Book Review of The Founder's Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup by Noam Wasserman

This is a must read for anyone in the entrepreneurial/venture capital space.

Just occasionally you read a book that you wish you had read 25 years ago.  I worked in the entrepreneurial/venture capital sector 1984-2007 and I so wish I had read this book in 1984.  Unfortunately it was not published until 2012 so it was not possible but if you are (budding) entrepreneur, potential start-up hire, angel investor or venture capitalist you should really read this book.  This is the first book that really gets to the human side of entrepreneurship but is based on the evidence of a ten year study of some 2000 technology and life science start-ups for the period 2000-9. 

Note the title; it is dilemmas not dilemma.  In this book Wasserman identifies a number of defining moments in the trajectory of a start-up where the entrepreneur must make a choice which while it may appear to be operational or tactical ends up having significant strategic consequences  For example a the first decision for an founder to determine what is his or her motivation? Is it wealth-or-control ("do you want to be king or want to be rich?").

This really resonated with me.  For 12 years I was the Executive Chairman of Nanyang Ventures which had three early stage funds doing Series A & B investments.  One of innovations when I introduced at Nanyang Ventures was to psychologically profile the entrepreneurs.  What we discovered after five years is that our winners had three key characteristics.

1.       They had high numerical intelligence.  They could understand the numbers.  We thought we could compensate for those who had high general and verbal intelligence but low numerical IQ with a competent CFO.  We were wrong.

2.      They were dominated by the desire for economic success.  The personality tool we used was the Humm Wadsworth as it is one of the few tests that measures this factor.  Initially we were looking for energetic team builders who were decisive and competitive (kings).  Again we were wrong.  Wasserman lists the problems that ‘king’ entrepreneurs and venture capital investors may have.  We had all of them, many in triplicate.

3.      They were also dominated by the desire to complete projects and saw the start-up as a series of projects.  They were extremely task orientated and focused on the technical details.  They were into planning and compulsively reading everything they could about a project.  Their passion ignited the rest of their team.  We had not picked this factor as being necessary; again we were wrong.

Some of the Amazon reviews criticise it for being academic.  I could not disagree more.  This book resonates with reality

Emotional Intelligence: Core Emotions and Five Factor theory

In mid-June of 2014, the famed psychologist and emotions expert Paul Ekman sent a survey to 248 researchers active in his discipline.  He achieved a moderately high response rate of 60%.  The idea was to see what the fast-growing field actually agreed upon in interpreting the scientific evidence on the nature of emotion.  He recently published an article about the results: What Scientists Who Study Emotion Agree About

The survey showed that at least one notion is solid: Universal emotions exist. Eighty-eight percent of the scientists who responded agreed that, no matter who you are, or where you were raised, you are bound to share certain feelings with the rest of mankind.  They were asked which emotion labels (out of a list of 18) should be considered to have been empirically established.  The five emotions that scientists rated as the most universal were anger (91%), fear (90%), disgust (86%), sadness (80%), and happiness (76%).  Finally, there was high agreement about whether “specific moods may be related to specific emotions(s) such as anger to irritability” (88%), whether “specific personality traits are related in some way to specific emotions, such as fear to shyness” (82%), and whether specific emotional disorders are related in some way to specific emotions, such as disgust to anorexia (75%).

Goleman, who refers to Ekman in his seminal book, Emotional Intelligence, has listed a hierarchy of emotional intensities.  He defines an emotion as a feeling and its distinctive thoughts, psychological and biological states, and propensity to act such as when we become angry.  He then goes on to define a mood, which, while more muted, lasts longer than an emotion, and he compares the emotion anger with a grumpy mood.  Beyond moods he then defines temperament, as the readiness to evoke a given emotion or mood, such as someone with a choleric temperament.  Finally he notes there are the outright disorders of emotion which can lead to insanity, such as someone with paranoid schizophrenia.

Level of Emotional Intensity	Population Penetration & Frequency
Emotion	All of the people all of the time
Mood	Most of the people some of the time
Temperament	30% of people most of the time
Disorder	1% of people all of the time

Temperament is the genetic basis of your personality and the most widely accepted model of personality by organisational psychologists is the five factor model (FFM), which have been defined as openness to experience, conscientiousness, extraversion, agreeableness, and neuroticism.

My question is simple: How do the five basic emotions link up to the Five Factors?  I can see link between happiness and extraversion but that is about it. 

Personally, and those who have read my blogs and books would know, I move in the opposite direction starting with mental disorders and then on to temperament, then mood, then finally to emotions.  It is easy to imagine for example how someone strong in one of the five factors (e.g.  conscientiousness) could get angry or be disgusted by someone very weak in same factor.

How to really spot a corporate psychopath

Yesterday I received a link to this interesting article by Hannah Norton “How to spot an office psychopath”.  The article argued that there are certain personalities who deliberately inflict harm to others and that these personalities fall within a category that psychologists call the ‘Dark Triad’ which comprises three sub-personalities: Machiavellianism, sub-clinical narcissism and sub-clinical psychopathy.  There is a strong correlation between psychopathy and bullying behaviour and unfortunately while Psychometric testing is commonly used by companies at the recruitment very few if any test for the Dark Triad.  The article then says that common signs of the corporate psychopath include superficial charm, a grandiose notion of self-worth, the need for stimulation and impulsiveness, pathological lying, the ability to manipulate others and a lack of remorse and empathy. This is all true but recognising these traits during a behavioural interview is very difficult, and once you have hired the corporate psychopath it is too late.

There is one profiling methodology that does include corporate psychopaths and that is the Humm-Wadsworth.  Here are some clues during the recruitment phase that might prove useful.  First you should check out the LinkedIn profile for frequent job changes and few if any recommendations from senior executives.  Corporate psychopaths create very good initial impression but subsequently their peers become intolerant of their workplace habits. In particular, people dislike their taking credit for the ideas of others; and putting the blame for mistakes they have made onto someone else, typically an underling. Corporate psychopaths are very good at sensing this antipathy, and so change jobs frequently; often leveraging themselves into a higher position.  The other useful clue is what the person puts down about his or her education. School and university ultimately judge their students on their academic results, which for most of us means work. Psychopaths are inherently lazy, and their charm and people skills are of little help in the examination room. Most people elaborate on their education, specifying dates, subjects done, awards and extracurricular activities. The education section of a resume is something which is very easy for an employer to verify. If there have been issues, and with psychopaths there generally are, the education entry will often be pithily short.

During the interview you first check out their dress.  Red and gold are the two give away colours. So if you meet someone wearing a bright red tie, a gold Rolex, and a gold bracelet on the other wrist become suspicious. If you meet a female executive in a red suit, gold handbag, and gold shoes, and wearing a lot of gold accessories lift your level of watchfulness. Search Google Images for Donald Trump and in most of them he is wearing a red tie.

During the interview corporate psychopaths will be charming, but two things give them away. They will soon drop names by asking if you know some important person and implicitly showing they associate with winners.  Also, corporate psychopaths are driven by the desire for material success so they will talk about recent gambling wins or money made in on the stock market.  Their interests outside of work either include gambling interests such as horse racing or expensive “winner” sports like sailing or skiing.

While clinical psychopaths are estimated to comprise 1% of the population, for corporate psychopaths the number has been set around 3% of the workplace.  However there are probably another 12-15% of the workforce with psychopathic tendencies.  We all have a little psychopath inside us.