DNA

I once knew a guy who I will call “Wall Street Tycoon.” He had dreams of starting a hedge fund on Wall Street. So what did he do? First, he got really good stationary. And then he went out and he recruited about ten of his friends, acquaintances and associates from his private club and then he asked them to come aboard his newly formed corporation. Now, the only vetting criteria he used is where they went to school and what their resumes sounded like. PHD in French Literature from Standford? Check. BA in political science from Yale? Check. Former Harvard Law School Dean of Students? Check. You name it, he got every elite school grad he could find and he asked them to join his company.

And he got really good stationary and really good paper. Then he proceeded to set up a hedge fund that traded heavily in real estate. Sounds good so far? It was. The only problem is, for all their PHDs and impressive educational pedigree, not one of these people understood the fundamentals about starting or running a hedge fund. Many of them did not know for sure what a hedge fund did. Actually, the only person who knew anything about hedge funds was Wall Street Tycoon.

I was getting pretty fed up hearing him bad mouth everybody when deal after deal fell through. “But why did you bring this guy aboard in the first place?” I asked one day in exasperation. “He knows nothing about what you are doing and you knew that from the start.” Wall Street Tycoon got really angry and impatient with my ignorance. “This guy is a PHD!” he rasped.
“Yes," I concurred. "But PHD in what?!”

He was a real genius this guy, Wall Street Tycoon. He personally guaranteed about $5 million dollars using his house as collateral for the debt, and proceeded to spend money, a lot of money on things like sponsoring scholarship funds for major universities in the city in an effort to get on “the Board” so that he could be in the right circles, and get investors for his fund.

But when you really got down to asking him what exactly his company does and what his vision was for the firm and what his strategy was for accomplishing his vision and how any of these people fit into the mold other than to add impressive resumes, he got defensive and told you things like “this is very creative. You are not going to get it. I know what I am doing. This is what I do. I am a financial engineer.”

Well, I was not an engineer but I got a bad feeling about this company from the start. I told him he needed to sit down and do some root canal and figure out what it was his company was about, and give everyone clear goals, and surround himself with some people who knew how to run and maintain a hedge fund. In short, I was asking him to figure out the company’s DNA before going one step further.

Do I need to recount in numbing detail how this story ended?

The moral is, before you take a step further, figure out the DNA of your company. Believe me it is a lot more complex than fancy resumes and stock paper.