Is Greed Good for Entrepreneurs?

5th Aug 2012
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It might sound clichéd but it is ‘necessary’ to introduce Gordon Gekko, from the 80's movie Wall Street, every time one is talking about something pertaining to greed.  The movie was interesting, but how much of what he said was credible, can be implemented, or at least thrown a thought up on? That was “banker-speak”, for the people with nearly infinite greed. What about entrepreneurs? Can they afford to be ‘that’ greedy?

There is this exuberant thrill and energy associated with the feeling of starting-up. Startups dream to traverse the uncharted paths, explore unseen regions and take huge risks. This level of enthusiasm cannot control the growing greed. If managed well, this greed can assist in achieving the same aspirations. This happens because, greed drives people, and it keeps them awake at night. The constant yearning for more, be it cash, equity, power, or fame, motivates an entrepreneur to work hard and dream bigger.

What’s wrong with it? Nothing. Period. Consider, for example, recruiting for a startup. It's almost impossible to get someone to work with you or for you on a start-up unless you address their greed, whatever it might be. Someone might be aspiring to become super rich over-night, or might be dreaming of becoming the king of a particular market. There are people who aim to “change the world” with their startup. Wow, greed has different forms. It has evolved. So what do you do? You find out what they're greedy for, give them a chance to get it and you may just be able to land them for your business.

For me the noblest of human motivations is greed. I don’t mean theft, fraud, tricks, or misrepresentation. By greed I mean people being only or mostly concerned with getting the most they can for themselves and not necessarily concerned about the welfare of others,” says a notable economist, Water E. Williams.

We had seen it happening with Google and Apple employees, and we saw it happening with Facebook employees as well: For a startup, equity is the face of greed. It's greed that lets you pay with equity to your early employees and give them a share of the pie so that when you exit, they are adequately rewarded. It is true that in the beginning, you anyways don’t have much money and paying with equity is more often than not the only option that you’re left with, but it’s in your benefit only. The feeling that a share in the business gives to the employee gives a kick in the butt to make him slog for the extra penny! It drives him crazy, the greed, and the thirst never ends. Imagine 10 such ‘hungry’ employees working for you: a mountain of success in the making!

We talked about instilling greed in the employees and also titillating their greedy nerve, BUT, and there's always a "but" involved, should YOU as a Founder be greedy? Alone, no, together, yes. Let your employees be greedy. It keeps them motivated. As a founder and C-level executive of your business, be magnanimous in the spoils. Let people lead, develop, learn, and earn. Share the wealth and let greed be a positive driving force.

It’s a thumb rule that when things appear too rosy to be true, there’s definitely some major issue lurking around. What goes up comes down. Growth is considered the hallmark of business success, but uncontrolled growth can—and does—kill entrepreneurial companies for two primary reasons. The first is that businesses need a proper order and infrastructure to scale sustainably, but few startups invest the time and effort to lay the foundations for growth in those first hectic years. No attention is paid to culture of the company even. That's too bad, because things tend to spin out of control when you put the pedal down. This mostly happens with the companies that receive a large infusion of outside capital. It's the equivalent of trying to break the land speed record by strapping a jet engine onto a soap box racer. Don't be surprised when the wheels come off.

The second reason is that greed-fueled growth is quick, and to manage businesses at those rates becomes very difficult at times. Additional investments are required, management reshuffle needs to be done, and even some fresh perspectives need to be reined in. The hyper-growth can suck up large amounts of cash, forcing businesses deep into debt or bringing the whole enterprise to a screeching halt. Many times, owners are not even aware of the impending collapse, because they focus on profitability (as depicted on the income statement) rather than cash flow. Never forget that cash is the lifeblood of your business!

Now, as each day seems to bring a new business scandal, we can see . . . a system that lavishly rewards executives for success tempts those executives, who control much of the information available to outsiders, to fabricate the appearance of success. Aggressive accounting, fictitious transactions that inflate sales, whatever it takes. Ken Lay, Gary Winnick, Chuck Watson, Dennis Kozlowski and the more recent Rajat Gupta— we’re not talking about a few bad apples. Statistics for the last 5 years show a dramatic divergence between the profits companies reported to investors and other measures of profit growth; this is clear evidence that many, perhaps most, large companies were fudging their numbers. Now, distrust of corporations threatens our still-tentative economic recovery; it turns out greed is bad, after all,” says Paul Krugman, a notable economist.

What’s your say? Would you prefer to hide your greed behind “it was an offer I could not reject” or would you prefer controlling it?

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