When I write about collaboration, I’m usually writing about its benefits. But there are potential costs as well, as this post on the Freakonomics blog indicates:
We find that individual venture capitalists choose to collaborate with other venture capitalists for both ability-based characteristics (e.g., whether both individuals in a dyad obtained a degree from a top university) and affinity-based characteristics (e.g., whether individuals in a pair share the same ethnic background, attended the same school, or worked for the same employer previously)….We find that while collaborating for ability-based characteristics enhances investment performance, collaborating for affinity-based characteristics dramatically reduces the probability of investment success. A variety of tests show that the cost of affinity is not driven by selection into inferior deals; the effect is most likely attributable to poor decision-making by high-affinity syndicates post investment.
In collaborating, we’re choosing whom to work with. And as it turns out, whom we choose has a major impact, at least in the cut-throat world of venture capital.
We feel comfortable working with people like us, but that comfort seems like it leads us astray. As the study referenced above points out, it seems that VC syndicates that collaborate based on social affinity have problems managing their investments. Perhaps their lack of diversity causes them to overlook potential problems and solutions, or perhaps their desire to “get along” keeps them from making hard decisions.
Either way, the conclusion is clear: When you’re picking whom to work with, you’d be wise to avoid selecting for comfortable similarity, or you’ll end up selecting for groupthink.
I think this is something I always knew. Back in 2008, when we were considering CEO candidates for PBworks, the founder David Weekly discussed his thoughts with me. “Both the candidates are great,” he said, “But I really feel a connection with Candidate X.”
“Of course you do David,” I said, “It’s because he’s just like you: An enthusiastic product visionary. But we’ve already got one of those. Pick the CEO that will add the most to the team, not the one you’d go skydiving with.”
And the rest is history!
