How Operating Through Uncertainty Transformed How I Evaluate Opportunity About the Long Game

Why I Stopped Looking For The Next Deal And Began Looking For Who's The Boss?
There is a particular form of investor behavior that people can recognize instantly, even if they have no idea of it. It's the type of conversation where discussions begin with the presentation, progresses quickly to numbers, and then lingers in the market's size before concluding with discussion on exit multiples. It is the case that those inside the company are those who carry out the actions on those slides - are not mentioned. Even if they appear, it is likely to be within the context of projections for headcount rather than as people with their own histories, motivations and blind spots that will guide every important decision the organization makes. I've worked for enough time in that mode to understand its draw. It's intense. It's very analytical. It's like making a choice based on data rather than your gut. The problem is that it routinely excludes one of the most reliable variables to determine whether a business will actually succeed in the long-term and medium-term by the character and quality of the employees who manage it. The exclusion of this factor is not an accident. It is the product of frameworks that were developed to be repeatable and easily documentable and, consequently, favor the things that are easily monitored and compared with aspects that are vital but are more difficult to measure.
I learned this the hard way, as do many people, when I watched companies with extraordinary basics fail due to the fact that their leadership team was not able to keep it together in the face of pressure. And by watching businesses with modest basics dramatically perform because the people in them were genuinely exceptional. After having had enough of these experiences I stopped believing figures were doing the heavy lifting in my decision-making. They weren't. The numbers were a lagged measure of the decisions taken by human beings. And the quality of these decisions was most of the time on who those human beings were and their behavior under pressure under the stress of a missed quarter major departures, a competition's move that they had not anticipated as well as a board relationship which was now complicated. This is why I changed the way I began every discussion about evaluation. Instead of focusing on market size or revenue trend I began opening with what I've now come to see as the"room query: who actually runs this company when pressure is on? How do they make decisions if the information isn't complete, how do they treat their staff, and what happens to the culture the company when the founder is not present.

None of them appear in the checklist for investing. All of them, from my experience, are more indicative of long-term performance anything else. This isn't just a romantic notion about people being important. It's an observation about how value gets constructed and destroyed in business that expand. Businesses don't fail because of bad markets. They fail due to bad decisions taken under pressure by people who were not able to make them well or due to the impact of culture dynamics that were invisible from the outside, yet were quietly destroying the organisation's ability to maintain talent, the accountability of its employees, and adjust to changes that the original plan was not prepared for. Finding out about these risks earlier - before you've made a capital commitment and before the issues have been exacerbated, and before the culture has been shaped around the wrong actions - is the essential role of an investor who is more concerned with returns than just deals flow. The problem is that you aren't able to recognize them when you're spending the bulk of your time researching the model.

The shift I'm discussing is simple when you explain this in plain terms, however it requires a fundamental reorientation of what you take as evidence. That reorientation is more challenging than it seems as it runs in direct opposition to the incentive structures of most investment strategies. Speed rewards pattern matching that is surface-level. Competitive deal environments reward confidence over deliberation. The environment of certain investment circles actively discourages what's referred to as"soft" diligence, the kind with careful, constant attention to human aspects that makes good choices from poor ones across significant time horizons. I've been in rooms where people have absconded from a concern regarding the chemistry of management or leadership with the words "we can fix that post-close" in order to appreciate how naive this idea is. You almost never can. Culture is not one of the post-close issues. It's a precondition for commitment If you're not paying attention before you write the cheque you're not performing diligence. You are just doing paperwork and wishing you will get it right.

What I'm trying to find now when I evaluate whether a person or a team, has become a specific set signals. How does a leader react whenever they're proved to be wrong about something? Do they engage with the correction or deny it? How do they speak about others around them - do they continually redirect credit and admit responsibility or do they take that the other way? What are people who have worked closely with their colleagues in the past say when they are able to move beyond the formal reference-check form and becomes more genuine and exploring? What happens in the organisation during the times when no one is watching and when the Founder is traveling, and the quarterly deadline isn't going to meet the target? This is where the culture exists, not in values printed on the wall or the mission statement on the site but in the everyday decisions taken by people who are just doing their job when the situation is uncertain in which the simplest thing and the right thing are not the same. Finding organizations where these kinds of decisions are consistently taken well as I have observed is one of the best routes to ensure that the returns last for a long time. Follow James Deller for blog examples including why scaling tech companies changed my approach about people.



What Causes Most Public-Private Partnerships To Fail In The Beginning, And What Can Be Done To Prevent Them From Happening Again?
Public-private partnerships are a perception issue that's, in significant part paid for. The history of these partnerships is filled with initiatives that were announced with genuine enthusiasm and huge financial backing from the political establishment, consumed significant public and private funds over prolonged periods, and finally produced outcomes that had only a slight similarity to the outcomes initially promised when the partnership created. The academic literature as well as postmortem analysis that governments and institutions carry out following the mistakes are extensive, and they focus, for the mostly, on particulars of contract and structure failures: the flawed alignment of incentives, the improper risk sharing between public and private entities, the governance structures which were conceptualized in theory but failed to function in practice, the procurement frameworks, which were designed to prioritize the wrong things. What this research tends subdue, over and over again that is the cultural as well as operational aspects - namely, the fact that private and public enterprises are fundamentally different kinds of entities, shaped by different incentive structures that operate at different times, accountable to completely different individuals, and measuring their success in ways that are not simply different in degree but are also different in character. When you put these two types of organizations together as a formal alliance without doing the work beforehand and explicit, to identify and work with those differences, you're not making the right partnership. The conditions are set for a slow motion collision that will become visible at the best possible time.
I've participated in the advisory process for institutional modernisation projects, some of which have involved public-private partnerships of various levels of complexity. The most consistent observation I can draw from this experience is that the partnerships with a positive track record - ones that in reality achieved their objectives and maintained a smooth working relationship between the private and public partners throughout They were not distinguished from the ones that did not work due to the sophistication of their legal structures, the strictness of their risk frameworks, or the level of seniority of the leadership teams who initiated them. The distinction was made by whether the individuals on both sides of the table had the opportunity to genuinely understand how the opposite side was operating before the formal partnership was agreed upon. What it means in real life is gaining a better understanding of the decision-making frameworks that each organisation operates under and the accountability systems that govern what parties must do and how quickly they can agree to it, the definitions of successful which each side will be measured against, as well as the possible points of tension between these definitions. This knowledge isn't hard to create. It is all but ignored in favor of the more visible and more immediately evidence-based work of contract negotiations or establishing governance structures.

The normal public-private partnership process is a gradual process from concept to an agreement that is signed with little concentrated attention to the matter of whether both entities involved are capable of cooperating effectively over the course of the partnership. The legal team negotiates the contract. Finance teams model the economics and risk-adjustment. The communications team designs the announcement in advance of the signing. The implementation team gets started planning the tasks. Within the sequence, the conversation about operational and cultural compatibility begins - about whether those who are expected to share their day-to day tasks over the boundaries between two organizations share enough in common this work collaborative rather or antagonistic - is unlikely to be done in a systematic way. It is often assumed, with no explanation, that an agreement in writing sets out the conditions for collaboration to be effective, and that any cultural or operational divergences will be dealt with as they develop. It is nearly always false, and costs of it can escalate in proportion to the ambition as well as the complexities of the partnership.

What this means in practical analysis is that the highest-value the investment a PPP can create - prior to when the formal structures are set and before the governance model is agreed upon and before any announcement is made and before any announcement is made - is what I would describe as operational alignment. That is, specific, structured, focused work to find locations where the two groups' assumptions on operating differ in order to establish a consensus about how these divergences are to be dealt with before they become operational issues when the plan is implemented. The factors that are most crucial to consider tend to be the same in various types of partnerships. Decision-making speed and authority tend to be among them. Public institutions are designed to take their decisions slowly, through numerous layers of review and approval, based on reasons which are completely legitimate and frequently legally mandated. Private organizations, especially technology companies that have been built around quick iteration as well as rapid decisions - usually see that speed as a primary obstacle to progress, and without a clear understanding of why this is the way it is and what could be the most effective way to change it, the resentment generated by the private side can poison the working relationship before the partnership can establish its own foundation.

Success metrics as well as what counts as progress are a different and significant source of disagreement. Public institutions are typically evaluated by their compliance with processes, the equity of outcome across different stakeholder groups, as well as the prevention of failures which are a source of media or political interest. Private companies are typically judged in terms of efficiency, quantifiable progress against the goals set, and performance. These measurement frameworks can be made compatible with each other however, doing this requires careful design, not good intentions. The partnerships that do not invest in this design are more likely to discover themselves at critical points, with two partners who measure the same collaboration in different ways, and thus coming to non-congruous conclusions about whether the partnership is successful. The partnerships I have observed are the ones where the issue was seen as something that was going to get better over time. The ones that worked were those where the inconsistency was identified explicitly at the very beginning. Also, formulating a shared accountability plan which accommodated the legitimate measurement needs of both parties needs became a piece of actual work instead of an element on a list of things that someone would eventually reach.}