But Why?

Being an investor and board member means that you are close to the companies you invest in but not “in them.”. This near and dear relationship creates some interesting challenges for both the management and the investors. One of them is understanding the difference between information/reporting and a real understanding of what is going on in the business.

I often find myself saying “but why?” at board meetings:

  • “Revenues are soft this quarter” – but why?
  • “MAUs are up 150% over last quarter” – but why?
  • “We are going to miss our ship dates” – but why?
  • “We expect to decrease our hosting costs by 50% next quarter” – but why?
  • “We can’t seem to get any interest in the next round” – but why?
  • “We are getting a lot of inbound interest from investors” – but why?
  • “We have a lot of turnover in our engineering organization” – but why?

The beauty of working with investors who see a lot and have seen a lot is that they can often help you diagnose the disease by looking closely at the symptoms. But you have to be willing to engage in that exercise and be open to hearing “but why” and be prepared to answer it.


Comments (Archived):

  1. awaldstein

    The thing Fred that makes you interesting to me is that you do not come from an operational side. As I do.That you are an open pattern matcher, a numbers guy with a respect for human nature and an embracer of the unexpected.Lucky the company that can work with you to conjure up answers to Why.

    1. fredwilson

      Thanks Arnold

      1. karen_e

        Not everybody knows that Arnold has such an interesting entrepreneurial past — at Atari, I believe. He should link out to his personal story sometime soon for the benefit of new readers. Now that I’ve finished the Doriot book I have so much more context on the California miracle (or whatever you want to call it). KE

    2. PhilipSugar

      This is why diversity is so important.

      1. pointsnfigures

        diversity of experience, opinion, thought.

        1. awaldstein

          you cannot control or manufacture diversity of opinion on events that you have unforeseen. what you can and do do is choose your advisors and investors with a diversity of experience, expertise and thought. sometimes opinion on decisions are clearly in line of course.

          1. pointsnfigures

            My point is, just getting someone of a different gender or skin color isn’t necessarily diversity. People confuse it. Having someone with an engineering background, an operations background, an accounting background and a marketing background is diversity.

          2. awaldstein

            I don’t know where this is coming from honestly.You build your company to best represent your market for obvious reasonsYou build your advisory team/board to best represent expertise and diversity to aid you to make decisions.There seems to be little confusion in this to me at least.

          3. pointsnfigures

            People don’t understand what diversity really means. They look to fill in boxes instead of meaningfully thinking about what it really is.

          4. awaldstein

            This is not my experience at all on a board/advisory level.From within a team/company/culture perspective it is slightly different but I find more clarity, more color/gender/ etc blindness amongst most people as that is the mix in the world.Interesting that our impressions are so completely different and mine are not restricted to any specific geography nor I bet are yours.

          5. LE

            Right.But also diversity in intelligence and upbringing as well. What I have noticed is that companies, let’s say google, only (seem) to hire the best and the brightest at least in terms of actual important positions (meaning not in the lunchroom but in product development, engineering, marketing and so on). To me this often leads to a customer experience that does not mimic the entire customer base which isn’t of that caliber. You can see it in their products and the way that they operate. Compare what Microsoft designed vs. Apple. In that case, although I have no clue how Apple hired I do know that Jobs had a way of thinking like an average person and as such the products had a simplicity that most tech products didn’t. Most CEO’s aren’t going to have that skill set. Generally people like that don’t rise to CEO level. So they have to rely on employees. And hiring the sharpest tool doesn’t necessarily achieve that.Seriously how stupid does a manufacturer’s employees have to be to design a VCR that most people found hard to program, even using 80’s engineering and technology? Why? For one thing to the engineer it’s easy. (This plagues bitcoin as well..)

          6. JLM

            .Diversity today is both a social “feel good” value and a practical business interest.What PnF says as it relates to actual business experience is correct. It is desirable to have a diversity of education, skills, experience. It is desirable to mirror one’s market.Ethnic and gender diversity is a liberal value which falls into the camp of social engineering. Not to say that social engineering is not a worthy goal, but it is not as critical to the success of a business as the type of diversity as espoused by PnF.Some folks — may I call them “liberals” without offending anyone? — like to talk about ethnic and gender diversity, but their actions do not mirror their words and it is fair to say that successful enterprises may not be willing to risk their success by making such a change.Take a group photo and look at the faces and see if an enterprise’s actual body count reflects their stated goals or utterances.JLMwww.themusingsofthebigredca…

          7. LE

            Take a group photo and look at the faces and see if an enterprise’s actual body count reflects their stated goals or utterances.I also wonder to what extent (per my comment yesterday about Coinbase makeup) they think that age diversity is also good.My wife, who is much much younger than I am was watching CNN with me last night. On the screen was Carl Bernstein. So I said ‘that’s Bernstein or maybe Woodward, no it’s Bernstein’. She is like ‘who are you talking about’? I said you know Carl Bernstein. She says ‘who’s that?’. I think she’s kidding. I say ‘Woodward and Bernstein’. She says ‘who are they’. I still think she’s kidding. She finally convinces me she has no clue what I am talking about. I then say ‘you know ‘All the President’s Men’? And the movie even? Dustin Hoffman and Robert Redford? Like an old PC it’s like ‘no file available’. I then say ‘let’s call your sister (who is a few years older and ask her). I call the sister and she has never heard of them either. I am amazed. Like it’s even popular culture at this point?But likewise she is amazed at all of the things that I don’t know (particularly music or drugs whatnot) that she knows about because of her experiences in the past. And obviously she is smart and has a very respective job. Just was before her time. Not only didn’t live through it didn’t even hear about it. Wow.I guess my question is if maybe age can also be a drawback in terms of what you avoid because of your past experiences. My sister in law (the one who didn’t know who Bernstein was either) is starting to do real estate. I am thinking she is making mistakes but I am tempted to let her make the mistakes because maybe they aren’t mistakes that apply in all situations. And maybe I am biased and to cautious as a result. Who knows?That is one thing Fred has going for him as far as lack of operational experience. He isn’t shackled by the past and locked into it in the way that someone with operational experience might be. No battle scars to hold him back (and I mean this as a positive in case it’s not clear).

          8. JLM

            .The value of wisdom as a trait is trading at an all time low.It is why I often remind folks that their generation did not invent sex.There are things going on in the world today which people of a certain age cannot relate to because they have no historic frame of reference.I think the hysteria revolving around crypto-currency fits into that category. It is the second iteration of the “mousse in the hair” investment bankers who created three tranche derivative securities without knowing how to foreclose on a bad loan or how to work out a bad loan.You are not giving Fred full credit. He’s in his fifties and has seen plenty.The other day I had a convo with someone about Watergate and I asked them what happened and who was involved. Crickets. Yet, this same person said the current situation with the Russians and Trump was “worse than Watergate.”Youth is wasted on the young and we grow wise too late in liife.JLMwww.themusingsofthebigredca…

          9. LE

            My 14 almost 15 yr old step son sat down at the table last night and interrupted my reading of the wall street journal where on the front page (see below) was a chart showing bitcoin right up next to gold and the 10 year treasury note. Front Page, Top.He started to talk about Comey being on TV (keep in mind he has never talked with me about politics before and isn’t the type) as if some big major event was happening on tv like the world cup or the olympics (today). This is what I call the ‘newly hatched’. Someone who comes into the world w/o perspective and doesn’t realize the way the world works because of that lack of experience. He said something like ‘do you think he will get impeached because of obstruction of justice’ (Trump in other words). To him from what he was told or whatever the buzz was it’s pretty close to a certainty. It’s probably his first ‘big deal’ in terms of something he never thought or cared about before. And it’s now been dropped into his head. I remember when Nixon waived goodbye. My dad said “they all cheat he just got caught” or something like that.Anyway, check out @wmoug:disqus @fredwilson:disqus the WSJ front page chart below. Next step is the ticker at the top of the paper…. https://uploads.disquscdn.c

          10. William Mougayar

            yup. in crypto, we trust.

          11. PhilipSugar

            You get to Philadelphia and we will go see some of my favorite Pennsylvania Deutsch friends, and enjoy their food. Be ready to eat some sweet foods, we can also have some honey from my hives that they made and see their workmanship at my house.

          12. Vasudev Ram

            Wow, cool! Thanks for the offer; I would definitely like to do that, and will try to make it happen.

          13. sigmaalgebra

            I thought the quote was “Youth is such a wonderful time of life. Too bad it is wasted on young people.”Now that I know what I wish Dad’d told me when I was, say, 10-15 (he wanted me to learn first hand, by experience, e.g., about how to understand girls, as if I were the first), where can I apply to be, say, 12 again?

          14. JLM

            .Further to my answer, this is why a smart CEO has a “gray haired eminence” amongst his mentors and advisers. I had one and he taught me so much that I am going to go put flowers on his grave today.JLMwww.themusingsofthebigredca…

          15. Rick Mason

            I have experienced this often with otherwise very bright younger people. Do you want to know the reason why?It’s because the schools have minimized the teaching of history. I had a discussion with a college student who told me that her class spent more time on Vietnam than all the other wars this country has fought, a significant amount more. She knew nothing of WW-1 or Korea because they weren’t covered in class at all.

          16. JLM

            .So, I’m betting they don’t know much about the Finnish-Russian War of 1939 or that the Finns sided with the Nazis for a time in WWII?Studying history is the easiest way to imagine the future.JLMwww.themusingsofthebigredca…

          17. sigmaalgebra

            Or the music Finlandia by J. Sibelius, complete with machine guns mowing down the Ruskies!Gorgeous performance of the music athttps://www.youtube.com/wat…With a gorgeous video. Uh, for the battle scenes they show a lot of ducks!But the famous hymn is gorgeous.

          18. sigmaalgebra

            My European history course started by spending a lot of time on Hammurabi, touched on events like the Council of Trent, got all wound up about the French Revolution, IMHO never said anything very important about any of the content, e.g., enough to consider what the causes might have been, with no attention at all to technology — spears, copper, bronze, iron, steel, horses, chariots, gun powder, ships, open ocean sailing, etc., and never got to past 1848.So, I had to learn the rest to the present by whatever, yes, lots of books, but also various videos.

          19. sigmaalgebra

            Naw, you forgot: As WaPo, back when it was a newspaper, editor in chief Ben Bradley shouted over the whole WaPo newsroom,WOODSTEIN!!!!!

          20. awaldstein

            “may I call them “liberals” without offending anyone? — like to talk about ethnic and gender diversity, but their actions do not mirror their wordsso according to you that i as a liberal am just a freakin lying ass and I shouldn’t take offense that as a liberal my actions don’t mirror my words.get a grip.

          21. JLM

            .”Some folks … “If the shoe fits …You are quick to don the victim hood today, bro. Only you know whether you fit into that class of folks whose actions do not mirror their words. That is a fairly tight modifier, no?If your actions do not mirror your spoken and espoused words, then, YES, you should be offended. Not at me, but at yourself, for being a hypocrite.JLMwww.themusingsofthebigredca…

          22. awaldstein

            You are good writer and say what you mean.This is not a matter of interpretationI am no dummy nor anyones victim. Read what you say.This is below you. Get a grip.

          23. JLM

            .Tough day, Arnold?There are a good number of liberals who passionately espouse gender and ethnic diversity, but when you look at a pic of their companies, the pics show neither gender nor ethnic diversity.They talk a good game, but fail to play a good game.If this feels like you to you, then salute!Not a difficult concept to understand.It may be a reading comp problem. Or, you may just like playing the victim.JLMwww.themusingsofthebigredca…

          24. awaldstein

            great day, terrific year.gender balance has nothing to do with liberalism.this topic is not politicized.your wisdom is still at times quite profound.I suggest you think about unpacking it from all the shit you are wrapping it in.

          25. JLM

            .”gender balance has nothing to do with liberalism”Really? You wrote that? No kidding?It is a core liberal tenet. If I were a liberal, I would be proud of it as a core liberal tenet.I applaud it and think it is a worthy political difference between those who favor it and those who don’t. It is a meaningful political difference and it is the kind of thing that thoughtful voters should be concentrating on as it is real.You are grasping at straws. If you are going to be a liberal, own it. Be a liberal. Take a stand and stop calling names.It’s OK to be a liberal. Some of my best friends …JLMwww.themusingsofthebigredca…

          26. awaldstein

            Oy!I give up and will no longer engage. .

          27. JamesHRH

            @jlm hardly needs help from anyone, but i didn’t take what you took from his comment.Certainly, conservatives don’t espouse quota based ethnic or gender equality, they think they should be free to hire whomever they wish.So, it has to be liberals who do it.

          28. PhilipSugar

            See my comment below. I really believe people love trying to define people not accept people.

          29. awaldstein

            I bet you are a terrific executive as our jobs are not to do what comes easily but to do what needs to be done and set an example.Accepting and encouraging diversity is one of those things.And by doing so change happens.

          30. PhilipSugar

            People have gotten so polarized.If I say I am not for affirmative action forcing promotions for one set of people or making quotas, I get one set of people that is pissed.If I say I am completely for (and I am and support with the three T’s) programs to get women and minorities into software and entrepreneurship so that we get more balance the other side is pissed.Where is respect for the middle?If I try to actively recruit from ZipCode Wilmington or the Delaware Women’s Business Network (and I do) that is very different than saying I only am going to hire or promote X type of person.But actively celebrate diversity. We do this through respect, understanding, food, and sport.I am a pure tech shop here in DE. We have 25% of people that don’t speak English at home, and 20% women.Am I as diverse as the rest of the company which does sales, marketing, account management, and admin? No.That actually came up at an exec meeting, and an African American exec said look he’s a pure tech shop and he is our token White, American, Middle Aged, Heterosexual, Christian, person.I looked around and said I never thought of it that way, I didn’t know that was my role. He said AND he is Ivy League educated, he is a great token.He said I was at his pre-Memorial Day Pot Luck Picnic, they had spicy southern Indian food, vegetarian northern Indian, Romanian Goulash, Ukrainian Jewish bread, and of course American barbecue. (I had a smoker and had made brisket and pork shoulder)We learned Phil is dreadful at cricket and whiffle ball (no matter how softly the bowler bowled, or how little spin the pitcher put on the ballI couldn’t hit), ok at European football, good at U.S. football, and pretty good at cornhole and horseshoes.

          31. awaldstein

            Agree…everything is politicized and its a challenge.For myself as a person and with brands I works with.Considering (don’t think I”m going to do this) taking a position which will require building a new division for a smaller public company under some time constraints and found myself thinking about the human diversity piece from a design perspective as the slate is completely empty.Those who can confront these issues with some humility and work in progress attitude rather than bravado have my respect cause it, like us, like our world is definitely under construction.

          32. PhilipSugar

            I certainly did not mean to start a controversy. Diversity is an attitude not a box. I agree with this.People comment about my offices atmosphere and they mistake that it causes our culture.They are wrong. Our culture causes our atmosphere.Once I came back from a long overseas trip. My most junior guy had a really strange expense report. I said what is this stuff from ebay? Coin acceptor? CRT monitor? Cabinet? Custom graphics?He said it’s Christmas, we took a vote and decided our team building would be to build a video arcade, you weren’t here but the vote was unanimous. (Every single game from when you were a kid) “We used an old computer but it runs games like donkey kong, tetris, punch out and 150 others and they all load in RAM for a computer that is too slow for even you to use.”Diversity is about accepting other people. Sex, religion, race, ethnicity, size, etc., We can have the most petite quiet religious Indian woman and the biggest loudest brash New Yorker and we do. They get along famously.

          33. JLM

            .What you describe is like a zoo. You have collected two of each specimen for your ark. The way you describe them is like Noah.Diversity — in the work place — is about not seeing or cataloging the differences. It is about setting out the starting blocks and not noting the color of one’s skin, their gender, their etc.Diversity — again as used in the work place — is about being blind. Not seeing or noting the differences, while providing equal and fair opportunity to all.Where the friction begins is when someone espouses a certain attitude toward, as an example, gender. They speak words that say they support a certain representative percentage or presence as if hitting that number proves their intent.When they talk, but do not act, they foul their own culture with the hypocrisy of having lied to themselves while having lied to the company.They often force a situation to meet a mythical target and thereby do simply check a box.Diversity can be the natural result of a blind meritocracy in which the finish line performance determines further opportunity and rewards. It is a hard thing to do, but it can be done.JLMwww.themusingsofthebigredca…

          34. PhilipSugar

            We could not disagree more.My point is not to hire two of each.You have seen I am very against affirmative action. I think if you say: I want to have this many of this type of person for this position, that is wrong. I have been outspoken on this. Saying your board will be 50% female is no different than saying you want 50% of your board to be men under 30.However if you think you can just have a bunch of 25 year old males serve an enterprise base of older executives you are dumb (and I have been dumb, not out of spite but out of hiring people like me. DUMB)If you think they can serve a marketplace that is more than half female without a really good female staff you are dumb (and I have been dumb)What I am saying is that you damn well better make sure provide an environment where people can feel comfortable, and get the right mix.If you do you will attract and keep a diverse group of people and they will get along and you will be better off for not having group think.You want to go political? I promised not to do this but I will for you.Want to know why some people were shocked that HRC lost? No diversity.Does that mean I support DJT? No. I am an equal opportunity hater.Corrupt or Crazy. I don’t like either choice. I think we need a viable third party and then we won’t have what we have now, which I think both parities are happy with.If you say you voted Libertarian, Democrats say you voted Republican and Republicans say you voted Democratic.Bullshit.It’s like pro wrestling. Both parties are happy playing the hero and the villain, and changing sides every eight years. Same with the media.Get a third party in there and you will either compromise or continue to lose power.

          35. JLM

            .I think you are actually agreeing with what I said.The most fundamental duty of a CEO is to create an environment in which employees can be productive. Then, the duty is to give them clearly articulated objectives which flow from and support the company’s tactics and strategy.As to politics, I don’t agree that people were shocked by HRC’s loss because of some measure of diversity or lack thereof. She should have won, could have won, would have won but for a few other things.She had the misfortune of running against a part time, newly minted politician who hadn’t gotten the coronation message. It happens.I yearn for a third party — the JLM party — but, unfortunately, the primary system in the US is totally controlled by the established parties. They are co-conspirators in deciding how it will be run and preclude the opportunity for a robust alternative.The biggest unsung function of the primary system is that it is training for the general election, the main event. Candidate Trump learned the game in the primaries and perfected his unusual communication strategy while running against the media. All learned on the primary trail.In an odd way, the third party candidates elected DJT if one takes their vote in the critical states and attributes those votes to the non-Donald candidate. His margins in all of the surprise-win-states were within the chalk stripe width of the third party votes.The English election shows the impact of multiple splinter parties. Of course, PM May made one of the worst miscalculations in English political history by calling for an early election.I like it when you disagree. It’s called a discussion. Thanks.JLMwww.themusingsofthebigredca…

          36. LE

            Get a third party in there and you will either compromise or continue to lose power.With a massive amount of money and perhaps 20 to 30 years of time this could happen. The money would buy awareness and it would be a slow process over time until it was accepted. Then their would be a tipping point where all the sudden it seemed viable to the masses and it started to be taken seriously. But the timeline for that is not quick. And it would take a boatload of money.Look in this country no sport has challenged Football, Baseball and Basketball the closest has been Ice Hockey since we were born and that isn’t taken super seriously. No pro soccer even though there are certainly enough people who would go to games (why is that? Seems strange actually..)Other than that (money and time) not going to happen. Especially since the media is who anoints institutions so what’s in it for them? [1][1] Then again they were stupid enough to give legitimacy to the internet which then put them out of business so I guess it’s possible.

          37. JamesHRH

            I think it is more elemental than that, although there is nothing wrong with your list.People who connect to the world differently or have different perspectives on how to do things, or just think differently are important.The error in gender & ethnic parity, to me, is the superficiality of it.Do I think most women connect to the world differently than men?Yup.Have different perspectives on how to do things?Not really, I think those drivers are personality or experience or even culture, rather than gender based.Just think differently?No, not at all – those are the hardest people to find almost never come in a nicely segregated grouping.

          1. JamesHRH

            Jeepers, what a great link that first one is LE

        2. PhilipSugar


        3. Joe Cardillo

          Have you read the below? I was going to write more but it struck me as better said than I ever could…https://medium.com/this-is-…(the author, btw, has driven the engineering team at Slack for the last couple of years, and just accepted the head job at Kickstarter)

          1. pointsnfigures

            http://pointsandfigures.com… Sounds similar no? I agree with a lot of what she says. What an interesting career, life and perspective she has.

          2. Joe Cardillo

            Yep, couldn’t agree w/that post more. And Erica is great, I’ve followed her work for a few years now…well worth paying attention to.In my experience meritocracy and diversity of experience make sense in principle, but too many startups/founders/execs that say it fail to understand via a distribution/delivery lens – you have to actually be working on it and not just saying “hey we offered a thing but no woman of color was interested or applied.” #trainthemen indeed.I’m also not convinced the world needs another financially secure white guy solving the “small business website development” problem…it doesn’t mean I don’t encourage and support him anyway (Sorry, Mike! Karl! *actual people*) but ultimately it would be hypocritical of me to say “yeah let’s judge people on their actual work” if I don’t engage in the outreach/distribution/delivery to folks whose work isn’t surfaced, or who for various reasons have been messed with economically/socially/emotionally/intellectually by the existing structure.

      1. PhilipSugar

        This is a good talk. I have had a nice chat with him.

  2. LIAD

    fun really begins when you start stacking the but whys.you either get to the root cause or you discover holes in your understanding which you can then go about trying to fill.or you decide, screw this, and go chug some beers.

    1. Lawrence Brass

      Ready to vote LIAD? What is the people’s mood in the UK towards the election?

      1. LIAD

        I think the country has election fatigue.This election was meant to be about giving the previous govt a strong mandate to negotiate Brexit, it’s ended up being about social care and national security.The opposition party, Labour, has been taken over by a hard left leader, to the point where half his own cabinet recently resigned in protest against him and his policies. absolute mess.Conservatives have been miles ahead in the polls for years, tightened during the campaign, most are still expecting them to win big. I hope they do,

        1. Lawrence Brass

          It is interesting to know that Brexit doesn’t seem to be the central issue anymore. Thanks LIAD and good luck with your preference.

          1. Russell

            Oh it is still the central issue for the next 5 years … it is just that Teresa May won’t talk about it and Labour are trying to have their cake and eat it too with one foot in remain and one for leave.

          2. Lawrence Brass

            On the effects it will have sure, but for the voters? Do you think that for the voters attending today it means the same thing?

          3. JLM

            .Brexit did not end the world. Three terror events in three months are a bit much.JLMwww.themusingsofthebigredca…

          4. PhilipSugar

            ALERTS TO THREATS IN EUROPE: BY JOHN CLEESEby John Cleese – British writer, actor and tall personThe English are feeling the pinch in relation to recent events in Syria and have therefore raised their security level from “Miffed” to “Peeved.” Soon, though, security levels may be raised yet again to “Irritated” or even “A Bit Cross.” The English have not been “A Bit Cross” since the blitz in 1940 when tea supplies nearly ran out. Terrorists have been re-categorized from “Tiresome” to “A Bloody Nuisance.” The last time the British issued a “Bloody Nuisance” warning level was in 1588, when threatened by the Spanish Armada.The Scots have raised their threat level from “Pissed Off” to “Let’s get the Bastards.” They don’t have any other levels. This is the reason they have been used on the front line of the British army for the last 300 years.The French government announced yesterday that it has raised its terror alert level from “Run” to “Hide.” The only two higher levels in France are “Collaborate” and “Surrender.” The rise was precipitated by a recent fire that destroyed France ‘s white flag factory, effectively paralyzing the country’s military capability.Italy has increased the alert level from “Shout Loudly and Excitedly” to “Elaborate Military Posturing.” Two more levels remain: “Ineffective Combat Operations” and “Change Sides.”The Germans have increased their alert state from “Disdainful Arrogance” to “Dress in Uniform and Sing Marching Songs.” They also have two higher levels: “Invade a Neighbour” and “Lose.”Belgians, on the other hand, are all on holiday as usual; the only threat they are worried about is NATO pulling out of Brussels .The Spanish are all excited to see their new submarines ready to deploy. These beautifully designed subs have glass bottoms so the new Spanish navy can get a really good look at the old Spanish navy.Australia, meanwhile, has raised its security level from “No worries” to “She’ll be alright, Mate.” Two more escalation levels remain: “Crikey! I think we’ll need to cancel the barbie this weekend!” and “The barbie is cancelled.” So far no situation has ever warranted use of the last final escalation level.A final thought – ” Greece is collapsing, the Iranians are getting aggressive, and Rome is in disarray. Welcome back to 430 BC”.

          5. Lawrence Brass

            Yes, fear causes immediate damage. My brother had organized a trip to the UK for vacations and he canceled it just because of that. He usually travels with his wife and youngest daughter.

        2. jason wright

          this election is all about the ‘Conservative’ party and its own domestic issues, the same issues that forced Cameron to call the Brexit referendum in the first place.Labour hasn’t been taken over by a hard left leader. It was being taken over by a right wing coup. Corbyn represents the authentic values of Old Labour. Blairites should leave and form their own party, as should the hard right of the Conservatives. Perhaps they can work together LOL.The British people are not served well by the particular style of British democracy.

    2. William Mougayar

      “discover holes in your understanding”- you mean, discover holes in “their” understanding. That’s more insightful.

      1. Twain Twain

        Discover holes in BOTH’s understanding.Infinite can be the ingenuity of people and also the ignorance of what we don’t know. This is why we spend our entire lifetimes learning, discovering, adapting new knowledge and maybe inventing new tools.

        1. cavepainting

          Love the double infinite. That is the truth.

          1. Twain Twain

            When I was 2, Grandpa told Mum, “When I asked her “Why” she’d cracked the lock on our gate and left the garden, she looked up as if to say, “Why don’t you think like me?!” and then she said, “To go see my friend” as if it was the most normal thing to do!”So the “Why” exchange isn’t just between investors and CEOs, LOL.As much as possible, it makes sense for everyone to stay curious.

    3. JamesHRH

      All senior people should seek to understand.Great post.Simon Sinek made a career out of Why? beimg the key to leadership.

      1. LIAD

        Love Simon. But his work was about finding a why from which you would build everything else. An ideological why.This why is more operational.

        1. JamesHRH

          True, but I feel Ops Whys lead to the best strategic Whys.

    4. Steven Roussey

      Yes, often referred to as the “five whys”

  3. Lawrence Brass

    Regarding the “be prepared to answer it”, I wonder at what stage of development a startup can / must / is expected to provide detailed information reporting and analyses. From the start of the relationship?

    1. JLM

      .From the first day, a startup should “practice the way they intend to play.”JLMwww.themusingsofthebigredca…

      1. Lawrence Brass

        I was thinking about how good or bad can be including code in advance in a system to gather and pre-process data meant for reporting to management and the board. What I have seen in the past is that the reporting systems are built later, scavenging data from the logs, improvising.What do you think about including these tasks, at least writing good logs from the start?

  4. MattMinoff

    This reminded me of a great post from a while back about getting to the core of a problem using 5 Whyshttp://www.startuplessonsle…

    1. Vasudev Ram

      Was going to mention 5 whys or five whys, but you beat me to it. First thing that came to my mind when I read the post. I’ve read it was used as part of Kaizen in Toyota, etc.https://en.wikipedia.org/wi…The Wikipedia article above confirms that it was used at Toyota, and also that Ricardo Semler of Semco (who I’ve mentioned here in some recent posts), used it too, as 3 whys.

  5. Russell

    @fredwilson:disqus For example why would FB copy Instagram?! Here is an impassioned defense of copying by Hiten Shah … https://producthabits.com/f… A very personal counterpoint to your comments on BBG probably interesting for your portfolio companies as well.

    1. leigh

      https://uploads.disquscdn.c… Interesting article. Now this just says it all for successful companies that want to create a challenger culture:

      1. JamesHRH

        This is dumb.Did FB set out to kill Google?50 years ago, FM was going to kill AM. Then TV, Then the web. AM still there.

  6. leigh

    The classic difference between an observation vs. an actionable insight

  7. Mike Cautillo

    I ask the same of many global macro strategists “But when?” :))

    1. William Mougayar

      I agree. When, is the corollary to Why.

    2. Vasudev Ram

      “If ever” might be more appropriate in some cases 🙂

    3. JamesHRH

      Wall St adage – you can know the Price or you can know the Date, but you can’t know both.

  8. Girish Mehta

    Actually this is one of the tools I have seen often abused in operations reviews by people who did not have operational expertise themselves. They don’t know how to get to the answer themselves, but they are smart enough to know when and where to ask Why.Within my team during ops reviews, I used to have a guiding principle – We can all see where the dashboard is red and where the dashboard is green. Don’t ask Why if you have not done the work to have a point of view on the question.Important the team understands the difference between having a point of view, and doing the work to have a point of view.Regarding the examples given in the post – most of those statements simply should not exist without the “Why” built in to the review.A basic idea is that reviews focus on “input” metrics more than “output” metrics, while covering both.For example – the first statement “revenues are soft” is an output metric. Some examples of relevant input metrics (depending on applicability to business) would be – Weighted Average Price Position vs target and historical / Lead generation activities/ Average time to closure on leads/Product Mix vs target and Avg. per unit realization vs target / Sales staffing levels, Abandonment Rate, Close Rate, Churn as a ratio of new acquisitions(not ratio of installed base)/ Delivery to target/Customer Satisfaction metrics. Many of these would have further drill-down. Once you cover the input metrics, you typically see “where” this output metric – revenue here – is soft.The input metric has not yet told you “why”, it has indicated to you “where”. Knowing the where, you drill down the relevant input metric/metrics to get the why.If you focus on the right input metrics, the output metrics usually take care of themselves.

    1. William Mougayar

      “Important the team understands the difference between having a point of view, and doing the work to have a point of view.”Well said key statement,- but sometimes these 2 can be complementary, if it comes with the experience of seeing other similar situations.

      1. Girish Mehta

        The work in that case could be examining that the pattern recognition is not actually confirmation bias, and asking yourself what might be different rather than what is similar.

        1. William Mougayar

          Got it. Agreed.

    2. JLM

      .Agreeing more with you than you agree with yourself.Well played.JLMwww.themusingsofthebigredca…

    3. Joe Cardillo

      You raise some great points – I largely agree re: deep operational expertise, in part because one of the biggest (and simplest) mistakes people w/o it make is measuring what’s happening, and not the rate of of what’s happening.The latter almost always uncovers a why, and keeps you focused on actual growth and not vanity stuff. If you know a certain segment of users is increasing or decreasing, vs. your overall revenue, for example, you’re incentivized to understand and grow it.

      1. JLM

        .The most common error that people who do not have true operational experience make is they don’t know what percentage of a plan actually happens. They are unable to come to grips with what doesn’t happen, but which is normal.In my CEO coaching, one of the first things I ask a CEO is, “What percentage of decisions do you make that are ‘good?'”The best CEOs say, “Forty percent.”The worst CEOs say, “Ninety percent.”Experience beats the false optimism out of you.JLMwww.themusingsofthebigredca…

        1. Joe Cardillo

          That is really well said JLM. And not only do the best leaders understand it’s 40 percent, they also move that 40 percent faster than everyone else.What do you think of how various startup / business support orgs walk first-timers through a 45 page business plan? I struggle w/that at times because, having operational expertise, I know a lot of the stuff in those doesn’t get done, or you couldn’t possibly know the answer to until you actually build a thing (which has led me to consistently think more in terms of frameworks and less in terms of plans).

          1. JLM

            .What we call a business plan is no longer an adequate planning doc.A startup needs a vision, mission, strategy, tactics, objectives, values, culture, business engine canvas, business process graphic, elevator/taxi/boardroom pitches, dollar weighted org charts.It is not important that they are great literature as much as it is that they are coherent and work together. You can revise them as reality rears its ugly head, but it’s way easier to revise a plan than to make one from scratch.JLMwww.themusingsofthebigredca…

  9. William Mougayar

    Another old trick is to ask Why 3 successive times, because often the first answer only scratches the surface of the obvious.

    1. JamesHRH

      Every four year old knows this trick , as Louis CK.

  10. Joe Marchese

    A former colleague used to say that people who know How will always have a job. People who know Why will always be their boss.

    1. JamesHRH

      The Why people also have a good chance of being utterly useless, unless they ask know How and Why.

  11. pointsnfigures

    And be unafraid to confront the deeper issues behind, “But why?”

  12. Dorian Benkoil

    “Why?” is a great question. It can elucidate a lot — from simple information to a richer understanding of the person being questioned. It can make people uncomfortable and therefore seem a little rude. But that shouldn’t stop those in a position like yours from asking it.

  13. JaredMermey

    A story that aligns with the financials is key to building trust with an investor (and co-operators). It shows true understanding of what inputs are affecting the output. Good investors will listen to the “but why?” no matter if the scenario is good or bad.Looking forwards, being able to understand these things is the difference between financially modeling a company with Excel formulas and truly understanding the human elements/relationships/interactions that are inherent to those formulas. There are innate frictions that are difficult to measure in a spreadsheet.

  14. JLM

    .The necessity for a board member to ask WHY is indicative of an immature reporting process. Any CEO worth his salt will provide facts with explanations right out of the chute.Any fact which does not meet “plan” is low hanging fruit and has to be addressed both internally and externally. Where there is no definitive explanation, the universe of possibilities must be exposed.The last thing any competent CEO does after reviewing the board materials — before sending them out — is to anticipate the board’s questions and to incorporate the answers before they are asked.A salty board member will not just ask WHY but task the CEO to anticipate all the WHYs and to provide them as part of the original board information. The creation of a repetitive and effective process of communication is a critical touchstone between a CEO and a Chairman of the Board.There is a lot of needless energy that is expended in interrogating the CEO. This creates discussion fatigue which can blunt the quality of decision making as people get tired talking about things. CEOs undermine their credibility as they often cannot think fast enough on their feet to please a skeptical board member which undermines trust and confidence.A clever CEO calls the board members a couple of days before the board meeting and asks them if they have any questions. These questions may be answered by a supplemental bit of info forwarded to the entire board or covered by the CEO in the original presentation.The CEOs job is to anticipate questions, to answer them at the earliest point in time (with the board package or before the board meeting), and to follow up after the meeting with the board to ensure they are satisfied with the explanation.For CEOs, this will relieve a lot of wasted time. For boards, this will build confidence that the CEO understands the nature of the communication from the perspective of the board itself.This is a subtlety and nuance that experienced CEOs get and it is why they have calm, short board meetings. An experienced Chairman of the Board guides the CEO to this promised land.The running of the board meetings should be orchestrated between the CEO and the Chairman of the Board. It is really the essential duty of the Chairman equaled only by the necessity of evaluating the performance of the CEO.JLMwww.themusingsofthebigredca…

    1. JamesHRH

      So many startups don’t think of meetings as planned events.I like to think of them as performance art.

    2. sigmaalgebra

      A keeper!

    3. Thomas Luk

      “But why?” from an investor leads to coaching a junior CEO.The seasoned CEO not only anticipates, but creates the “But why?” and shows potential answers or at least the actions to be taken.

      1. JLM

        .A smart CEO does not take his primary coaching from someone who has the authority to fire him. That is basic self-preservation.A junior CEO wants to approach the game as if he were a seasoned CEO and seek support from someone who has been a CEO for decades. That is the most important reason CEO coaches exist — to inject experience and known solutions to overcome inexperience.The CEO is “renting” experience which is cheaper than buying it.Not every issue is a question which calls for an answer. A lot of time can be wasted answering unasked questions.A CEO should differentiate between explanations and questions. They are different.JLMwww.themusingsofthebigredca…

        1. cavepainting

          Brilliant transition from wisdom to sales pitch! You rock!

          1. JLM

            .Haha, it’s natural. I never spend a penny marketing. I have no website and I don’t do anything to solicit business. Most people don’t even know the name of my company (The Wisdom of the Campfire). I don’t even have a business card with the company name on it. I do own the domain.I get a lot of clients from referrals from angel investors and VCs. I have worked with C suite folks from some of Fred’s companies, but the referral never came through Fred. Or maybe it did and I just didn’t know it.I work with Austin TechStars. I don’t get business from the companies, but from the mentors and the investors.I get a few calls — more than I might imagine — from investors who have a deal in the ditch.I get a lot of foreign clients from English speaking countries. I only have a couple of Austin clients though I like them a lot because we eat a lot of BBQ.Now that I have been at it for about five years, I have had a few CEOs make me look good because they have had spectacular exits.For the first time, this year I have fired a few clients who were not taking the work seriously., They pay just fine, but they weren’t doing the work. A couple have called me back six months later and asked me to work with them again.My primary endeavor these days is writing and I am getting some traction. I have had several things published.JLMwww.themusingsofthebigredca…

    4. cavepainting

      What you say is very true, but an additional level of “But Why” inquiry in the board meeting or in a 1:1 can help get to the root cause. The 5 Whys method can be helpful. https://en.wikipedia.org/wi…But the real challenges here are related to human nature. For reasons of self preservation, hubris, and often wanting to be consistent with past statements or claims to the board, CEOs often do not get to the root cause or are unwilling to discuss it explicitly. They can also throw board members off the trail into real reasons (that might reflect badly on the CEO and his team) by planting red herrings.Yes, you can ask “But Why” a lot. Yes, you can integrate it into board meeting material. But unless you really establish a positive culture at the board level and establish a certain level of openness and honesty in discussing problems, none of these things might really matter.

      1. JLM

        .In the pursuit of excellence the CEO himself is often the biggest impediment if his journey is not honest.When I went to military school, I didn’t know if I could make it. I did and I learned something about myself.When I went to Airborne school I knew it was a piece of cake even though some folks didn’t make it through. I knew I could make it.When I went to Ranger School, I wondered if I could make it. I told myself I’d do my best and if that was good enough, then I would make it through. About 50% of any class washes out. I made it.When I built my first high rise building, etc. etc etc.I had the pleasure of working with investors and boards who were excellent in their appreciation for order and a well defined approach.If a CEO is not playing honest with himself or the Board, then it is only a matter of time before something important breaks.CEOs have to know that something more than half of the decisions they make will turn out to be WRONG.A Board has to create an environment in which failure is not fatal and in which they reward success. Soon, basic incentive takes over.An experienced CEO who has dealt with a number of board members has a huge advantage over a board. He understands the game and he can see their reactions before they even react.In all things, an honest commitment to a hard objective will bring out the best in all of us. Failure is not fatal and is often the building block of long term success.When I was at my best, I could coax a great performance out of a mediocre performer. But it took me 20 years to learn how to do that.JLMwww.themusingsofthebigredca…

  15. creative group

    FRED:But why?Does an investor need to be on the majority of boards they invest?Does an investor need to evangelize portfolio companies that the street knows are flawed and require major resets but continue to the Mega Church sermons.

  16. sigmaalgebra

    It is a norm, often bitterly enforced, that conversations, reports, analyses must have only such short statements.Bummer.Instead, for anything like useful rationality, even just for giving a working brain and good luck a chance, the company should already have known a lot about the “why” now and should have seen it, good or bad, coming some quarters before.No good for some Allied general reporting back to Ike that they didn’t see the French Normandy hedge row country until they tried to cross it.No good that at dawn on June 6, 1944 the US didn’t have B-17s and then P-47s doing their best at Omaha beach flying parallel to the shoreline and bombing and strafing. The P-47 carried eight 50 caliber machine guns, and flying that thing over ground troops and equipment would make blood and guts out of people and small pieces out of big equipment in a big hurry. With that timing, the Germans would not get earlier warning of the time or place of the invasion. With that flight path, the Allies in the ships and boats would not have been at risk. Then maybe Omaha Beach would have been closer to a safe walk ashore instead of a “bloody shambles”.Moreover, if really do need to know “why,” then such short and simple questions and answers should be no more than thin soup at the beginning for a long dinner of many complicated courses.Standard remarks of rational caution apply: Measure twice, saw once. Trust but verify. Have both belt and suspenders. Never try to put more than 10 pounds in a 10 pound bag; planning a maximum of 5 pounds is better; and if there is a lot of doubt then plan for only 2 pounds. Each statement is close to a theorem, and immediately after each theorem should come a rock solid proof. Then the theorem and proof should have a good, first-cut intuitive view. A theorem without a proof is like a car with no wheels — it won’t go anywhere. Or such a theorem is like a barrel without a bottom — it won’t hold anything. Or it’s like a paper mache boat — it won’t make it even across Lake Erie, much less the Atlantic or Pacific.There should be good planning. Then during the execution, that should mostly be routine within what was anticipated in the plan. If you fail to plan, then you plan to fail. Good planning is important. Good planning is possible; any plan that fails upon first contact with the enemy is a bad plan.Some good planning: The Lockheed F-117; it flew into all the Iraqi antiaircraft defenses of Baghdad and never lost a plane, and no plane even got a scratch. Terrific planning. The Lockheed SR-71, flew 2000+ miles at Mach 3.0+ at 80,000+ feet over the USSR for years, never got shot down. A key was a terrific, novel engine from a Pratt and Whitney operation in Florida. Terrific planning. Gulf War I, 250,000+ Allied troops, 8 weeks of an air campaign, 100 hours of a ground campaign, killed some hundreds of thousands of Iraqi troops, killed fewer than 300 Allied troops, made Robert McNamara’s (the main architect of the US disaster in Viet Nam) about Gulf War I “It will be bloody. There will be thousands and thousands and thousands of casualties” look like the total, incompetent, bloody fool he was. Gulf War I — terrific planning. On time, as planned, remarkably few casualties, many fewer than anticipated, even with the early two week bad weather delay. Terrific planning.The US M1 tank, could shoot while moving (the best Russian tank had to stop to shoot), with a gun accurate at 2 miles (the Russian tank gun range was 1 mile), with sights that could see in the dark and through smoke, dust, and rain (the Iraqi tank crews just couldn’t see). So, when the US M1 tanks saw Saddam’s Russian tanks, in less than a minute, lots of exploding Russian tanks and zero US casualties. Terrific planning.Good planning: The US wanted to win the war in the Pacific. Okay. (A) Take that stuff about fission from Szilard, Wigner, Teller, Einstein, Fermi, Oppenheimer, von Neumann, Feynman, Ulam, etc. and make it work — give General Groves whatever he asks for, right, ballpark $3 billion, a lot of each of people, equipment and supplies, land in Los Alamos, Hanford, Oak Ridge, etc. (B) Tell Nimitz and MacArthur to take the Marianas, Guam, Tinian, etc., be able to defend them, and build one heck of a seaport, supply depot, forward HQ, and airport there. Right, might need a few dozen new, much better aircraft carriers, associated support ships, battleships, submarines, new torpedoes, radar sets, proximity fuses, landing craft, etc. (C) Tell Boeing to build a plane that can carry a significant high altitude bomb load from Tinian to Tokyo and back. Then, when that’s all ready, end the Pacific war with unconditional surrender of Japan in a week.Code breaking — terrific stuff. Why did the Japanese lose a big carrier and a small one early in the war in the Coral Sea? The US broke the Japanese code and knew that Japan was to attack in the Coral Sea. Midway, why did the Japanese lose four aircraft carriers at Midway and Nimitz and the US get one of the best naval battle victories of all time? More code breaking — the US knew Japan was about to attack Midway and was ready. Ike and Monty in North Africa? Sure, code breaking: The British broke the German code and knew when Rommel’s supplies were on the way from Italy and sank them. Code breaking? Terrific planning. At the start of the movie about Nash is the statement “Mathematics won WWII”. That’s not really wrong. Good planning.Uh, lots of incoming warheads and some defensive missiles — which missile attacks which warhead. Okay, can solve that with the W. Cunningham version of the version of the G. Dantzig simplex algorithm of linear programming but specialized for minimum cost flows on networks where the arcs have maximum flow capacities. But, alas, the execution time is not guaranteed. With the work of D. Bertsekas, execution time is guaranteed. Nice work. Good planning. Dung Dong Song Pong Ill in Ping Pong Yang may yet see an application.Look at one of the US H-bomb warheads — it’s a cone, surprisingly small. Inside it has not just a fusion bomb but a fission bomb as a trigger. But how to make such a small fission bomb? Dung Dong Song Pong Ill in Ping Pong Yang has his best people working on that right now. If they discover how, then they get 1/2 of an extra bowl of rice complete with maggot protein; else they get a long vacation in one of Dung Dong Ill’s slave labor camps? IIRC, the way the US got that was some nice geometry from von Neumann — he was always nicely plump! Nice work, planning.

  17. jeff

    Not to be wordsmithy, but I recently read a convincing Ted piece on how much better “What” is then “Why!” “Why” can be loaded with negative feeling and inaction; “What” gets you to the Insight faster. http://ideas.ted.com/the-ri

  18. awaldstein

    I don’t understand what your getting to with the Fred/Brad/Why thing.I have pitched Fred in the past and I can assure you he knows how to ask penetrating questions.

    1. JamesHRH

      Found your comment a little thick, butter – wise.I use the Enneagram. Fred’s a 5. They tend to be data & intuition or very very What driven ( Fred’s first instinct is to gather data – want to see what blogging is, start a blog and measure it). 5s gather & sense & produce.Mr Burnham’s a 7 – they question & break & reduce things. Very very Why based. They do less but have higher impact. Analysts not doers.

      1. awaldstein

        thick butter wise–have no idea what that means but all good.

  19. sigmaalgebra

    Reading this thread, reading my first post here again, etc. I tend to agree, but then some of my experience tells me that both the real problem and the real solution are simpler.Example: When I was at FedEx and had saved the company the first time, by writing software to schedule the fleet and produce a schedule that convinced some skeptical, crucial BoD member, investors to write their checks, I, still a worker bee, got to sit in on the weekly senior staff meetings. So at a meeting, there were lots of questions such as in this thread. So, founder, major investor, COB, CEO F. Smith went to his first subordinate for the what, why, how much, when, where, stuff. The subordinate didn’t have any answers, so Smith made notes on the questions and said to get the answers by the next meeting. Okay, that was the first subordinate, and also, same story, for the second, third, …, the last. Bad meeting.But I was also there for the next meeting. Smith opened his notes and asked the first subordinate for the answers. The answer was “Oops, forgot, didn’t get the answers.”. Then for the second subordinate, same song, …, for the last subordinate. Super bad meeting.Uh, when go to a meeting, if don’t have a laptop, etc., then bring a calendar, say, the old Week at a Glance thing, and a spiral bound, high school style, notebook. Each day start a new page with a date. Bring both, and a pen, to each meeting. When get a work assignment, write it down. Build a TODO list. Work to get the items on the TODO list done, by the deadline, e.g., the next senior staff meeting.Gee, each good student in high school or college does this. I didn’t really do this because the work was either (A) I cared a lot about it or (B) I didn’t. Math and physics were in (A). Shakespeare was in (B). If I didn’t care, then I wasn’t going to do it anyway. If I did care, then I was never going to stop working on it and didn’t need a TODO list. E.g., in plane geometry, there were some more difficult problems in the back of the book, and I made sure I solved 100% of them — mostly they weren’t very hard, but one took me a weekend. I never missed one. But my wife, Valedictorian, PBK, Summa Cum Laude, Woodrow Wilson Fellow, NSF Fellow, Ph.D., was so solidly TODO list oriented she was constitutionally incapable of forgetting anything, so much she didn’t have to write a TODO list, and so determined that she essentially never missed a deadline or got a grade less than A in her life.Okay, then, for the Smith subordinates, at the first meeting, none of them had a notebook with them or wrote down anything. And they were NOT students within missile shot of my wife. Or me in math, physics, or then, computing. So, it was a good bet that all of them would forget to do the work, and they all did.So, the solution: Get subordinates who bring a notebook and Week at a Glance and a pen to each meeting and make full appropriate use of these. That is, get what can be called good, serious, smart, diligent workers.There is another solution that might work: At the second meeting when subordinate was not prepared, make an example of them. Then adjourn the meeting for, say, 48 hours and try again. The Saddam, Hitler, Stalin, Godfather, Capone approach might have been to have the unprepared subordinate stand and then, for the example, shoot them between the eyes.The problem is so common, in school, business, maybe also the military, that there are some well known solutions: In school a solution is for the teacher to have the unprepared student stand and tell them with a serious, angry voice “Never come to this class again without being prepared.” or some such. That is, the student is afraid they are about to get thrown out of class.Among the subordinates, there develops an implicit standard, and the leader has to keep it from falling and likely slowly raise it.So, in shortest terms, the leader just has to maintain high standards. Then the why, what, where, how much, etc, hopefully take care of themselves.