Life is a series of interactions. How we manage these interactions plays a meaningful role in our future. This is particularly relevant for entrepreneurs and investors, between which exists a delicate symbiosis that teeters between cooperation and competition. This is further complicated by the fact that investors often work together, yet have the dueling agendas of doing right by their portfolio companies as well as their limited partners. It is difficult to apply game theory to this problem because of its myriad dimensions and the vastly different utility functions of the players involved. That said, there is one over-arching principle that applies in all cases which makes the math infinitely more straight-forward: karma.
Notwithstanding the trend towards short-term thinking and immediate gratification in Government, media and across society, there are a few immutable truths:
- Life is a marathon, not a sprint; and
- Relationships matter.
This creates stress when short-term behaviors are then viewed through the lens of long-term relationships. Old saws such as “What goes around comes around” and “Payback is a bitch” (or other notions of “karma”) didn’t spring from nothing: they came from the observation that those who act badly tend to have bad things happen to them precisely because they weren’t mindful of the longer-term implications of their behaviors. And the problem is that short-term thoughtlessness can take an awfully long time to overcome, as trust and credibility needs to be rebuilt and prior wounds need time to heal. It is much more efficient - and much kinder - to simply do the right thing in the first place, and to adopt a longer-term perspective from the start.
None of this is easy, mind you. Giving up your seat to an elderly person on the subway shouldn’t require thought: it should be reflexive. Few karma points for this. But when something is truly difficult, like a founder giving up a significant chunk of equity to bring on a great senior leader or a venture syndicate lead making room for smaller strategic investors, this is where the karma test is in play. Classic knee jerk responses to the above are often akin to the following: “I’m not hiring that person: no way I’m diluting myself like that” or “I refuse to make room for this investor: I want to keep the capacity for myself.” Sometimes it’s best to take a deep breath, step back and think deeply about personal motivations and the long-term implications. “Might this new hire truly transform the business and massively expand the equity value pie, separate and apart from my percentage ownership dilution? Perhaps it does make sense for the company,” or “While I’d really like to own those few more points in the business, the founders like and trust these investors and believe they can truly help the company.” This issue no longer becomes simply what I want for me, now, but what is best for me - and others - over time.
In short, it’s about the company, stupid. An easy concept to understand, but a hard one to put into practice when so many around us are perpetuating the myth that optimizing for the short term does not adversely impact the long term. I can tell you from experience that most (but clearly not all) of the time, short-term thinking is costly in the long run. It’s not altruism, it’s just good business. And good karma, too.