strategic consultant to:  

One of my clients mentioned the other day that he would “worry forward.” I love the phrase. My clients, entrepreneurs all, worry forward that a deal will close, that the legal language in a contract will get settled, that he or she will make enough revenue to cover their needs, and so on.

Perhaps this is the usual anxiety of difficult times, but for entrepreneurs it can become a way of life. To be an entrepreneur is to live in freefall – to never know what change will come, for good or ill. Will the contract sustain into the next phase? Will the client change management and cancel her contract? Will his marketing outreach actually work? Will the cost of that show actually create revenue?

Of course, life is like this for everyone, but others have at least the illusion of more structure and the expectation that they have a job to go to in the morning, a paycheck every two weeks, and coverage for certain benefits. Now, the pink slip can hover, and of course job security is a thing of the distant past, but still, entrepreneurs are making it up as they go along every day, no matter how deep their experience. Entrepreneurs can have no illusions and must make their own structure every morning.

The antidote for worrying forward is to look back. This discipline involves slowing down to take notice of what you dreaded and what actually happened — to literally take note of it, to put it into your experience. Many folks remember only the dramatic bad stuff that happened to them, and forget the successes and the avoidance of anticipated bad stuff that never came to pass. To “put it into your experience” means to take the time to take credit for what you did that managed to avoid the anticipated bad experience, and that created success in a risk that you took.

So, notice:

• Your dread of that legal language? Settled without hassle? Why? Because you were clear, gave the other attorney time to absorb your position and make some changes, and because you didn’t allow yourself to be defensive. Don’t overlook these accomplishments – give yourself some credit.
• That contract that moved on to Phase Two despite the client’s tight budget? Notice what you did to ensure this: you positioned your value proposition carefully, and got creative about your pricing model to relieve some of the client’s pressure. Give yourself a bit of applause for a job well done.
• That show that cost so much and turned out so well? Notice that you did your homework meticulously in advance, scheduled twice as many meetings as usual, honed your pitch, and did all that detail work that makes those meetings at shows move on to the next encounter and the close of new business. Don’t disregard what you committed to create success – acknowledge it.

Now, sometimes you’ll hear someone say, “Wow, you really got lucky with that one!” Don’t believe it. We make our own luck, and you made that success with every effort you completed.

The benefit of the discipline of “looking back” is that, over time, you come to understand the level of your own competence in your deep self. Then your “worrying forward” will diminish to a small noise in the back of your head, not the stuff of nightmares. I promise.

Having insight into the dark side is essential in business, but we must learn to look there but not live there. In recent years, I have found a place in myself that allows this question to accompany me in all my business dealings: is that a lie?

Many of us, the fortunate ones, approach life and business with optimism and good faith. We take people at their word; we assume they are telling the truth, even if we see a bit of spin on the story, or exuberance in the telling. This optimism and good faith are part of the constitution of many entrepreneurs, and gives them their resilience to keep on through the trials of building new ventures, again and again.

And this same optimism and good faith can be an obstacle to their success, until they hone the ability to cast an eye of deep skepticism on essentially everything they hear from potential partners, investors, and strategic allies. This is particularly troublesome to the most honorable entrepreneurs, the ones who, by their very nature, keep their commitments.

The trick here, to look on the dark side but not live in it, is a kind of segmentation of your thinking – you can both let yourself fly high on the exuberance of a gleaming story of success (with a partner or an investor), and then come down to earth, without bitterness or negativity, and look at the opportunity, the partner and the investor with a colder eye, that says: “What if it isn’t so?” What if the technology hasn’t really been tested? What if the benchmarks in the investment deal are set against my keeping control of the company and there is a hidden motive here? What if this buyer wants only to close my company because it competes with one of his own companies, and he will never build it, as he says? What if this charming, positive and successful person across from me is a flim-flam man? What if I’m being conned?

In my work with entrepreneurs, I refer to this as my being Darth Vader – showing the dark side of every opportunity while we are assessing it. My work has shown me so many deals and their consequences that I often find humor in this perspective, because I have seen such a wide range of characters. The humor that is now embedded in being Darth Vader can startle my clients, but also lightens the gloom.

How do you master this segmentation of thinking? You sit still for awhile, alone, outside of the negotiations. You allow all the feelings to run through you, and recognize each one for what it is – euphoria, hope, skepticism, distrust, doubt (and self-doubt if that shows up), and the early stages of paranoia.

• Look at the optimistic projections you’ve been shown, and indulge in a few dreams of what that kind of success might mean for you. Then set this context aside.
• Conduct rigorous due diligence on the person, the product, and the capital, by yourself and with your advisors. Use your network. Did she really get that MBA? When she said she was instrumental in that other company’s success, did you find anyone who knew her and would verify this? Did you test the product and verify the results of the beta test of the technology? Did you see the investors’ check the potential partner claimed he had received?
• Examine the negotiations you are involved in, step by step, to see if there is any behavior inconsistent with a true story. What promises or illusions were mentioned but never followed up on? How long does it take to get a response to your communications? What does the behavior you witness in negotiation tell you about a long-term working partnership? (Someone once said, “If courtship is this difficult, what will marriage look like?”).
• Consider seriously the pessimistic view of the opportunity and your risk profile. How much are you planning to offer and commit of your time and expertise for what return? How much control do you have at what point? If everything falls apart, what are you left with and what have you signed away that cannot be retrieved? Then set this context aside.
• Study your “gut instinct.” You won’t be able to ignore it if you don’t. Your gut instinct is often correct but just as often irrational. So take a look and allow yourself to feel it. Then set this context aside.

Finally, take some time in a neutral context to see what weighs in more heavily – the doubts or the confidence that this is the right choice. With the information from your due diligence and your risk profile, the balance should tip significantly more one way than the other.

These tactics help us expose all the ways we can approach a decision, including the exuberant hopefulness of a new opportunity, and its dark side. By separating each approach, we can avoid our own irrational feelings sneaking up on us and helping us to rationalize a bad choice.

This discipline grows easier the more often we apply it, and saves us from approaching opportunities with either too naive or too defensive a context.

New College, Oxford is of rather late foundation, hence the name. It was probably founded around the late 14th Century. It has, like other colleges, a large dining hall with big oak beams across the ceiling, yes? These might be two feet square, forty-five feet long.

Some five to ten years ago, I am told, some busy entomologist went up into the roof with a penknife and poked at the beams and found that they were filled with beetles. This was reported to the College Council, who met in some dismay, as where would they get beams of that caliber nowadays?

One of the Junior Fellows stuck his neck out and suggested that there might be on College lands some oak. These colleges are endowed with pieces of land scattered across the country. So they called in the College Forester, who of course had not been near the College itself for some years, and asked him about oaks.

And he pulled his forelock and said, “Well, sirs, we was wonderin’ when you’d be askin’.”

Upon further enquiry it was discovered that when the College was founded, a grove of oaks had been planted to replace the beams in the dining hall when they became beetly, because oak beams always become beetly in the end. This plan had been passed down from one Forester to the next for four hundred years. “You don’t cut them oaks. Them’s for the College Hall.”

A nice story. That’s the way to run a culture.

~Gregory Bateson

A paper copy of this has resided in my archives, “Thinking,” for more than 25 years. I wanted to share it with you.  The Internet now tells me this is an excerpt from “How Buildings Learn,” by Stewart Brand (as told to him by Bateson) and that New College dismisses this story as “nonsense.” Still a story worth telling , sharing and remembering for 25 years.

Keeping control of your Company’s vision and its execution is essential if you are to create wealth – even after you relinquish the CEO seat.

I learned a lot from two CEOs I knew well, who each let go of control of their companies to new management at the height of success, after an IPO, but without keeping a close eye on developments from their Board positions.

“I didn’t know that the CEO I hired would lie to me, now that I was on the Board. Well, not lie exactly, but position the condition of the company in a good light and cover up the dangers, come Board meeting time, just like every CEO does. I didn’t realize I had become the Other. I lost $50M by sticking by the stock as it nose-dived, and not watching more closely. After it tanked, my founding partner had to go back in as CEO to turn the company around.”

The other founding CxO insisted on holding on to his stock, after he and his founding team had left Management following the IPO. He was not active on the Board. He lost $30M he could have had from the sale of the stock when it was strong, because he resisted all advice to diversify his stock portfolio, and held on to the company stock all the way down from hundreds of dollars per share to pennies per share.

Both of these CEOs were very intelligent and savvy, and had put more than 5 years into the development of their successful companies. So don’t think this cannot happen to you.

Another story is of lost opportunity based on mistaken early capital strategy, not an uncommon tale. The founding CEO took on more capital than he needed from top venture firms during his Series A. This cost him a great deal of his equity, as it was early-stage funding. The collaboration went well, and the company succeeded nicely. But when they reached the growth stage, the investors and the founder had different opinions on how to maximize that growth. But by then, the CEO did not control enough votes on the board to see his vision through. Market forces changed, and the Board’s strategy for growth maintained but stalled the company. Eventually, the CEO had an observer’s seat on the Board, and nearly 10 years from the start of the company, the exit by sale of the Company brought him around half a million dollars, but not the $5M or $50M he had envisioned from the beginning.

There are some lessons here in distance and objectivity:

• Understand how your position changes when you occupy a new role, and how human nature (new Management) behaves towards you in that role.
• Watch closely from your Board or shareholders’ position that new Management is making the decisions that are best for the success of the Company and its (your) shareholders’ value.
• If you are not watching closely, diversify away from extensive holdings in any company you do not control or influence, even if you started it.
• If you are not in control of the company you have founded, become objective about it, no matter your personal or emotional attachment to its original Ideal.

Wealth creation is not only achieved by an excellent idea executed deftly… the end game is as important as the beginning.