The Joy of Being Wrong: Lessons Learned from Jim Collins, Steph Curry & Allbirds

In some life professions, being wrong one time can get you fired, sued or even killed…

Take anesthesiology: When you’re responsible for sedating patients, a “success rate” of 95% is unlikely to yield a stellar Yelp Review. The same goes for airline pilots & bungee jump instructors. You’re one “bad day” away from making international news!

In other professions, you can be wrong a majority of the time, and still be an industry All-Star. Just look at Steph Curry. Widely considered the greatest shooter in NBA history, Steph Curry MISSES 56% of his 3-point shots. In one painful outing in 2017, Curry bricked ALL 11 of his 3-point attempts. Oy vey!

And in still other career paths — such as Venture Capital — being VERY RIGHT one time can redeem a career of #EpicFails. A single 100X+ investment in Facebook, Uber or AirBnB can make you VERY RICH; and, like a hearty dollop of Aunt Jemima Syrup, cover-up MANY less-than-correct future predictions!

Like hoops fanatics gushing over Steph Curry, Management Consultants hold a special reverence for Jim Collins. The pinnacle of Collins’ career — his metaphorical Unanimous MVP Season — is the book Good To Great.

Like the title implies, Good To Great answers the question: How do “good companies” become “great companies”?

To unknot this management pretzel, Collins analyzes 11 publicly traded corporations that, between 1965 & 1995, experienced cumulative stock returns 3X the general market — despite cumulatively underperforming the market in the 15 years prior to their respective bull runs.

According to Collins, the profiled companies turned themselves around — NOT because of luck or hyper charismatic CEOs— but because of deliberate action taken by each organization’s Management Team. EVERY “Good to Great” company, Collins concludes, shares 7 Core Attributes:

• Humble CEO more concerned with long-term organizational success than personal gain
• Emphasis on finding the right people for the right jobs
• Strong faith + willingness to confront tough realities
• Being the best-in-the-world at ONE profitable revenue driver
• Culture of discipline
• Relentless focus on forward progress
• Never over-relying on technology breakthroughs

With the satisfaction of a job well done, Collins writes:

“I like to think of our work as a search for timeless principles — the enduring physics of great organizations — that will remain true and relevant no matter how the world changes around us.”

Since Good to Great was published in 2001, some painful lessons have learned in sustaining greatness:

• In 2008, the U.S. Government begrudgingly bailed out Fannie Mae. The mortgage giant — praised by Jim Collins for “never wavering in their faith” — was hemorrhaging billions of dollars in sub-prime mortgage debt
• Circuit City, celebrated for its “4-S Model” emphasizing service, selection, savings & satisfaction, filed for bankruptcy in 2008
• Wells Fargo, a company Collins lauded for having the industry’s most exceptional Management Team, was busted in 2016 for creating millions of fake customer accounts. Yikes!

Of the remaining 8 “Great Companies”:

• 2 companies outperformed the S&P 500 (Abbott Labs & Nucor) + Gillette was profitably acquired by Proctor & Gamble
• 4 companies underperformed the S&P 500 (Walgreens, Pitney Bowes, Kroger & Kimberly Clark)
• Philip Morris, bless its heart, continues to profitably make the world a better place!

Are the Gods of Business eternally fickle?

How is “greatness” so quickly replaced by bankruptcy, government bailouts, & ho-hum financial performance?

From the perspective of Venture Investing, there are 3 fundamental flaws with Good to Great (and most business books like it):

1. Past Performance vs. Future Returns: The world is dynamic & ever changing. What worked for Circuit City 30 years ago won’t necessarily work for your company today — or even prevent Circuit City from going bankrupt!
2. Glorifying the Victorious: AFTER an event has occurred, it’s easy to judge whether a chosen strategy was right or wrong. The results are obvious! In the heat of the moment, however, challenging situations rarely have neat-and-tidy solutions. Just ask Pete Carroll. In the closing seconds of Super Bowl XLIX, Carroll called a passing play that — tragically for Seattle Seahawks fans — was intercepted. Had Seattle scored a touchdown, commentators likely would have praised Carroll’s “gutsy & untraditional” play-calling. Instead, here’s a clip of Carroll discussing his #EpicFail on Good Morning America
3. Correlation vs. Causation: While Good to Great companies all share common attributes, are those similarities the reason for each company’s success? To give a silly example: Every December, there’s a spike in A) blankets purchased in California AND B) Australian bush fires. In an effort to save the Australian Outback, should the Mayor of Los Angeles ban all blanket sales? Or, perhaps, could more mysterious factors be at play?!?

I’m of two minds here:

On the one hand, I strongly believe that “Things do NOT need to be truth in order to be helpful.” If a management philosophy, business guru, OR astrological sign inspires you to accomplish incredible things, by all means, go with whatever works!

Conversely: I’m fascinated why some ideas take off — and others do not. As logic-encoded humans, why do we gravitate to “management wisdom” with such obvious limitations? Shouldn’t the “best ideas” withstand basic accountability?

Venture Capital is a humbling profession.

When you A) look at hundreds of deals every year AND B) only write a handful of checks, you’re bound to pass on MEGA WINNERS. Ask any Angel Investor or VC, and they’ll painstakingly rattle off their “Non Portfolio” of unicorn misses. Some Radically Honest investors bravely share their stories online!

To give a personal example:

A few years back, a savvy friend told me about a startup shoe company raising a Seed Round. “They’re the most comfortably shoes I’ve ever worn!” my friend excitedly proclaimed.

At the time, the company had completed a $120,000 Kickstarter campaign. They sold a single silhouette in a handful of colors. The brand’s core value proposition was the inclusion of Marino Wool — which is super soft & comfortable, and eliminates the need to wear socks. The company? Allbirds.

Having spent more than a decade in the footwear industry, Allbirds’ future success must have been obvious to me, right? Not exactly!

In the early days of TOMS, the company was remarkable NOT because we sold canvas shoes; but rather, because we championed a Giving Story that was simple, authentic & emotionally compelling. TOMS customers were more than just shoe buyers: They were fans & evangelists.

When examining Allbirds, however, all I saw was a pair of shoes. The emphasis on wool was unique— but would the brand/product/story inspire customers to become enthusiastic promoters?!?

Had I invested in Allbirds’ Seed Round, my original check would now be marked-up 50X+. Instead, I have a Great Anecdote of Failure!

After so much talk of failure, I’ll close on a positive note:

In a complex & ever-changing world, it’s hard to predict the future. Focus on making calculated bets vs. stating “unequivocal truths.”

If your bestselling book is “poetic nonsense,” you can always write another one! One air ball won’t determine Steph Curry’s basketball fate… but a single UNICORN investment might make you an All-Star Venture Capitalist.

And if you pass on Allbirds’ Seed Round, don’t lose HOPE. The company’s online store is open 24/7, and gladly accepts returns & exchanges!