Dare to Be Great & Dangers of Group-Think

I read a fantastic memo titled "Dare to be Great" recently by Howard Marks of tier-1 hedge fund OakTree.  In it, he quotes Barton Biggs who lists the following shortcomings of committees:

1. Collective rationalization of share illusions generally believed

2. Negative stereotypes of out-of-favor groups, techniques and individuals

3. Unwarranted confidence in chosen approaches

4. Unanimity, suppression of doubts and pressure on dissenters

5. Docility on the part of individual members

6. Free-floating conversations during meetings, and

7. Non-adherence to standardized methodologies.

This is interesting stuff.  The power of a venture capital partnership draws largely on its collective wisdom.  But, this very nature of group decision making can cause a reversion to mean behavior and stamp out the scary bits of excellence which could yield outsized investment returns.  For a great example, look at the Bessemer Venture Partners' courageous self-mockery of deals that were too scary for them to invest in that formed the anti-portfolio:  http://www.bvp.com/port/anti.asp

One example: eBay
"Stamps? Coins? Comic books? You've GOT to be kidding," thought Cowan. "No-brainer pass."

How best can a venture firm "Dare to be great" while still leveraging the power of the partnership?  Perhaps each partner should be given one bullet per fund (ever 3 years) in which he or she can proceed with an investment even if its gets voted down by the partnership?  I don't know the answer, but I think it is a darned important question for venture investors and for entrepreneurs of excellent but unconventional businesses, like eBay, Skype, etc.

By the way, I LOVE the phrase "Dare to be great."  When I worked at elite M&A advisory firm Lazard in the mid-1990s, our Chairman Michel David-Weill used to give a great Dare to be Great speech to the captains of businesses who were on the cusp of tackling transformational deals.  It had a powerful effect.  Few things are more inspiring that a call to arms to achieve excellence.  Think of JFK's "Ask not" speech for example, or MLK's "I have a dream."

It is what I love about working with entrepreneurs, their dare-to-be-greatness.  It is part of what America so great, that we have so many people daring to be great.  Let's encourage that...

Comments

[JJ]

Hey-
You don't happen to have a copy of the memo "Dare to be Great" still? I am interested in finding it. Thanks!

[JJ]

BTW,
I have been a Sonics season ticket holder since 1984 and am an entrepreneur who wants to change the investing world for individuals...

[Alexxuo]

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