We Fixed It. You're Welcome.

Melissa Eaton [0:00 - 0:00]: Foreign.

Aaron Wolpoff [0:14 - 0:51]: Here's how this works. In each episode, we pick a company we all know that has something going on right now. Then we put ourselves in charge and see if we can fix it. You'll be hearing from Melissa and operations. Peter on finance, Chino on people and culture, and me on marketing. My name's Aaron. As always, a quick disclaimer. We are going into this somewhat cold, and nothing we say should be construed as legal advice, financial advice, or anything that would get us in trouble. These are our views and opinions. We're here to ask the kinds of questions everyone's thinking, have an engaging conversation, and maybe come to some conclusions that we feel are worth exploring by the end. If we fixed it.

Melissa Eaton [0:51 - 0:51]: You.

Aaron Wolpoff [0:51 - 0:59]: You're welcome. All trademarks, IP and brand elements discussed are property of their respective owners. Melissa, what are we talking about today?

Melissa Eaton [0:59 - 2:57]: So this week's episode delves into the perplexing trend of CEOs who fail upward, where leaders repeatedly rise to prominent roles despite major public failures. And so we have some key examples to talk about, including Adam Newman at WeWork. You know that there was a massive valuation crash and questionable leadership decisions. And a lot of it is just amazing to think about how he has somehow maintained an image of success. And even through this mismanagement of the failed IPO and heavy losses, he's quickly found new opportunities after he stepped down. There's a different type of leader that we're going to be also talking about, which is Billy McFarlane in the Fyre Festival. And so some of you know about that. He actually went to jail for the disaster that was the Fyre Festival. And Yet Fyre Festival 2 is in the works. And then last but not least is really kind of a very interesting. And something that we see a lot of with CEOs is with Travis Kalanick in the Uber world. And that's really where visionary leadership transformed Uber. But it also birthed this really toxic culture marked by harassment and legal battles. And despite all of that chaos, despite that toxicity and his exit didn't end his influence in tech, and he's remained very active. And I was already at a new place called Cloud Kitchen, so love to examine the six systematic issues that we have that allow these leaders to continue to fail, yet also ascend. It's. It's a very interesting kind of problem to be solved. So do any of you here on the panel have experiences with These types of CEOs? Clashing of values, business acumen, character. Who wants to start?

Peter Braunz [2:57 - 3:18]: Oh, this is one of my favorite topics always I have a soft spot for great business failure stories. Leaders going to, you know, jail or falling off the mountaintop or. Or generally this sort of thing. So I work in finance and tech, so you see it quite a bit. We're going to be talking about some of these tech examples, but I got to say, I'm. I'm really excited to be talking about the topic.

Aaron Wolpoff [3:18 - 3:38]: That's such a thin line, too, between Audacity. Right. And. And. And bluffing your way through it. And some CEOs wind up on the right side of history. I guess they're just crazy enough that it works and some it catches up with them. So I think maybe we'll talk about both cases today.

Chino Nnadi [3:38 - 4:00]: I think it's actually quite interesting. I just finished reading Bad Blood, the Elizabeth Holmes book where she was the CEO of Theranos, and it's like her counterpart, Bill McFarlane, where a Fyre festival. There's a few Netflix documentaries, even movies about kind of their failing upwards and. Yeah, where they are today. So it's quite interesting.

Melissa Eaton [4:01 - 4:15]: Well, and Chino, I'd love to get into this and maybe this will be an outtake for later, but I actually interviewed with her and I have my own Bad Blood story, and it was very. Wow, it was. It was crazy. Yeah.

Peter Braunz [4:15 - 4:16]: Knew the voice.

Melissa Eaton [4:16 - 4:30]: I. I dodged a bullet there. It was right when all of this stuff started. I mean, at the time, she was actually on the COVID of Forbes and magazine and all that stuff when I interviewed. But, like, very quickly afterwards, everything kind of fell apart. So.

Aaron Wolpoff [4:30 - 4:32]: Were you the whistleblower, Melissa?

Peter Braunz [4:32 - 4:33]: Yeah.

Melissa Eaton [4:33 - 4:39]: No, but I asked the wrong types of questions in the interview that became clear.

Peter Braunz [4:40 - 4:43]: Wow. So you said, does it work or.

Melissa Eaton [4:43 - 4:55]: Yeah, I said some qu. I had some questions about QA because that was what they wanted me to help run was, you know, on an operational side. And I got my interviewer actually hung up.

Peter Braunz [4:55 - 4:55]: Wow.

Melissa Eaton [4:56 - 5:03]: And then she called me and she was like, sent me flowers and she was like, oh, no, no, no. I was like, you know what? I think this is good. I think I'm good.

Peter Braunz [5:04 - 5:13]: So what do you did. Does that tell you that the HR function was in on kind of the. The deception or what? What do you take from that?

Melissa Eaton [5:13 - 5:34]: I think that it could have been. I think that there was an awareness that there was what was actually being shared with the public and what the customer experience was, which is kind of one of the things we'll be talking about here with Uber and everybody else was very different than what the reality was.

Peter Braunz [5:34 - 5:34]: Yeah.

Melissa Eaton [5:34 - 7:25]: Right. So for me, if I'm in charge of customer experience, client support. So I would have been working with all of, I think it was at Walgreens that they were working with or whoever she. They had a contract with. Right. And then on, you know, like, if there's a QA problem and the testing isn't, you know, Chino knows this. If the testing isn't correct, like, and someone is, you know, misdiagnosed, that's on us. We could go to jail for that. Right. You know, those kinds of things. And so I had some questions about, like, what kind of systems were you utilizing? What was the risk management? What was that? Like, what did that look like? And the head of research that I was talking to was like, I am a PhD and you are not. And he hung up. And I was like, I didn't feel like that question was off base for the job I was applying for. So. So I think that there, you know, it was, it was. You know, it's very interesting and I think this kind of can lead us back into our topic because I think one of the questions is, where is the oversight for these CEOs on their operations? Right. And you know, Peter, like the finance side, like, when you're not making your numbers or you're not hitting your okrs or you're not hitting your KPI's, where is the oversight that says the data is telling me this, your charisma is telling me that everything is okay. Do gate. Right. You know what I mean? But like, that, it's a, it's, it's, it's a, it's not, it's not functionally, it's not the same thing. And I think you're breaking trust by when you think about, for the customers, that's the thing, is that you've made a promise that you're going to do something. And then when that doesn't happen, how do you solve that?

Peter Braunz [7:25 - 10:30]: Oh, it's so interesting. So the, in the case of Elizabeth Holmes and Theranos, it's FDA regulated, right? You're dealing with people's health. So the stakes are extremely high. I come from financial services, which tends to be pretty well regulated. So those sorts of highly regulated industries tend to clamp down on some of this. But some of these other examples that we've talked about, you can get a long way with charisma and polish, like the Billy McFarlands or the Travis Kalanicks or even the Adam and Newman's of the world. These are all industries that are less regulated. And these people just are able to Bulldoze through the objections with what seems to be number one. If we were writing a, you know, a handbook on how to be a fail upward CEO is you got to have the Riz like your charisma game has to be on lock. You dial it up to 11 and then you just surround yourself with people who buy into the vision. You start doing things like, you know, with Elizabeth Holmes. She had Henry Kissinger on her board and her, her, her grandfather was well connected and she's well connected in the Silicon Valley. So she had this cachet that comes with the kind of like running in the right circles. And I think networks are something that we're going to be talking about, but that tends to help a little bit. And just having that confidence. You see it a lot in tech. You see it a lot in tech where there's a fine line between confidence and arrogance, I would say. And the arrogance can easily lead to, you know, misleading investors less. So you don't see it so much in the public markets. By the time a company kind of gets to the public markets, that gets found out pretty quick. But that certainly wasn't the case for Adam Newman. I mean we can talk about him for a little bit. But really had took a lot of that SoftBank money, which is a famous SoftBank famous investor was very close with their, their founder Madas Yaku San and he basically got them to commit billions of dollars as lead investor and then work towards that ipo. And then as soon as the IPO came, I mean you start getting the scrutiny of these analysts, they start taking you into the books. And when you're flying on private planes and you're hiring your, your wife to create a preschool curriculum and you're, you know, you're doing all of these different things, taking the corporate jet on, on surf trips, you know, the, the analysts are going to start looking into it and then that starts to make the board look bad and then the board has to, has to step up. So lots of examples of people falling off the mountaintop. But yeah, I think it's fascinating how these early, earlier kind of, I don't know if you call them con men or what, but they're running a version of a scam that preys on, you know, either early investors, a desire for a quick buck or for a return or even in the case of Theranos, like I think a lot of people who went to go work for them were just optimistic about the story and it makes sense. You're going to be able to do blood testing on A drop of blood. This is going to be game changing. It makes sense. And that's enough to get you in the door.

Melissa Eaton [10:30 - 12:22]: Well, I find it interesting because I think you're, you're kind of getting to this around again. I don't want to put it all on one person, but like when you think about like all of these people are amazing storytellers. They're visionary, they're enthusiastic, they have the right type of energy, they've got all that. But when you think about the boards that were kind of the purse strings, you know, Chino, you just read the book, so you know this, but like there weren't scientists on that board. They, you know, Henry Kissinger, not scientists. Okay. They were big names, right? Like they were all politicians, they were all banker, whatever, and like the scientists. So my husband's a neuroscientist, so he's the first thing when I told him I was interviewing, he's like, that can't. That doesn't work. He's, he's like, I'm sure it doesn't. There's no way. Right. But then what was interesting to me was like when you're reading the book about how she went out and got money and got investors and got this amazing board, and so then, you know, if Henry Kissinger's on it, then all of a sudden all these other people want to be on it, right? Because that's, you know, and you see these boards that are really diverse. But don't you need someone in the business to tell you, like, tell Adam Newman to, you know, to tell Travis, like, this is what operationally and this is from a business perspective. These are the watch outs that you have to think about, like, how are you going to pay for insurance, you know, for all the Ubers? What are you going to do when there are claims and when they're bad drivers? Whatever, whatever, whatever. But also like, you know, we work was a great idea and it still is. But like, how is it that, like it's just become kind of the joke and it's really based on his leadership and Gino, I mean, what's your thought from a, like a God, from the.

Chino Nnadi [12:22 - 14:35]: Poor team, the people and the recruitment piece, I think it's a really interesting. And I think we bring up a few pieces that I love to highlight. So, you know, we've all heard of emotional intelligence. Ei, right? It's a basis for literally any job because we work with people. What's a little more nuanced is cultural intelligence. CI. And it blends the to and where you find these kind of feeling upward CEOs, they are very high when it comes to cultural intelligence as well as emotional intelligence. They know how to work a room. They have that charisma that we're talking about. There are certain features of this person like the, the high network, you know, the ability to sell. They do have. You know, again, every single one of these people aren't coming from a background of nowhere. And I think it's really important as you know, you're. If you were a board trying to hire a CEO and kind of figuring out and vetting what that candidate profile should look like, all of those pieces are important. But as you said, Melissa, some of that differentiator is the actual skill and technical skill pieces. Right. I can surround myself with experts and I think a great CEO does that. But if there's only one expert on the board or if there is no real experts on your team, this is where you run into problems. Especially when you look at something like a Theranos. What's interesting, when you look at a fyre festival, for example, there is a scale between snake oil salesmen and maybe, you know, you had the right idea, kind of like Adam Newman, where, you know, it's a beautiful vision but it just wasn't executed well. And of course the toxic culture, there is a line so we, I wouldn't put everybody on the same kind of snake oil salesman ranking, but there is a, there is a factor of that. And I think as a board and as kind of those folks that are vetting it, you need to make sure that there is some form of credibility in their background and experience outside of them just being able to schmooze really well.

Aaron Wolpoff [14:36 - 15:31]: I'd argue we need, we need some of those renegade CEOs to put a stake in the ground, you know, to go beyond incremental innovation. Say I'm changing the world. I have no idea how we're going to get there, but it's going to happen. Who's with me? Right. We need those types of leaders now, whether they are leaders of people and know how to, you know, be, be effective, be kind, be, you know, accountable along the way. That's a question that we, you know, we'll continue to debate because we've seen examples of, of, of leaders that go unchecked. Right. So, but, but my question back is where is the accountability? Is, is it all on that, that visionary, you know, can we, can we give them, on the positive side, can we call them visionaries and, and game changers and on the negative side, can we call them charlatans or you know, whatever, but where is that? Is there shared accountability or is it all not one individual?

Peter Braunz [15:31 - 18:22]: I think that I totally agree. One of the things that's interesting is the difference between, you know, these charismatic people and they go on and you know, the proof kind of is in the pudding and, and time kind of sorts it out. But the difference early on between an Adam Newman and maybe another, you know, well known entrepreneur that's very comfortable taking risks like an Elon Musk, those, those kind of like characteristics look very similar early on. And it's almost like it's an asset to be risk taking, to have the charisma. But then very quickly you need to backfill it in with a very, very adept ring of experts. So like Elon had JB Straubel, he's got the head of SpaceX, I think her name is Gwynne Shotwell. And so there's all of these people that he's able to rely on. And even though he might be casting huge vision, he very quickly backfills it with. He's a very good acquirer of talent of the skills that he doesn't have or he acquires skills himself, but he gets people to bring the vision alive. When you're somebody like an Elizabeth Holmes that, you know, you couldn't make that leap early on, she really could have, like you said, Melissa, invested, had a board that had technical expertise, really have a technical co founder, those sorts of things. And instead of, you know, taking the tact of trying to backfill with experts that would be able to bring the vision to life, seems like she just kept giving the lie more and more air. You know, this was at one point Elizabeth Holmes was the only self made American billionaire woman in, you know, in U.S. history. And so imagine like I think her net worth at one point peaked at around $4 billion. Imagine the pressure that that creates to keep the lie going. And you know, it's a, it's a, it's the same thing with Adam Newman. What was he risking if it worked? It was a zero or a one to him. He wasn't coming off of any sort of other reputation or any other source of wealth. He had to keep it going and he had only upside to keep, you know, to keep the charade going and no downside almost. And the downside would be in stopping. So I think, I think what's interesting about this is there's a risk component here and it's good to a certain degree and that dial, fine tuning that dial. But from, if you're going to disrupt an established industry or try to be the Next, you know, 50x100x startup, your point of reference, when you're judging that they look people, charismatic, visionary people, they all kind of look from, from the rest of us, they all kind of like, look like similarly, you know, like outliers. And it's hard to gauge. It's very difficult to gauge, I would say.

Melissa Eaton [18:22 - 19:51]: Well, I thought it was interesting what you said about Elizabeth too, because I don't feel like she felt it was a lie. I think what she felt like this was her vision, Aaron, what you said, right. And she just was not able to translate that into action. An actual outcome, right. So she had this vision and she thought that they would be able to build it and her team was not able to do what she wanted them to do. And so she kept selling this because this was her vision. But I don't think that she ended up being able obviously to deliver. And so the question is, like, when you look at like someone like Elon, he talks a big talk too, but like he delivered, right? Like SpaceX, like, he delivered Tesla. He delivered like people were like, that's crazy, crazy talk. Like, you're not going to be able to have a rocket ship go up and land that. That's not going to happen, right? You know, you're just going to have to throw away that $500 million, right? And he was like, no, no, they're coming back. And he did it. And so I think, I mean, not that he's the leader I want to follow, but like, what I would say is that ability to deliver on the actual dream is the thing that kind of, I think is missing with these others and then ends up hurting the brand because the brand can't be kind of, you know, divided from the actual leader because of kind of what they've.

Chino Nnadi [19:51 - 22:14]: Done already with that too. And I think that that difference. And again, like, looking at it from a recruitment talent perspective, like, why is Elon. And again, no matter how you feel about Elon, and of course with all of his companies, there's room for improvement. But the difference between Elizabeth or Adam or Billy, it's the people around them, right? You need the charismatic, you need the risk take. You need to be able to sell a dream and be a vision. Like that is what a leader needs. Like a CEO that's a part of the job. Like, that's, you know, there's personality tests that look for that for CEOs when I'm hiring. But the key difference is who do you surround yourself with? And that I would say is the difference of what becomes successful. Again, pointing towards Elon versus the others that we've mentioned where they just didn't have the expertise. And it's about talent at the end of the day. And the problem is when you start selling a book of bad goods, essentially there is a point when both Elizabeth, Billy, they realize, you know what, this isn't working. And going back to the original question of like, where does the accountability taken at that point, if you're not bringing in people to fix it or to execute. Like, we can all have a vision. I want to be a billionaire one day and live this life and that life. We can all, you know, I want to change the world. We can all be visionaries. But if you don't have the backing or the team support or you don't bring in the resources you need, especially when you're worth over billions of dollars, where you have all of the resources in the world to do that, then it becomes your problem. Then you are accountable. And of course there's a board of directors in the background that in some cases CEOs are just figureheads. But with all of these folks, they were the people driving, they were the ones building their board of directors who eventually kicked them all out, funny enough. But it's on you as that CNO and visionary to say you're the one that's driving the ship. So if the ship is crashing and you're going right into an iceberg looking at Titanic, do you keep driving the iceberg or do you turn around or do you do something else? And I would say it's the CEO's accountability there, once you realize that.

Aaron Wolpoff [22:14 - 22:36]: But you know, how does that happen culturally and institutionally where a CEO is allowed that much bandwidth, right, to just run, run rampant, right? Is it, is it a fear based culture? Is it, is it, I mean, what, what happens to institute and to an institution that just allows one unchecked individual.

Chino Nnadi [22:36 - 24:38]: And I would say, you know, when you look at like the unconscious biases and going into that, right, Authority bias is a huge thing. The person in power, you know, we can all sit in a room, but if there's someone that has the power and they say, well, no, actually this is what I think about this. Guess what? Everyone's going to agree with them because they're the ones that are paying all of their bills, right? That is just innate in nature with any type of workplace. And so when the person at the very top that is kind of controlling the strings, isn't checked, or they don't have a team around them where, you know, that aren't just yes people. Because that's another issue as well, where if you create a board of directors that are just going to tell you what you want to hear, not how we need to execute and how to make whatever we're building successful, that is also a problem. And you actually do see that. Again, in the case of Elizabeth Holmes, you didn't have the technical expertise. You had people that were saying to her, yes, yes, keep going, keep going. You didn't have a scientist to say, you know what? This is not. This doesn't work. Right. And, you know, I would say these are really big, exaggerated examples, but in your own lives and careers, I'm sure you've seen it before, where there's a leader who's gone unchecked and maybe their ego's a little bit big and, you know, maybe they have a really loud voice and, you know, big presence where people get smaller in those cases. And again, there's that power dynamic that you need to always remember in any workplace. And as much as there's HR to help mitigate, sometimes the reality is if you have a leader that's going unchecked, that's going to remain unchecked until like a board or some higher power comes in. And if that person's at the highest power, you see things like, we work where this becomes incredibly toxic, people are running at the gates. And then you go to things like Glassdoor, where people have the opportunity to share their feelings kind of unfiltered or without that fear because they're away and the truth comes out.

Melissa Eaton [24:38 - 27:43]: Right. I think the other thing is, Aaron, to your point, is that there are so many startups where the founders end up being the CEOs or the top leader, whatever role they're going to be in. And when it's that scenario, the leverage they have, because they actually usually have the highest percentage of shares of the company, allow them to let go. The people that are not. Yes. People, you know. Right. That are going to challenge them, maybe. And also I think makes that dynamic again of the investors and the board a little more like in reverence to them. And which is not always the right thing, because when we talk about, like, how do we keep them accountable for results, how do we keep them accountable for a healthy culture, you know, you know, growing great talent and actually delivering the outcomes, if you're the head captain and you're all In. I mean, you're just going to do what you want to do, right? So I think that's kind of the problem that there have been in startups where you see this, and then now when people are trying to go public, you. There's a lot of due diligence that's done by all of these financial institutes. And I'm sure, Peter, you know about all of that. And I've been at some of these companies that have been wanting to go public, and the amount of questions that kind of come back at you, it's really a little shocking. And I think there's a lot of fear from founders that when they go through that, they're going to be asked to leave that role. And you see that a lot of times when companies have somebody come in and look at them, they'll say, you actually need a seasoned leader in, you know, this, whatever it might be. So it's very. It's a very interesting, I mean, concept of, like, what do these. You know, these CEOs are bringing a lot to the table, but at the same time, you know, to be sustainable, I think we've all made points of like, they need to have the right army behind them and right group of leaders behind them. I look at it kind of like right now, it's the middle of football season, right? And so you think about, like, how coaches get fired. I don't think head coaches from all these NFL teams get fired all the time. But then, like, by that, by next season, they've just kind of moved teams. Like, is there like, only so many CEOs? Right. You know what I mean? We've kind of talked about that. Like, CEOs that, you know, used to run, like, retail are now running, like, Campbell's Soup or something. You know, it's like, wait, is that the same thing, like, running the gap versus running the, you know, whatever? So it's just kind of. It's a. It's a question of, like, if there's feeling that there's a very small pond to choose from, and then you've got these big egos, you know, and they're saying, I can take it to the next level. Right?

Peter Braunz [27:43 - 29:06]: Yeah. I think everybody, if you're an investor, whether you're of a. An investor from a public company or you're an investor from a. From a private company, especially venture capital, who they tend to be much more comfortable with risk. You're trying to take shortcuts here to, you know, you see a lot of deals come through, so you're Looking at a couple things. Yes. You're looking at the pedigree of the leader and what they've done in the past. So if they worked at Apple and they ran all of the retail stores, why can I not bring them in and have them, you know, run JCPenney? Or you're looking at the board, the pedigree of the board, perhaps. Or you're. And sometimes you just, you just discount those things. You're like, I need, I'm gonna back a visionary co founder out of the middle of nowhere, you know, who's got a bold vision and is getting a little bit of traction. And you know, I think one of the things I want to ask you guys, do you think that this is primarily a construct or a reflection of, you know, America has a little bit of an obsession with the singular genius. The lone entrepreneur that comes emerges and you know, transforms an industry, whereas other cultures, businesses aren't necessarily built around that concept of singular genius. Is this simply a side effect of buying into that one person, that visionary that you need to have in the city in the one spot, as opposed to a more a flatter hierarchy that gets attributed to team? What do you guys think?

Aaron Wolpoff [29:07 - 29:59]: I think it might be because when you're talking about a glass door, you know, where employees get to get to have their say, it's a fractional, fractional audience. Right. Compared to a CEO that has a cult of personality and is as a mouthpiece. And Also there's a 24 hour news cycle and a direct line to an audience that can be relatively unfiltered depending on the restrictions of the company. But there might not. Be. So a CEO might take to the public and say, here's what I want to do with this company. They're not letting me and get on my side. And they have the power to do that. If we went back in history and Henry Ford had a social media presence, he might have been judged differently and the company might have a different fortune. Right. Or it's a byproduct of the time that we're in.

Melissa Eaton [29:59 - 30:05]: I think that's a great question. How do you think this is our job here? We would be able to fix this.

Chino Nnadi [30:05 - 30:15]: In my opinion, again, going back to like, I do think that you do need a visionary, but does that visionary need to be the same visionary the entire time?

Melissa Eaton [30:15 - 30:15]: No.

Chino Nnadi [30:15 - 31:39]: I think as a CEO or founder, you need to know when to step back and maybe jump on the board and take a back seat and have somebody. If your goal is to build and you know, make whatever product or service you're doing the most successful. Sometimes it's okay to say, you know what, I'm not. I can't continue to be this leader because I don't have the skill set at this scale anymore. So I think there's that piece, you know, we talked about again, rallying a team around you. But I think, you know, when you're looking at, you know, anybody can be a visionary as well, I think there's another piece of succession planning. It's, you know, if we're looking at the same pool of CEOs, yeah, you're going to get the same thing, a different day, just chopped up in another way. And I think it's really important as a CEO to, you know, do executive training is constantly be learning what is a succession plan. If you're doing something that's completely different than everybody else, right. How are we training, training and building the next generation of CEOs to keep going? Because otherwise you're going to get the same people at the top and you know, that's fine. But in 20, 30 years, you know, if you want kind of your company to be, you know, forward where it lasted generations, right. You're going to need to think what's, what's next? What's that succession plan for you?

Melissa Eaton [31:39 - 31:42]: What about you, Peter? What do you think needs to be done?

Peter Braunz [31:42 - 34:25]: You know, I've seen great, I've seen some companies kind of go through this phase and then they're able to mature out of it and get on solid footing. I think, I don't think you're going to be able to stop like the singular visionary. I think that powers a lot of the entrepreneurial kind of progress in the economy. But I think that the red flags to watch out for would be a board oversight and qualifications of the board. Look at that and see how active is the board. And then compensation's gotta be another piece. There's not a lot of incentive. If you're a CEO and your goal is just simply to get to an ipo. There are things you can do in the short term that can compromise the long term health of these companies. Like Adam Newman's a great example of that in WeWork or just simply trying to lie until you can get to the next milestone, the next funding thing, and then you try to figure it out. So I think probably the compensation is important. I also think the way the structure in which companies are rewarded in the early capital formation stages with venture capital, venture capitalists are very comfortable making 10 bets, losing on nine of them and Those sorts of odds. Instead of looking for the singles and the doubles, I think it creates this environment where you're going to see a lot more risk taking because people are going for those home runs. Every venture capitalist steps up to the plate and they are not trying to get singles and doubles, they are trying to crush every single one. So I think that that has a portion of it. I don't know how you can regulate that, but if I were a partner at a venture capital firm, I think that that is something that I, I would look at very, very closely. And then finally, if I'm looking on paper like you guys mentioned, the succession plan, let's look at the strength of the team, the number two, the number three, the number four people. And then beyond that, it's really just looking for red flags. You know, is there, are they employing their family members? That's a big red flag. Is there nepotism that's happening? Do they have a personal relationship with their lead investor? You know, are there arm's length transition transactions against non affiliates? You see that becoming more and more of an issue. So I would say from the financial perspective, if I'm just looking at somebody's, you know, whether it's their, their 10k or if it's their pro forma or even if it's their pitch deck, I'm going to be asking those questions and trying to understand the business. Why are you different? And if they're playing on a lot of the intangibles and if it's a 90% bet on a, on, on a founder, you know, I don't know if I have the risk appetite for that. Some, many people do, but you just have to know what you're signing up for as an investor.

Melissa Eaton [34:25 - 36:00]: I think love that, I love how you mentioned like the, you know, the financial component of it and especially from an investment perspective because as you know, someone who's been at startups, I feel like you're constantly, and I did, this is the one thing that the founders did amazing at, you know, work at and CEOs have to do. This is just trying to go get money, right? And it feels like you're on a constant treadmill of like asking for money. And so to your point is it seems like there's a lot of, you know, Silicon Valley bank, all these people that will give you money, but what is the, what is the accountability for the money that you've been given? Right. So if I'm going to give you $150 million, you know, do they ever, you Know, yeah, you have board meetings every quarter, and you kind of go through a little pretty deck, you know, that Aaron would make look really, really good. But are you really showcasing what you're investing in and what your actual, you know, strategic goals are and how you're going to hit those outcomes? And so, again, I feel like there's a bit of, like, we're making investments into these startups or into these companies and following a CEO's vision, and we're not necessarily gonna follow up with it in the sense that you would if it was your own money. Right? Like that when you said, I don't have that risk appetite. Cause I, you know, I'm not gonna just give it to somebody and not know what's gonna happen with it.

Chino Nnadi [36:00 - 36:00]: Right.

Melissa Eaton [36:00 - 36:09]: So it's very interesting to me because I feel like that's a component that you see with these guys, that it was, like, unchecked. It felt like it was very unchecked.

Aaron Wolpoff [36:09 - 36:54]: I don't know if any lessons wind up getting. I don't know if any lessons wind up getting learned, though, because you have, let's say you have a CEO that went through the ringer publicly, right? Flamed out. Now they're a free agent. They're still a known entity. And even a brand with a stain on it has recognition. And so there's still maybe a cachet to being involved with that individual and bringing them and saying, you know, I learned so much from that experience that I'm. I know what to do differently. And now let me do it for you. There's. We love a good redemption story. Right. So maybe there's tolerance for that. And I don't know how many lessons are actually getting learned in the process.

Chino Nnadi [36:54 - 39:20]: To add to that. Yeah, to add to that, too. You were saying China, I think there's a piece of. There's going to be that grittiness, that unchecked part of just. That's the nature of startups, right? You're figuring things out. And I think as investors, you know how to check that. Like, what is the point of when you check it? Is it when you get to ipo, is it before that that you want to make sure that from like, a culture perspective, you have a succession plan? You have all of the things that Peter kind of outlined in Check, or do you not care? Right. Like, again, you know, when you look at it going back to Elon with Twitter now, X, that was a really rough transition. People were sleeping in their offices. People were so many. I'm sure we all have, like, Individual stories of someone who's worked at Twitter at that time and just how brutal it was and how every day you're kind of feeling like you're walking on the plank. And, you know, thousands of, like, you know, right now, X is thriving. And Elon has done that for a lot of his other companies. And so, you know, as an investor, are you saying this is kind of the standard? We don't care. As long as it's successful or it's going, then that's great, right? Not that it's great, but it's like, okay, that's your strategy. You don't really care. So as long as the product is shipping, you're doing what you need to do. We don't really question it. And maybe that's your measure of success. Where there's other VCs and other investors who might say, you know what? That's great, but we don't want that state. We want to have and build an organization or a product where people look to and say, you know what? That's incredible. Not only did you push a vision, you've built a workforce that believes in you and you have loyalty. And people want to be here, not they're forced to be here out of fear. It's really up to the board and the CEO at the end of the day to figure out what they want, because you can kind of move in different directions. And I would say with all of these folks, it was unchecked, because it was okay to be unchecked. Nobody cared as long as the product was there. In Billy's case, or in Elizabeth Holmes case, it was so, so unchecked that even though the product wasn't at all where it needed to be, like, Fyre Festival was an absolute disaster. When you get to that stage where it's completely failing, that's where it becomes the onus on the CEO.

Aaron Wolpoff [39:22 - 40:19]: So we have these companies that have created a bubble around CEOs and allowed them to. To run wild. We have individuals that are hardwired to take advantage of those types of opportunities, or they get where they are by proximity, and they're not necessarily the right leader, but they've been given leadership. And once they have a taste of it, typically they don't want to relinquish the power. Right? So we've shown that it can happen once for someone that doesn't have a track record, can. Can earn their way into an opportunity or find their way into an opportunity, get investors, get backing, get the support, whether it's culture of fear or Personality or however they get to that point once they fail out. Did we fix it to the point where it's not going to happen again? Or is that just, you know, is it so institutionalized that those, those CEOs are going to go on to have long and fruitful careers? I want to know if we fixed it.

Melissa Eaton [40:19 - 41:01]: I don't know that we fixed it in that manner. Right. Like, there's always going to be these, like, amazing visionaries that going to be like the Pied Piper. People are going to follow them. But I do think that we've brought up great red flag checklist items, right, that can actually help sustain and grow the business and can also make sure that the culture, the people are all taken care of, the customers are taken care of. So in my mind, I think that we've raised awareness that there are things that should be looked at in order to help to prevent, you know, a disastrous blowout like we've seen with some of these.

Aaron Wolpoff [41:01 - 41:02]: What do you say, Peter?

Peter Braunz [41:02 - 43:40]: Yeah, I think it generally comes down to I really am starting to more and more see it as a cultural thing. If you look at the way that Japanese CEOs are, are, you know, brought up and conditioned to serve the company and where it is from a compensation perspective and where it is from an accountability perspective, that is a uniquely Japanese centric, culturally centric approach to business. And, and I think the opposite. The pendulum swings the other way when you're talking about American entrepreneurship. We are very comfortable with failure, you know, both personally and professionally. And. And like somebody said on here, America loves a redemption story. So it creates a little bit more our bankruptcy loss there. People are incentivized to take risks. You will survive and you can come back from it. And I think that that powers a huge portion of our economy, that kind of entrepreneurial spirit, which is great. I don't know if you can throw out the baby with the bathwater. When you have that little bit of an approach, you are going to see charlatans kind of get into this space. And oftentimes the people who are visionary or start off as visionary, they can become charlatans. Or sometimes the charlatans can get far enough, they can get to the escape velocity, and they can again hire that team that can actually bring people along. So it's really difficult, in my opinion, to separate what is powering, kind of like that risk taking and the innovation versus what's a responsible level of risk. So for me, I think that what we've talked about in terms of red flags to look for everybody's going to have a little, Every, every company is going to have a little bit of, of their own kind of cultural dysfunction. I would say the secret is being able to decipher, is this too many red flags? Is this adding up? Are they able to be successful in spite of the dysfunction? And is the dysfunction kind of, is it at an acceptable level? And it's difficult. Even people from the outside is extremely difficult. You don't know the goings ons, but it's even difficult if you're inside one of these organizations. I've been in many organizations where I've convinced, okay, tomorrow this thing is going to fail, it's going to fall down this house of cards. And I've been completely wrong. Those companies are still going as opposed to, I've left companies where I'm like, this company's good, it's just not for me. And then something either on a macro level or something comes out of left field and it crushes that company. So it's really difficult to predict. I think the best you can do is make sure that you're comfortable with the risk and that you understand the risk.

Chino Nnadi [43:40 - 44:22]: I would say, Tina, if we're looking at it from a perspective of do we fix spotting these types of people, I would say yes, we did fix it. But again, back to Peter's point, it really is dependent on the appetite of that company. How risk averse they're willing, how toxic they're okay with having their workplace. So. So I think we've outlined some really good pieces on how to spot these people when you are looking to hire a CEO or a leader, or if you're an investor looking for those signs. But you know, that's so from that perspective, I do believe we fixed it.

Aaron Wolpoff [44:22 - 44:42]: Yeah, I agree with you, Chino. I think we came up with some indicators and maybe a playbook. But just the fact with Billy, we're talking about not even another investment or another company. We're talking about Fyre Festival too. It's the same thing again. Maybe we'll have a different outcome. Well, that time will tell.

Melissa Eaton [44:42 - 45:02]: This podcast is produced by Straightforward Media Group. All rights reserved. If you'd like to learn more about how a podcast can help your company establish authority and generate leads, please email us@erictraightforwardmg.com or go to straightforwardmg.com for more information.