Zero to One_ Notes on Startups, or How to Build the Future ( PDFDrive )

OWNERSHIP, POSSESSION, AND CONTROL
It’s not just founders who need to get along. Everyone in your company needs to
work well together. A Silicon Valley libertarian might say you could solve this
problem by restricting yourself to a sole proprietorship. Freud, Jung, and every
other psychologist has a theory about how every individual mind is divided
against itself, but in business at least, working for yourself guarantees alignment.
Unfortunately, it also limits what kind of company you can build. It’s very hard
to go from 0 to 1 without a team.
A Silicon Valley anarchist might say you could achieve perfect alignment as
long as you hire just the right people, who will flourish peacefully without any
guiding structure. Serendipity and even free-form chaos at the workplace are
supposed to help “disrupt” all the old rules made and obeyed by the rest of the
world. And indeed, “if men were angels, no government would be necessary.”
But anarchic companies miss what James Madison saw: men aren’t angels.
That’s why executives who manage companies and directors who govern them
have separate roles to play; it’s also why founders’ and investors’ claims on a
company are formally defined. You need good people who get along, but you
also need a structure to help keep everyone aligned for the long term.
To anticipate likely sources of misalignment in any company, it’s useful to
distinguish between three concepts:
• Ownership: who legally owns a company’s equity?
• Possession: who actually runs the company on a day-to-day basis?
• Control: who formally governs the company’s affairs?
A typical startup allocates ownership among founders, employees, and
investors. The managers and employees who operate the company enjoy
possession. And a board of directors, usually comprising founders and investors,
exercises control.
In theory, this division works smoothly. Financial upside from part ownership
attracts and rewards investors and workers. Effective possession motivates and
empowers founders and employees—it means they can get stuff done. Oversight
from the board places managers’ plans in a broader perspective. In practice,
distributing these functions among different people makes sense, but it also
multiplies opportunities for misalignment.