Welcome back and thanks for joining us for episode five of The Evolving Leader. We're excited to have Alan Stein, Jr. in the studio with us to talk about the importance of getting the fundamentals right. Alan is a keynote speaker, performance coach, and author of The Soon to Be Released and will be released by the time this comes out. Book, sustain your game. Many of the lessons that he shares in his book and that we'll discuss here today come from come from spending time with some of the most successful basketball players in the world, including but not limited to Kobe Bryant and Kevin Durant. Alan, thanks for being here with us today. Oh my goodness, it's my pleasure. It's great to be with you. It's great to see you again, Al. You too, David. So let me just ask at the start before we get going, how is it that you have come to rub shoulders with some of the greatest basketball players the world has ever known? Well, basketball was my first identifiable passion and I fell in love with the game at five years old and I'm so grateful that here, 40 years later, basketball is still a major pillar of my life and I've spent my entire life around the game and incredibly thankful that I've seen it from three very distinctly different vantage points. The first third of my life was as a player myself. I was able to play all the way up through college. The next third I spent as a basketball performance coach, which was when I actually got to work with these elite players and now on this back third, I'm the father of three children that all play youth basketball. So I've seen the game from every angle and I got into basketball performance training at a very opportune time when there weren't very many people doing it and some doors were open for me that allowed me to do work at Nike and Jordan Brand and USA Basketball and I got an opportunity to work events for the likes of LeBron James and Kobe Bryant and some pretty amazing players. But I also had an opportunity to work at two different high schools here in the Washington DC area that ended up producing future pros like Kevin Durant and Victor Oladipo. So I've had a unique journey that I've gotten to see both sides of the curtain. I've gotten to see what it takes for a young player to rise to the mountaintop, but then I got to work with these established pros and see what it takes to actually stay there and sustain that level of excellence. So very thankful basketball has been a major part of my journey. Very nice. So one of the important things for any leader to know is kind of their role in the process and I'd be curious to get your take on this. David and I were talking over lunch. We feel like the role of a leader is really to be more coach or maybe even GM than it is to be the star player. Is that your experience as well? Absolutely. I'm not very musically inclined but I kind of equate it to being the conductor of the orchestra. The conductor's job is to get everybody to play their instrument to the best of their ability and when done and blended beautifully, you know, you get harmony and you get some nice music and that's ultimately what a conductor's job is. And I view the same thing as a leader, a leader or a coach or really you could fill in any word there, parent, teacher, manager, director, supervisor. It's your job to find the strengths of each person on your team. Put them in the right position where they can maximize those strengths and make a maximum contribution to everyone else. And if everyone is doing that in alignment with the vision or the north star that the leader has set, that's when you have an extraordinary team. I love that word orchestration, right? It's one of the first lessons that I learned from one of my mentors way back in the day was how to let go as an entrepreneur and to delegate truly in power. And that was the image, the image of an orchestra and an orchestra leader of really getting everybody aligned around that same sheet of music and singing the same song, right? Such an important part of leadership. I think one of the key things about that is in order to get everybody to follow that vision, you don't have to just paint that vision, you have to be able to have the respect of the entire orchestra to follow you. What have been the secrets that you've seen? You've worked with amazing coaches, amazing players that are providing leadership on the court, not just off the court. Where does that come from? Where does that respect kind of germinate from? Respect has to be given first. You have to have a respect for those on your team, you have to have a respect for the process, a respect for your organization, a respect for the game, if you will. So the respect has to generate from you as the leader first. And then on top of that, you'll start to build in things like trust. You need to earn the trust of every single person on your team and you earn trust by giving trust and showing and having behaviors that show that you are trustworthy. And these things all provide the foundation to which your leadership and your influence and your impact will eventually be built upon. And that foundation is vital. I mean, that was why I'm glad in the intro you mentioned the basics. That's something I really embrace are the basic fundamental principles or the fundamentals, if you will, of what it takes to be successful in any area, especially that of leadership. And we all have to make sure that we are paying homage to the basics every single day. And I know in my own life, anytime I'm not performing at a level that I believe I'm capable of, it's usually because I've unconsciously started to drift away from the basics. I have to refocus that lens and get back to them. And that usually puts me back on the right path. It's amazing to me how the basics and not doing them can undermine what you're trying to accomplish as a leader. And I learned this and you really brought it to the forefront of my mind when you and I met and you really spoke about the basics and how you had seen the best players in the world work on the most fundamental moves and skills in basketball. I have found it's like, if you don't brush your teeth in the morning, you've got horrible breath. It doesn't matter how much you dress up. It doesn't matter how good you are or what. It's that distraction that undermines that respect. And there are certain things we all have different strengths and weaknesses. There are certain things that just don't come natural to some of us, right? And things as simple as not being responsive or not being polite or not being able to communicate and articulate yourself that we look at really basic things that some leaders don't pay attention to really sabotages more than anything, their leadership ability. Oh, absolutely. And it always goes back to those fundamental building blocks. I mean, to me, one of the pillars of being an exceptional leader is simply caring, is caring about the people on your team, is caring about your mission, is caring about your organization as a whole. And then you think of what are the building blocks of how do you show someone that you care? Well, I'm a big believer you invest time with them and you invest your most important currency, which is your attention in the present moment. So when you have an opportunity to be with someone on your team, give them your full attention, actively listen, you know, have a genuine curiosity to get to know not just more about them from a professional standpoint, but even from a personal standpoint, find out what's important to them and truly solidify that connection. And then when they know that you are all in and you truly care about them as a human being first and as an employee second, then they're going to increase their requisite buy-in and believe in. And now you've got, you've created a culture where everyone is working together to make a maximum contribution to move towards that North Star. But for me, it always starts with caring. And, you know, that's not something you can fake. That needs to be genuine and it needs to come from your heart. And you show people you care by investing your attention in them. One of your favorite phrases is be where your feet are. Yes. Right. I think that goes to that, right? One of the ways we show care is by really paying attention, investing in the present moment versus being somewhere else, thinking about something else. Yeah. And I always try and give proper attribution. I've heard be where your feet are. I heard it first from Nick Saban, the head football coach at Alabama. And I heard it from Oprah Winfrey. So if both of them said it, it has to be true. Has to be true. But you know, it's funny. There's something, and I've always loved quotes. I'm a self-diagnosed quote nerd. And I started writing down quotes on a yellow legal pad when I was 15 years old. Wow. And then with the advent of the computer, transferred those over to a Word doc. And I have a Word doc now, still on my laptop, with thousands of quotes. And there's just something about the way that words can be organized that can make the meaning resonate differently with folks. So there's a million ways to say you need to be in the present moment. But the second that I heard, be where your feet are, I just had this epiphany moment. I just, that made sense to me.  But I say that to myself dozens of times a day. But if I ever find myself, whether I'm in a meeting with you two, or I'm having dinner with my children, and I find myself temporarily distracted or not being present, I just, that is my trigger. I simply say, Allen, be where your feet are, be where your feet are. So it brings me back to that present moment. So that's one of your basics. It's one of the fundamentals that you live by. And I've experienced that so many times. What are the others? Do you have three or four other basics that you just always go back to and make sure you're practicing? I do. And let me preface this with, and I've started sharing this on stage and actually find that the vulnerability helps increase connection. I'm not a master of any of this stuff. I'm not speaking from a place of mastery. I'm on the same path as both of you and as everybody watching and listening to this right now, but I'm proud of the path that I'm on. And I love not only sticking to the basics, but having people in my life that care enough about me to hold me accountable to sticking to those basics. For me, I'm, I'm big into routine and structure and consistency. That's actually something that gives me comfort. So I, I love routine and I have a meticulous morning and evening routine, which I would consider one of my basics and I don't deviate from it. Now, I'm not robotic. Basically, what I have is a framework that I say, all right, every morning, here are the things that I need to accomplish in order for me to be my best self. And they're not always identical. You know, for me within the first 60 minutes of every day, I try to do something physically that gets me moving. I try to do something mentally that stimulates thought. And I try to do something emotionally, you know, kind of engages the heart. So if I can do those three things within the first hour of waking up, it puts me in a pretty good mindset to be my best self. And now what I do for each of those three things may differ. Someday I may do some yoga. Another day I might go for a run. Another day I might lift some weights and that's the physical part. Sometimes when I'm on a run, I'm listening to a podcast. Sometimes I take 20 minutes to read a new book. So those things I allow for some variety. But I think if I can engage those three parts of my being every morning, then it lays that foundation. And I've also come to realize, you know, with some self-awareness and some introspection, I love early morning. So I love the early hours of the morning. So many of the times I'm doing these things at six or seven or eight o'clock in the morning, which then leaves the rest of the day to be productive and to be present. So I would say habits and routine and structure are another part of my basics. And living present, which is really challenging to do in today's very digitally distracting world and sticking to structure and habits when there's a variety of other things that necessitate our time, those things are never easy to do. But I value them so much and they are so important to me that I make the time to do them. You keep coming back to them. David, let me jump in and ask what are some of your fundamentals, either from a scheduling perspective or a leadership perspective? Yeah, what do you, what boxes do you try to make sure that you check? You know, it's funny and I found this over and over with leaders. Mine are so similar, right? And I didn't even realize this, but my morning routine is a huge part. I'm the exact same way. The early morning hours are when I get in my best work as a human being and it starts with waking up and having my prayer time in the morning. And then I go and work out in the mornings and then I go and I have what I call my deep work time. I set it aside. It's where I do my thought work, right? Because of exactly what you said, I can be productive and then I can engage. And so that morning routine is number one, number two, treating people, right? One of the core values at Three Pillar that we talk about all the time is intrinsic dignity. I really believe in caring for people. You say it one way, I say it slightly different. It's the same thing. So a human being is a human being. And regardless of what they do, they deserve respect and honor and really investing in other people is really important to me as well. Those are some of the staples for me. But then I think I also have some very tactical ones, responsiveness, right? One of the ways I show respect is I practice making sure I get back to people within 24 hours when they reach out to me. Am I perfect exactly? Like you said, no, there are times when that inbox queues up and I drop the ball. But I really try to discipline myself to if somebody's going to reach out to me, I need to respond, even if it's just quick and short and acknowledge them and to get back to them and not let them be waiting on me, right? There are some things like that that I really pay attention to. Yeah. And one other thought that just stimulated from what you were sharing, another one of my basics that I've really tried to lean into over these last few years because I was admittedly awful at this very early in my life and probably all the way up through my late 30s was learning how to detach from outcomes and focus more on the process. Not to say that goals and outcomes aren't important. They can be that North Star, if you will, but not allowing achievement to dictate my self-worth and my self-value. So basically learning to love the work for the sake of doing the work and then any outcome or goal that you reach is simply a byproduct of that. And it's something you can celebrate and you should celebrate, but not kind of putting all of my eggs in that basket. Learning to do the things on a daily basis, the habits and the behaviors, the way that you treat people and then letting things just unfold.  So the vast majority of my focus is in my own attitude and effort. And I'm getting better at certainly letting everything else go that if I can say, even with this interview right now, if I give my best effort and I have my best attitude, that's all I have control over. I don't have control over what you guys say or what you ask. I don't have control over what the people watching or listening think of me. So I have to learn how to let that go.  That's the North Star, but I don't control that. So all I can control is my effort and attitude. And I'm starting to get to a point in my life where I'm finding peace with that. And there's some serenity in knowing. I'm following the process. I'm doing the best I can and I'm living my truth through the basics. And everything else is just going to happen the way it happens. And I'm okay with that. One of the first times that you shared that with me and you were talking about attitude and effort, it really resonated. And there's two things that happen from it. First one is my kids have all heard that over and over again. So thank you for helping me be a better dad. Of course. Number two, you also share with that. One of your very small examples about the basics and really putting where your money, where your mouth is, is about shopping carts. Go to the grocery store. And how many people have the attitude and the effort to simply go and wheel that cart over to where it's supposed to go versus leaving it in the middle of the parking lot. And what does that have and what is the impact it has on so many other people around here? And that was an eye-opening moment because I was one of those jerks, right? Here I am preaching and talking about wanting to care about other people and doing the basics and simple things. And it was like, wow, what an eye-opening moment. Right? And so now for the last five years, however long it's been, I put shopping carts back because of you, Alan. I love that. Well, I'm a huge believer that little things make a big difference. When little things are done consistently, they make a big difference. And when little things are done by a lot of people, it actually makes a big difference. And I've tried to refine my stance on the shopping cart issue because one of the other areas where I'm trying to grow is to be less judgmental of other human beings and to make less assumptions about other people. So in my opinion, someone that abandons their shopping cart in the parking lot, just leaving it in a space, it doesn't mean that they are a bad person. And it doesn't mean that they are selfish, entitled or lazy. But I do believe that is an act of selfishness, entitlement or laziness. And because I don't have the full picture and I don't have the context of who they are or what they've had going on in their life or their day. I should not be in a position to judge someone. But I do believe in that moment, they made a decision that was not being their best self and is not in the best interest of the society that we're all a part of. So for me, those little things, they add up. And now with that said, as I said, not only am I not coming from a place of mastery, I am far from perfect. I am a flawed human being and I will have lapses in judgment. I will make poor decisions. I don't think it'll ever be the shopping cart example, but there will be times in my life where I do something that is lazy, entitled or selfish. Yeah, selfish, absolutely. And we all need to be able to give each other grace. And we all need to be able to be lenient with each other and give people the benefit of the doubt. But that also starts with our self, being self-critical and beating yourself up and packing on guilt and shame when you do something poorly isn't going to help. So another area where I'm trying to grow is when I make a mistake, which happens frequently, is acknowledge it, make an amends or apologize if it's warranted, learn from it and then do my very best not to repeat it. And I think another fundamental truth of leadership is if you're going to expect it of others, you have to expect it of yourself. I believe in modeling the behavior that I want to see in others and that's one of them. So before I would ever condemn someone for not putting their shopping cart back, I need to make sure that I'm always returning mine properly. I just, I laugh at that kind of tongue-in-cheek because I think it's kind of a microcosm of a much bigger lesson, which is every moment you have an opportunity to make a decision to show up as your best self and to contribute to the world around you. And my goal is to make that decision as consistently as I can. And when I fall short because I'm fallible and human, giving myself some grace to just move to the next play. Yeah. I love that. Next play. I remember it. Is that a, that wasn't the Steve Nash story, was it? No, I actually learned it from coach K, but it's very applicable to Steve Nash because he's one of the best that have ever done it. And the concept of next play is don't worry about what just happened, refocus your lens on what's happening right now, what's right in front of you. So the best basketball analogy is, David, you just missed the layup. It's okay. Next play. Will, you just turn the ball over. It's okay. Next play. Guys, I know the referee missed the call. It happens occasionally. Next play. And the reason as your coach that I would want you to focus on the next play is because there's nothing you can do about that missed layup or that turnover. It's over. And if you choose to allow what happened in the past to detract from your ability to invest in the present moment, you're not able to perform at your best. And, you know, right now in the throes of March Madness while we're recording this, we're seeing this at a high level. You are seeing which players and which coaches quickly move on to the next play and which ones are fixated on something that didn't go their way. And now I know from my own experience, this is very easy for me to say, and it is not easy to do. There is nothing easy, especially if you're a coach and you feel like your job is on the line, if you're not winning games and you feel like the referee didn't make the right call, it is really challenging not to get fixated on that. But it's in your best, you know, it's in your best interest to simply move on, say that is not something within my control, and now let's focus on the present moment. And when you can do that, you will perform at a higher level more consistently. Yeah. One of the great examples that I think I've just seen of this that I think brings a lot of what we're talking about together is actually John Howard. He had the coaching faux pas horrible situation was not his best self, right? Got suspended because of it, physical alteration after a game. And then what happens three weeks later, he's reinstated and he's showing incredible compassion to the losing team, incredible sportsmanship, right? Like, wow, talk about somebody going next play and then applying the basics about caring about humanity to overcome that. I thought that was incredible leadership. Yeah. Well, I'm actually so glad that you brought that up because it kind of puts a nice big red bow tie on a lot of the themes that we've been talking about. Now, I've never met Coach Howard. And as I said, I certainly don't want to judge him for any of his behaviors, having never walked a day in his shoes, but even to his own admission, he made a colossal mistake in judgment when that altercation happened against Wisconsin. He showed remorse. I thought authentic heartfelt remorse. He accepted his punishment, which was a massive suspension and fine. And then he moved on. He had an intimate talk with his team, apologized to them and moved on. And then when given an opportunity to actually show some compassion to someone he had just beat, I thought he did that brilliantly. And what I do find fascinating, you had all of these people basically attacking him on social media for his poor behavior. And I'm not seeing enough people applaud his kind of renewed behavior and moving on. And I would love to see more of a balance in those things. I think people should be allowed to make mistakes and we should be able to forgive each other for them and move on. And I know there is a huge spectrum of mistakes that someone can make. But I do believe that he's learned his lesson. And what I will find interesting, now unless Michigan wins it all, he will lose in the next couple of weeks. And how will he behave after a loss? Because there were some people that said the only reason he showed compassion was because he just won a huge game. I don't think that's true. I actually think he's going to be very gracious in defeat, whenever that may be. And if Michigan does win the whole thing, I think he'll be gracious in victory. But that is a wonderful example of someone that moved to the next play, learned from a mistake. And I think as a society, we should applaud that and reward that. I'm not the same person I was 5, 10, 15, 20 years ago. I did some things 5, 10, 15, 20 years ago that weren't my best look that I certainly would not do today. But I learned from those things and they make me who I am today. So I think we should all lean into the fact that our imperfections and our flaws and our mistakes can help build character and build us into the leaders that we are all trying to come. The evolving leaders that we are all trying to come. It's part of the journey, right? It's the scars that we have, right? We've skinned our knees, right? And so we remember why we fell in the first place, right?  I think that's one of those fundamental lessons, right? It's one of the fundamentals we all need to go back and learn from those mistakes and not let them get us down. Yeah, absolutely. So let me ask about the book. It's called Sustain Your Game. It will be out in a few weeks, as we mentioned in the intro. I assume you're taking some of the lessons that you've learned over the 5, 10, 15, 20 years that you alluded to. Are there any maybe never-before-told stories that will be in the book that you could share here since this won't be out until after the book comes out? Yeah, absolutely. Happy to. Well, to kind of put into context, so my first book was Raise Your Game. And the goal of that was to show folks how to reach optimal performance. But then I realized that's only half the battle. Staying there is the hard part. And staying there is more of the long term. I mean, it's one thing to get to the top of the mountain. It's the other thing to stay there. And that's where the sustained portion comes in. And where I really started to feel, especially during the pandemic, were the effects of stress, stagnation and burnout that a lot of people across a variety of industries were starting to feel. So I wanted to address that. One of my favorite stories from the book is actually a non-sport story. And it speaks to the importance of preparation. And I believe preparation is one of the best antidotes to stress, that the more prepared we are for anything, the less stress we feel. Now, I am a hip hop aficionado. I love hip hop. However, this story is about Van Halen back in the 80s, who was the rock band of all rock bands. And their lead singer, David Lee Roth, at some of their concerts, they would string him up and they'd have all these different attachments on him because he would be doing all of these almost gymnastic type movements above the crowd. They had pyrotechnics going off. Like they were doing stuff that was absolutely incredible. Well, if you can kind of picture, pretend I'm a lead singer of a rock band right now, and I'm connected to a harness and wires, like there's a tremendous amount of safety precautions that need to go into that. And there are certain things that need to be done for my own physical safety, as far as the way the stage is built, the way all of these things are constructed. Well, when Van Halen's on a massive tour, they don't have time, as the band themselves, to make sure every T is crossed and every I is dotted. They have to put trust into the people that are actually building out that stage. So what they figured out, they would do is they had a very lengthy agreement and a contract and embedded in that contract with great detail where the specifications of what needed to be built for the stage, how the harness needed to be, because literally David Lee Roth's life was at risk if this was not done correctly. But what they did that was so genius in that contract, they actually put that in our green room, we need to have a bowl of M&Ms and the brown M&Ms need to be removed from the bowl. And the reason they did that, they knew that the moment they showed up, if they walked in the green room and the brown M&Ms were not removed from the bowl, that person did not read the contract thoroughly. And the chances of them having executed everything to the standard that it needed to be done had been diminished. And in the contract, it said that if there were brown M&Ms in this bowl, we will be paid in full and we will not perform. And people would sign that contract and they would show up for shows. And if they walked in the green room and the brown M&Ms were removed, they trusted that the people had prepared the stage in the harness correctly. If they walked in and it wasn't the case, the brown M&Ms were not removed, then they did not have faith that it was going to be safe to execute and they would get paid and they would not play. Now, what's interesting about that story, because I've heard this urban legend in this myth, but it's been twisted. It's always been painted this picture that rock stars, they're so entitled and they're so pampered that they can't even, no, that was not the reason that they put that clause in there. It was a way to make sure that the group they were working with was so prepared that they could perform safely. So it really speaks to the fact of how important preparation is. And I just think that's such a fascinating and innovative way to make sure someone is reading through a contract. So, yeah, that's one of my favorite stories for that reason. But the moral of it is how important preparation is and the more prepared you are, the less stressed you'll be. Because could you imagine how stressed out David Lee Roth would be if he had to be strapped to a harness and is going to be floating 50 feet over the crowd if he wasn't confident that it was done correctly? Right. Right. Wow. Yeah. Powerful story. Absolutely. Well, we could go on all day, Alan. And we wish we could, but I will get you out of here on this. It's March 23rd as we sit here. You alluded to the NCAA tournament that's going on right now.  Who's going to take it home? Well, I have a very, as David knows, I have a very strong allegiance to Duke and to Coach K. So every single year, I believe Duke has the potential to win it all. Now, funny enough, five of those years I was correct because it's one of five championships, but I think it would be an unbelievable farewell. Duke has the potential to do it, but as we all know in March Madness, anything can happen, but I'm going to put my money on Coach K going out with a trophy. Yeah. He's the type of leader that deserves it, number one, and luck tends to play out. It's not luck. It's preparation, right? And so I think that's a good chance. Well, as a Tar Heel, I hope that UNC and Duke get a chance to play in the final four and we'll let the chips fall where they may. And I tell you what, I mean, I would say UNC is the hottest team in the tournament right now. They are playing, they're over indexing what they've been doing. And what's kind of funny is people think automatically because I'm a Coach K fan and a Duke fan that I don't like UNC, nothing could be further from the truth. Now, when those two play, I root for Duke in full transparency, but outside of that, I love Hubert Davis and I love the culture of UNC basketball and I'm always rooting for them as well. So yeah, seeing them meet in the final four would be, it would be epic. That'd be the way to go out if you're Coach K. Can you imagine? Win or lose, it'd be an epic battle, right? It would be pretty cool, but I'm just so glad that the tournament has kind of returned to old form and it feels like it did prior to the pandemic. You know, I'm certainly biased, but to me, there's nothing like the pageantry of March Madness. Absolutely. Well, last question, sustain your game. Where can people go to find it and where can they go to learn more about you? They can go to sustainyourgamebook.com and there's a variety of different resources there. I actually did the narration for the audio book, which I'm really proud of, and we've enriched that content with some music and some sound effects. We even added a bonus section that's on the audio, but it's exclusive to the audio book, which is an interview I got to do with Reese Davis of ESPN. So whether someone wants to read the physical book or they want to hear my smooth and sexy, silky voice for eight hours, they can get all of that at sustainyourgamebook.com and you can find everything else at alansteinjr.com. Awesome. Nice. Well, Alan, thanks again for joining us to talk fundamentals of leadership and thanks to everybody who joined us either on the podcast or the video today and go get Alan's book when you get a chance. Thanks, guys. Congratulations on it. Thank you.


The Tiger, financial news network, update. Hi folks, Larry Peseveno giving you the afternoon update for TFNN. We've got stocks down with the exception of the NASDAQ is up about 18 points. Dow Jones down 300, which isn't much considering the news that's come out. S&Ps down about 17 and the Russell's down about 18. We've got Treasury bonds up about a point. Treasury notes acting still pretty strong. Gold under a great deal of pressure, down $17 and silver under a great deal of pressure, down $1.29. And that tells us that we've had a pretty good correction almost ready for a good buying opportunity, I would think, in the silver coming in pretty soon. The big news, of course, is the strength in the U.S. dollar, folks. All of the currencies are failing to the U.S. dollar. That's what's giving the, why it is going the opposite of what it usually does in the gold market, but it is holding up at a very, very strong level, that U.S. dollar. So that's telling us that we're going to go in this direction, at least for a day or two. And remember, we've got Friday coming in, and we have this old adage in the market that sell in May and go away that only has worked once in the last 10 years. This may make it 11 out of 12, I don't know. But these were watching to see how the prices are going. We're having a weakness across London. The FTSE is down. Also, the German DAX is down after being up for a considerable amount. But all in all, it's not the end of the world. Jamie Diamond, president and CEO of JPMorgan came on and had some very negative things to say about the debt ceiling, also about the banks, and a few other things that were not very structurally helpful to the market. He felt that the banks were still in a great deal of trouble, and that that debt ceiling could be the black swan that would take us down into something farther than a regular recession. And that's what sold off the market. So we'll listen to what the charts say, not so much what people say, and that's what we try to do because it's not what you think you're looking at. It's what you are looking at, because it's not what you trade. It's what you think. That's what you have to do. You've got to look at what you're seeing, folks, and trade what you see, not what you think. We'll be right back.


Building on our previous session, the next session, we will be deliberating the pitfalls for entrepreneurs and red flags for investors. We have with us Matt Marks, who's a successful inventor, has seven patents to his credit. He's also a professor of technology and innovation at MIT Sloan School of Management. And he's also an executive on several board of several startups in the speech recognition industry. Joining him, we have Bijan Sabat, who's like a general partner at Spark Capital. He's led early stage investments in companies such as Force Choir, Tumblr, and Twitter, and many more. I hear he's a very talented photographer as well, and he's also known for investing in startups that he's super passionate about. Join me in welcoming both Bijan and Matt. You want the couch? You can have the couch. I'll take the couch. I could use the couch. Jerry was here, so he knows I like the couch. Very good. Very good. Hi. All right, well, so we were thinking of doing some Q&A. We wanted to kind of tee it up first, talk about a few things. And first thing I want to say is that Bijan's been to my class here at Sloan about five or six different times over the years. And I remember the last time he came, someone asked him a question that people always ask, which is how do you know what to invest in? What do you look for? And at first he talked about some things he looks for, then some of the things that he gets scared of. But then he said, and then there's also things I just don't care about. And that was the most interesting thing he said on the day. You want to take us back in time and talk about a couple of those things? Yeah, I mean, Matt and I were so engrossed in conversation here, so I hope this isn't redundant to what was just talked about. But the thing that I've kind of learned, I've been doing this now for, we started Spark Capital 11 years ago just across the river, and oh wow, this is funny. This is my photograph. Anyway, and we do principally early stage investing. We also raised a growth fund. We're now in our second growth fund, but we tend not to get obsessed about things that I find is almost conventional wisdom in this business. We, I don't really care about patents. I don't care about intellectual property as a differentiator. I don't care about the business plan. I don't even care about the business model. So that's kind of how I started your class, and I think it raised a few eyebrows. It raised some chaos, because most of them just come from new enterprises, which is a business plan class, where we teach people about gross margin and how do you pick your customers. And you were there saying, actually don't worry about the business plan, the business model. And you said you don't worry about patents, but you do worry about the problem the patents are designed to protect it against, right? Because imitation is obviously, in fact, you were just telling me about a startup, we won't name it, where you thought about investing, but then you were worried that, well, can't just somebody else come in and do this same thing. How do you tell, because a lot of, someone would argue that many social media plays are very easily replicable. How do you decide when maybe it's replicable, but I'm like, they've got this first mover, like what do you look forward to think they'll still make it? Well, look, I mean, just to touch on the patent thing lightly, and it's a bigger topic, but I think patents, my understanding is patents were really designed, patent law, especially the Knights who were designed to help the little guy or the entrepreneur. I mean, that was the whole basis around protecting somebody's invention. And that process has really been almost just tortured. And now we have a situation where I think patents are really set up for the big company.  You know, we are investors in many companies. Some have been sued by patent trolls or even larger companies. And we haven't had a situation yet where we were found guilty of breaching somebody's patents, but yet we've got to defend ourselves. And similarly, you know, the idea of going after somebody for breaching one of your patents, this costs millions, if not tens of millions of dollars to deal with. And an early stage company just doesn't have the ability to do it. So I don't say it to be flip. I say it because I find it's not even practical to sweat it because this is not something a young company can really deal with. It also probably speaks to the types of businesses that I tend to invest in. But ultimately, we have not seen that that's the real thing. I mean, there have been cases where it's helped, but it's the critical thing about this company is not the patents. If I can just add an anecdote to that. So my third start, which wasn't on the screen, it's called Vlingo, it was up in Harvard Square.  And we came up with, this was basically trying to do Siri about four years before Siri back in 2004. There's no 4G networks, like 3G is very slow. And no one believed it would work. They were like, really? And so we took out some patents and almost as soon as we got our first patent, we got sued by a certain large speech recognition company about 20 miles north of here. I won't name them, but they know who they are. And they asserted that we had committed a trade secret, that we'd stolen trade secrets and influenced on their patents. And exactly what you said in the resource thing, we'd raised some money, but they had not billions in the bank, but hundreds or tens of millions in the bank. They had plenty of lawyers, but it wasn't just the money. The real problem was that once the lawsuit came on, our CTO, like half of his time was taken with this lawsuit. And they knew that, they knew that they could decimate much more, because we were seven or eight people at the time. And so taking your CTO out for deposition after deposition for doing discovery and all that really slowed us down. And so I don't want to talk more about it, but I totally agree that patents are, I mean, it's not a level playing field by itself. It's not. I mean, the thing, the last point I'll make on a right at this moment is we're investors in this company.  A treadmill company? This company doesn't- Or a treadmill for- A treadmill company sued our portfolio company. That company doesn't make an iPhone app, doesn't make anything internet connected. They make treadmills. And it's a multi-billion dollar company. And they went after this little startup for patent infringement.  Yeah, we got trolled. Yeah, my second startup, we got trolled by some random NPE that was coming after us. It was nuts. So why don't we change gears a little bit? I just wanted to talk about not just early stage, but one of the things that happens as you kind of go down, kind of work through the process is, obviously most companies don't get funded through just one round of financing. I mean, you could just ask for all the money and say, we need $120 million and you get it. But from an investor's perspective, you want to kind of stage it out, see how things go. And so there's this question of when you, you know, the previous speaker said, this person will be on your board for 10 years and that might be true. But there's a question of whether the VC stay involved and also whether the founders stay involved. And one thing I talk about in my class is that many founders get into business, it's not just because they want to change their own, not just because they want to make money, but because they want autonomy. They want to work for themselves. They want to preserve their dream. And what you see, however, is not a small percentage of founders, but in my research, it's about 20% of founders end up getting replaced. That is a certain point in time, either voluntarily or involuntarily, a new person is brought in to run the company.  And I think it's something that founders are becoming more aware of back when I was starting, it was kind of like, what happens? And what I'm curious is from your perspective, what are some things that a founder can do to not necessarily inoculate themselves against this, but just to be aware of the dynamics that might come up? How do they, you know, the last speaker used this diligence thing, I didn't know that was a verb. He said, please diligence your investors. How do you figure out how loyal and committed the investor's gonna be for the long term? Because you don't have to reinvest. Right, right. Well, look, I think step zero is, before you even think about the investors, just think about your co-founders. You know, I think part of the issue about, you know, a founder, a co-founder running the company forever really depends, I think, on the strength of the co-founders and the stability of the co-founders.  So I think step zero is to make sure that the co-founding team is as robust as possible. And we talked about that a lot in your class of how to pick co-founders and things like that. You know, I think the issue about, you know, founders running this company forever, it really should just be in the best interest of the company, ultimately.  You know, you look at Evan Spiegel's taking Snapchat public. You know, I think he gets to run the company six years after he's dead, you know. So, right, we're shareholders in Snapchat. So I'm happy to be a shareholder, but I guess the point is that there's different ways to do this. You can either legislate it, or I think you can just, you know, frankly, just do a great job. And, you know, no VC I've ever met wants to take the founder out of the company when it's going great, you know. So, and I think the real thing here is to just, you know, focus on that and focus on building a great management team and focus on building a great company and be less obsessed about, you know, putting contractual rights to run these companies forever because, you know, you may not want to run these companies forever. I mean, it may be not what you're well suited to do. And then I think all the other things that, you know, came up in the last panel, I think are critical as well of picking great investors, picking great co-investors. I'd also like to see more boards take on independent directors as well. I think too often we see boards that are kind of a couple founders, a couple of venture capitalists, mostly dudes. It's just that dynamic needs to change. We need to get more diversity. We need to get more independence on these boards and have proper governance. Let me key off something you said about co-investors. So, in fact, before we got in here, you said that sometimes you get worried about who the new investors are gonna be. From a, realistically, how much say do you get in that process? So let's say you've got around, and let's say you're planning on reinvesting because if you're not, you don't have any say, right? You're gonna reinvest, how should the founders think about engaging you regarding new investors, or should they just say, well, I'm taking money from this party now, and guess what? Like when does that, how does that conversation happen? What do you find, what are the mistakes that founders make about these following rounds, communicating with existing investors? Well, you know, I think some founders and investors have a better dynamic than others. I think we're all just human and things happen. But I think if we do a good job, we get to play a, we earn a role to have a discussion with the founder about the future financing of the company. So, and we tend to just share our experience. We tend to share, hey, we're contemplating bringing in more capital. These are the investors that are interested, and this is our experience working with each of these investors. And I think some investors have real strength in certain areas. Some are known for patience. Some have more reputation for having sharper elbows. Some have different skills that they bring, and so we try to think about what's best for the company. But it's really shaped my career a great deal. I mean, I tend to work with a lot of investors that I respect, and I've seen them in tough times and in good times, and how they conduct themselves really matters. Now, let's go back to the founder replacement question. So, you said some founders might want to do something else. Some founders, maybe if you're Evan Spiegel, you can lock yourself in, but not too many people I would guess can do that. But as an investor, let's say the founder wants to stay. The founder's trying their hardest. They really, really want to keep doing. How do you decide when to pull the plug? Is it just based on the performance of the company? What if the company's doing really well, but you feel like it's in spite of the founder? Yeah, yeah. Have you judged? Well, at that moment, I often look at myself. If I get to the place where I feel like the company's doing, you know, okay, but we can do better, and somehow I've convinced myself that it's the founder's fault, it's kind of a time to take a breath and realize that the board is probably not doing a good job. I mean, at that point, there's a real chance that the board has failed in a number of things. I mean, the board may have failed in helping the founder see that he or she should build the great management team. Maybe the board has done other things to not allow that CEO to really grow as a CEO. So I think the first thing I try to really encourage my fellow board members and myself for that matter is to kind of just like, hey, before we start pointing fingers, let's try to figure out as a board on what's going on here. But presuming, if we've done all those things, if we've brought in a great management team and all these other things, then I think it is a real heart to heart about what do we all want this company to be? I think the hardest challenge I've ever seen in this business is frankly when a co-founder or a management team loses confidence in their CEO, their founding CEO. I think when that happens, it becomes a very stressful situation and those have been not often, but that's the hardest ones. So when a management team says, we love so and so, but it's a vote of no confidence at this point. And it's hard to make it happen, yeah, definitely. Yeah, it's interesting, I'm doing a research paper now looking at this question of founder replacement because it's something that people have looked at kind of in small samples of like 200 surveys or whatever. And some of these papers say that half of founders get replaced and it just seemed like it was too much. And so what we did is we went and got all of the venture-backed companies since 1993, I guess. We have good data and counted all the way forward and checked, how many of these founders get replaced? And it turns out it's about, now it's kind of hard to track because you have to report when you raise a round of financing, you don't always have to report when the founders change. You have to use your judgment. It looks like the rate is not 50%, but it's about 17 to 18%. There's almost one in five founders who does not stay as in an executive role. Now that could be that they left voluntarily, as you said, like in my first startup, one of our founders was kind of a serial person who did it for two years and became the chair and then left to go do a startup. He's now on startup number eight. But often people are kind of pushed out, whether it's the management team or whether it's the board saying, you know, it's been fun, but now's the time. It's hard to tell. Now the interesting question is, does it help or does it hurt? If you just look at all the startups that have been replaced, so it's about 17, 18% of them, those companies do worse in general. And so you might say, aha, the boards, the bichons of the world are making startups worse because they do worse. But the thing about that is when do you replace? You're probably not gonna replace when things are going great. You're gonna replace when things are going badly. So you have a selection problem where if you just look at that, it looks like things are getting worse, but no, things were, it's like you were saying, well, we rearranged the chairs on all these ships that the Titanic sank, what's wrong, right? And so I won't go into all the nitty-gritty, but we found a way to kind of distinguish between replacements that were kind of at the VC's discretion and those that were not. And what you find when you distinguish that way is it actually seems to help performance. And so one thing that I would just say is as someone who's done a few startups is, yeah, be open to what is in the best interest of the company, which is awkward because as a founder, you feel like you're making this Faustian bargain. I'm like, I'll take investment, but now I'm kind of giving away control. And there's this kind of fundamental tension between the control you keep and how fast you can move. And you've probably seen that over and over in the companies you've dealt with. Yeah, I mean, you have the benefit of the data. I have a smaller set with our portfolio, but I think the, I believe that thing you said, which is that when you do this replacement, it mostly doesn't work. And I think that's a big reason why it's a very painful. When you get to that point, that's not because you want to. Yeah. So should we open up for some questions? Yeah, great. So I hear there's a microphone somewhere. If we have a microphone, that's great. Is there a microphone? If not, you can just, here we are. We have a couple of microphones. And where's the first hand? Right up here in front, right? I want to know, do you guys prefer companies with one founder or two and then what's the best way to attract a VCE? Yeah. Yeah, we really like two founders. Maybe three, no more. I mean, it sounds like a rule and we've just learned that one founder by his or herself is just insufficient. We really like the idea of somebody who's more product-minded and somebody who's more business-minded or somebody who's more technical and somebody more business. I've heard some people describe it as you need a hacker and a hustler. It's a little cute, but I think the sentiment of having people with complementary skills is a good thing to do. I think sometimes we see out of like an academic environment out of undergrad or something or even MBA, sometimes we see people, six people show up at our office and say, hey, we all took this class together, we're starting a company together. Don't do that. And that's our least favorite outcome. So I think two, maybe three, rarely one. Although Tumblr started that way, right? Yeah, I mean, David had Marco from the beginning, but he was the founder. But David Karp is a unique person. I mean, he has this amazing product instinct and a business mind. So it's highly unusual, but he could make something and talk about where it could go within a weekend. I mean, it was just an extraordinary situation. Michelle, I have a question for you. You mentioned that it would be nice if there was more diversity within boards. I'd also like to ask you, what about diversity in terms of VC partners? How as a woman would you become a VC partner? And how as a woman would you go to a VC to actually get investment? There's two sides. What's the second question? I heard the first one, but what's the second question? The first is to be a VC partner as a woman. The second is as a woman entrepreneur trying to get funded. I think there's issues on both sides of that. Yeah, I think they're also related. Right, yeah. We do have a diversity problem. I mean, I think in the VC business, it started out for sure as a clubby business, small number of firms. We now have a situation where the number of investors, angel investors, seed investors in VCs, it's grown quite a bit, but we still have a diversity problem. We've hired our first two women partners in the last two years. So we've been around for 11 years. It took us nine years to get our act together and it was a shame on us, I guess is the right way to deal with that. But it's obvious that we're better for it. We make better decisions. It just feels like way, way overdue, I think we're just constantly trying to improve and I hope we hire more people that have more diversity. We will be better served for it. Women entrepreneurs, I'm more optimistic than ever. I feel like it just feels like there's a lot more momentum. There's just, we're just seeing more women entrepreneurs starting companies that are technical, that are creative, that are going for it. We're backing more and more. I just feel more optimistic. It's definitely an issue, but I'm so optimistic about that.  Clearly the latter I think is the issue, but I think we're making progress on both, but we can do better on the former for sure. I think a few different ways. I think one way is to start your own firm is certainly one way to do it. Another way to do it is just, I think these men at these venture capital firms need to just figure out that it's a competitive advantage to just hire better people and to have only men on your team is not a better team. So I think that's clearly changing. I don't have like one silver bullet, but I think it's a series of things, but you're seeing progress on all these things, but it's just overdue. It's just really overdue. I have a question. Do you wanna say something? Just to clarify, when you said start your own firm, you meant start your own VC firm? Correct. Okay, yeah. I thought you meant do a startup. You know, forerunner ventures, cowboy ventures. I mean, it's happening. It's happening and it's a better world for it. Great. Hi, question for Matt in particular. Can you walk us through how you built your founding team, whether it was one person, two or three, and then as you raised different amounts of money, how you kept them together, and what was the equity that you felt was fair to give to them at the various points in time? Okay, so I'm gonna skip the equity question, but in terms of the, well actually, no, I'll say something about equity. So half of the, so there's been, we don't have data on every startup because when you get funding, you don't have to say how much equity you have, but there's a couple of professors who've done surveys for the last 10 or 12 years. And at this point, they've asked about kind of 10, 12,000 startups, so we have decent numbers. And here's some things you need to know. First is half of startup companies do an equal split, 50-50. One example is Zipcar. Now Zipcar is founded by the most famous alumna of MIT Sloan, Robin Chase, right?  But you probably didn't see your co-founder. No, because actually this was her co-founder's idea. They met on a playground here in Cambridge, started the company together and did kind of a handshake deal. And then the co-founder kind of drifted away, didn't stay committed. And so Robin spent 18 months kind of suing her co-founder, trying to get back the 50% of equity. Because if you don't have any vestia or any terms in there, it's not like you have to do something to get your equity. And there's so many companies have dealt with this. Microsoft, when Paul Allen got cancer and had to leave the company, you have that with Pandora when the CEO quit. So equal splits are not always the wrong thing, but when they're done quickly, it can be kind of a questionable decision. The other thing that's worrisome is half of startups don't do any sort of vesting. And this is often founders feel like it's my company. It should be my equity. And so why should I have to work four years to get it? Bad, bad idea. People get sick, people lose interest, people don't get visas, all sorts of things happen. And you don't want someone walking off with 20 or 30% of your company. So that's my thought on the equity. And then a couple of other thoughts on founders. So Bijan said, yeah, usually two or three. I've seen founding teams of seven or eight. And that's very risky because it's hard to get on the same page. And I would say that this getting on the same page thing is something that's also tricky to do. Because often if there's two of you or three of you, you'll sit across from each other and say, I'm gonna be here for the next 50 years. And be like, yeah man, like let's do this for the next, like build the next great American company. But secretly I wanna go to grad school in a couple of years. I'm gonna do a quick flip. And often when we talk about these things, we kind of get into group think. We don't really tell, we lie to each other. We're really good at it. And so a couple things that I've seen founders do is they don't talk about it. Instead, they will split up and they'll write kind of the Wall Street Journal article they wanna see about the startup in a couple of years. Or they'll just take a survey and you'll be shocked at how not on the same page people are because when they don't just sit and talk to each other. Because I remember at Tell Me, we were like, oh, we're gonna be here forever. And we ended up selling to Microsoft after, well, I guess it took seven years, but that's not what anyone said at the beginning.  Think you wanna add something? No, that's okay, okay. Other questions? A few more? Yeah. Thanks. What is a responsible way to determine your salary as a founder with limited funding and maybe no revenue? Sounds like zero. No funding or revenue. You just answered your own question. Sorry, with funding, maybe no revenue. Ah, okay. I mean, I think if it's a company that just raised C Capital, it's really a question of, every founder is in a different situation, but I think it's fairly modest is the short answer because every dollar you take for yourself, it's a dollar less runway for the company to kind of get to progress. So I don't have a specific number for you, but I think typically a seed stage company, let's say, without revenue, the founder, depending on the market, it's roughly $100,000 or something like that. Sometimes less, depending on if the seed round's a lot smaller, maybe a little bit more depending on the market, but that's kind of the dynamic range. The last question here. So this is again for Bijan. I'm sure you see kind of a lot of data points on this. I'm curious as to whether you think that a certain founding team background outperforms another. Like, do teams with 10 years of previous friendship work history, work better than teams that assemble over a hackathon? What kind of do you see as like overarching trends? Yeah, I mean, I think the thing that we've seen with co-founders is the hackathon isn't necessarily a negative signal, but because maybe they came up with this idea to hackathon a year ago and inspire them to work together for the past year and they really spend time to get to know each other. So it's fine. I mean, I think blind dates are tough in this business, but I think clearly more time really syncing up on expectations, roles. When we see a company come in and say, hey, all three of us are gonna be CEO, it clearly shows they haven't had the hard question. So I don't think it's really about time. It's more about the quality of the connection is the critical part. Can I jump in on that one? So you asked about data, and this survey I talked about has data on this. So here are the things you wanna watch out for in founding teams. People who all are in the same role, you alluded to this. So all engineers or all consultants or all business people, yikes, watch out. The second thing is people who have been friends, but who have never worked together before. Those founding teams tend to fall apart. The companies tend to stall. And I think the reason for that is that you're gonna have to make a lot of hard decisions, right?    When you're working with people who are mainly friends to you, there's now an extra cost to making a hard decision, which is a cost to your friendship. And so you may avoid some of those tough conversations in a way that you wouldn't if you'd actually worked with that person before or even if they were a stranger. And so you're kind of playing with fire when you start with just good buddies or classmates even, or let alone family. Yeah, we have only one portfolio company with this co-CEO structure that's thriving. But it's one, it's one. Do you, I think this is out of time till go on to the next session unless you wanna take more questions? That's great. I see our counter's almost over, so. All right. Thank you, everybody. Thank you. Appreciate it.