Non-Linear Growth

PSYCHOLOGY! But very few even recognize it as a discipline.

As the cliche goes, every night, the most valuable assets in my investments walk out the door; the people. And the group that is responsible for managing all those people, the management team; they are not just “executives”, they are people too. Those executives need to be nurtured and developed if they are to perform. And from my perspective, psychology and “mindset” play a key role in executive development.

So how does a VC help put the entrepreneur/executive in the right mindset? Well, it starts with the VC having the right mindset to begin with. So what is the “right” mindset? Carol Dweck, a Professor of Psychology at Stanford, wrote a book on two basic mindsets she has observed and analyzed over many years, creatively called “Mindset”. It is a simple, but remarkably powerful construct for understanding how people frame their worldview and their place in the world.

According to Dweck, there are two basic mindsets that people adopt; the fixed mindset or the growth mindset. In the fixed mindset, people see their abilities and those of others as based on fundamental talent. This inherent talent is perceived to be unchangeable; fixed. A fixed mindset person would think “I am talented at math”, “I am not a good artist”, “I am a naturally gifted athlete”. In contrast, people in the growth mindset believe that talent is “developed” through hard work and that everyone has the ability to improve. They are interested in the journey, and view the result as an outcome based on many factors, including effort. Both success and failure are considered opportunities to learn and improve.

In my opinion, a venture investor with a fixed mindset is doomed and potentially dangerous. Every failure is taken as a personal affront to their talent. Rather than learning from failure, those in the fixed mindset look to blame others; the market, the management team, the “irrational” competition. They view investments that are behind plan as failing them and therefore a waste of additional time and effort. If the Company is behind its sales target, the VP of Sales and Marketing must not be talented enough. Fire him. There is no consideration given to helping the CEO, and executive team develop their skills, because they can’t be developed, their talents are fixed. Success is even more dangerous for the fixed mindset VC, because success validates the belief in their raw talent. They don’t have to work hard, their inherent “deal-sense” will carry them. In fact, working hard might cause others to question their raw talent. Those who are inherently gifted don’ t need to work hard.

More importantly, a VC with a fixed mindset can’t help a management team get into a growth mindset. They don’t view the team as people to be developed, but rather as people to be judged and kept or terminated. They take credit for others successes and blame others for their falures. This risks putting the entire company in the fixed mindset, stifling team development, creativity and the risk taking that emerging companies thrive on.

If the fixed mindset is dangerous, the growth mindset is powerful and empowering. Every challenge  is an opportunity to learn or to help someone else learn. Success is seen as the result of hard work; effort is rewarded as well as results. There is no blame, no finger pointing, only accountability. The only way to fail is to not try.

I look for growth mindset entrepreneurs. If you are an entrepreneur, look for a growth mindset VC. And if you are in a fixed mindset, fret not. Read the book; you’ll learn something. And with some hard work, you can change your mindset!

Filed under: Books, Lessons Learned, Venture Capital, executive development, mindset, personal development, psychology