No One Asked Me But...

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Whenever insiders perched at the top of public companies decide to sell their stock, the argument they always make is that they are diversifying their holdings. A recent story in the New York Times on the insider rush at home-building companies -- and whether or not the vast liquidication is a signal that we're pushing the limits of the tensile strength of the bubble -- reminded me of how this facile excuse so perfectly highlights the difference btween a public and a private company.

Entrepreneurs have their fortunes and their life's work, generally, wrapped up in their companies. They're a different species from professional managers who have one eye on the business and the other on an exit strategy and "wealth preservation." The very idea of insider selling to an entrepreneur is hard to fathom; it's a fundamental betrayal of conviction.

I wonder how a CEO who just sold a couple of million dollars worth of his or her company's stock can look at a potential customer with a straight face and say "do business with us." How can you ask for confidence in your organization when you've just demonstrated a significant lack of it? After all, "diversification" is simply a polite way to say that your money is at less risk -- or can grow faster -- somewhere else. When you've bailed out why should someone bail in?

It seems to me that any entrepreneur competing against a public entity has a huge advantage in this dimension. But are we using it? Just because the depth and level of committment that an entrepreneur feels is intangible, doesn't make it any less real, or meaningful. Insider selling is one big, jumbo metaphor for the self-interest that -- sadly and largely -- goes unrecognized at America's largest companies.