Paradoxes To Live By
May 30, 2016 Written by: W.B. “Bud” Kirchner
Is it possible to have too much money?
Is it possible to be too well known?
Every (business) person knows neither of those prepositions could be true. But could they?
My thoughts (comments) here particularly reflect Kirchner Group’s experience with early and mid-stage companies as we have dealt with them in both our traditional merchant bank activities and those sponsored by Kirchner Impact Foundation. These are companies that are often at the leading edge and they are doing high profile (e.g. societal benefit) activities. They are universally founded/managed by smart ambitious people.
Beware Land Mines
I expect it goes without saying that the course to building something of value is riddled with land mines – some as obvious as market acceptance, team building etc. but some (arguably the most dangerous because of this) are far less obvious – especially since they have insidious implications and may be paradoxical in nature.
The two that come to mind (and that I have seen wreak havoc) are:
- Too easy/too much money (capital)
- Too much profile
Or in another context:
By way of disclosure, I should declare Kirchner Group has an inherent culture based on real value creation and thus we are particularly sensitive to the mistake that anything that glitters must be gold.
Capital Efficiency (Put Your Hand Back in Your Pocket)
Is it as simple as too much of a good thing when it comes to money?
If you can get by with a “rule to live by” – I would say yes. In other words when in doubt put your hand back in your pocket.
NOTE: My comments here are intended to relate to the big picture issues but there are lots of good articles on the ‘science’ of capital efficiency and best practices:
- “Three examples of how capital efficiency leads to major growth” – Norwest Venture Partners
- “Capital Efficiency Measures” – Shareholder Value Advisors
- “The Long Lost Myth of Capital Efficiency” – Feld Thoughts
In order to have this part of our discussion we at least need a bit of context – we are essentially discussing the ratio between total capital raised and total enterprise value created. Keeping in mind the latter involves intangibles.
When capital is (over) abundant you tend to do things like: [company perspective]
- Be less innovative .
- Spend less time in front of customers.
- Expand initiatives too readily.
- Hire too quickly.
- Spend any capital reserves (Yes – rainy days do come).
- Weaken position (valuation) regarding subsequent finance.
Which leads to things like: [personal perspective]
- Dilution that often results in reduced ‘reward’ for founders and early investors.
- Loss of being the master of you own destiny (most egregious!) via the imposition (enforcement!) per:
“We live by the Golden Rule. Those who have the gold make the rules.” – Buzzie Bavasi
Celebrity Obsessed, Entertainment Oriented
As a general guideline I share the words of Jeffrey Armstrong (Author of several books and for years a corporate executive in Silicon Valley)
“Ego expands to fill the space not filled with knowledge.”
Back to my earlier point – being a spokesperson for a great product or service especially one with societal benefits attracts a lot of attention. This is exacerbated by our celebrity obsessed entertainment oriented society.
One might argue circumstances conspire against founders/managers keeping their feet on the ground.
Once again, the impact is significant at the enterprise level:
- Poor team building – “All I need are yes men.”
- Not listening to customers – “They don’t really know what they want.”
- Objectives become short term – “This is about keeping my name up in lights.”
And the toll on an individual is also significant:
- Interpersonal dynamics skills weaken.
- Personal growth stifles.
- You end up drinking alone!
Luckily there is a simple solution – remember the works of Harry S. Truman
“It is amazing what you can accomplish if you do not care who gets the credit.”
And in closing – if you are unfortunate enough to have exploited money and fame and don’t become a ‘shooting star’ – keep the following quote from an American poet, essayist and existentialist philosopher in mind:
“The biggest challenge after success is shutting up about it.” – Criss Jami
About the Author: W.B. “Bud” Kirchner is a serial entrepreneur and philanthropist with more than 50 years of business success. He is not a scientist or an academic but he does have a diversified exposure to neuroscience, psychology and related areas. Generally speaking, the ideas he expresses here are business-angled expansions of other people’s ideas, so when possible, he will link to the original reference.