Posture and Performance
I think because she’s passionate about the topic, our Managing Director Emily recently sent me a paper from the Yale School of Management about bilateral conflict. It explores the ways search entrepreneurs can get sideways with their investors and vice versa. It turns out when self-interested people act in their own self-interest, weird stuff happens.
That said, in this season of investor letters, one point the paper makes hit home and is something that I struggle with when drafting our own investor updates. Namely, that GPs/entrepreneurs/operators “may mislead investors with an information asymmetry advantage.” This is because the GP/entrepreneur/investor “has all the key indicators that foretell future financial results” and therefore can “control the narrative that investors receive.” Whether that means being overly positive, insufficiently negative, or simply careful about what you say when, an investor letter can project a lot that isn’t real.
Now, let me be clear: when I say I struggle with this, it’s not because I aim to mislead our investors. Rather, it’s because it’s a true fact that letters can only be so long, some developments matter more than others, things can also be better or worse than they seem, and there is always incomplete information.
This is the struggle.
So when I am pulling together our own updates, I try to be mindful of something I’ve started calling the Performance-to-Posturing ratio, with the aim of spending a lot of time talking about actual performance and its drivers and little-to-no time posturing.
Is it always 100%/0%? No. But you also won’t catch me opining on the ubiquity of water, admiring Euclidean geometry, quoting obscure Australian philosophers, expecting you to know who Maurice Merleau-Ponty is, or name-dropping James Joyce.
Dammit.
– Tim
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