Wednesday, October 4, 2017

What do you want money or power? (650-7)

Entrepreneurs are often told that the founder must struggle with a "control versus wealth" dichotomy. So we ask budding entrepreneurs, "Do you want to become rich or do you want to be in charge?" If the assumption is that the entrepreneur is solely seeking capital appreciation , we may advise the Founder CEO to give up control as fast as possible, if a faster runner comes along you should give the baton to them, right? The more folks rowing your boat the faster it will go.

In fact, this is an artificial construct that mirrors the assumption that monetary wealth is the only way to measure value. Many folks decide that because they can't measure it it doesn't exist. Are you captive to that false assumption? If so, then a single yardstick, capital appreciation, can fool you (and prior economists) to determine that that yardstick is sufficient proxy for value.

Craigslist, Wikipedia, Apache, Linux, MySQL, LibreOffice, and Firefox are all enormously valuable yet their success did not translate to capital appreciation.Today's entrepreneurs are not the Robber Barons of old; it is rare that only motivation is money. Most folks have a sense of fairness, ethical behavior, environmental sustainability, equity, and positive impact. At some time these other values will challenge a steadfast emphasis on monetary gain. As one replaces "wealth" with "value" the dichotomy falls apart.

Control and value are not dichotomous. Tight control can yield or destroy value, as can lose control. For example, a lack of control by the founder can generate a lack of value placed on social responsibility and subsequent production of a company with minimal or negative social impact. In fact, that choice may lead to destroying monetary value as well if the customers also value social impact. Do folks really think that one can launch a successful company that sells a product that kills people (e.g., the tobacco industry)?

If the personal definition of value is more nuanced and a non-monetary reason for a desire for control is defined, a simple function won't do. To be fair to the entrepreneur and guide them in the choices they need to make we must develop a more broad definition of the tradeoffs associated with value creation.
The first step is to define the personal value of control. 
  • Do you want control because you have a vision of something that is truly unique? 
  • Do you want control because otherwise you have no clue what you do with your time?
  • Is the purpose of control to ensure that you and only you tell you what to do? 
  • Do you want to be invcontrol because you get bored doing the same thing? 
  • Do you seek out flexibility to engage in opportunities you didn't foresee?
Alternatively, are you tired and would rather be a spectator than a player?

Value too can vary. All these models of control seeking and avoiding can achieve different types of value.
  • Where does social responsibility fit in? 
  • Do you care about externalities? 
  • Is compensation parity an issue?
The control vs. value debate is thus not a battle or a tradeoff, but the start of an internal and external conversation, and an exploration of how the two relate for you. That isn't as simple as a dichotomous model, but our brains are pretty sophisticated. Reducing motivation to two options was inevitably simplistic.
  • How much control over the direction of the startup do you want and what are the personal and external motivations? 
  • What value do you want to create? Assuming there are multiple components, how do you rank them in importance or weigh them?
  • If it turns out that you cannot achieve all your potential values, which one is more flexible for you. What value will you give up?
  • Most importantly how does your being in control map to obtaining value? In other words, without your efforts would the value still be realized?
Answer the questions now and write them down. Later when an investor asks you to change your control or the direction of the company, you'll have an answer and a guide for what direction to go. Over time, one's desire for control changes as does what we value. Be prepared to ask the questions again; the answers might not be the same.

To summarize, the vision of an entrepreneur as someone who wants to become fabulously rich or powerful is pervasive. And we expect that to achieve the goal they need to tirelessly work 80+ hours a week and demonstrate to third-party investors on a daily basis that they are willing to forgo everything to make money for them. Instead perhaps entrepreneurs are people with new ideas who want to work with others to launch them. Entrepreneurship in America is actually decreasing, despite all the resources that are available here versus elsewhere in the world. Perhaps in 2017 we should stop focusing on burning out entrepreneurs by locking them into a treadmill assuming that value equals money, and instead focus on capturing their creativity and energy.

Photo Credit: Omnidirectional treadmill immersive simulator.JPG Author: David Carmein Licensing: Permission is granted to copy, distribute and/or modify this document under the terms of the GNU Free Documentation License,

4 comments:

  1. I love the change in focus from control and cash to value. I'm glad you posted the questions that can help a person analysis themselves before they start a business and should reevaluate themselves before going to meet with an investor. Great read!

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    1. Sabrina,

      Yes, one of my interest is how an entrepreneur can decide if entrepreneurship is the right choice for them. I think that process requires an awful lot of introspection. And to me, this is one of the most important questions if the entrepreneur hopes to stay with the company through thick and thin. If a company doesn't align with your values but is chasing after money as the sole reward, then it will likely lead to burnout.

      -- Brad

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  2. Hi Brad,
    There are several valuable things to weigh and consider regarding the wealth vs. control dilemma. Your post eloquently offers several questions to ponder and explore deeper into the realization of what control really means to the founder. Flexibility and planning can be key to a successful startup, but knowing what your expectations are for yourself and the company are valuable as well. The last sentence in your blog sums up todays entrepreneurship well, “Perhaps in 2017 we should stop focusing on burning out entrepreneurs by locking them into a treadmill assuming that value equals money, and instead focus on capturing their creativity and energy.”

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    1. It always shock me that people are surprised to find that some of the most successful folks were actually never in it for the money. Many wanted to "do something cool." Again, that doesn't mean they were on the "control" side of the dichotomy, they had a value bigger than money or control.

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