6 things VCs can learn from The Last Dance

Miguel Encarnacion
13 min readJun 25, 2020


A 6-peat of VC lessons from everyone not named Michael Jordan

Image Credit: Photo by Yuting Liu on Unsplash

I want to share some thoughts about The Last Dance from the lens of a basketball-obsessed venture capitalist. But l hate belabouring the obvious so I’ll focus on everyone not named Michael Jordan. In retrospect, the talent across the board in that dynastic Chicago Bulls team is crystal clear. But that’s rarely the case in the moment. I have a 6-peat worth of lessons to remember from “the others” in the docuseries.

Okay fine, let’s give MJ his proper due first. He is almost unanimously acknowledged as the Greatest-Of-All-Time in basketball. While I am still optimistic that Lebron has a few good years in him left to prove otherwise, I am in absolute awe of the single-minded drive of His Airness to dominate a sport. And yet, he was actually cut from his high school basketball team and was just the 3rd pick in his draft class.

“There was no one alive, not Coach [Dean] Smith, Not Rod Thorn, who drafted him, no one, none of the experts thought that he would become what he became.”

-David Falk, Michael Jordan’s agent from 1984–2003

The role of general managers, scouts and coaches in varying degrees is to assess talent. It is now unfathomable that the GOAT was not even viewed as the Top 1 or 2 in the year he left college. In VC parlance, that’s an Anti-Portfolio that will haunt you forever. And recent NBA draft classes have shown that the ability to pick winners hasn’t improved much today based on some major flops (Hi Canada, Hello Serbia) and some all-time steals (Hi Greece, Hello Again Serbia).

Image Credit: Bessemer Ventures Anti-Portfolio

Since I left banking to start a game design company a decade ago, I have completely changed the lens in which I view the world. Having now re-invented myself as a venture capitalist, I look at everything from the perspective of discovering outliers. So while MJ is an outlier among outliers that completely changed basketball and sports marketing, there are many other outliers that require attention from The Last Dance. How they all came together into one of the greatest dynasties in professional sports history is a black swan case study worth a closer look for venture capitalists obsessed with finding the next big thing.

“We weren’t very good during the time leading up to Michael. The team was on a downward keel, if you will. Back then in Chicago, everyone was a Bears fan. Northsiders were Cubs fans. Southsiders were Sox fans. Blackhawks had fans scattered throughout, but there was no buzz about the Bulls.” — Jerry Reinsdorf, Chicago Bulls owner

1. Dennis Rodman — When evaluating founders, try to also look for good ideas that seem like bad ideas.

Ultimately, Jordan had proven his talent by the time he entered the NBA. The experts were just unable to imagine his full potential. In contrast, Rodman was never highly recruited and had become unwanted by the time he joined the Bulls despite winning 2 championships and coming off 4 straight rebounding titles. He was universally seen as a bad idea due to his volatile personality. But the Bulls decided to invest in this misunderstood talent and he proceeded to top the league in rebounding for another 3 years coinciding with their 2nd 3-peat. MJ called him “one of the smartest guys that I played with.”

As an investor, you don’t outperform the market by just betting on good ideas that seem like good ideas. Either everyone will be on that boat (who are you outperforming?) or competition will be through the roof (returns will be capped). By definition, true contrarianism is hard to come by and yet venture portfolio theory dictates it for success. In a study of 3,100 venture portfolios worth more than $100M, Curalytics found that 593 portfolios had more than 50% in common with each other. Unfortunately, there is still a lot of groupthink and herd mentality in venture capital.

The Rodman trade was one of the masterpieces in this story and very few people would have made that contrarian decision.

“Just leave him alone. You don’t put a saddle on a mustang.” — Detroit Pistons Coach Chuck Daly on Rodman

2. Jerry Krause — Even if you think you’re doing a good job of evaluating talent, there is a lot more room for improvement.

What’s funny about that brilliant decision is that the guy who made it, Bulls’ General Manager Jerry Krause, had to be convinced by his Assistant GM, Jim Stack. A decade earlier, Krause along with every GM in the league passed on Rodman (27th pick, 1986) as he was drafted in the 2nd round. To be fair, Krause may have thought he had the power forward of the future since he traded for Charles Oakley (9th pick, 1985) a year earlier. Except in that draft, he may have tallied his worst Anti-Portfolio when he passed on Karl Malone (13th pick, 1985), who is 2nd in the all time scoring list and would be an unanimous top 5 power forward of all time. Malone, who graduated from an obscure college, would end up becoming the primary hurdle for the last 2 Bulls’ championships. Viewed from those lens, one of Krause’s major wins in drafting power forward Horace Grant (10th pick, 1987) from a similarly little-known college is completely overshadowed. Had Krause drafted the Mailman instead, perhaps they could have expedited the beginning of the Bull’s dynasty a couple of years.

Lots of room for improvement. But let’s give the man some credit here because he himself was seen as a bad idea by many. When Chicago Bulls owner Jerry Reinsdorf considered bringing in Krause as the GM a year after drafting MJ in 1985, he spoke with executives around the league and everyone said “don’t touch the guy.” Yet for all his flaws dismantling a dynasty too early and lots of late career missteps, Krause compiled one of the best decade-long stretches as GM ever, building the first basketball empire around a shooting guard.

In VC, improving talent assessment entails going beyond the obvious. There is too much cognitive bias that goes unchecked. Too many investors have a framework that goes like this: Harvard = check, Mckinsey = check, Termsheet = check. Sure, there are many outliers which have that path, but I’m sure there is also a splattering of mediocre false positives in there who don’t get exposed until it’s too late. Putting “MBA required” in a job description is both overrated and extremely lazy. It’s a shortcut for actually evaluating talent on a premise that graduate schools are completely meritocratic. Oh please. Everyone knows about the legacy admissions, nepotism, and inherited privilege. The feedback loops are also skewed because too many decision makers subscribe to that heuristic. For European investors, I don’t think that the engineering grad + PhD/MBA + research/software firm checklist is necessarily a large deviation from that lazy talent assessment.

Keep track of your anti-portfolio. Note why you passed on companies. Gather data on the founders. Do a periodic cross-reference to be properly informed about the founder profiles you regularly pass on and how your framework might need some work.

3. Scottie Pippen — Look for a commitment to bring in talent at every position.

According to MJ, “whenever they speak Michael Jordan, they should speak Scottie Pippen.” Pip was also a steal entering the league as a 5th pick in 1987 with little fanfare as he played college basketball for Central Arkansas, which was not a part of the prestigious National College Athletic Association. Less than a decade later, he was recognized as one of the top 50 players of all time.

There are few better Number 2s than Pippen in the history of the NBA. But it didn’t stop there. Down the line, Chicago brought in winners and gems in the rough. This was apparent in their search for a power forward. They also put importance on having a spot up shooter, which John Paxson played well in the first 3-peat and Steve Kerr sustained in the 2nd one. They even brought in opponents that excelled against the Bulls defensively in prior playoff battles including Rodman and Cleveland’s Ron Harper.

From a VC standpoint, it is critical to spend time with the founding team and other key first hires. Due diligence should be holistic with sufficient time spent on understanding the core team, especially in the earliest stages. As an early stage investor, I subscribe to the same philosophy that Pear VC put forward regarding differences at the various stages. I look for a similar commitment from the founders to build a team for the long term.

Image Credit: Pear VC, Navigating the New Seed Landscape

4. Bill Cartwright — Understand team dynamics and how the skillsets and personalities fit and complement each other.

Building the best team is not just about stockpiling on talent. How it all fits together is absolutely crucial. We saw this when Chicago traded Charles Oakley for Bill Cartwright. Apart from being the rebounding champion the prior year and Jordan’s “protector” against very physical teams like the Bad Boys Pistons, Oakley was also MJ’s best friend on the team. And yet, the pieces of the puzzle did not fit perfectly.

Jordan questioned the trade and did not respect Bill Cartwright, who they received in exchange for Oakley. In episode 4, we see Jordan saying “I didn’t want Cartwright to have the ball with 5 seconds left.” Wanting that may be totally fair. But he took it a step further and threatened teammates not to pass them the ball if they passed to Cartwright. Yet Cartwright eventually earned Jordan’s respect by playing his role and standing his ground. Despite never being a star in the league and being past his prime when he played for the Bulls, he became a strong locker room presence and was even co-captain for that 1st 3-peat. His calm demeanor was the perfect counter balance for Jordan’s aggressive obsessiveness.

Too often, team fit is interpreted as a lockstep alignment on beliefs, work styles, personality types, behavioural traits and sometimes even demographic profile. Yet, those really smart people at Mckinsey have shown that diversity literally pays, with a 25% positive variance in FINANCIAL PERFORMANCE for the most ethnically and gender diverse teams. From a startup standpoint, studies have shown that individual traits matter in relation to other traits and that contradictory traits within teams are a big driver of success. Especially in the world of startups where the goal is usually to become regional or global winners, team diversity is an asset as soon as startups leave their home market and need differentiated viewpoints to really understand other cultures and capture other customer bases. Venture funds need to lead by example. If you say you are looking for global winners then build a global team with an international mindset and differentiated perspectives.

I have been living full time in Germany for 3 years and there are still facets of German culture that I am yet to understand, what more the rest of a very culturally diverse Europe. So no, an analyst’s 6 month student exchange semester in Hong Kong definitely doesn’t qualify as sufficient perspective for Asian internationalization. But even a GP’s 10 year international stint may not be enough if there was no intentional immersion in the foreign culture. Most expats run around very small and homogenous circles. And please, don’t try to cheat diversity by just bringing in people who look different and yet are actually similar in background and perspective by most key measures. A 2nd generation Asian American will have a very different perspective from an Asian who was born, raised, studied and worked in the region. There is no substitute for a truly diverse team.

5. Phil Jackson and Tex Winter — Culture and process tie everything together.

Speaking of Cartwright being co-captain, the man who made that decision, Phil Jackson, is now one of the winningest and most well-respected coaches in professional sports. Jackson’s encore for the epic 90s Bulls dynasty was the first one in the 2000s by guiding a different team, the Los Angeles Lakers to another 3-peat. By borrowing from Eastern philosophy to craft team culture, he became known as ‘The Zen Master’ and accumulated 9 championships as a coach. In all of those championships, Jackson was assisted by Tex Winter who was the innovator of the ‘triangle offense’ basketball strategy.

As is the case in this organization of black swans, both Jackson and Winter were question marks pre-dynasty. Jerry Krause again displayed his eye for talent by taking in Winter as his first hire after a modestly successful college coaching career. Jackson was an even bolder bet despite his championships won as a role player in the NBA and as coach in the less competitive Continental Basketball Association. Krause had to groom Jackson who was an unconventional ‘hippie’ that did not fit the traditional mold of a head coach. Personal grooming was even a part of it as Krause had to tell him what to wear during his 2nd attempt at interviews after failing 2 years earlier. Framing it from Native American history, which heavily influenced Jackson, both him and Winter were actually ‘Heyokas’ in their own way.

“In their tradition, you would be a ‘Heyoka’, a backward walking person. There were people that were different and you’re a ‘Heyoka’.” -Phil Jackson to Rodman

Company culture and process determine how all the talent fit in together. VCs should dig beneath the surface to truly understand these 2 components. There is a lot of fluff out there. Don’t expect to understand culture by reading the company manifesto. Have a closer look for anecdotal evidence to support or refute their stated beliefs. Do the same with process and frameworks. Understand the chain of command and the distribution of authority. Look for bottlenecks and key decision-makers who need to be a part of due diligence.

6. Toni Kukoc — Keep an eye out for underrated pools of talent and build a knowledge base on how talent translates across borders.

In another move that is both visionary and a relative flop, Krause orchestrated the import of Toni Kukoc at a time when very few NBA teams put value on sweet-shooting big men from Europe. Imagine the luxury of having both Michael Jordan and ‘the Michael Jordan of Europe’, which Kukoc was considered at the time. The fact that Krause had been actively scouting for European talent, which were largely considered soft and unathletic, was impressive. And yet, he couldn’t properly assess how this talent translated into the American game. Kukoc was definitely ahead of his time and he contributed significantly to the 2nd 3-peat. However, he reached his peak as a 6th man of the year in 1996.

From less than 2% in 1980 to roughly 6% in 1994 when Kukoc entered the league, the number of foreign-born NBA players in the NBA has exploded to over 25% with more than 100 international players this season. After being invented in the U.S. in 1891, basketball has now become a global game with talent coming from every corner of the world. The NBA rode the wave of internationalization but also helped facilitate it through their Basketball Without Borders program, which accounts for ~30% of the current pool of international players.

The digital revolution is doing the same for technology companies. Information access democratization is creating pools of talent all over the world. Yet, the playing field is nowhere close to being even. There are a lot more factors that determine success. That is an opportunity that a lot more VCs have been looking into post dotcom bubble. In 2015, Cambridge Associates published research stating “international investments have accounted for a larger share of the top 100 gains: from 2000 through 2012, they represented an average of 20% of the total gains in the top 100, compared to an average of just 5% from 1995 to 1999, and they reached as high as 50% of gains in 2010.”

Image Credit: Cambridge Associates, Venture Capital Disrupts Itself

Talent in emerging startup hubs will look very different and it will require effort to identify them and understand how they can translate to a regional or global playing field. The willingness to take a closer look will determine the next generation of VC winners. That’s what I hope to achieve as a cross-border investor looking for founders and technologies in Europe that can be scaled successfully in Southeast Asia.

Finding the Lost Rodmans

The 90s Chicago Bulls dynasty is one of the ultimate black swans in sports history. The Last Dance showed us that, in fact, the entire organisation was full of black swans. What if the owner didn’t make a bet on an unpopular scout to become GM? What if that GM didn’t make a bet on little known coaches who would implement a revolutionary system? What if those coaches didn’t figure out how to bring out the potential from under-the-radar players that the GM picked and make all the personalities fit together? So many what ifs down the line. It is a story of identifying and investing in outliers, who ended up identifying and investing in outliers themselves. That is why it is so relevant for early stage venture capitalists, but in fact, also for founders, recruiters and anybody else who has daily decisions regarding talent.

In the VC world, a lot of things have to work properly to find and help that 10x or 100x company achieve its potential. And I believe that the outcome is largely a function of understanding talent and it’s many faces across the entire journey.

Clearly, my other obsession is discovering outliers. I have talked about Finding the Lost Einsteins before. For the sake of Zeitgeist, I will temporarily rebrand my North Star to Finding the Lost Rodmans.

This first appeared on e27.co

Disclaimer: This article is not meant as a commentary or indication of support on the individual beliefs, personal decisions or societal impact of Dennis Rodman or anyone else from that Chicago Bulls team. I speak of them as outliers only from a basketball standpoint and how they created a lasting impact on the game.