David Friedberg, an American entrepreneur, businessman, and angel investor, said in recent podcast: “There is this concept of adverse selection which is the negative actors will seek them (bad investors) out and there will be a match. Ultimately, they will be adversely selected into the deal which will blood them up.” The conversation was about investors who do not want to think for themselves, and are trying to outsource important decisions to others. Like, if Sequoia Capital enters the deal, then we too can, no, even need to enter. The irony is that the more successful everything will be, the worse it will be in the end. On the one hand, success fuels a person’s belief in his own foresight. On the other hand, delegating key decisions to others atrophies his ability to distinguish between signal and noise. Each round only raises the stakes. It’s only a matter of time before an increasingly overconfident investor comes across an ingenious scammer like SPF and invests all his savings in a scam a la FTX.
A long time ago I had the opportunity to spend a winter vacation visiting the founder of a billion-dollar company. We had assigned our children to a ski school. The first morning the entrepreneur said to me: “Let’s go, let’s take the kids to school. I was about to go out with my snowboard on the mountain, so I wondered, “Why, isn’t there a driver?” He looked at me very carefully, “Don’t you want to meet the instructor you’re handing your son off to for the day?” I involuntarily exclaimed: “Well, this is Europe, a professional school, an expensive resort, etc.” But as I was already saying these words, I realized how right he was. That situation alone taught me more than a semester at Chicago business school. I then thought hard about my risk-assessment system.
Since then, I have had many cases of my own and others to make sure the lesson is true. There are a number of decisions in business that no one can make for us. A company owner tired of putting out fires convinces himself that a hired CEO will do wonders for his troubled company. The introverted CEO communicates with employees exclusively through HRDs. The investor makes a deal without thorough due diligence, afraid of missing out on a hot trend and/or a promoted startup. Attempts to move out of responsibility for their own destiny are punished by it harshly and inescapably. Director Guy Ritchie said it well: “You must be the Master of your own Kingdom.” It doesn’t matter how shrewd or wrong specific decisions turn out to be. All that matters is that one make them exclusively for oneself.
Yours sincerely,
-Alexander
You can help Ukraine defend itself and the World from Russian aggression here.
”Who are you and what do you do?"
As a business therapist, I help tech founders quickly solve dilemmas at the intersection of business and personality, and boost company value as a result.
"I have an extremely important business decision to make. Can you help me?
Reserve a time on my calendar that is convenient for you to meet with me. We'll clarify your request and discuss options for how you can help.