Barbara Corcoran, drunks under streetlights, and how entrepreneurs make dinner

[Another excerpt from the book I'm writing, currently quite enjoyably at a monastery-turned-conference centre in Tuscany. Chapel to explore during teaching and writing breaks is at right.]

“The left [rational] side of the brain is totally overrated in business. I’m not a believer in the MBA-type stuff. Most of the times I ever lost a lot of money with somebody, they graduated from Harvard.” These blunt words come from Barbara Corcoran, who founded a real estate brokerage she sold 28 years later for $66 million, before becoming a “Shark” investor on the T.V. show, “Shark Tank”. They are representative of an important anti-analytical, anti-over-intellectual opinion much more broadly shared within the business world. How does one reconcile that with thoughtful, repeated, systematic risk management? Even if performed very non-bureaucratically and linked to business decisions, as recommended in this book?

One of the core strengths of entrepreneurs is their commitment to their trajectory. While they may not dither with endless tradeoff analyses, they do very much think about threats and opportunities in their business. Their commitment and concentrated exposure forces them to go all-in, but also to respond, pivot, somehow deal with adversity, and to maximally exploit flexibility and opportunity. In fact, speaking with successful entrepreneurs, I am often struck that they are much more clearly able to articulate what precisely are the big bets of their business model than cog-in-the-machine executives. The difference is that while a cautious, analytical executive may articulate their bets (if they bother to) as questions, concerns, or worries, the entrepreneur will articulate them as positively-held beliefs about the world. These assumptions are articulated (perhaps over optimistically) as fact, but also modified or jettisoned without regret if circumstances change or the bet turns out to be wrong.

What Barbara and other like-minded passionate entrepreneurs are really railing about is two things.

First, overly analytical and risk-averse “intellectual”/MBA business people over-think and under-act. They are always second-guessing themselves, don’t commit, and take decisions late by an excessive hunt for an analytical fact base. They are not fast enough to pull the trigger using heuristics and retreat too quickly rather than hustling.

Second, they over-analyze what is analyzable rather than what the real issues. There’s a well known joke about a drunk looking for his keys (hopefully house keys, not car keys!) under a street light. “Where’d you lose them?”, asks a bystander. “Back down the block.” “Shouldn’t you look for them there, then?” “No, it’s too dark back there to see anything.” If Barbara’s strawman Harvard MBA analyzes merely the issues where he has plentiful access to data and well-established analytical methodologies, but ignores his gut about the shadowy issues that really matter, then he is wasting his time indeed.

Self-reflective entrepreneurs-in-spirit, whether they are the founder of a startup or a line executive in a larger company who doesn’t want to miss the forest for the trees, do make time for “MBA-type stuff”, and by extension analytical frameworks and methodologies like risk management — where they are relevant enough! As I write this, I am working with two talented, driven startup founders-turned-CEOs. They can articulate their big bets, and have at their mental fingertips a solid understanding of the handful of most crucial risks that may derail them from their objectives. They have actively through through ways to anticipate some of those risks, how to be resilient to others, and how to turn some of them into opportunities at the right time. They may not have formal risk reports, risk metrics, heat maps, and their companies’ organizational complexity is a far cry from what would require naming an explicit Risk Manager. But crucially they both reflect that their best thinking on this occurs when they detach their minds from the mundane. “I think about that sort of stuff when I fly back [in his case, regular trips from his home to work with an accelerator in Silicon Valley] and am not getting pinged by my team all the time”, says one of them. “I try to divorce my mind from the details once in a while and think in scenarios, usually when making dinner”, says the other. That’s what good risk management is (though I’m not sure how it impacts dinner!)