Believe it or not, one of the most profound pieces of advice that I’ve given over the years when someone I know and like is facing adversity is to “go ahead and quit”. Taken out of context, this might sound like a horrible piece of advice, but I truly believe that presenting the option of quitting is almost always better than telling someone they have no option but to stick it out. Now let me explain.
In my simple world, there are two types of people: People who can’t help but give everything they have and people who are wired to be OK giving less than their all. To be clear, one type of person isn’t superior to the other. Each has its strengths and its weaknesses, but it doesn’t change that fact that in my 25+ year career, I’ve observed that people really do tend to fall nicely into one of the two categories.
I’ve also observed that when a person says they’re “giving their all” they typically aren’t. Giving one’s all to any given task is really difficult and comes with significant sacrifice in other parts of one’s life. To some people, the pursuit of balance is their life’s mantra, but it’s a fantasy standard to people who understand what it takes to “give their all”. Balance is the mortal enemy of unwavering grit because there’s only so much time and energy a person has. It’s really the basic math of life: A person can spend their energy all in one place or spread it around.
So back to my advice. Accomplishing big things isn’t easy. The path is always rocky and many times downright treacherous. Sometimes, situations might even feel impossible. But, when I let someone know that they always have the option of quitting, what I’m really doing is asking the question: “What type of person are you?” I ask them to think really hard about quitting and more importantly how they think they’ll feel the day after they quit. If “relief” is among the emotions they surface then they’re a very different type of person than if “extreme regret” is the prevailing thought. And if they do end up quitting (which usually means abdicating responsibility and accountability), then everything is out in the open and decisions can be placed in the hands of the people who are willing to stick it out. Poking the bear to find out whether you can rely on someone to give everything they have surfaces issues and opens dialogue, both of which are important steps in understanding what type of person you’re working with.
I know many of you are thinking: “Of course. Being a Founder requires being maniacally focused on solving difficult problems”. While this is true, I’ve watched a Founder figuratively curl up into a ball and ask to be relieved of his duties. I’ve also watched a Founder hold his own business hostage (equity and cash) because he was busy worrying about himself in a time of crisis. And I’ve seen a Founder go on vacation the week before AND the week after a RIF because their golf trips were already booked.
But as importantly, I frequently see Investors throw in the towel on their struggling companies under the logic that “the power law dictates that I should spend the vast majority of my time with my winners”. While the logic could be true, this is a narrow way of thinking about the role of an Investor (i.e. – produce the greatest immediate return for LPs) and there are other things to consider. Part of the job of an Investor is to be there side-by-side with their companies through thick and thin and help navigate tricky situations. Doing this will build the VC’s experience navigating tricky situations and simultaneously create Brand around being “founder aligned”.
Hopefully Founders seek out the VCs who come with the best reputations, so spending the time with a struggling company could end up producing long term returns. I personally think Founders should reference check Investors regarding their “grit” in the same way that VCs try to determine if the Founders are “all-in”. Just my two cents….but I know which camp I’m in so consider this a very biased perspective.
And believe it or not, as important as the power law is to VC returns, there are countless situations where a struggling company hacks away at their market and makes the right pivots and tells the right story to the right investor to attract the right amount of capital and ultimately succeeds as a result! There are more moves to be made than most people think, but it takes grit and determination to execute plans when a situation appears dire.
I affectionately call this the “Chip and a Chair” attitude which should really be attributed to Jack Straus, a very famous Poker player in the 1970s and 1980s. Jack “Treetop” Straus was best known for winning the 1982 World Series of Poker Main Event where he was able to come back from being down to a single chip earlier in the tournament. He had a chip to play with and a chair to sit in so he was still alive in the tournament. Many poker players would have given up or gone “on tilt” (i.e. – when a player becomes frustrated and starts making ill-advised plays based purely on emotion) but Jack stuck it out and played the best poker he could. He knew that he had very few moves available given his chip “stack” and he also knew that when he made moves they had to work. But he stayed alive long enough to build his stack back up and eventually won the whole tournament.
So, are you a “Chip and a Chair” Founder? Are you a “Chip and a Chair” VC? How much fight do you have in you? Which is more important: Getting a bit of relief or avoiding future regret? If you ever want to know, just quit when the going gets tough and see how you feel the next day.
Frank, very interesting. I also read your comments in the WSJ today. I am Anthony Nerantzis, a recent graduate of James Madison University. I currently work on Capitol Hill, but during college I interned at both Raymond James and Morgan Stanley. After reading some of your material and learning about your background, I’d love a chance to talk to you and see if there are any opportunities available at QED. My email is email@example.com