On Fear, Honor, and Building Companies
By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search
Chasing down what I believed to be a significant business opportunity, I recently visited a farm in Kansas. Yes, a farm – complete with horses, cows, goats, chickens, and a very large farm dog named Josey. The large dog – along with everything else on the farm – are owned by a large man named Peter. Peter is maybe 6’2 , 40-something years old, and has the frame and toughness of an ex-football player. By ‘tough’, I mean that I once watched him hold an open flame to his arm to detoxify a bee sting.
When he is not tending to farm animals, Peter Leffkowitz is a world-renowned thought leader in an industry that I will avoid identifying at this time. Entrepreneurs and professionals from all over the world fly into Kansas City to go on hayrides with this man and obtain his counsel on how to better manage their companies. I myself have visited Peter’s ranch for the same reason on several occasions, but most recently with the intention of securing him as a strategic investor in a new startup. As it turns out, I came away with something far more valuable than financing, and opted to summarize our discussions from that day in this article.
The story I am about to share contains some of the most important business lessons I’ve ever been privy to, but I will warn readers in advance: the balance of this article will be shockingly devoid of sound business reasoning. It is full of contradictory statements, logical holes, and leaps of faith based in mid-western values. Geoff Moore (‘Crossing the Chasm” / ‘Inside the Tornado’) once told me that he often published untested theories in his books and relied on readers & consulting engagements to experiment and confirm validity of the same. I figured that if the approach was good enough for Geoff Moore, it was good enough for me – because I remain uncertain as to whether it is possible for any CEO to completely embrace the philosophies below and still ‘win” in the traditional sense of the word.
Lesson 1: The Dinner Table Litmus Test
Betrayal is usually a terrible thing. I say usually because as it turns out, I owe my relationship with Peter to a former employee who stabbed me in the back several years ago. The employee decided one day to share our customer data and critical intellectual property with a competitor in exchange for a higher base salary and flashy job title. Which is why my spirits fell when Peter called to notify us that he had been offered a retainer by a local competitor of ours. Sure enough, our former employee had contacted Peter on behalf of his new employer about developing a strategic relationship (only days after he had contacted Peter for the same reason on our firm’s behalf).
I should note at this point that Peter had not signed any agreements with our firm whatsoever. Peter and I had never met…we had spoken via conference call only once. Further, the nature of Peter’s celebrity status in the industry does not permit him to enter into exclusive relationships. In other words, Peter was free to work with our competitors if he so chose.
“What did you tell him?” we asked, assuming that Peter was simply providing full disclosure and about to inform us out of courtesy that he was now engaged with a competing portfolio company.
“I told him to go to hell.”
Suddenly, I was listening much harder.
Pete went on to relay details of his conversation with our ex-employee, growing angrier as he spoke; he seemed in complete disbelief that someone could work for one company, then move to a competitor the next week with no regard for his old team. “This guy has no honor,” he spat in disgust.
As a group, we expressed our gratitude, reassuring Peter that we would be loyal to him for years to come. Privately, however, I was stunned. Of course, I was appreciative of Pete’s loyalty, but it seemed a ridiculous contradiction. After all, search firms are hired by clients specifically for the purpose of coaxing executives out of direct competitors. And in a former life, Peter had been one of the best in the headhunting business! In fact, I was not actually upset at the fact that our employee had joined a competitor, rather, it was the sleazy way in which he went about it. And in any case, the employee had stolen from and lied to our firm, not to Peter. So all in all, I found Peter’s actions quite puzzling.
I questioned Peter about it for the first time as we rode in his truck headed for the ranch. “Pete, you didn’t owe us anything….they were offering you money…Why didn’t you take it? ”
He responded immediately: “Listen to me very carefully Angel, because this is important: Never do business with someone that you would not welcome to your dinner table.”
Peter commented that his refusal to work with our ex-employee all those years ago was partially out of loyalty to us, but primarily due to a gut feeling that the person on the other end of the phone that day was simply not worth dealing with. If anything, the turncoat’s disloyalty to our firm served more to confirm Peter’s original hunch, as opposed to setting off any new alarms. Peter explained that he would never allow a person of such low integrity into his personal or professional domain, no matter how much money was involved.
On one hand, Pete’s theory seemed flimsy. That is so naive, I thought. Sometimes, you have to work with low integrity people. If a sales rep will bring $5m in revenue with him, does it matter that he’s a jerk? Should I turn away customers that are ready to buy, just because I don’t like the customer’s ethics? It seemed to me that the goal of business was to make money, not make friends. Many CEO’s have confessed to me that some of their biggest mistakes involved hiring executives that fit the culture but lacked competency. (“I really liked the guy…but he just couldn’t get the job done.”) It was also not lost on me that perhaps the reason Peter could be so discriminating when selecting who to work with was because he was already financially independent.
At the same time, I began to wonder what it would be like if everyone I worked with was the kind of person I’d invite to dinner. One advantage became immediately clear: applying Pete’s ‘dinner table” law would mean less energy spent on low-value particulars. Those who have experienced the efficiency of a handshake-based business relationship will understand what I’m referring to. In these cases, neither party worries about the wording of an obscure clause in a 50 page contract; it simply goes without saying that each party will act in good faith. Dave Beirne, General Partner at Benchmark Capital, once told me that the people he preferred to do business with were those with whom contracts were unnecessary; with people who intrinsically understood, he said, that ‘everyone would be taken care of.” (As an aside, I have just such a relationship with an e-commerce / web design firm called ‘Principle” – I encourage those of you looking to re-design a website to try them out).
But in the end, as I tried to imagine myself severing all ties with certain people that did not pass the dinner table litmus test, I discovered an internal resistance. I could not imagine myself doing it – an unidentified emotional roadblock stood in the way. A few hours later, I realized what it was.
Lesson 2: The Problem with Fear
One of the first things I noticed after wandering the ranch is that an Australian Cattle dog named Chaka was missing. The last time I had visited Peter, the hyperactive canine had come shooting out of the trees, barking at us as we rode the tractor down the main road towards the entrance to the ranch. But today, Chaka was nowhere to be seen.
Later that day, I remembered to ask about Chaka. “We lost her,” said Peter, his voice lowering. “She ran out into the street and got hit by a car.” Sorry to hear that, I said. Did she have any puppies? “Yeah…a few…the one we kept died the same way – just ran out into the street and got run over.”
As a dog lover, I couldn’t help but get annoyed. “Peter, why the hell do you let the dogs roam all over the ranch unprotected? This place is huge! Can’t you put up a fence or something to keep them from running out into the road?”
“Angel,” he said stubbornly, “You cannot live your life in fear. I’m sure Chaka didn’t regret one day of her life, being able to enjoy everything the world had to offer. Who am I to restrict her freedom like that?” (To anyone who is not a dog lover, I realize this story has by now lost all credibility.) He continued: “Fear makes no sense. It makes you focus on all the wrong things, and miss all the good stuff.” I fell silent, suddenly less interested in doggie rights as my mind began considering Peter’s words in the context of leadership.
My first impulse was to argue. I had heard plenty of ‘no fear” soliloquies in the past but had always dismissed them as the simplistic babble of motivational speakers and narcissistic CEO’s. As an Executive Recruiter, I am quite aware that ‘fear” of failure or ‘fear” of loss or ‘fear” of just about anything can be a wonderful motivator. Fear of failure has driven many an entrepreneur to work 100 hour weeks and squeeze success out of ventures that seemed destined to fail…fear of missing quarterly targets has driven many Sales executives to make ‘just one more call’. So once again, my rational mind initially resisted Peter’s simple philosophy.
Slowly, however, as Peter’s words sank in, the true danger of operating from a place of fear became apparent. First, I realized that fear too often causes one to think about what could go wrong, instead of what might go right. Entrepreneurs and CEO’s are regularly turned away by venture capitalists who are obsessed with either technical or market risk – the common problems that any new venture is likely to face. But does it really take a genius to point out the risk associated with an early stage venture? Andreas Stavropoulos, a Managing Partner of venture firm Draper Fisher Jurvetson, once told me: “Any idiot with an MBA can point out what might go wrong with a business.” He argued that the more challenging task was to conceptualize what might happen if the vision actually worked. In other words, if things go right, just how big does this company get? It was hard to disagree.
The second problem with fear is that it leads to inaction. ‘Analysis Paralysis” is the phrase most often used to label the state of investors or CEO’s that insist on having all the facts before deciding which way to steer the ship. Conversely, the most successful CEO’s seem to have a knack for finding their way in the dark. “Any decision is better than no decision,” these CEO’s are often heard saying – primarily because one learns more from taking action than from endless evaluation of the options. The notion seems so commonsensical that it begs the question, Why are so many executives obsessed with having all the data in the first place? The answer, of course, is fear. Fear of what your staff will say if you make the wrong tactical decision. Fear of what your board will say if you make the wrong strategy decision. Fear of what society will say if you are perceived as having ‘failed’.
Which brings me back to Pete’s dinner table. Or more precisely, his dinner table law. It occurred to me that perhaps the reason I so often risked getting mixed up with people that I suspected were of low integrity had to do with….Fear. Fear of missing an opportunity. Fear of what might happen if the person I declined to partner with went down the street to a competitor and became successful. (Readers that truly want to know what this feels like are encouraged to ask any venture partner that declined to invest in Yahoo, EBAY, etc.)
I realized all this while Peter continued his rant about the importance of allowing our canine friends to enjoy their short lives. After all, one year to a human is like seven years to a dog. The average large dog lives maybe 8 – 11 years. “You mean to tell me you’d never let Twist off-leash in a field…just because you’re scared he might run off?! Fear makes no sense, Angel. Life is too short.”
The lesson works for dogs, and perhaps for us humans as well.
“Twist”, by the way, is the name of my Labrador retriever. Six months ago, he was kicked out of his doggie day-care for attacking several other dogs that were quite a bit larger than he, including a Pitbull terrier. So Twist, I’m proud to report, is absolutely fearless. Unfortunately, that is more than I can say for his owner. As an entrepreneur and executive recruiter, I confess that I am a chronic worrier. I worry about my candidates…my clients…my employees. The ‘what-ifs” never stop – so it is fair to say that I live in perpetual fear. And while Pete’s ‘power to the puppies” speech reminded me of the dangers of living in fear, it did nothing to explain how to live otherwise.
It wasn’t until Peter vomited all over one of my business ideas that the secret to doing away with fear was revealed.
Lesson 3: Where Money Really Comes From
As I mentioned earlier, Peter had long ago attained celebrity status in the same market that was being targeted by an early stage venture that I was about to invest in. I arrived at the ranch in hopes of securing him as a strategic investor and board member. If I could win him over as a partner in the business, the venture would start with immediate credibility.
After completing a few random chores, we walked over to Peter’s boardroom – contained in an Amish-built log cabin that sits on the shore of one of his private lakes. I booted up the laptop, and started running through power-point slides, much like an entrepreneur presenting to a venture firm. I pulled out financial projections. I pointed out that the market size was immense, and the potential to enter other verticals was strong. He made some comments about low barriers to entry that I had anticipated. I was not attached to any one plan, I told him. What I wanted was his commitment to going after a particular market – the business model was negotiable. “This idea is based on the biggest wave of change since the internet,” I exaggerated, trying to close him. “Maybe this isn’t the exact model…but somewhere, somehow, there is money to be made – we just have to figure out the where and how.” History shows, I explained, that great business opportunities often arise during times of massive change. “This is one of those times, Peter. We can make money here.”
He sat back. “So basically, you’re saying this huge trend is going to happen…”
“It’s HAPPENING,” I corrected.
… “and you want to find a way to exploit it into a money making opportunity?”
“Then you’re definitely going to fail,” he concluded.
Frustrated but hopelessly curious, I leaned forward and waited for him to explain.
“The problem,” he stated calmly, “is that you’re starting from bad Karma.”
Come again?! I had expected some criticism around typical business issues, e.g. customer adoption, margins, etc. – but a horse ranch in Missouri was the last place I had expected to be discussing new age philosophy. He seemed to sense my disbelief and changed his tone slightly. “Angel, what you’ve got to understand is that while business opportunities might arise during times of change, great businesses are built when you focus on making people’s lives easier.”
He continued: “Money is attracted to ideas steeped in genuine concern for others. One can never build a lasting business for the sole purpose of profit. The natural laws of the universe won’t sustain it.”
I had heard this stuff before, of course, but had always dismissed it as new age idealism. After all, business history is full of case studies that disprove Peter’s theory. Some of the wealthiest people I know have hit homeruns by starting from a place of ‘bad karma’, picking markets that were hot and betting on the winners – with no regard for creating long-term value. Hewlett and Packard themselves confessed that the original goal was just to start a business – any business! And if memory serves, making people’s lives easier was ancillary, if a priority at all. (Executives from HP, feel free to advise if I’m off on this point)
So on any normal day, my rational mind would have discarded talk of ‘Karma” as flaky and unsubstantiated. But as anyone who has ever had a mentor knows, words of wisdom previously ignored often seem deserving of further consideration when delivered by the right messenger. And so, because Pete was Pete, I decided to attempt the old Zen exercise of holding two contradictory ideas in mind at the same time, hoping that an epiphany would eventually arrive. And arrive it did – just not in the way I expected.
Peter’s advice, simply stated, was to stop focusing on how to make money for myself, and instead focus on how to create real value for others. Let me state up front that I have no data to show that one path ‘attracts money” faster than the other, and so cannot comment on the validity of Peter’s statement in that regard (though I do encourage readers to send their anecdotes or refer me to investors and executives that share the same philosophy so that I may probe further). However, what I did discover (quite unexpectedly) is that focusing on creating value for others has an amazing side benefit: it makes fear go away.
Here’s why. Fear is directly correlated to the degree of obsession one has with an outcome that is not necessarily within one’s control. Things like money, status, and power are all goals that place the focus on oneself. But achievement of such goals is only partially the result of individual effort – external circumstances factor in as well. Is Bill Gates” fortune purely the result of his own hard work and genius? Hardly. Luck and timing played a role in Microsoft’s rise, as they do in all great success stories. Even the most successful entrepreneurs and executives will fail to achieve certain wealth or status-related goals from time to time – and therefore, face the same failure-related psychological challenges that all of us do.
When a person is attached to goals that are not entirely within that person’s control, fear is inevitable. Ever notice how the best negotiators seem absolutely fearless? Superior negotiators behave as if they have nothing to lose because they have minimized emotional attachment to the outcome of the transaction. Does that imply that to overcome fear, one should simply stop caring about everything? No – because this would be akin to throwing the baby out with the bathwater. Ambition and intense drive are still mandatory for long-term success. The challenge is to retain the same drive and commitment that have always been required to win in business, but change the ingredient that fuels those qualities. Think of yourself as a race car driver who can choose between two types of gasoline for your vehicle. Both allow for the same speed and performance, but one type releases a dangerous by-product that clogs up your car’s internal mechanism and causes long-term wear and tear. Which gasoline would you choose? The desire for personal wealth is one type of gasoline, and the desire to create value for others is an alternative. When ambition is fueled by the desire for personal wealth or personal status, fear is the natural by-product. If the focus shifts to creating value for other people, fear – or at least fear of business failure – seems to dissipate.
The problem for most of us, of course, is that we do not consciously choose what to focus on or value. Rather, we allow our external environments to define these items for us – and in doing so, strive to acquire the status symbols or media accolades that prove to society (and ultimately ourselves) that we have, in fact, achieved something of significance.
Which brings me back, once again, to Peter Leffkowitz. You see, Peter is a man who seems oddly unconcerned with being featured on the cover of ‘Fortune Magazine’. The very first thing that he did after picking me up from the hotel that morning was to visit a place where farmers buy stuff, and haggle with the store owner over the price of a used saddle. It occurs to me now that no one who owns a giant ranch yet still cares about spending a few hundred dollars extra on a saddle could possibly be crippled by fear of business failure, or be tempted to work with a person of low integrity for the sake of making money. And I wondered for a moment what my life would be like if I actually cared about things like saddles…or horses…or hay.
Anybody need a farm hand? I have the world’s greatest rolodex in enterprise software, and also like dogs a lot.