The Founder Factor

I've long noticed that the most innovative, decisive, and risk taking companies are led by founders or at a minimum have their founders actively engaged in all key strategic decisions. There are many examples. One could point to Richard Branson, Steve Jobs, and Rupert Murdoch. It's also noteworthy to look at the difference between Microsoft when Bill Gates was highly engaged and since he's largely moved on.

I was thinking of that today as I was reading Jessica Vascellaro's account of Google's decision making on the China situation. According to Jessica, Eric Schmidt prefers to see Google stay in China. And Sergey Brin prefers to see Google leave.

Google's statement on China is pretty extraordinary. That they are even considering leaving the largest growth market in the world is a stunning revelation. And it is unlikely that hired and professional management would make such a decision. Management's primary job is to build value for shareholders and it would seem that leaving the largest growth market in the world is not in the shareholder's interest.

However, when the largest shareholders happen to be the founders, such decisions take on a different light. And it may well be that leaving China is the best thing for Google, its employees, its customers and users, and its shareholders. Only time will tell what Google will do and what impact it will have on the company.

I am very impressed with Google and have been for a long time. I think that many of the reasons it is such an amazing company result from having its founders engaged and involved in the key strategic decisions the business faces. The founder factor is a huge intangible force in companies and is most often for the best.

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Comments (Archived):

  1. RJMO

    Great observation, Fred. The characteristics that make entrepreneurs who they are (vision, comfort with risk, integrity and strong values) make for different decisions than what you see from folks who are trying to “preserve” something. Founders are creators, and so they feel more comfort with big risky decisions.

    1. fredwilson


  2. laurentk

    The level of involvement is a tough management decision. How much freedom and trust do you place in the people that help you build an amazing company, and how much do you trust yourself when opinions differ.Especially at the beginning, and especially when everyone is complimentary (tech guys, marketing guys, strategy and vision for the founder, …. )Where do you draw the line ?

    1. fredwilson

      you have to delegate everything but the most important strategic decisions

      1. laurentk

        Of course, but what’s implied in my question is how to define what (or to what extend) is strategic… After buying summize, integrating the search into twitter is strategic. But do you need a feed for searches ? is it strategic to decide which operators can be used in the search feed ? You might say no, let the search team decide. But at the end of the day, thousands of applications don’t use the Twitter API but the search feed instead (like…

        1. fredwilson

          right. the devil is in the details. i’d say the decision to buy summize wascertainly strategic but many of the other decisions related to it aretactical.

      2. Harvest Creative

        I would definitely put the China question in that important strategic decision pool. Way I see it… China’s business landscape clashes with the core principles of the Google business and brand. Nobody understands what’s at the heart of the brand better than the founders.

  3. awaldstein

    Creating change is tough work and is beyond logic at times. Vision and core beliefs are the heart of innovation and yes, only the founders/leaders can make this happen.Thnx for this. Important discussion.

    1. Niyi

      Very well put. The founders are usually the ones that define the core vision so they have a vested interest in seeing it through.Google’s “Don’t be evil” principle endeared it to millions around the world and helped to drive its rapid success. Its magic technology helped too.In recent times, the shine seemed to have come off Google as it faced more criticism. Now is a perfect time for the founders to realign everyone on the soft reasons why we fell in love with them in the first place.

      1. awaldstein

        Niyi, had forgotten about ‘Don’t be evil’. Thnx for surfacing that.For tech especially, we are creating new worlds and new ways of doing things. Required both brain and heart to navigate through the unknowns.

        1. Keith B. Nowak

          “Required both brain and heart to navigate through the unknowns.”Heart is a very important, but often times ignored, component. Perhaps this passion/determination/inspiration is what gives founders the ability to impact a company in ways hired management cannot.

          1. awaldstein

            Heart is hard to quantify. Fred probably deals with this all the time I bet.I might add that the gap between ‘hired management’ and ‘founder’ is large and can be bridged. I know that when I’ve worked as a CMO for companies, I’ve never taken a position where I didn’t feel that my passions and my ability to influence strategic direction were not aligned with the founders. Of course, I was not always correct 😉

          2. Mark Essel

            How well did you get to know the founders before you joined forces. Mostly curious what’s a good length of time to delve deeply into the long term philosophy for founders.

          3. awaldstein

            How long does it take to develop trust, including vetting networks, interviewing boards and personal time? You never spend enough and there are always risks on all sides. Even trust doesn’t guarantee chemistry.I’ve thought about this throughout the day and Fred’s point is quite correct. The power to drive the company either with or against the established grain is mostly a function of ownership, and only founders have that equity power. And at the end, it is that ownership power that lets these type of ‘Google/China’ choices to be made.

      2. ShanaC

        It needs to get softer, it introducing too much stuff. technology can be a cold world without a reason why to use it, and without a softer impact and maybe a guiding hand how to use it.That maybe is a strong maybe: The libertarian in me says no, to many actors at work with too many viewpoints, and some with too much power, but the reality is most people screw up and can be in badly damaged situations without some sense of guidance when their world is turned upside down by tech.

  4. andrewparker

    I agree with your enthusiasm for founder leadership. It’s intangible and often generates amazing strategic vision.But, I’ll add a small counter-point that is that dark side of founder management and control of public companies. Often in order to continue to exert control over a company when going public, there has been a recent trend to create two classes of stock. One is the founders/management Common, and one is the general public Common. The two are often nearly identical, except the founders/management Common will come with 10x voting power per share. Google did this in their IPO and it has essentially silenced the public-owned voice in their company.For founders to have full effect in their sometimes radical decisions, they need (or maybe just desire) unilateral control, like Sergey Brin and Larry Page have. Now, I trust those Founders very much (and will all my personal data in Gmail). But, other companies/founders using these 10x voting classes of stock I trust far less.

    1. fredwilson

      i agree Andrew. i am not a fan of dual classes of stock.

      1. JLM

        Being public but not being publicly controlled by virtue of arbitrary and contrived stock restrictions should simply not be allowed. This is right up there with the artifice of short selling, naked short selling and repealing the uptick rule.It is a violation of the fundamental spirit of responsible corporate governance which is a foundation element of public trading of a company’s securities as it allows an artificially created subset of shareholders to artificially dictate the composition of a company’s Board of Directors which is in direct contravention of the concept of majority independent directors of public and exchange traded common stock.This should draw the attention of the SEC, PCAOB and the exchanges as being an unnatural consequence of what is garden variety stock manipulation albeit at the stock legend/restriction level.If a stock issuer wants to play that game, then their securities should not be publicly traded.

        1. Sammy

          Or, you can chose not to buy the stock, knowing that the dual structure exists. It’s a free market – buy it if you agree with it.Keeping up with Wall Street’s short-term expectations is what drives many public companies to make the wrong decision.

        2. Pascal-Emmanuel Gobry

          Come on now. You can argue about naked short selling and the uptick rule, but it’s hard to argue that short selling isn’t a good thing. Short sellers bring liquidity to the public markets and — that’s more important — help bring down hubristic managers.In the aftermath of the financial crisis, several stockmarkets around the world (I know India and Pakistan, but I’m pretty sure there were others) banned short selling, and all that happened was to drastically increase volatility.

          1. JLM

            I ran private companies for a long time before I ever ran a public company. I now run a tiny public company. I have always been quite skeptical about public companies.Stock exchanges exist for the benefit of “shareholders” not for the benefit of traders. It is a place to provide liquidity not to provide speculative opportunity. It is an arranged “marriage” not a “hook up” joint.Ownership is real and tangible. Short selling on the other hand is a temporary status based upon borrowing the securities sold and creating an “accrual” position which is contingent, intangible and speculative. It is not ownership. In fact, it is the shadow of ownership and only exists while the light is shining — figuratively speaking.A company lists its stock and conforms to the exchange rules to enable shareholders to buy and sell the capital/ownership of the company not to provide a stack of “red” chips for speculators to use to speculate in the short term fluctations of the market and more so not to create the very short term fluctations that they seek to exploit.The company’s agreement to adhere to the exchange’s negotiated rules is the act which empowers the exchange to exist rather than the presence of a number of innocent bystanders who may or may not be interested in buying any stock.If the rules are fair, the exchanges will continue to exist and operate even if all the hot money speculators decide to stay home that day. This is a reality and is the essence of capitalism — the presence of real capital.Today most exchange rules simply mirror the SEC and PCAOB rules — take a look in particular at the elements of corporate governance. These are good rules, by and large, but they are rules for real companies which issue real securities and which require real governance.At the end of the day, a short sale is just a garden variety derivative security which derives its existence from the willingness of a shareholder to “loan” a short seller a share certificate.Exchanges are not casinos.

          2. Pascal-Emmanuel Gobry

            “Stock exchanges exist for the benefit of “shareholders””That’s exactly right. And so, if a shareholder decides to loan me the stock for a fee, and I decide to sell it and then replace it, it’s our business, not the manager’s.I would love to live in a monochromatic world where you have the Good Guys on one side, the Investors, and the Bad Guys on the other, the Traders, the Speculators, the Gamblers. Life must be easier there.Meanwhile, facts are stubborn creatures, and you don’t seem to acknowledge the pretty strong academic evidence that short selling bans make life worse for shareholders and companies.PEG

          3. JLM

            Companies agree to list their shares on exchanges subject to the rules of the exchange. No companies, no exchanges.The company’s motivation is to provide a public market to its shareholders, not to provide a casino in which the legal tender of its shares creates a set of chips to be “bet” against either the exhange, the company or other shareholders.The exchange exists to provide a uniform framework for the benefit of the companies and their shareholders not to erect a casino for those who would only seek to “borrow” rather than own.The business of short selling is not a “business”, it is a bet. And bets, by their very nature, are made in a casino not on an exchange.Naked short selling is fraud. Short selling, absent the uptick rule, is a mob. Short selling is not why companies placed their shares on exchanges and ultimately companies are responsible for obtaining and maintaining a public listing.

          4. Dave Pinsen

            Late to this, but short selling is an important part of the ecology of markets, and isn’t inherently less valuable or moral than buying shares in the secondary market. Short sellers often shed light on destructive policies by company management.Also, exchanges may not be casinos, but investors can face more casino-like risks running long-only, un-hedged portfolios. Compare the audited returns of professional investor and Short Screen member Marc Mayor of InsideALPHA to the returns of the typical long-only mutual fund over the last ten years. Marc generates impressive returns while minimizing market risk by running a market-neutral, long-short portfolio. Which is more casino-like, betting that a well-run company in a particular industry will go up in value, or betting that the values of a well-run company and a poorly-run company in the same industry will diverge? In the second case, you have minimized market and sector- or industry-specific risks.

          5. JLM

            Owning a share of stock is owning a part of a businesss. That fact is obscured in America today to the detriment of stockholders of all types.If one does not fundamentally like the business, then don’t buy the stock. The decision as to whether to buy a stock or not is the sole province of the investor.The very language which you use to describe all of the alternatives are a clear indictment of the divergence of your thought from “ownership” to something more akin to a bet. Bets are made in casinos.Deciding which companies to own — over a long period of time — is an essential skill in determining the outcomes of any investment. Some folks have or develop that skill and some don’t.Exchanges exist to facilitate the marrying of buyers and sellers in accordance with the exchange rules and with the approval of management not to influence the nature of the risk of ownership or to enhance returns.Long, long term ownership of good companies will have good outcomes if one is a good picker of companies.The company qualifies for, obtains and maintains — at some considerable expense — the public listing for the company’s stock and should have every assurance that its stock will be traded in an orderly, fair and precise manner for the benefit of the company and its shareholders only. The company owes its fiduciary obligation only to its shareholders and not to others who would use its shares for their own benefit adverse to the interests of either the company or other shareholders.Short selling — naked short selling, short selling in the absence of the uptick rule and short selling in general — is never in the interest of the company and the company should not be expected to conduct its affairs — including paying to maintain its public listing — in a manner which is not in its interest as the company and only the company is the keeper of the public listing.

          6. Dave Pinsen

            I was just repeating your language in using “betting” and “casino”, noting that long-only investors take on more risk than market-neutral investors.I am aware that being a shareholder means owning a part of a business. If corporate executives want more shareholders to act like owners, they ought to treat them more like owners and align their interests with them. Many CEOs (especially, non-founder CEOs) don’t do that.Good companies have little to fear from short sellers. The CEO of my largest stock holding — one that I bought more of after it had dropped 90% from my initial purchase price — complained about shorts depressing the price of the company’s stock near its nadir. I told him the best response to short sellers is to execute your business successfully. He’s has since then and any shorts have gotten their heads handed to them.There’s nothing in the world wrong with shorting a poorly-run company. It can even have a salutary effect in getting current management shown the door and replaced with more competent leadership.

    2. Mark Essel

      So that’s how founders can still run a company after going public. I was trying to imagine running a public company without something like that. It’d be like permanent zone defense where you just keep on losing based on average defensive thinking.

  5. Charlotte Kim

    This statement might categorize me as one of those idealist entrepreneurs, but I think the differentiating factor with Founders making executive decisions (in particular with this situation) is integrity. Their decision with respect to the China opportunity may not be the best financial one, but it has a HUGE political and human impact internally within their company and externally across the globe, that only a company like Google (or maybe Microsoft) could have. Google’s position is very clear: We support laissez faire AND international human rights, period. Today, if I were an employee of Google, I would be very proud, I would work harder and love my company. As a Google user, I will be more loyal, and the fact that they seek world domination and will sometimes “fail to categorize” the websites of would be competitors bothers me a lot less.

  6. andyswan

    Double edged sword as usual:Founders will tend to keep the long-term interests of the company as a top priority, while suits paratrooping in may be more inclined to focus purely on the next couple of periods.However, there is often a skill set that the suits have that most founders don’t….leveraging the “completed” product and taking the business to the next level successfully.I think you need both types of expertise on a team, but like Google it’s probably a good idea to keep the “rarely played” trump card in the hands of the founder for the big, company-defining moments.

    1. fredwilson

      google has a good situation with Eric making most of the decisions andLarry/Sergey being there for the biggest ones

      1. LIAD

        regardless of whom decided – net net, a positive decision to pull out?

        1. ShanaC

          who knows. This is a decision with so many long term implications. I’m waiting for the internet paratroopers to come and fly in with information to drop onto Shanghai, ala a Berlin Airlift…

      2. Mark Essel

        2 founders one exec. Interesting balance of power.I’m surprised Larry and Sergey haven’t considered trying their hand in other startups. I suppose they can experiment in many different markets from Google, without fully committing…

  7. SharelOmer

    In order to make it work the founders need to be very special, people that can put their ego aside and think of the company benefit and its vision to grow.i think that in many successful companies the founders were replaced by a CEO with more experience, that run the company , and they took product and coo positions, Google Digg and apple are a few example i am aware of.Something that amazed me, in web 2.0 exp NY i heard Digg founders in a panel, and after the original founder of Digg Kevin told about his angel investment the CEO told something like “am i paying you too much…” , now this is not trivial.So i agree, founders are the ones that drive the company from vision to reality, but they need to be even more amazing people to stay in the company and make sure it happens after they are “moved”.

  8. Grant C.

    In terms of academic work around the subject of founder influence, there’s an article from the California Management Review, Spring 2002 analyzing organizational blueprints for 150 Valley startups. I can’t post it somewhere because it’s from a school bulk pack with all kinds of restrictions, but an abstract lives here:…The article is mostly about founder blueprints and their role in determining the HR blueprint startups choose, but there’s an additional finding that a.) the role of the founder is like a genetic imprint and b.) organizations that change their blueprint (e.g., shifting away from a founder-centric structure can be a significant destabilizing force). It’s not a perfect analog, but if the subject of founder influence is of interest, it’s a pretty decent article.The reason Fred’s comments reminded me of this was the imprinting notion–it’s not just that Sergey and Larry are the ones engaged in the strategic dimensions, but it’s that they’re continuing presence and stature within Google also colors the way their leadership teams and the organization as a whole strategically see the world. Strong present founders typically have baked in a strong culture reflecting their vision that is a powerful force.

  9. daveschappell

    Jeff Bezos, at Amazon, once said that one of the most important things for a CEO to do is “to say yes” (to big investments, risks, etc.).I think that founders who are pursuing really big visions have much more ability to do that, and take huge gambles, whereas non-founder managers are much more risk adverse, and not there for the pursuit of the vision.That’s why I admire folks like Zuckerberg and the ambitious investments that Facebook’s making, Amazon and the Kindle and AWS, Google and their relentlessness, and lots of the ambitious upstarts — some you just have the sense that they’re not in it for a quick flip… that the only thing really bringing joy is turning the vision into reality, and then creating new vision-items to pursue.Onward…

    1. fredwilson

      right on dave

    2. eric_bingham

      This was certainly a momentous step for Google and one would think (hope), was the result of considered thought/logic, not based on philosophical grounds. My first thought when seeing the headline was – this was a founder driven decision, not one led by Eric Schmidt. Dave – your admiration is shared, but the danger is that hubris can enter the equation and that can be deadly. Google is big…China is bigger. Taking an “I’ll show you” approach and pulling out may not work here.

      1. JLM

        There is no idea which is “bigger” than fairness and freedom. China is 8 x bigger than the US in population. Their landmass is enormous. Their history is incredible — they were literally an empire when we were living like savages.But the soul of their country is very small while the sense of America’s virtues — as flawed as our democracy can be at times and as cynical as we have all become — is the grandest set of ideas ever put into practice.That student who stood in defiance in front of those tanks in Tiananmen Square represented the power of freedom over tyranny — unfortunately he was crushed.When the Colonists revolted against the most powerful nation and armed force in the world and prevailed, the American spirit of freedom was brought to life for all time.Unfortunately, only the victors get to write the histories.

        1. Aviah Laor

          with all the ancient culture, rising nationality and power and all that, if you will offer a green card to randomly selected Chinese, I bet that 11 out of 10 will gladly pick it and move.

          1. JLM

            Well said!Is there any other country in the world where a person would commit a crime to immigrate? Is there any other country in the world where the beacon of personal freedom and opportunity burns as brightly?I am often personally ashamed for how little I am personally grateful for the great luck of having been born here!

          2. James

            I think that is true if you do this experiment and 11 out of 10 will gladly pick it and move. But the question is why. The reason is neither free speech nor democracy or human rights. If you ask these 11 people why they want to do that, the only answer you get is MONEY. If one day they find that they can get more money in china, they will gladly pick it and move again.

          3. kidmercury

            booyah! nailed it. like wu-tang told us, cash rules everything around me.

          4. Aviah Laor

            You have to account for the good forces sometimes, kid. The Jedi’s are out there also 😀

          5. kidmercury

            indeed, the good forces must always be remembered, that is why i always emphasize the most powerful good force that can never be defeated, i.e. the truth that sets us free.

          6. Aviah Laor


          7. Aviah Laor

            Guessed that this would be the answer, but it’s not only the money. It’s about freedom, open society, opportunity, individual over tradition, skills and efforts over class or connections to the administration. Not that everything is perfect in the US, but at least these are the … Founders factors. And good founders leave their mark long after they are dead.But if you tell me that Mandarin tradition is preferred for you over Franklin and Lincoln, i respect that – although doubt it will be your choice.

        2. Carl Rahn Griffith

          Good – powerful – analogy. It’s when the ‘victors’ screw-up I get especially p*ssed off … I’ve seen too many pyrrhic ‘victories’ in life/business.

        3. fredwilson

          i think ideas are more powerful than armies

          1. kidmercury

            for sure, that’s why 9/11 truth is destined to win…the truth is bulletproof and lasts forever

          2. JLM

            Ultimately, in a democracy, ideas propel armies.That is why it is essential to commit the American people intellectually to a war before going to war. When the American people are no longer committed to any particular war, the war is over even if it takes the President and Generals a bit longer to understand that fact.This view was first articulated by Gen Fox Conner who was the mentor to both Eisenhower and Marshall. He was the modern Army’s first deep thinker.

    3. Carl Rahn Griffith

      Nicely put.

  10. daryn

    I agree with you, but think there is also who I’d call the non-founding founder, who joins the company at an early but not founding stage, but is a complete owner/”founder” in terms of action, decision, and vision. They may not have started the company or come up with the initial idea, but they are 100% bought in and it shows.

    1. fredwilson

      do you have any good examples of that “non-founding founder” daryn?

      1. daryn

        me? :)Let me think about that, but the first who come to mind are Jonathan atPicnik and Glenn Kelman at RedFin.

        1. fredwilson

          i get it nowyes, you are the classic ‘non founder founder”

          1. daryn

            Thanks :)If I had to summarize it into a few words, I’d say it is operatingwith vision, not just strategy, but there is something else as wellthat seperate this person from just being a great CEO/exec.One more person coming to mind is Tony @ zappos…

          2. Dave Pinsen

            Just out of curiosity, why wouldn’t Steve Balmer meet the “non founder founder” criteria?

          3. fredwilson

            he does for sure, but he has not been a good leader for microsoft in my opinion

      2. mcenedella

        Howard Schultz, Starbucks; Ray Kroc, McDonald’s; maybe Andy Grove, Intel?

        1. fredwilson

          andy grove may be the iconic non-founder founder

  11. Doug Kersten

    I don’t think anyone should be confused. Google did this only after their business was threatened, not because they were specifically concerned about China trampling anyone’s rights. That being said, it is an admirable and gutsy move and I am excited to see them make it. It goes to show that even if U.S. companies tend to think of the business world as global, other countries may still think in purely nationalistic terms. If Google were a Chinese company it probably would not have been attacked. Then again, a Chinese company would never do what Google has just done. It is not just the founders, it is also the country/environment that those founders are working through/from.It will be very interesting to see the level of power an entrenched Internet company really has. I don’t think we’ve seen something that demonstrates this in the past.

    1. JLM

      I think that we are going to find that China is the primary force shaping the remainder of this century for a number of reasons beyond the obvious size of the populace, landmass, market and awakening sense of national purpose.I recommend James Kynge’s excellent book — China Shakes the World. The discussion and specific business anecdotes are particularly enlightening and the fact that he has spent 30+ years in China writing for the FT while speaking Mandarin makes it particularly insightful. This is primarily a business book but it is quite illuminating in understanding the Chinese psyche.The Chinese bear watching for a number of reasons.Their awakening sense of nationalism which has been blunted by the Communists until recently is now being tapped into as a unifying national theme — in much the same way that we are the UNITED States of America.The Chinese are building a blue water navy with sophisticated submarine capabilities and the desire to project force over the horizon with a fleet of air craft carriers. American naval aviation is perhaps the single most unique element of our military capabilities and no other country really possesses such capabilities. The Chinese are challenging us directly.The Chinese are actively at war with the entire Internet and were among the first to recognize the command and control implications of being able to shut down the Internet on command.Echo the preceding sentiment on the Chinese fascination with and developing capabilities to blind the US by destroying our satellite command and control capabilities. Our Navy needs this to be able to shoot, move and communicate. The Chinese have staged tests of satellite destruction where only American satellites exist. Nations “practice” their “playbook”.The Chinese have continued for over a decade to build landing craft and to position tactical nuclear weapons adjacent to Taiwan. They are waiting for their moment. Taiwan was their second objective after Hong Kong. They have Hong Kong now.The Chinese are an old civilization which considers the West and Europe as recent additions to the civilized world. China was a “civilized” Empire when Europeans were eating with their hands.I mention all of this because in many ways the Google attitude toward China right now may the last time that American companies have a chance to confront China at a time of their relative weakness and our relative strength.Good on Google!

      1. Dave Pinsen

        Interesting you mention James Kynge. I’ve blogged about his “China Continental” thesis a few times (Most recently, in the footnote to this post, where I also linked to an FT editorial that had a more bearish take on China’s economy). I hope Kynge is right that China is transitioning to an economy fueled by internal demand; that would be good for average Chinese and the rest of the world too.I have a tough time envisioning China becoming a global military hegemon, for a couple of reasons. The first reason that comes to mind is that the post-war status quo of U.S. Naval hegemony in the Pacific has been pretty good for China and its more advanced neighbors, economically speaking. Why mess with a good thing? The second reason is that it’s a lot easier to project power globally when you are surrounded by oceans on two sides and friendly neighbors to the North and South. China is cursed by geography by comparison. Consider some of its neighbors: Japan, which mopped the floor with China in WWII; Vietnam, which fought China to a standstill, if memory serves, a few decades ago; Russia; Mongolia — sparsely populated, but a country whose ancestors conquered China and most of the rest of the world; India, the world’s most populous democracy (and a country China has fought a war or two with in the past, when India was weaker); Pakistan; Afghanistan. Add to that mix separatist Tibetans in China’s southwest and separatist Muslims in China’s northeast. I suspect the submarine-building (China still spends a pittance on military procurement, compared to us) is more about keeping the steel mills humming. A more likely scenario — and a more ominous one — if current trends (i.e., certain self-destructive American policies) hold isn’t China replacing the U.S. as a global superpower, but the world having no such superpower.

        1. JLM

          I agree with much that you say and your observations are quite strategic and astute.I consider the implications of the Chinese intervention in the Korean War to be very important. In many ways, the Korean War — even having been over 50 years ago — was China’s experiment fighting against the US in much the same way that the Nazi’s experimented with much of their war fighting doctrine in Spain before WWII.The Chinese have catalogued their own multitude of shortcomings and they have slowly but surely begun to whittle away at them — the inability to control the skies over the next battlefield and the inability to fight over the horizon and totally inadequate battlefield communications.The Chinese know that their only real advantage was the sheer number of soldiers they were able to marshal at the point of attack.The Chinese are very deliberate and take a very, very long view. What is troubling about, for example, their naval buildup is that they have immediately begun to confront what will be the long term issues for success against us — the ability to exit their mainland ports undetected and the ability to operate silently for long periods of time in the middle of the Pacific and the ability to disable our means of communicating with our fleet.I doubt that even our current administration can prevent the US from being the only remaining superpower for at least another century. We have the best military and the best military hardware on the planet. We literally are competing with ourselves when it comes to weapons development.

      2. Mark Essel

        Very interesting info JLM, appreciate the background.

  12. Alberto Brizio

    To reinforce the validity of the argument, it is worth to consider the flip side. What happens when founders are removed or isolated by the newly appointed company management and no longer participate in key strategic decisions? In my own experience this often leads to terrible results. The company loses its focus and its core values get diluted very quickly, alienating both customers and employees.

    1. fredwilson

      alberto – i’ve done that and paid the price so many times. you are so right.

  13. im2b_dl

    control freaks that know when not to be. Fred I also have to say Google knows they can’t let “don’t do evil” slip. In the past year or two that image has slipped. They need posts like yours. They can’t just be the fastest, or the biggest, or the best financed. If they look greedy, the internet as a democratic structure and lightening fast at the “emotion/color of the social” will effect their bottom line. They are getting this..the customer for them and everyone on the internet is effected by trust and judgment as an ethos.

    1. fredwilson

      it’s funny to thing that they need posts from me. but you are right. they do.

  14. im2b_dl

    remember microsoft imho was effected more by the image of big bad giant in the status quo than by the quality of their products (that gap of quality to the average customer isn’t as big as the technical crowd likes to think it is) .

  15. William Mougayar

    Aside from the fact that both founders and management alike can make good or bad decisions, the one factor that could play more prominently with founders is the “emotional” one. I read somewhere that Sergey’s bias was influenced by his direct family history/experience in Russia.

    1. fredwilson

      yes, that bit about sergey was from jessica’s piece that i linked to

  16. Andrew Stern

    Fred: I think you’re under-emphasizing the vital combination some CEO’s have for entrepreneurship + management. Frankly, it’s a really rare combination, because some of the traits that make you successful at one make you unsuccessful at the other. (Classic example: building something that everyone tells you is crazy vs. listening to the customer.) Obviously finding those leaders who can do both is powerful, and explains why many VC’s invest behind the same founders again and again. But it’s also quite common, and sometimes necessary, to change management teams as a company matures. Don’t you think?

    1. fredwilson

      pushing out founders backfires more often than it works. it’s better when the founder is the one hiring a CEO who works for the founder and the board. the way sergey and larry did it is best.

      1. Aaron Klein

        When it comes to pushing out founders, the best setup is promising the #2 guy the top job five years in the future. Then when that day comes, and the founder isn’t really ready to retire, you put him in a job that doesn’t fit him. After four months, you piss everyone off by trying to hit the undo button.This is now known as the “NBC” approach.

        1. fredwilson


  17. LIAD

    i think it cuts both ways.founders are so emotionally invested sometimes they cant see the wood for the trees. sometimes anyone involved in the business save for the founder can see the writing on the wall – but the founder remains oblivious. but like i said – it cuts both this case billions in potential future value will be eroded because the founders decided that the hacking attempt/vibe in china wasn’t right. – remember they went into china agreeing to sensor the SERP’s, they are not puling out for human rights reasons and they are not pulling out for revenue reasons…so why are they really leaving? like you said Schmidt didnt want them to. is this not a case of the founder factor going the wrong way?

    1. ShanaC

      They are lucky they are a balanced then…

  18. leeschneider

    Fred, do you have a breakdown on which of your posts generate the most comments? I think that would be interesting to see, as clearly your post today has racked up some good comments.

    1. fredwilson

      the political ones get 300 comments every time. but i find it painful to write about politics. i will keep doing it for sure. but it hurts to see the hate come out.

  19. bartdenny

    I read it said somewhere that Google had developed an amazing decision-making culture, whereby product managers and key engineers developed an amazing ability to channel what Larry or Sergey would think about a particular issue.After reading this and starting to pay attention (I worked there 3 years), I saw how effective this was. People might not explicitly say “Larry will think so and so,” but there was often their presence, even when the founders were never likely to have any influence in the decision being made (or even know about it).

    1. fredwilson

      that’s the magic, when the team channels the founder(s)

  20. Pascal-Emmanuel Gobry

    That’s true. Chris (Dixon) had a great post a while back pointing out how most great companies in the past century (Sony, etc.) basically peak after their founder leaves.

  21. MikePLewis

    Totally agree with this post. This is why i’m somewhat optimistic about AOL. It seems that Armstrong is operating as if he’s a founder instead of just an operator.

    1. fredwilson

      and he can because he doesn’t really work for time warner any more

  22. Nat Kannan

    FredKudos. You can add initially Founder run companies such as Ford, IBM, Kodak, Oracle, J. P. Morgan, Disney, Daimler, Virgin Atlantic, RCA, GE, HP, Intel, Nike,Sony, Boeing, J. P. Morgan, Tatas, McGraw-Hill, and others are now global brands. I think founders bring passion and energy to their mission of building great companies, which has worked very well for a lot of stakeholders, but occasionally has also derailed companies like Sun, Digital, Control Data, etc.When professional managers work well with the founders on a solid business model, magic seems to happen.Your view is refreshingly rare among VCs who view founders as fungible.Nat KannanFounder and CEOJeeva Portals, Inc.Boulder, CO

    1. fredwilson

      i love the way you signed your comment Nat

  23. jasoncalacanis

    Google continues to impress… from products, to their partnership philosophy and now this, they really are impressive.Yahoo handed over the names, Google walked.

    1. kidmercury

      credit to google indeed, it’s always admirable to stand for what’s right.

    2. SharelOmer

      we learn from one another, but who is teaching Google? … they really need to work hard and invent themselves on a daily basis, a company with strong backbone and real values knows how to do it and do it right…

    3. fredwilson

      wooot. @jason is in the house

  24. giffc

    I was just thinking yesterday about Twitter, their API and their support (rather than control) of their developer ecosystem — which comes down to the ethos of the founders. It’s interesting to imagine what the path of the company might have been with a different, more conservative attitude…

    1. fredwilson

      both Jack and Ev have shown great leadership on this issue. they both believe deeply in the model.

  25. Dave Pinsen

    Fred,Howard Lindzon says, essentially, that Google left because it was getting beaten by Baidu, and that claiming a high-minded reason to exit the country was mainly a PR fig leaf on a business decision.Your thoughts on that?

    1. fredwilson

      it is not that simple and Baidu’s success has a lot to do with the way China works

      1. kidmercury

        damn boss dissing howard…..i hope you will play fair and diss jdawg today too

        1. fredwilson

          donelook at the first screen shot in this…

          1. kidmercury

            lol this whole thing got me thinking about what jdawg would do if he were in google’s position….probably nothing unless china started censoring celebrity gossip, boy then he’d probably really get riled up, lolbut silence on 9/11 truth, of course. that’s just to be made fun of. man, talk about insulting the FDNY. i sure i am glad i never did something that irresponsible and immature! 🙂

  26. jpball

    I assumed the argument would fall into the apparent value of founders versus the apparent value of shareholders.It probably sounds corny, but this comes down to 2 broad issues; shared (value, vision, etc) and a common (“language of success.”) Founders get to build their company, select their team, and pursue their customers on a platform (values, vision, language of success) shared by the constituents. Everyone is (mostly) on board, even when the founder must pivot.Traditional public/private ownership structures nearly always fail at getting everyone on board with those values, visions, and a shared language of success. Google’s unique combination of stock structure, unprecedented and frequently not well understood success, and sharp focus on values, vision, and language of success sets them apart.Whether you like Google leadership or not, they are managing to accomplish what we all know is necessary to succeed regardless of your size, influence, or current momentum.

    1. fredwilson

      that’s why the manifest they wrote when they took the company public is important. they effectively said “here’s how we are going to run the company”. buyer beware.

  27. JLM

    What a fascinating subject, as usual! And a lot of very insightful comments.I see the impact of the founder being the predictable difference between leadership and management.Leaders do the right things.Managers do things right.Leaders take groups of people (companies) to places they would never get to left to their own devices. Managers ensure that the trip is orderly.Leaders are critical to an enterprise’s future when no known road map exists — they invent the map — and managers are critical when the road map has begun to emerge — they follow the map.Innovation v exploitation.There is another dimension that to me is critical and fascinating — COURAGE. Courage is a funny thing. It is continuing to function calmly and purposefully when the environment suggests otherwise and discourages continuing.The easiest dimension to explore is simply physical courage. There are people who can simply ignore the fray sufficiently to continue to operate. They seem to have ice water in their veins but in reality they simply have a high tolerance for chaos and can continue to focus on the issues at hand.In the business world, I think this virtue or characteristic is a critical element in being an entrepreneur. An entrepreneur has the courage to continue to operate when lesser (?) folks would be disuaded from acting.Founders had the original courage to start the company and continue to have a reservoir of courage which they can call upon at difficult times.

    1. Aviah Laor

      What an excellent comment, as usual

      1. ShanaC

        I know, to this day, I wonder where he gets them from.

    2. ShanaC

      Your challenge: Defining courage, especially not physical courage.

    3. Carl Rahn Griffith

      Love it.Hitting ‘Like’ isn’t really an adequate enough response to that posting.

    4. fredwilson

      JLM, you’ve done it again. What a great comment. I reblogged part of it at

    5. disqus_w0ATpTWRr0

      Excellent comment. Retweeted.

      1. Donna Brewington White

        You can retweet a comment? How? I want to do that!

    6. Lucas Dailey

      Spot on.

    7. Donna Brewington White

      Somehow missed this in my original viewing of comments. Wow! This crosses boundaries between industries, for-profit, nonprofit, business, government, etc. Courage is what they can’t teach you in business school, or any school for that matter and is probably one of the most significant attributes of leadership. If you can’t teach courage, there has to be a way to draw it forth, nurture it, because quite honestly, there seems to be a dearth of this today and it was one of the virtues upon which our nation was founded. I can’t help but think about how this is sorely lacking in the political arena…and what a tragedy this is. This one comment helps me to understand why I believe entrepreneurs are so vital to our success as a nation. But I also believe that entrepreneurs need to be mentored and cultivated…sometimes even saved from themselves in order to protect the value of what they can contribute. Perhaps, even released from the responsibility of day-to-day management at some point — at least some of them — for that very reason. I keep hoping that VCs are part of the answer.

      1. JLM

        The issue is really one of “character” — courage being one of the virtues which defines ones character.I am of the firm opinion that there are truly no “extraordinary” people only “ordinary” people who rise to the occasion by hard work or the circumstances in which they find themselves.I am also convinced that every person ever born is filled with character but some are denied the opportunity to have it exposed and developed by the unfortunate circumstances of their lives.We used to have institutions in America — tightly knit families, churches, sports teams, Boy/Girl scouts, schools, the military — which could be counted upon to administer the hard lessons and deliver the requisite friction to expose, develop and refine character.I think that a clever VC can provide a bit of that development. The question is whether it is too late to do that by the time that a VC gets his hands on them.

        1. Donna Brewington White

          I appreciate these words. Now you’ve tapped into my mother instincts and the questions this raises about raising kids…but alas another topic. Do you really think it is as bleak as that last sentence indicates? However, if you are right, then role of the VC is an even more important agent because he holds the incentive for change…funds.

  28. dennykmiu

    Google is a unique company and its Founders are in a unique vantage point that I doubt that many of us struggling entrepreneurs would share. However, this article is a thought-provoking good read for anyone who is a Founder/CEO of a startup, who are both the owner and the executive. In fact, in the beginning of the startup, being the Founder means that you own 100% of the company but at the same time, you are also its first employee. Interestingly, these two distinct roles provide two different and potentially conflicting sets of responsibilities. As an owner, your responsibility is to yourself and your family and you are free to make any political statement that you wish to make. On the other hand, being an executive means that you have accepted a fiduciary duty and the mandate to protect the interest of your shareholders. In any case, I beleive Google leaving China would be a devastating blow to the Chinese citizens AND to the Google shareholders.

    1. JLM

      Entrepreneurs are entrpreneurs regardless of the size of their enterprise. That is an immutable characteristic of the disease.The captain of a rowboat and the captain of the QE II are both Captains and they both know it. Even the Ship of Fools had a Captain.

      1. fredwilson

        Entrepreneurship exists in the tiny space between madness and genius; and, its journey requires a few cross border violations across both madness and genius to get to the final destination – JLM

  29. Phil Wolff

    Skype, as a division of eBay, had a similar set of choices when it partnered with TOM-Online to enter China and later, in 2008, when it was discovered that all sorts of data were being collected for monitoring purposes by the TOM-Skype joint venture. Will Skype’s new owners and the original founders assert different values? Leave management to maximize value? Or wait for an IPO or M&A before acting on non-economic conviction?

  30. Faruk Patel

    Founder Factor with a strong controlling stake – soo true Fred.Thoughts:Thomas Edison once said, ” I find out what the world needs, then I proceed to invent”.Sergey’s decision may be based on:- his vision of actually delivering what the world needs- If Google pulls out, it may just create a stronger following for google. That too from people who may be the most loyal because of their personal belief structure- the GOOD-GUY advertisement for free that google is going to continuously receive from the press while this saga lasts- Within China itself Google may see a decent jump in users because of this saga- Sacrificing 600 million in low profit revenue is not a big gamble for a behemoth like googleI could go on. But you guys get the idea. Sergey is a very creative man. This, very, much could be a need based creation.The questions in my mind are whether they are going to follow through on quitting China? If they do, for how long are they going to stay out (Like Fred says – it is the fastest growing marketplace on Earth)?And, what is the “Need” that Sergey has defined?

    1. George A.

      I agree, but isn’t the history here that when google initially agreed to comply with censorship, they got absolutely roasted by the press and users?It seams to me that this incident has given them an obvious breaking point to reverse a decision that they later regretted.I wouldn’t salute Sergey yet. It is one thing to stand behind your principles, it is another thing to threaten to do so, get nothing and then impression is that China won’t budge, they could care less. If Google stays it will only be because once again they chose “to look the other way” again.IMO, It was a bad call to take this bluff public. I have never seen it work well for a company to say publicly “we might do this”.I agree with you fred, IF THEY DO LEAVE, there is no board of independents in the world that would have made that decision. not a chance.

      1. Faruk Patel

        Exceptionally good points Gallen.I will agree with you that China is not going to Budge. As a matter of fact, they must be laughing right now. Also, their press release is quite a cordial warning to others.We both concur, that this is a saga which is a gamble – and like Fred said, “Time will tell”.Personally, I would have tackled the situation differently. But then again it is always a numbers game – and masses minds, actions, reactions and loyalty is also a numbers game.

        1. ShanaC

          This has another element of time involved: we see it. Around 1/3 of the chinese internet market sees it too, and it generally is the most educated class of chinese internet users.What will my counterpart in China think of all of this 20 years from not. There is an element of freedom of thought, of learning, of being, of discovering, when you are say 19-23 (young adult aged).China the country may be laughing: but all of those tweeters are mostly my age: and they will have to prop up the country somehow, and 20 years hence, if they get rid of Google (when I am 43) there will a price to pay when those “kids” are in power.

  31. Paul..

    As a number of other commentators here have said, it can work both ways. I’ve seen some incredibly successful companies that have only (or mostly) been so through the continued involvement of the founder; but also companies where the founders have been so unwilling to let go of _any_ of the key decisions – often driven by their lack of trust and experience of the world outside their own company – that it hampered their ability to understand and back alternative/creative strategies. Sometimes the founder(s) needs to just hire smart people and then mostly get out of the way. In fact, one of the names you cite above – Branson – talks about this fact in his autobiography and acknowledges the benefits of hiring smarter people than yourself, getting them invested in the vision and then letting them execute.

    1. fredwilson

      a company will reflect the quality of the founder. when the founder is world class, you’ll get a world class company. when the founder is weak, you’ll get a weak company.

      1. Paul..

        that’s true, but I also think that the dynamics can shift over time as the company grows and changes. The smart founder knows when and where to hire smarter people and then help enable their success (by providing guidance, removing obstacles and getting out of the way). I’ve seen smart founders with strong companies flounder when things get too big for their own personal sphere of influence and they fail to trust anyone else with any meaningful decisions.

  32. Anon

    Hello Fred,AS a related question, is there any successful western online company, the point being the cost of replication is low in the online work, as in rewriting a facebook, ebay etc is very do-able and China is clearing ensuring that local replicas of western companies will win. This is sensitive issues but can someone point to the contrary. This is only the case of China since in most other countries, India, Japan, Korea etc big online players are successful(eg google/yahoo in other mentioned countries).

    1. fredwilson

      western internet companies generally can’t compete in china, japan, and russia

  33. Dave Pinsen

    A clever headline for this post (for those who remember their biology) would have been Founder Effects.

  34. sigmaalgebra

    Yes, you have mentioned one of the basic facts of life in business.Yes, one hired CEO said, “I’m not going to drop $2 billion into another desktop operating system”, and soon Gates had $40 billion in after tax cash.But, to mention this fact of life! Where is your decency, demeanor, delicacy, decorum, discipline, discretion, sensitivity, sympathy, empathy to let yourself be cruel, SO cruel, HOW could you BE so CRUEL?!!!For a novel project, the career of a hired manager (A) is not hurt much even by fantastic success they didn’t attempt, (B) is not helped much even by actual fantastic success they did attempt, but (C) can be ended by any failure, no matter how major the goal or how minor the failure. Uh, the guy who missed out on the $38 billion kept his job!A founding CEO with a lot of stock and Board support can do novel projects, but otherwise nearly everyone is like the Little Red Hen in the Mother Goose story: The hen could see the possibility, but no one else would take it at all seriously until the result was out of the oven, on the counter, fragrant, with customers lining up ready to buy. So the hen did it all alone but owned it all!For an entrepreneur, the big companies are either standing still or moving in largely predictable ways and, thus, easy to avoid, and there is the Internet, a big, unsolved problem, some ‘field crossing’, a LOT of infrastructure software essentially for free in .NET, 2 TB hard disks, solid state paging disks 100 times faster than rotating disks, 4 core, 3.3 GHz, 64 bit processors for $100 now and Moore’s law continuing with 48 core processors, hmm …!Broadly a lot of people mess up which is why it is easy to be so disappointed in the state and progress of civilization. So, for people who don’t mess up, there’s opportunity, yes, as founding CEOs who make successes out of novel projects.

  35. Aravind

    Great point. The difference between Leadership and Management couldn’t be any clearer.Leadership is about having the vision to look ahead and formulate a strategy. Management is efficient execution of the said strategy. Clearly, Sergey is a decisive leader. I can’t imagine that this move is purely about idealogical positioning. They must have brainstormed for months!Google is fortunate to have both excellent leaders and managers.

  36. Sean Saulsbury

    I agree that management’s job is to build value for shareholders. But I cannot father how it is in shareholders’ interests to be a party to human rights violations in China, including censorship. That Google chose to cooperate with censoring its search results, and aiding in such a massive violation of free speech and human rights, is shameful. For a company whose motto is “Don’t be evil,” its shareholders should be appalled and disgusted that their company is a party to these actions.

    1. fredwilson

      i think they really do/did believe that engaging in china will help open china’s mind and systems.

  37. Donna Brewington White

    Scanning the comments, a lot of great conversations — some on the original point, some taking off from the China dilemma, human rights, etc. Part of the charm of this blog.The whole question about when founders are the right people to run the company is a running dialog well beyond the confines of this blog and one that I find fascinating. As much as I am enamored with entrepreneurs and founders, I’ve observed companies fail or flounder because the right moment to pass the baton was missed. How about another post…addressing the question of when the one with the initial vision and passion is no longer the best person to run the company, even though something is lost by making that transition. Although, certainly there are examples — aren’t there? — of creative ways to maximize the founder’s strengths and involvement when his/her executive abilities are inadequate for the task at hand of managing the business as it evolves. I hear/read a lot about when to make that transition — or at least about the question of when to do so — much less about creative solutions to maintain the “founder factor” without it becoming the “founder flounder.” It seems that the VC industry is a good place to figure this out.How about it, Fred?

    1. fredwilson

      this is the greatest challenge of my job. i don’t have any clue how to do it right. and i’ve wrestled with it at least fifty times now.

      1. Donna Brewington White

        Fred, your modesty continues to astound me. Surely, in 50 or so wrestling bouts, you’ve gotten it right some of those times…and the times you didn’t, knowing you (even from a great distance), I imagine you’ve learned something about this. Yours if anyone’s, would be a fascinating voice on the subject. Perhaps you’ve already talked about this somewhere and I’ve missed it.I’ve been hearing more about colleagues (recruiters/search consultants) getting involved in the due diligence process for acquisitions…helping the VC/PE assess capabilities of the team under consideration. As much as I love the combination of mental and gut assessment, I am beginning to wonder if the types of assessment tools being used in these instances point toward a solution…at least in part — you know, determining the strengths of the founding CEO and where the breakdown will possibly occur…so you can begin planning for it in advance and determining the right leadership (note I didn’t say “management”) configuration to compensate. There is so much at stake and so many unnecessary failures…IMHO.

        1. fredwilson

          yes, i’ve had successes. and i’ve had miserable failures. i continue tohave both. there is no rhyme or reason to them that i can find.

    2. Aviah Laor

      When Michael Jordan played baseball he was not so great. I think it’s a question of where rather than when.

      1. Donna Brewington White

        That’s a great point. Not to get bogged down in semantics, I think the “what” is also significant.

    3. sigmaalgebra

      Sure, hard disk drives, refrigerators, car transmissions, and humans all can break down. When that happens, have to do something. Otherwise:First, that a CEO built a business large enough to be concerned about already says they have something valuable and rare.Second, tough for anyone else, inside or outside, to understand that business as well as the founding CEO.Third, really tough to look at someone else and be sure that they can replace the founding CEO.E.g., for some large business X, might have the world’s best headhunters look around the world for months, hire the best looking person they find, give this person a terrific compensation plan tied to the growth of the business, see them hold one meeting where they hear two dozen undefined three letter acronyms and give up, hear them say “I’m not going to drop $2 billion into another desktop operating system”, miss the $40 billion in after tax cash Microsoft soon had, and lose out entirely or nearly so to Microsoft (got their first big break with a fantastic gift from X, and later another gift from X nearly as good), Intel (X long was the leader in microelectronics), HP (where X was long a leader in laser printers and invented RISC), AMD (that at times worked with X), Cisco and Juniper (the core of their routers using chips made by X), Oracle (using data base ideas developed significantly by X), Seagate (using disk heads invented by X), Sun, EMC (beating X in several important ares of business), Dell (beating X starting just in a dorm room), AOL and Yahoo (that once X tried to do with Sears), Google (where X totally didn’t ‘get it’), etc.Or, suppose you have a successful company, the CEO dies in a plane crash, and you are looking for an outside CEO. Would you hire Gates as of 1990, Ellison as of 1994, Page or Brin as of 2000, etc.? I ask you bluntly: If you want the results of Gates, Ellison, Page, Brin, need to hire someone ‘like’ that, and how are you going to do that? Would any of these people make it past your phone screen interview? Which of them would you invite back for a second interview? If they were already in the company, would they be rising quickly or on the way out the back door?Or, the best ‘executive search’ efforts fail even to ‘back fit’ the empirical data; those efforts and the whole new CEO selection process has next to no predictive value.My wife died, but before that she was one of the most perceptive people about other people I have ever known: Once about someone we knew with a wealthy father she asked, “What has he actually done himself?”. Good question.Or, in more detail, there is no end of the ways someone can get off track. Or, not knowing something true and relevant is not good; believing and running off chasing something false is much worse. A CEO of a rapidly growing business needs to find their way forward, successfully, in dim light without running off chasing something false. Not easy to ‘evaluate’ that ability. Doesn’t run off after something false is easy: Just stand still, and that’s usually the best a headhunter can get. Or, what the heck does a headhunter know? E.g., would you hire the headhunter? Weren’t those the guys who avoided differential equations, Maxwell’s equations, and algorithms and decide their office needs a MAKEover?In simple terms, nearly no one knows how to hire a CEO really to replace a founding CEO. I know, I know: The candidate has a solid handshake, strong jaw, deep voice, confident manner, good eye contact, good emotional intelligence, good tan, small waist, a large chorus singing their praises, delegates well, reorganized, restructured, reinvigorated, redirected, re-purposed, …, all of which with a dime won’t cover a ten cent cup of coffee.Of course, no one knows everything. So, when a business grows so much that the founding CEO, in this thread we can assume technical, is not doing well with the work of, say, some of an SVP Sales, CFO, CIO, SVP HR, SPV Operations, etc. then what to do?There’s a good, standard answer in three letters — COO. Or, for a smaller company, SVP Operations or just Office Manager. The US is just awash in people from the military, elsewhere in government, local, state, federal, academics, K-university, divisions of large corporations who have done well managing from dozens to tens of thousands of people and beautifully skilled in nearly every well-known, teachable, applicable management technique on the planet. They will be as stable as cast iron, give you a rock solid 60 hours a week staying solidly within the lines, and never be bothered by new idea!There’s the Howard Hughes example: With some just terrible problems (OCD, injuries, social awkwardness, etc.), apparently he (1) actually continued to make money in the oil drill bit business, (2) actually did make money in the movie business, (3) made a lot of money in the airline business, and (4) did something in aerospace (missiles, helicopters, satellites, two curious boats), and medical research. Nice.Change the CEO? The CEO has a LOT of power over the future of the company. Since no one really knows how to replace a founding CEO, replacing one is giving up too much to get too little. Go for a COO instead.

      1. Donna Brewington White

        COO’s can be a GREAT solution, especially if the issue is management ability. But, sometime the issue is leadership ability and it becomes problematic when the CEO can’t relinquish that aspect (or at least to some extent) — even when he/she should.

        1. sigmaalgebra

          Well, for a COO more important would be “management knowledge and experience” instead of “management ability” which is less direct and more a matter of potential.For the rest, the tough point is the “should”, that is, how is the Board to determine, discover, and know “should”?I gave some examples illustrating the difficulty, e.g., Howard Hughes, who long might have looked like he “should” be replaced but who did make money and the CEO of company X, the best person the best headhunters could find, who might have looked like he “should” be able to be a good CEO but who, net, from the best position in the world, stood still and missed out on the biggest events in all of business history.If you are on a Board, are doing your job, have a CEO who seems to imagine he is some Samurai warrior, has Asperger’s syndrome, or arrives to work on roller blades, then definitely you should ask if he “should” be replaced, at least as a ‘leader’, right?Here’s one: The CEO looks, uh, ‘unprofessional’. The company is selling to consumers. So, here’s a guy who’s sold to consumers, Coke, Pepsi, beer, something like that. So, …. Too soon, oops. The company uses electronics. Here’s a guy who’s managed electronics. So, …. Oops. “Anyone have the Pixar phone number?”.Or, for the difficulty of “should” there is, “For every question there is an answer that is simple, straightforward and wrong” (H. L. Menken).

        2. fredwilson

          the greatest success i’ve had is pairing the founder with a great operatingexec (CEO/COO)that’s what we have at twitter with Ev and Dick, for examplethat’s what Dave Morgan and Curt Viebranz had at TACODAthat pairing requires deep mutual respect and trust and usually comes from along standing relationshipit’s very hard to force. it often just has to come together naturally.

  38. Mark Harai

    Hi Fred,You can’t replace the passion and vision of individuals that have given birth to their companies. In most cases, founders are looking to change the world. They are looking to have a positive impact on lives and communities they serve. It’s more than just profit and loss. The DNA and personality of the founder is what attracted the incredible teams of people that became part of the company and made that company successful. It’s that culture and persona created by the founders in the company that attracted the loyal customers and fans. That is not replaceable.As far as China is concerned, it’s the American mindset and freedoms that have provided the opportunity for founders to change the world – not Chinese oppression. Founders of companies from all over the world AND CHINA have come to America to establish their dreams and build great companies because that’s what Americans do. Regardless of the reasons and motivations stated in the comments for this move by Google, it’s good that Google is drawing a line and standing on the side of the freedoms that America provides. That’s not about the money – it’s about doing the right thing and that’s what America needs a lot more of today.Thanks for this thought provoking post.

  39. Terry J Leach

    I’ve heard for sometime many people saying “I don’t trust Google with my private information” or “Why would you trust Google?”. It’s the founders of Google that I trust and not some big corporation named Google. Some people might say that’s the same, but I think Google would not be the company it is if the founders did not have some guiding core values. The founders know that over time if we stop trusting Google it will have a adverse impact on the business.

  40. Lucas Dailey

    Very good thoughts. The founder moral-compass issue is something my team has talked a lot about, and is the primary reason it would be hard for me to sell. As for Google, call me judgmental and cynical but my views on the issue are about the same as Paul Carr’s,…I’m a firm believer in Net-Good (coined!), not letting the perfect be the enemy of the good, but there are always lines that should not be crossed. Voluntary oppressive censorship is one of them.For me and a lot of people I know, Google really fell down when they agreed to China’s terms. Like Paul’s writes, even if their new tact didn’t have strategic advantage it would still fall well short of making their moral reputation whole imo.

  41. Zach Tumin

    I’m re-reading Russ Ackoff’s “Art of Problem Solving”. Amazing guy, but – to the point: he tells the tale of three founders who leave their business manufacturing carpenters’ hand tools to go off to do other things. The company flounders; they return, and ask Ackoff for advice: what to do? Ackoff first plays it safe, says, leverage your same technology for other products, like plumbers’ tools. They said, Nah, not interested. He says, “Ok, try more *exotic* products, like for aircraft maintenance.” They said, “Nah. Not interested in that either.” It was the time of the transistor, and Ackoff came back to them and said, “How about transistors?” They said: “Cool, what are they?” Turned out they wanted to get reinvolved with their business by introducing a new, not a familiar technology – just like when they started…get more fun out of it, feel a part of it. Eventually, they diversified into the hydraulic coupling and valve business. The moral of this story, says Ackoff: “One can enjoy a game played by others, but one can only have fun by playing it oneself.”

    1. fredwilson

      that is so true

  42. paramendra

    I can’t argue with your founder factor theory. But what I want to touch upon is Google and China, the hot topic that has roiled the tech scene globally. I don’t go with those who think Google is doing this to get itself some marketing buzz. Hogwash. This is a principled, moral decision. It speaks to the very heart of what the Google founders set out to do. To organize the world’s information. That is hard enough a task when free speech is uncompromised. But to find yourself in a situation where free speech is suffocated, I mean free speech is not only a human right, it is that most fundamental of human rights upon which all the other human rights are based. It is the building block of human rights. I am going to watch this drama very closely over the coming month. I do see value in engaging a large country like China. And I am a huge fan of China’s economic growth over the past three decades. I want them to teach that to the rest of the Global South. But Manmohan Singh with his China like growth rates over the past few years has proven democracy does not stand in the way of rapid economic growth. And I don’t think American democracy is where China needs to end up with. The American democracy is fundamentally lacking in areas like campaign finance. America is not a one person one vote democracy. But free speech is beyond democracy. If the Chinese could figure out a way to be a one party state that respects free speech, I might go for it (although that is so stretching it, it almost feels like a rhetorical thing to say). I have always been fascinated by Google as a technology company. I featured Google on my personal homepage years before it made its first dime. But I have never respected Google more before. Way to go, Google.

  43. Jeff 'SKI' Kinsey

    Absolutely. Assuming the founder is not a bozo. FYI: I too would pull out of China. Actually, I would probably not have entered the country.

  44. Jihoon Lee

    Love it.

  45. Farhan Lalji

    Don’t think it’s just about Founders as executives that Fred’s talking about, I think he’s talking about Founders as majority or major shareholders, so that their decisions aren’t just about short term solutions for market reaction. But rather for what they truly believe is in the best interests of the company for the long term.Yahoo! and Sun’s founders didn’t have the same kind of share structure that the Goog founders have set up (I believe, but if I’m wrong I’m sure someone here will correct me).Fortune 100 companies need to have visionaries at the top (whether as CEO’s, executives or other roles making the major decisions) who see beyond the short term results. Google and Apple defiinitely have this, other companies not so much.

  46. fredwilson

    i’m sorry i disappointed youi’ve written at length on this topic in the pastprobably should have linked to some of those postsi really do believe that founders add a very important intangible tocompanies that make them better

  47. Niyi

    I think a fairer assesment is that founders are more likely to execute the company’s vision.Google’s vision is embodied by the famous statement “Don’t be evil”. Yahoo’s vision, well, I don’t know what it. It isn’t clearly defined so no wonder Jerry Yang couldn’t execute it quite as well.Through this action, Sergey Brin has demonstrated that he isn’t prepared to compromise on that principle.Insofar as it earns them a tonne of goodwill, I think it makes good economic sense to pull out of China.We often forget that China and the US form a symbiant bond (sorry for quoting Star Wars: Episode 1). China’s competitiveness will be damaged if the most advanced tech companies start to pull out of the country. This will cause its leaders (assuming they are rationale) to take steps to encourage companies like Google back.That outcome is ultimately, is a good thing as I’m sure you agree.

  48. JLM

    Not to be argumentative but I think Fred’s words indicate a focus not on “management” decisions but on “strategic” decisions. Big difference.I think there is always something to be gained by throwing out a thought provoking idea and allowing the discussion to bubble up on its own. I like to think of AVC and Fred as a salon host who simply invites interesting — very interesting — guests, throws out an interesting topic and waits to see what develops.The fact that he drew your comment from you is proof positive of the success of that approach. I am always a bit skeptical of universal acceptance of anything and I like to hear the other side of every argument.A bad idea held by a majority is still a bad idea.Your examples of companies whose founders may have constrained their long term growth and success is equally valid. Sometimes getting off the merry go round is tougher for an entrepreneur than getting on?Having differing views which are supported by different facts is what gives rise to a thought provoking discussion.

  49. Mark Essel

    It’s great to see contrasting opinions. While I do agree with Fred in the particular case of Google, we don’t yet know the ramifications of the decision (corporate politics, new world reorganization supporting corporations that share our beliefs?).There’s a big leap from this case, to the general case. Each corporation has it’s own culture. That’s what we’re really talking about, not just the gutsy decision of Googs founders.

  50. Farhan Lalji

    Yes. Huge.

  51. Morris Callaman


  52. Mark Essel

    Totally agree with Farhanlalji here. An executive is likely “hired management”, while a controlling share owner can call the shots without any meetings. Very different types of authority.

  53. Farhan Lalji

    Fair point, so maybe shareholders should cut CEO’s who have visionary ideas some slack.I’d throw in Bezo’s into the conversation as someone who spends money with long term vision. Cloud computing/Kindle/acquisitions, the guy thinks long and thinks for the best interests of his employees and the company rather than short term performance.

  54. Niyi

    I can’t fault that one. As they say, correlation does not imply causality 🙂

  55. Mike

    PRoales, was your point simply to assert that, generally speaking, founders are not the be all end all of a business? I think there’s evidence to support that claim. There is also a great deal of support in Fred’s favor (he named just a few) that certain visionary leaders are willing to take their companies places that would make most Harvard b-school grads cringe.For my part, it’s hard to imagine a CEO under pressure from the Board to make the kind of decision Google is threatening to make. Of course the key word there is “threatening”, so this conversation could be all for naught.

  56. ShanaC

    And how do you know in advance who is visionary and who is not- we have structures the way they are because in face we don’t know.

  57. ShanaC

    writing is a difficult craft. It takes years to master, and then even then, it can seem to master you.That said, never apologize for what you think (unless it causes harm to a huge amount of people…No Chairman Mao behavior). So feel free to continue thinking your opinions are good ones. Just weight them first and think them in a measured way.

  58. kidmercury

    sorry you got dissed boss. you did play it well, props to good defense.

  59. Mark Essel

    This post fits in well with at least the past years riffs. I think PRoales just may have been a little surprised by your jump from the single case of Google to the general case of strong leadership by founders.

  60. David Semeria

    PRoales, as someone who spent a long time in the equity markets, perhaps I can help you here.The key difference between hired execs and founding shareholders isn’t that their not cut from the same cloth. They may well be. The key difference is that the executives can be removed by the shareholders, whereas the founders cannot.Execs are continually watching their backs so as to not give shareholders an excuse to fire them. Hence the practice of setting short-term and achievable goals. Frequently these targets can be in conflict with long-term value generation for the company.Hence, founders can focus on the long-term, hired hands cannot (even if they wanted to).

  61. Farhan Lalji

    Really good point. But I do believe if a founder stays around once they’ve become gazillionaires it’s usually because they believe the company still has growth potential and are able to contribute in dynamic ways that an executive brought in can’t.I’d love to track a fund of companies where the founders are still major decision makers within the company.

  62. ShanaC

    Nothing stopping you from tracking such a fund if it exists, or just run the numbers yourself.Remember: Jim Collins is laughing the way to the bank on the reverse idea.

  63. ShanaC

    This is much more difficult for me to watch in some ways. I’m tired of slow change.I’m growing up to political consciousness in all of this. This is my fifth version of some sort of media driven revolution I’ve seen since my late teens. (Orange, Cedar, Hitnatkut, Iran, and Google Pulling out of China)Every single time I see this, I hope to god that I see more free. And then for a moment, you do. And then it goes away. It is the saddest thing I’ve seen.They’re primarily my age. And they are the biggest losers. People often don’t realize what it means to communicate freely.What would you do to come here if you knew your access would be blocked -would you stop using your real name, stop using photos? What?What would you do to say what you really think?It’s hard, really hard to watch this, because I’m afraid there won’t be a long chance in a while to get behind the Great Firewall again for a large swatch of China (or at least even awareness of the Great Firewall)…

  64. JLM

    No American President in recent memory has had the cojones to go chin to chin with the Chinese over trade on the mistaken notion that we are selling more to them than they are selling to the US. The trade deficit figures say otherwise.Deny the Chinese access to the US market for a month and see what tune they are whistling. Let them sit on ports full of ships bound for nowhere and see if they value access to the US market for their goods.We should have both free and fair trade.The Chinese are the biggest trading cheats in the world but they only can get away with it because we give them access to our markets.The funny thing about it is that we really have the right legal structure in place right now to make it work.Take a walk along Canal Street in NYC and you will see exactly what happens when we fail to enforce the existing laws. The world is filled with knock off pirated Chinese goods. Some of it quite good indeed. We know it. We can find it. We do nothing about it.

  65. ShanaC

    That’s Foucault for you.

  66. Mark Essel

    Well put David. I was trying to come up with a description that would satisfy PRoales but came up blank.

  67. awaldstein

    Right on and correct!

  68. Mark Essel

    Shana, Kevin didn’t have any direct links with Wired NY. I’ll have to find someone else to directly contact…

  69. Mark Essel

    Wait, no tie ins to virtual currency, or conspiracy info about where the hackers are really from? You let me down Kid. I expect better from the quality of your comments ;)On a more serious note, I could see where PRoales was coming from even though I agreed with Fred about Google. They were hack attacked before they backed out though. That says something about their morality (corporate security before morality).

  70. Mark Essel

    Admittedly I may have first come here because someone mentioned Fred was a solid blogger.I returned because he’s the best at creating an environment that challenges me to think and learn. This is the finest commenters blog I’ve ever visited thanks to folks like yourself speaking freely.

  71. fredwilson

    that is true about the ratio of post readers to thread readers. it is unfortunate because us thread readers know where the best part of this blog is

  72. ShanaC

    K I was out for the day. I wonder who wrote that ad…

  73. fredwilson

    marc andreessen once told me you need to sell the company within three to five years after the founder leaves

  74. fredwilson

    yes, that is a big problem Charles. it’s the business that needs the founder. not the other way around.