The Founder’s Dilemma
Central Theme
When most entrepreneurs start their businesses, they tend to have an illusion that they have what it takes to reach the levels of people like Bill Gates and Anita Roddick, who are perfect examples of founders who are both rich(have wealth) and king(have control). Noam Wasserman points out that CEOs who are both wealthy and in control are exceptions. Therefore, founders are advised to choose whether they want to be rich or want to be in control. He argues that maximizing one of the two aspects minimizes the other, and trying to achieve both control and wealth leads to the founder losing out on both of them. The founder believes that no one else apart from them can successfully lead the startup. This partly true, especially at the initial stages of starting a business since they understand the blueprint of the enterprise better. However, most founders are overconfident, which obscures them from seeing the reality of problems they are likely to encounter.
Being optimistic and overlooking the challenges in a business startup are important factors that give the entrepreneur confidence to get started with the innovation but can create future problems. Wasserman also discusses how founders lose their control over the company with the aim of getting financial assistance on realizing that relying on their own resources is not sufficient to make the company productive. Another interesting fact that comes up is the paradox of how achieving results doesn’t prevent the founder from losing leadership position and instead increases the chance of losing the CEO post. This is because success creates new challenges that require more skills that the founder may not possess. In most cases, entrepreneurs become aware of the dilemma after the startup has grown. Studies reveal that entrepreneurs who surrender big shares of equity to bring in partners end up with a company that has more value and little equity. If the founder chooses money by giving room for investors ends up with a more valuable company at the expense of leadership. On the other hand, choosing control results to founders taking actions that allow them to lead the company even with reduced value.
Critical Analysis
The main weakness of the Noam argument is how practical it is for people to adopt the concept of making decisions without having emotional attachments or intuitions. It is human nature for people to be driven by emotions, and they struggle when it comes to incorporate their passions into new businesses with clear perspectives objectively. Wasserman is aware of this weakness, but he does not suggest how the problem can be minimized.
The book has the strength of being thorough. The studies used to substantiate the argument are diverse and make the concepts applicable to a wide range of people. The in-depth research makes the book a reliable source that can be used as a reference to guide business founders concerning wealth and control. The approach used to describe the principles is simplified in a manner that makes it easy to understand and different aspects
Wasserman’s work is a valuable tool that can be instrumental in making startups become successful or succeed more. The book provides a roadmap that gives entrepreneurs direction and, therefore, has minimal chances of making common mistakes. He emphasizes that the dilemmas are not new nor unique, and they have solutions. Scientific research and experience from those who have been there before can solve these problems and can apply to different demographics
Even though people have a habit of not learning from the mistakes of those who were there before them, The Founder’s dilemma can be essential in eliminating complexities in building a business. The book has equipped me with a blueprint that I can use to come up with better business decisions to prevent or solve problems.
Key Take-Aways
Noam’s concept is thought-provoking, and it prompts an upcoming entrepreneur like me to get into the business being more enlightened and having a better perspective of what factors to put into consideration. As entrepreneurs, we have a problem with emulating successful individuals without getting the facts right. For example, an upcoming innovator may look up to the likes of Bill Gates because of how he has both riches and control over his businesses without taking time to ask the question of what he did differently to achieve both control and wealth. This concept can help entrepreneurs to think outside the box and identify what aspects of their role models they should emulate.
With statistical backing, Noam illustrates how equity splits in startups don’t work in most cases. Approximately 73% of cofounders divided equity shortly after starting of the businesses. Uncertainties are inevitable during the initial stages of startups, and therefore founders should learn from Noam how to create an allowance for adjustments in the future. We learn from this book how to consider the prospect of a startup to ensure that there is longevity. Being too optimistic can be detrimental in the future, and therefore it is important to take into account all the possibilities. As the startups go through different stages, tasks required from the founders may change, and their roles may not be as valuable as they were in the beginning. Each founder needs to look at the bigger picture and see beyond their contribution since there are roles that can be performed better by other individuals. Paying attention to other founders’ efforts makes us identify their strengths and areas where they perform better than us. This is an important lesson that I have learned.
References
Wasserman, N. (2008). The Founder’s Dilemma. Havard Business Review, 103-109. Retrieved from https://hbr.org/2008/02/the-founders-dilemma