This is a very short post but it contains an essential guiding principle for investors in dealing with CEOs.
At this years Annual Meeting at Berkshire Hathaway, someone asked Warren Buffett and Charlie Munger how they intend to keep their managers of Berkshire‘s subsidiaries. This and another question triggered Warren to explain that he does not do micromanagement of his firms. He said he speaks only maybe twice a year to several of the CEOs of companies Berkshire owns. „If we thought that they needed us to be successful, we would get out“ . He then went further to explain: „Charlie and I like to paint our own painting without someone else telling us to use more red or more blue. And we think that the Berkshire CEOs feel the same and want to paint their own painting“.
This attitude contradicts massively with what I sometimes observe in the behaviour of investors in startups. There is a difference, the argument goes: In startups, we often have inexperienced founders, and sometimes more experienced VCs.
Nevertheless: I strongly believe that most VCs would do well to remember the basic truth in “Painting your own picture”. Nobody becomes a startup CEO because they want to do what Investors tell them to do.
I’ve experimented with both and in my experience it was nearly impossible to manage a dispersed team according to similar kpis. Everyone thought there market was special. but having 20 people from different nationalitites in one room, working towards the same KPIs never seemed to be a problem