By Elena Siniscalco
Few would disagree that entrepreneurs and the companies they create are an essential part of any successful economy. Nevertheless, today’s excessive levels of founder adulation – call it the cult of the founder – are proving damaging in ways that are plain to see, from Elon Musk’s takeover of Twitter and the spectacular collapse of FTX, to Mark Zuckerberg’s eye-watering investments in the metaverse.
Start with Twitter. Musk may not have founded the social media platform himself. But his dictatorial way of running it, and belief that he alone holds all the solutions to Twitter’s problems, is typical of the extreme self-confidence and “lone genius” mentality that characterises the cult of the entrepreneur. Musk’s delusions of grandeur, and our collective indulgence of them, are seriously threatening the future of an important communications platform, with Twitter rapidly haemorrhaging staff, advertising revenues, and credibility.
The other case study dominating the headlines is the sudden demise of crypto exchange FTX, founded by Sam Bankman-Fried. Thanks to his perceived charisma and “vision”, Bankman-Fried was able to overcome both his inexperience and a lack of transparency around FTX’s business practices to rapidly raise billions of dollars from some of the biggest names in venture capital, all the while rubbing shoulders with the political and business elite. Yet despite making the cover of Forbes, Bankman-Fried’s $32bn business empire ultimately turned out to be a house of cards, with FTX now officially bankrupt, unable to pay back its tens of thousands of customers, and subject to investigations by regulators.
A less stark but equally instructive example is Mark Zuckerberg’s stewardship of Meta, the company he founded (as Facebook) in 2004. While Zuckerberg’s success in turning Facebook into a social media empire is undeniable, his current mission to create the “metaverse” by spending tens of billions of dollars a year – while simultaneously laying off over a tenth of Meta’s staff – is more questionable. But thanks to the belief that founders always know best, investors allowed Zuckerberg to maintain a “dual class” shareholding structure at Meta even after its public listing. It made him largely untouchable when it comes to major business decisions.
It’s not as if we haven’t been here before. One need only recall Elizabeth Holmes, who conned investors out of hundreds of millions of dollars based on bogus claims about revolutionising blood testing. Or Adam Neumann, the eccentric WeWork founder who botched the initial public offering of his own company after evidence of his financial and strategic mismanagement came to light – and who is now staging an unlikely comeback. Why do we keep falling for it?
A society that values the contributions of entrepreneurs is no bad thing – indeed quite the opposite. But current attitudes towards founders veer beyond appreciation towards idolatry, blurring the lines between entrepreneurship, celebrity and influencer culture. The causes of this are wide-ranging, from the mythification of the tech founder through figures such as Steve Jobs and Bill Gates and the role of social media platforms in giving individuals a platform for self-promotion, to the cheap money and rapid growth of the tech sector over the past decade.
No matter how visionary the founder, creating, growing and running a successful company is a collective endeavour that relies on the effort and ingenuity of many talented people, not just one. And that is without mentioning the many other factors that determine a firm’s prospects, from access to skilled workers, high-quality infrastructure and the rule of law, to a conducive macroeconomic environment and of course, a healthy dose of luck. In other words, individual brilliance is a necessary, but not sufficient condition for creating and sustaining a world-class business. Some studies even suggest that companies led by founder-CEOs perform worse on management than any other kind of leadership structure, including family and private equity-run companies.
Today’s challenging economic conditions are forcing a delayed but necessary reckoning with the cult of the founder, in the process separating the wheat from the chaff. One can only hope that moving forward, investors – and society more generally – will be a little more careful about putting blind faith in charismatic founders, and pay more attention to the many other ingredients that go into building a successful company.
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