you turn information into a decision: not how to read the data, or how to carry out the plans you make. What you don’t find in the book are thorough treatments of technology strategy or culture, although the stories are there. It doesn’t account for the role of visionaries in your business; the art of persuasion, compromise, and execution; how to communicate a plan to subordinates; the extent to which change in any company is limited to what politics and culture will permit. The danger with this book, then, is that its readership will be those who pick it up because they have a desire to embrace complexity and follow the evidence. They’ll love this book as I have, will grow from its lessons, and may run brilliant businesses of their own but, with the ability to learn and assimilate, they might not have needed the grid. The cautionary tales that The Grid retells are mostly the consequences of hubris, which no amount of analysis will ever avoid. If the information your company needs is purposely ignored or suppressed; if your power structures were set up so that feel beats fact; if the people who would check your excesses are locked out of the boardroom because they bear inconvenient news, then The Grid won’t help you, and neither will anything else. For the rest of us, it’s a refreshing, authoritative manual for business design, and the most comprehensive planning tool of the many I’ve seen.

(In case you missed it, the Amazon link is here.)

Book Depository: Primal Leadership

This book, by Daniel Goleman, Richard Boyatzis,  and Annie McKee, boasts a handful of plaudits on the back cover. There’s one copy at ROLI and it wasn’t well-thumbed.

If you’ve been assigned a team, and had to steer everybody through the maelstrom of adversity, distractions, and competing opportunities that circumstance will generally chuck your way, this book argues that there are two broad categories of approach. First, the resonant approaches, which are great for teams that are already motivated and capable. Then, the dissonant ones, which are best applied in determined bursts to teams or individuals who aren’t.

Experienced leaders of quality will naturally pick an appropriate style for the circumstance, although different people will have different favourite tools.

The book suggests that there are four resonant styles:

  • Visionary. Persuading the team to buy into an audacious long-term strategy.
  • Coaching. Orienting people to the organisation’s goals, individual by individual.
  • Affiliative. Encouraging harmonious interpersonal relationships to exist within the team.
  • Democratic. Soliciting individual opinions and perspectives.

and two dissonant ones:

  • Pacesetting. Applying aggressive individual targets and grinding these out of the team.
  • Commanding. Providing direction without supplying rationale or getting buy-in.

They are all suitable under certain circumstances and problematic under others. The democratic style, for example, will paralyse an organisation if its survival depends on making quick decisions. Coaching can fail if individuals’ styles don’t match those of the coach, or for people who need regular, detailed feedback and excessive contact hours.

Dissonant styles are great when you think people have lost motivation or are underperforming. They are engaging and can actually help reconcile people with their work, but there’s a risk of damaging the morale of those who feel rewarded when they’re given greater autonomy (most engineers I’ve met are like this).

Much of the rest of the book is about building emotional intelligence through coaching, introspection, and honest solicitation of feedback. Emotional intelligence is the thing that tells you which tool is best to deploy at a given time. There are a few pages explicitly on not being a dickhead, as it’s a poor long-term strategy — but how many tech CEOs, with their shareholdings and their eyes on a lucrative exit, are interested in building companies to last these days?

There’s also a section on why leadership can fail with even the best of styles and intentions. These reasons will be familiar to anybody who’s read MSP or received training in programme management: lack of executive buy-in; failure to align with the culture; failing to motivate people to understand why they need to change their behaviour.

A leader must be part of the team, so that bad news and drifting goals do not get withheld from them, and also so that respect can naturally be cultivated. However, leaders must also be visibly removed from the team. They are concerned about wider priorities, and the relationship of their team to the others, so they must not become engrossed in the minutiae of fine-grained problems and tasks. This is a hard balance to maintain.

Essentially, if you live to learn, you love what your company does, you’re genuinely interested in the welfare and dynamics of your team, and you’re supported by a functional mentorship scheme, you’ll be all right without this book.

At a little under 300 pages, it’s another seam of great information that might have been written as a twelve-page pamphlet, if only they’d removed all the flaccid case studies that people seem to think are needed in a book like this. This book’s volley of supporting stories are so generalised that they are neither memorable nor convincing. Added to this padding is the occasional foray into neuroscience. Without any central thesis about how neural anatomy relates to emotional intelligence, this ends up reading like the marginal scrawlings of a New Ager: it’s all amygdala here and occipital lobe there, and then a digression about radiating spiritual harmony.

So I suppose I’m fortunate that I found this book so hard to digest.