Swing Decision-Making and Startup Founder Leadership
The difference between a good decision-maker and a great one comes down to minute details.
If you spend enough time around startup/investor land, you’ve probably heard the adage that the most important thing to measure at the pre-seed stage “is the team.” Broadly speaking, how most investors define a good team is one that (1) is balanced across skill sets and temperaments (2) has the commitment and tenacity to execute even in tough conditions and (3) has an edge in insight or ability. The question is: how on earth do you measure these things concretely? Can you put teams and founders on a scale of who is objectively better at what while utilising an efficient process? As an idea-stage to pre-seed investor myself, these are things that I’ve been trying to figure out.
In this article I’ll be exploring decision making. Decision making is huge, but the difference between an extraordinary decision maker and a mediocre one oftentimes boils down to a slither. Here’s what I mean. Most simple/obvious problems have big distinctions between right and wrong choices, and it’s not difficult to choose which one. For instance, if I’m standing right next to the Grand Canyon, I either have the choice to jump off the cliff or stay on the ground. Unless I want to see my bones turn to absolute mush and I want to see heaven much earlier than I need to, I will stay on the ground. 99.999999% of the population will think on the exact same lines of thought.
However, most problems and decisions don’t operate like that. Many, in fact, come with their own nuanced set of pros & cons; ones which if you asked 8 friends or “advisors” to give you advice, you’d get 4 of them telling you to go with Option A and 4 of them telling you to go with Option B. One of the biggest challenges early stage startup founders face, and will need to be able to do well is the ability to successfully navigate “swing problems” that require “swing decisions.” What we define as a “swing problem” is a problem without an obvious solution, and a “swing decision” as a decision that was basically “decided by a hair.” Organizations live and die by swing decisions all the time, and delving into recent failures such as Silicon Valley Bank make me think about how the future of startups and companies always hangs by a thread.
Here’s a simple example: SampleCorp has been performing at a very mid level for months and needs some development horsepower to pump out some more features in the pipeline quicker to have an edge over their competitors. After a month of interviewing, 50 potential candidates get whittled down to 2 solid candidates during the job search race. Does SampleCorp hire person A or person B for the CTO role?
Person A:
Pros:
Likable, charming personality
Creative and intuitive thinker
Enthusiastic about product
Charges a little less
Cons:
Not that good of a developer (but still decent enough, about 70% as good as person B)
Sensitive and doesn’t take feedback well
Person B:
Pros:
Extremely sharp and talented developer who can move the needle forward in terms of tech development
Creative and intuitive thinker
Takes feedback well
Cons:
Not as enthusiastic about product (treats it like a job)
Not as likable personality
Charges a little more
As a leader then, the choice becomes much less straightforward. And let’s play out a hypothetical outcome in both scenarios (assuming we have access to a time machine). In the first scenario, SampleCorp hires person A to their full-time CTO, holistically valuing culture and team fit over “outright development horsepower.” 6 months down the line, while person A brings a beacon of energy at team happy hours and meetings, SampleCorp realises that their competitors are overtaking them in product development and their existing pipeline is consistently getting delayed. When challenged on the lack of results, person A becomes defensive (because she is sensitive and doesn’t take feedback well) so no improvement happens and person A gets fired 3 months after the incident. In the second scenario, SampleCorp hires person B to be their full-time CTO, valuing “development horsepower” over everything else as an attempt to gain an edge over their competitors in the rat race. 6 months down the line, things appear great on the surface: updates are getting shipped at record pace, person B’s insights in the meeting room cause SampleCorp to build features that give them an edge over their competitors, and downloads and subscriptions are growing exponentially. Trouble is, person B is making the workplace culture a tad toxic. Although she takes feedback well, she’s also a bit of an arrogant bully, and doesn’t socialise with coworkers much. Despite all the progress made, the coworkers unite in mutiny to try to get person B outside, and succeed in doing so 3 months later. So which decision was right? Or does SampleCorp take scenario 3, where they pass on both of them and continue to head down a path of mediocrity?
One of the most derided decisions in NBA history was when David Khan of the Minnesota Timberwolves took Ricky Rubio and Jonny Flynn (both point guards) with back to back picks (No. 5 and 6) in the 2009 NBA Draft, bypassing Steph Curry. For those of you who don’t keep up with the NBA, Steph Curry became one of the greatest players in NBA history, while Ricky Rubio turned out to be a decent player and Jonny Flynn was out of the league in a few years. So what was the train of thought going through this guy’s head? Here was his rationale:
Looks obvious in hindsight, but not as obvious back then. Who knew what Steph would become, after all? And looking back, there might have been another scenario where Jonny and Rubio pan out. Then will we be laughing at David Khan?
So then, how do we attempt to find out whether someone can thrive under swing decision-making? It’s challenging to find out in an interview/application, but approximately a startup CEO who shows good acumen in making swing decisions should be able to exhibit the following:
Knowing how to utilise different principles of thinking for different situations. A good early stage founder always maintains principles in terms of ethics, but for instance: is conservative in some situations and risk-taking in others, instead of being all or the other.
When faced with an opportunity to follow the “hype train,” a smart founder thinks through the potential implications for himself/herself in terms of the short and long term health of the business, and holds back if there is a minimal chance of a large gain but a very large chance of a small/big loss (does not apply to VC by the way). When faced with the opportunity to muck the business out of mediocrity, a smart founder takes a calculated risk to move the needle by pivoting direction.
Considers all the strengths and weaknesses of all of the potential options around him/her, and then makes a decision with the least impactful weaknesses and the most impactful strengths (even if it’s ever so slight)
Prioritizes long term gains over short term gratification, but when the short term gratification is urgent, designs the terms to minimize the immediate negative impact.
Eg: when cashflow is tight, takes a bridge round but minimizes the size of the bridge round and finds other creative ways to maintain staff in order not to destroy the long term cap table and balance sheet
Knows how to balance heart and rationalism; sometimes the best long term decisions for a company hurt a few teammates, but you also don’t want to come across as a ruthless dick
Eg: a smart leader knows how to let go of his/her best friend if he/she is consistently underperforming at his/her role in a diplomatic way, but then will turn around and find him/her a job at another company that suits his/her skills better. Easier said than done
Knows how to turn on the jets and when not to turn on the jets; designs his/her long term work life around the optimal intersection between volume and efficiency so that burnout won’t occur
This looks different for everybody, but is incredibly crucial because lots of bad decisions are made when leaders are tired, etc.
Utilizes the principle of utilitarianism, which means the greatest good for the greatest number of people.
Overcommunicates when a decision is likely to cause confusion, because clarity > ambiguity.