Some years ago, I promised myself I would start a blog, but only after I crossed the chasm of having been in the venture business for five+ years. After all, what could you possibly have to say that is of interest to anyone before you’ve seen a few great outcomes and a couple of disasters. Well, I’ve now been in the game for over six years and I’ve finally gotten off my duff to get this going.
I’ve learned a lot in my six years in the business. The first thing I’ve learned is that I have a lot more to learn. Failure is part of the system; you can not be a VC without encountering frequent failure. I’m pretty comfortable with that; the trick is to learn from your mistakes and learn fast. Nothing frustrates me more than hearing others attribute their investment failures to “external factors outside of my control” – an “irrational competitor”, a “tough market”, “too much capital sloshing around in the space”. No, you made a bet and it didn’t work out; deal with it. If you attribute failure to factors beyond your control, you deprive yourself from an opportunity to learn. It turns out that one of the key personality traits that separates the great VCs from the pack is totally non-intuitive. Can you guess what it is? The answer later on.
The second thing I’ve learned is that things never work out quite as you plan them; even the successes. I’m a big believer in strategic planning. But I also believe that linear strategic planning (set a goal, create an execution plan and stick to it) is a recipe for disaster in emerging markets. What is required is “emergent” strategy, define the future you want to create, listen to the customers you wish to serve and meet their needs. Bill Taylor at Harvard Business School’s blog had a nice post on a related topic just the other day. In it he takes on the topic of whether MBAs or entrepreneurs are better suited to dealing with “tough times”. The results of the research are pretty interesting, although I don’t agree with the MBA vs. entrepreneur dimension along which the analysis is framed.
The difference in mindset, Sarasvathy concludes, boils down to a different take on the future. “Causal reasoning is based on the logic, To the extent that we can predict the future, we can control it,” she writes. That’s why MBAs and big companies spend so much time on focus groups, market research, and statistical models. “Effectual reasoning, however, is based on the logic, To the extent that we can control the future, we do not need to predict it.” How do you control the future? By inventing it yourself — marshaling scarce resources, understanding that surprises are to be expected rather than avoided, reacting to them fast.
I love that; defining the future, constantly re-inventing yourself, marshaling scarce resource, understanding that surprises are to be expected. If you break it down, whether your educational background includes an MBA or not has nothing to do with. It is all about a frame of mind, a way of thinking, an “emergent” view of building a great company. It is important to recognize that things don’t always, in fact rarely, go according to plan, but that not all is lost. Course corrections are just part of the game. People who think too much of themself tend to have a fixed mindset; “this is the way this will happen”; and when the plan doesn’t work, they can’t react fast enough.
Which brings me back to that personality trait that separates the great VCs (and entrepreneurs) from the rest. What is it? In my opinion; HUMILITY. Why? Because humility enables you to be introspective, to learn from your mistakes, and to know that things never go according to plan so you can make course corrections along the way.
Introspection, learning and course corrections are all representative of the theme of this blog; non-linear. It is the way I view the world; everything is iterative; there are no straight lines to success. Success comes to those who are able to shape markets, to define the rules of the game, to respond when assumptions are dashed and to lay down the road ahead so to that others can follow.