Posts Tagged ‘ambiguity’

Ambiguity and alignment

May 13, 2009

My last few posts have been very much “inside the world of vc and high tech” and I wanted to get back to the broader theme that underpins this blog – meaningful failure and what you can learn from failure.

I had one of those wonderful experiences last week where a friend connected me to a friend, and I subsequently found myself deep into a conversation I hadn’t expected.  In this case, I was on the phone with a former technology executive who left his career to pursue his passion for poetry.  There we were, getting to know each other, locating some common ground in our shared interests of startups and writing.

One of the subjects we lingered on was how whether you’re at work or at home, you’re the same person deep inside.  And that the converse is perhaps more interesting: what happens when you’re a different person at work than you are at home?  I was thinking alignment of values and areas of ambiguity.  This sent me in an interesting arc.

When I first started thinking about this I thought the issue was more about decency and less about ethics. 

Except people can be incredibly decent, treat others well, communicate compassionately and still be unethical.  They can define “truth” in a way that is not true at all, and exploit this ambiguity motivated by fear, or greed, or insecurity, you name it.  But it means who they are on the outside (defined truth) is different from who they are on the inside (actual truth) 

Which made me think of Entellium.  This is old news, but offers a rich example.

Entellium was a high flying venture capital backed startup in Seattle, where the CEO and CFO created a second set of financial statements that overstated revenue and presented these to their employees, board, and investors. Only these two executives knew about it, and they compartmentalized the truth, keeping it deep inside.  For a long time. 

John Cook of TechFlash summed it up well:  “More than $50 million in venture capital down the drain. Over 200 people out of work. And two Internet executives — both fathers — going to federal prison.”

They didn’t do it because of greed – they didn’t even profit from this deception.  In fact they ended up spurning a $100million offer from Intuit, knowing the fraud would come to light during the accounting review.  

One of the executives admitted the fraud was driven by the fear of failure.  A missed sales objective one quarter and the fear of confronting that caused them to overstate actual revenue.  And then the next quarter of course they were even further behind, and well you know the way these things play out.  So, they lied to their board and employees.

And to their families too, who were blindsided by the fraud.  The police showed up at their houses and took the execs away in handcuffs in front of their wives and children.  Imagine what was going through their heads, and the heads of their families in those moments.   And the comment I kept hearing from people who knew both men was “they were such decent people.”

So I guess you can be decent and have a very ambiguous ethical foundation.  In fact, the belief that your your ethical foundation has ambiguity is the tell-tale that you are no longer behaving ethically.  Entellium was all about the difference between what was true and what could be gotten away with.  There’s plenty of ambiguity to go around in those last six words. 

But deception is a whole number, there are no fractions of it.  There is no ambiguity.  So it’s really not about being a different person at work or home, it’s about always being the same person inside and outside.  Having truth be the connective tissue between the two.

David Foster Wallace said this well in his 2005 commencement speech at Kenyon College “The trick is keeping the truth up front in daily consciousness.”

If it’s up front, then it’s there for everyone to see.  A nice alignment between who you are inside and who you are outside.

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Posted in Empathy, Failure, fear of not succeeding, meaningful failure, Self-knowledge, Success, Values | 9 Comments »

More Series B musings

March 8, 2009

In talking to a few folks since my post Thursday on the nuances of Series B financings another analogy for Series A, B, and C financings came to mind.

You can look at investing in startups like selecting who among a classroom of kids will get into Harvard; if you don’t take this (completely dangerous) analogy too seriously, there are some interesting relevant analogies.  So just for a moment, enter a playful state of mind and let’s look at the landscape.

Series A investments are like evaluating a kindergarten class and trying to select the child you think would make it into Harvard.  You could look at a whole lot of characteristics about their classroom participation and capabilities and then try and figure out who would be likely to get be accepted twelve years down the road.  But it’s very much about taking a bunch of early, early data and trying to make a long range prediction. 

[If any of you have had kids in kindergarten, the sad thing is in real life there seem to be parents doing this math for their own children.]

But to play this out, with whoever you picked you’d have enough time and resources so that if circumstances develop along the way that take the kid you’ve “funded” off-track, you’d be able to help address these. 

Series C investments are like evaluating a high school junior or senior class and trying to select the child destined for Harvard.  Now you’ve got substantive and relevant historical data about performance, capabilities, and aspirations.  You have a much richer data set, and a much shorter time horizon – one to two years. 

With Series A, anything seems to be possible when you make the investment, and you have plenty of time to deal with surprises along the way.  With Series C, you can see and evaluate a lot of the substantive date, and have a reasonably clear sense of the prospects and risks.

Series B are like evaluating a middle school seventh grader’s class, and trying to pick who’s going to be Harvard-bound.  There is a trajectory that’s been established, but you don’t have the SAT scores, the high school GPA, or the extra-curricular activities that are going to factor so heavily in the outcome.  And, it’s hard to know who will blossom in high school and who won’t.  That the sullen introspective kid in the corner may deceive you as he or she may develop the confidence and leadership to become the head of the class in two to three years.  That popular kid  vying for attention may end up having more social skills than discipline, and could flame out academically in 10th grade.

This is an entertaining thought exercise precisely because it is so ridiculous. 

By the way, I have nothing against middle schoolers (I have two myself, and think the world of them, and their friends), but it’s an awkward stage.  Taking this back to our investment stage analogy, Series B is hard because you are between the “anything is possible” world and the “we have some relevant historical data and a shorter horizon”.

I’m not saying Series B investments are bad, it’s just that they’re their own unique animal that are particularly vulnerable in the current economic climate.  Fortunately, middle schoolers, regardless of the economic climate, will be just fine.

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Posted in Business planning, fundraising, Venture capital | 1 Comment »

Heartbreak and principles

February 7, 2009

Sometimes what we work so hard to accomplish and produce, even in the face of relevant experience and exquisite talent, just doesn’t materialize. How sad to view that as failure. Or rather, how sad to view the outcome as the only measure of success, when you have the opportunity to measure success by examining how you are working along the way.

One of my favorite short stories is “Ball of Fat” by Guy de Maupassant. It concerns a group of six citizens fleeing the oncoming Prussian army by stagecoach, attempting to find safety in a town far away. One of the characters is a plump prostitute nicknamed “Ball of Fat”. The others in the carriage are a range of upstanding citizens who view her with equal parts contempt and curiosity.

As they make their way the group gets hungry. The other five become irritated and cranky, hoarding what little food each has brought. Eventually Ball of Fat produces a veritable travelling feast, and generously shares the food she’s thought ahead to pack. A change in her status takes place, that day’s journey ends with the group treating her almost as an equal.

They don’t make the progress they expected, and have to stay the night in a town that they discover is occupied by the very army they’re fleeing. Circumstances are dire. Will they be held for ransom? Imprisoned? It turns out Ball of Fat is well known to the commander, and when he indicates he will set them free in exchange for an evening with her, the group takes a principled stand protecting her. But time wears on, and it becomes clear there is only one way out of this town. So Ball of Fat, against the protests of her carriage-mates, agrees to this bargain for the good of the group.

In the morning, all is well, the carriage is provisioned, and the group boards, but unlike the sense of shared destiny of the day before, the group shuns Ball of Fat, passing severe judgment on a woman who would “sell” herself. The atmosphere is cold and harsh in the carriage. They make their way along, and members of the group get hungry.

This time the others have planned ahead, and produce a wonderful array of food. Except Ball of Fat, she had no time to think about food (she was busy securing their freedom).  But no one offers food to her, in fact, food is shared liberally to everyone else, but her. The scorn heaped upon her is overwhelming. She slowly begins sobbing. The story ends.

Well, one reaction is “jeez, how bleak and sad”.  But is it really?  Ball of Fat acted generously and bravely, with a clear sense of herself and her values. She made her way through uncertain and ambiguous circumstances making clear decisions and tradeoffs based on principles that were transparent and honest.

My former assistant thought it was “the worst blog idea she’d ever heard”. And she’s partly correct. The message – it’s not about the destination it’s about the journey – is obvious and well trodden. Except because it’s so familiar, I think we spend a lot less time examining this than we would like to admit.

It’s easy to focus on the journey when the terrain is familiar, with familiar unpleasant junctures.  But when truly severe shocks occur, it can be hard to hold onto those principles to guide you. 

This is why I love working with people who have experienced spectacular failures.  You learn a lot about yourself and those around you when the product you’ve been developing and counting on doesn’t work and you miss your revenue plan, strain or destroy customer relationships, and all you know is only time and more hard work will solve the problem.  How you respond then matters a great deal.

Because Ball of Fat is so heartbreaking, it’s too easy to focus just on the heartbreak, and not on how she navigated the heartbreak.  Those principles produced honest and generous responses in the face of stingy and uncomfortable circumstances.  There’s no heartbreak in that.

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Posted in chicken killer, Empathy, Failure, Intellectual curiosity, meaningful failure | Leave a Comment »