“The best way to find out if you can trust somebody is to trust someone.” Ernest Hemingway said that. And we wouldn’t be a great if you were starting a business, and right out of the gate you had instant trust? You know,you could go solve the great problem with your co-founders and not have to worry about trust. Ernest, you gave me a great opener, but it is not exactly easy in principle.
I’ve started, founded, and funded four early-stage technology businesses over the last 15 years with varying degree of success and absolutely some failure. And one of the things that I’ve examined in doing so is a lot of this stemmed back from some earlier times. So I will start there.
In 2001, September 11th, I was a little late going to work one morning, and didn’t attend a breakfast meeting at a restaurant called “Windows on the World” in the North Tower. And within two hours, my livelihood, and sheltered view, and trust was wiped clean. And like a lot of other folks at the time, I was forced out of my job, and into starting my first company. As you can imagine, that first business taught me some incredibly valuable lessons. And also some super harsh ones. Lets put it this way: I used to have a lovely head of hair.
And it also told me some things to look out for in those businesses in the beginning, and one of the them is mistrust. I have the luxury of not just looking at mistrust from the four businesses that I have started, but I am an adviser to some others, I sat on the board with a few more, and so all of the mistrust seems to happen or form within at first pivotal 12 to 18 months period.
And it is usually for a lot of the same reasons and at the same moments, right at the formation and structure of those companies.
Why is there so much mistrust in the beginning? Well, we start by signing a stack of paperwork for legal protection meant for all parties involved. Starting a business literally starts with, “I don’t trust you, even though I am shaking your hand.” Or, “I trust you, but why don’t we get the divorce out of the way first, then we can go back and build a business?” Or, “I don’t trust you at all, you need to sign that paperwork.” How is this action OK at any level?
Here is terrifying statistic: 62% of all businesses fail because of co-founder conflict. And it is usually for a lot of the same reasons; misappropriations of funds,one founder feels like they are doing more work or they want more equity, soon enough you have greed or somebody gets a job. I mean, greed we can talk about that one issue for an entire additional TED talk.
And there is something more, there is something innate in all of us, something that’s kept us alive for millions of years, and that’s our architecture for self-preservation known as “fight or flight.” Think about it: if you’re starting a business and it’s really hard, how much easier is it to just say, you know what? Forget it. Or other people who tell you, and encourage the demons in your head, those voices that you hear, over and over again: “You know what? You’re better off Josh.” Yet we know that if we take time to process that data, and slow down, that we can come to a more cogent answer more frequently.
So, asking that question, asking that “Why?” “Why will people trust you?” Asking it over and over and over again is not an exercise in futility, it’s what you should be doing every time, even when you’re crushing it. Now,people were asked why they buy, and as you can imagine, starting a business, this is incredibly important. It’s pretty important. And the reasons that people buy don’t necessarily point to 100 year old brands. I mean, let me put it this way. I’m not taking anything away from the Coca-Colas of the world. They absolutely have earned their right place.
But 77% of the reason people buy is because of family and friend recommendations: 77%. And that makes perfect sense. They’re your family, they’re your friends. If your dog could tell you what kind of dog food it wanted to buy, you’d probably go racing off to buy it because it’s your dog. Anyway, all of this brings us back to a better place around why and how we should form businesses going forward. I’d like to propose something that I’m calling a “trust framework” and this is the reason or rationale – for people to begin businesses. And it has three core elements
So the first one is transparency. Sadly, I’ve been part of businesses in the past where this has been completely absent. – I’m having the Ted moment where my earphone is coming off – And within transparency, you need to be able to have fiscal transparency as a starter. What I would mean by this is very simple: take the team to go out and raise the money together. If you don’t want to have anything but a transparent moment, it would be great for the investors to see who else is involved in the company. Don’t just try and go it alone.
Another pillar in this is purpose. Now this sounds like an obvious one, and a purpose-driven company is one where everybody can get behind it. This is usually you solving a problem or a pain. Right? A pain or a pleasure. This is the best way to get people in behind what you’re trying to do, and how you’re trying to accomplish it. Now, you could start a business to just create wealth. But if you want to bring on greed, or that fight-or-flight that we talked about earlier, by all means do so. Your odds of success are going to go down. Conversely, sometimes we also put altruism or purpose-driven businesses in the category of being for nonprofits only, and that’s just not the case.
The last one is execution, and I can’t stress this enough: We all have ideas that go nowhere, and you need to execute on your plan. If you do not execute on your goals, nobody is going to trust that you can get from point A to point B. Execution is the measurable result of the planning that you’ve had in place to solve somebody’s pain or problem.
Another analogy is a sports one. So from the time that your All Blacks do the Haka, till the time that they leave the field you want nothing more for them to execute on their goals and when. This is a note to everybody in the audience: anytime you’re doing a really big speech, you always want to pull the appropriate sports reference for that local, local audience. Look no further than these guys. This is a company that has a trust framework in place, that’s buffered by both altruism and purpose, and their market cap, in my opinion, is really just the tip of the iceberg.
Here’s another one. This company publishes what every single employee makes, how they’re paid, and posts it on the web. This is a private venture backed company. They don’t have to do this but they care about trust. Here are some other companies that we all use day in and day out They have our credit cards, they have our location, they have our purchase history. One of them lets us stay at a home and another one in a car with a complete stranger. I don’t know about you, but if my mom and dad find out I’m doing this, they’re going to be really disappointed. I can hear it now: “Joshua, didn’t we teach you anything?”
Let’s go back to what Hemingway said about trusting someone as being the best way to trust them. I agree with that in principle but let’s also do ourselves a favor and set up better businesses for all the right reasons. Buffered by purpose, altruism, executable goals, and in a transparent framework. Starting a company is literally a giant pile of risk. If what we claim to want to do is have a better world for everybody involved , then we’ve got to work from a framework. And if we do it, and not just say that we’re going to do it, I think we’ll make a little money while we’re at it. Thank you.
