In 1936, while returning to Europe from an ocean voyage, Theodore Geisel crafted the poem “To think that I saw it on Mulberry Street” while listening to the rhythmic sounds of the ship’s steam engines. The poem would evolve into a book that would later be dismissed by 43 (by varied accounts) publishers who let Geisel know that they were just not interested. According to Geisel, he was on his way home to burn the manuscript when a chance encounter with an old Dartmouth classmate led to the publishing of his title by the Vanguard Press. Without that break, the world might not know Dr. Seuss.
Sam-I-Am! That Sam-I-Am! I Do Not Like That Sam I Am!
For years Goldman Sachs has generously provided fund managers and entrepreneurs time to tell their story in hopes of securing an investment from the incredibly powerful and influential firm. This Goldman culture is time-consuming, yet serves a significant purpose, even though 99% of the deals go nowhere. By being open to visit with managers, Goldman gets a first look at ideas/technologies, and the incredible deal flow offers Goldman volumes of information about market trends and technologies that many others will not see until it is too late. Additionally, GS uses this strategy to initiate relationships with hundreds, if not thousands of thought leaders who can be resources to their diligence, investing, and sourcing efforts in the future. Simply put, Goldman Sachs has been encouraging interns to eat green eggs and ham. It has become part of their culture.
I Would Not Eat Them Here Or There. I Would Not Eat Them Anywhere.
Sadly, the Goldman strategy has become counterintuitive to many business professionals who avoid these kinds of introductions, with the belief that only ideas and opportunities generated from their trusted network are worthy of consideration. The “I am not interested” mantra is a close cousin to “we don’t do that here because we have never done that before” and is often delivered to the messenger before the first detail is known. Why? Is it from past experiences, the mood of the day, a headline read in the Wall Street Journal, a market stereotype, a general sense that there is nothing new to learn, or the disruption that might occur from having to work on something new?
While looking at new ideas and opportunities, we often wonder if a study has ever been conducted on how much opportunity has been circumvented by the three simple words, “we’re not interested.” The Zen Masters of this perplexing strategy can often fire off an “I’m not interested” even before there has been the slightest understanding of why the person has called, thinking of course, it must be another sales guy with something I do not want nor need. A first-hand source at the table recently shared that, prior to leaving Albuquerque, a young William Gates asked a local law firm if they would be willing to provide legal advice in return for founder’s shares of stock in his upstart company. Without further investigation, they informed him they were not interested. Last checked, the firm still maintains a rough calculation detailing the expense of delivering those three fateful words to the tenacious entrepreneur. When combined with the opportunity cost of future legal work, well… let’s just say it’s no longer in the millions. How on earth could the grandiose plans of the 20-year-old college dropout be worthy of anything other than a “no” especially after this crazy young businessman suggested that someday a computer would reside in every home? Have you ever heard of such a tale? Similar stories of Steve Jobs at Atari and Steve Wozniak at Hewitt Packard are both well documented. How about Snap, Uber, DropBox and the other mega-deals where investors were “just not interested.”
If a physician-turned-investor called you tomorrow, stating that he developed an edge by reading Ben Graham’s Security Analysis, would you take his call? If you took his call and he told you he had identified a complete “misread” by the smartest banks on Wall Street and believed unlimited profits were imminent, would you allow him to explain, or would you tell him you’re “just not interested?” Had you been lucky enough to get that call and smart enough to listen, you may have invested in Dr. Michael Burry and Scion Capital, one of a handful of firms that delivered 400%+ returns by shorting the sub-prime mortgage market.
Is it really the opportunity that is not of interest? Or is it the fear of unwanted time-drains or the lack of interest in the unknown? While we don’t know the answer, there are a couple of things we know for certain:
- Nobody writes business strategy books on the “last mover advantage”
- Cities don’t build statues of the great pessimists that once resided there.
I Do Not Like Them In A House. I Do Not Like Them With A Mouse.
When Henry Ford introduced the integrated moving assembly line to the production of the Model T, he revolutionized an industry that had previously sold what were viewed as luxury items. By increasing production capabilities and driving down costs, he enabled more Americans to purchase affordable motor vehicles in 1913. Ford’s business manager, James Couzens, said that years before this, Ford was pitching his idea for his “horseless carriage” and had been thrown out of so many offices in Detroit that he once sat on the curb and wept.
Years after, many wished they had listened to Ford’s vision. Then, Ford himself got a taste of what it’s like to stop learning and evaluating. After selling the Model T unchanged in many key ways for 15 years, Ford was caught and surpassed by General Motors in car sales during the early 1930’s. GM was introducing new tires, hydraulic breaks, and automatic starters to the Chevrolet, while Ford largely ignored the advancing technologies of the industry through the 1920’s.
You Do Not Like Them. So You Say. Try Them! Try Them! And You May!
Mark Suster, Managing Partner at Upfront Ventures, spoke recently about his firm’s decision not to invest in Snapchat, despite being one of the first venture capitalists to hear about it. He says that he wouldn’t say that his firm passed on the opportunity because that would, “make it sound like you took a meeting and looked down on this project and said ‘meh.’ I didn’t do that.” Suster had seen other applications similar to Snapchat and “didn’t want to fund apps that would help husbands cheat on their wives or help kids send naked photos.” He realizes now that his was the wrong narrative for the company and he should have taken a different view. While Mark correctly stresses that it’s not his job to beat himself up for missing out on this rare opportunity, long before it was certain to succeed, it is important to learn a lesson from the reaction. If he had taken a closer look, maybe things would have been different.
Say! I Like Green Eggs And Ham! I Do! I Like Them, Sam-I-Am.
While time is precious and business focus is an admired attribute, we must remember that investment management is about keeping pace with change and recognizing new opportunities. While it would be ill-advised to take every inbound phone solicitation that hits your desk, having an open-minded, open-door approach to learning about new managers and strategies can be the difference between good and great performance. Recognize that not all meetings will create monetary rewards, but can provide value in staying up to speed on a rapidly changing investment environment. Professionals that have a process for managing cold calls and similar introductions receive far more than monetary gain. They are expanding their network, which can be worth its weight in gold down the road. Additionally, they will gain insight into what is happening and currently offered in the marketplace, as well as provide great training for young associates in the way of sorting quality from average opportunities.