Here's a thought experiment that doesn't take an Einstein to run: Let's say there's a large public company whose CEO has been behaving erratically. He has issued projection after projection that didn't pan out. He's been making bizarre, unsubstantiated claims about conspiracies against him. On an earnings call, he mocked Wall Street analysts. On Twitter, where he frequently posts his unfiltered thoughts (such as calling an emergency rescue worker a pedophile), he recently announced an intention to take his company private, triggering an SEC investigation into stock manipulation. There are credible allegations that drugs had something to do with the lapse in judgment.  

Oh, and by the way, the company has always lost money, and the CEO has four other jobs that demand his time. 

OK, it's pretty obvious I'm talking here about Elon Musk. Except I'm not, because, in this thought experiment, the CEO in question is a hired-gun professional, not a co-founder who's been involved in building the company from its earliest days. The question is: Would the company's board tolerate all this from Bizarro Elon, or would it fire him? 

That's a trick question. Obviously, he would have been fired long before he racked up this whole rap sheet. That's the power of being a founder CEO in Silicon Valley. 

Call it the Great Man theory of startup leadership. At any given moment, there always seem to be a handful of high-profile struggling companies whose boards and investors are convinced, absent any particular evidence, that they'd be struggling a lot worse were it not that the guy--it's almost always a guy--on top of the org chart is also on the articles of incorporation.

The Great Man theory explains why Jack Dorsey was welcomed back at Twitter even though he, like Musk, had another full-time job (running Square), and even though, on present evidence, he doesn't seem any more equipped to solve Twitter's biggest problem--rampant harassment, abuse, and disinformation--than his predecessor. It explains why Uber stuck with Travis Kalanick long after the point it was clear to the rest of the world he'd become a toxic liability.

It's not an unconscious bias. The biggest and most influential venture capital firms are heavily invested, literally and metaphorically, in the idea that companies are better off when run by their original founders. Ben Horowitz of Andreessen Horowitz says only founders have the "moral authority" to make unpopular but necessary decisions. Founders Fund says you can't judge "visionary entrepreneurs" by normal professional standards because the ones capable of pulling off the biggest bets are "wild-eyed" nonconformists who inevitably "come off as naive or worse." (Founders Fund is a backer of Musk's SpaceX.) 

Maybe that's even true. There's certainly plenty of research showing companies led by their original founders create more value for shareholders over time and invest more in long-term initiatives. There's also research showing, more or less, the opposite: that founder-led firms are less productive and worse managed, and replacing a founder as CEO "is beneficial on the whole." 

You can believe what you want to believe. But one thing that's undeniable is attachment to the Great Man theory makes it harder to see when a founder urgently needs to be replaced and harder to take the necessary remedial action in a timely way. In Uber's case, the company's reputation was so damaged and the internal politics so poisoned by the time Kalanick was finally forced to step down, a number of attractive CEO candidates reportedly turned down the job, among them Facebook COO Sheryl Sandberg

Indeed, it seems every time a founder-led tech company goes through a rocky patch, reports roll in that the company is on the hunt for "a Sheryl Sandberg type" who can play the role Sandberg plays vis-à​-vis Mark Zuckerberg at Facebook--professionalizing its management and messaging, overseeing the boring business stuff while the founder focuses on product and strategy. 

Here's a very modest proposal. Silicon Valley struggles with creating enough opportunity at the highest levels for people who don't fit into its typical Great Man founder mold, i.e., women and people of color. Silicon Valley also struggles with recognizing when laudable founder patience tips over into myopic founder worship. Maybe it's time to treat those as related problems? If investors were a little quicker to abandon their presumption that the founder is always the right guy for the job, it would create chances for a new generation of Sheryl Sandbergs to show they can run companies--not just the boring parts, and not just the ones that are already broken beyond repair. 

Maybe there's no reason to believe an outsider CEO could do a better job than Elon Musk of delivering on the Model 3's production guarantees. But could she do just as well while avoiding half a dozen crises of her own creation? That's another thought experiment that doesn't require too much thought. 

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Published on: Aug 23, 2018