Founders, once they have a successful exit, tend to treat themselves as Gods.

Investors bow to them, and possibly recruit them into their investment teams. Startups flock to them, in the hope that they might use their recently gained wealth to invest in these companies. Having produced one successful exit, people assume that these people have “cracked the startup game”.

And so even if they have started humbly after their exit, all this adulation, and the perceived to potentially make or break a company by pulling out their chequebooks, goes to their head and the successful exit founders start treating themselves as Gods. And they believe that their one successful exit, which might have come for whatever reason (including a healthy dose of luck), makes them an authority to speak on pretty much any topic under the sun.

Now, I’m not grudging their money. There would have been something in the companies that they built, including timing or luck, even, that makes these people deserving of all the money they’ve made. What irritates me is their attitude of “knowing the mantra to be successful”, which allows them to comment on pretty much any issue or company, thinking people will take them seriously.

Recently I’ve come up with a word to represent all these one-time-successful founders who then flounder while dispensing advice – “Arzoos”.

The name of course alludes to, which Sabeer Bhatia started after selling Hotmail to Microsoft. He had made a massive exit, and was one of the poster children of the dotcom boom (before the bust), especially in his native India. Except that the next company he started (Arzoo) sank without a trace to the extent that nobody even knows (or remembers) what the company did.

There is a huge dose of luck involved in making a small company successful, and that someone had a good exit doesn’t necessarily mean that they are great businessmen. As a corollary, that someone’s startup failed doesn’t make them bad businessmen.

Then again, it is part of human nature that we attribute all our successes to skill, and all our failures to bad luck!


The Necktie Index

I’m currently reading Roger Lowenstein’s When Genius Failed – about the rise and fall of the hedge fund LTCM. So when LTCM was in trouble, the employees there came up with a measure called the “necktie index”. I’m not able to find a good link to it, and unfortunately physical books don’t offer an efficient “Ctrl+F” option so I’ll have to paraphrase and put it here.

The necktie index states that the more senior officers of the company wear neckties, and the more the meetings they attend, the more trouble the company is in.

I think this concept is generally true, and applicable more widely and to all companies. The more the number of employees wear neckties (compared to normal business days), the more the trouble the company is in. The indexing to “normal business days” is important because different companies have different normal dress codes, so normalization is required.

On a related note, I read somewhere that sometime in the beginning of this decade, when most other investment banks had a business casual dress policy, Lehman Brothers insisted that all its employees wear suits and ties to office. And you know what happened to the firm.

Now UBS has released a 43 page dress code, insisting its employees wear ties, among other things. It probably gives you an indication of where the company is headed.

On a less related note, I used to work for a startup hedge fund whose first office was a room inside the office of a fairly large BPO/KPO company in Gurgaon. And every week, “inspirational quotes” from the founders of the BPO/KPO would go up on the walls, along with their photos. And this was fairly well correlated with the decline of the stock price of that company.