The pessimist in the room

In my startup investing, inside portfolio companies at the highest leadership and board levels, I always want to make sure that a pessimist has a seat at the table. I want a table full of optimists, but I also want at least one respected pessimist sitting there.  That pessimist should carry a general lack of confidence in humans to behave logically or ethically. They should also have seen many shit-shows in their lives. You don’t want someone who is just irrationally afraid that the sky is falling, but you do want someone always thinking about the downside case.

As it turns out, often that pessimist is the CFO or the General Counsel. These tend to work well as long as they are respected and have a voice. Without a pessimist in the room, with a seat at the table where the big discussions happen, there is no balance.

The optimists provide the energy and create the gains, and the pessimist ensures we consider our risks and can help us avoid disaster.

If your startup builds a room full of pessimists and you have one optimist at the table, then I think you’re in the wrong business. But the other way around is invaluable and necessary.

Do you have a pessimist in the room where it happens?

 

 

file under: Startups
  • I’m frequently ‘that guy’ talking about the worst case scenarios and thinking of steps to avoid realizing them. Though I’ve tried to label myself realist rather than pessimist, I’m usually the least wanted person in those scenario conversations.

    • David Cohen

      very valuable!

  • Great post David. Having been in the regulatory compliance profession for decades, I’ve often been viewed as the pessimist at the table; but over the years rather than just saying “no, we can’t do that” or “that will get us thrown in jail,” I’ve learned to reframe my position to “these are the possible regulatory risks, this is how we can manage them, and how can I help.” That is almost always well received. The worst is having a pessimist at the table that offers no solutions and not willing to problem solve.

    • David Cohen

      bingo.

  • Brent Daily

    I believe it’s less binary on the operational side than the investing side**. It’s more of a parabolic curve like the efficient frontier model.

    The Pessimism Frontier?

    From zero to go you need a healthy dose of pessimism to personally vet your idea and make the leap but not so much as to stall you out.

    From go through early customers the downside is negligible and pessimism around the table represents the lionshare of risk. No pessimism desired.

    As traction takes hold, so too should a company’s risk aversion and openness to pessimism.

    But it shouldn’t immediately manifest as a full 1/5th share (or however many seats are at the table).

    It grows to that, and more (e.g. in public companies), as the downside grows larger than the upside.

    **Never thoughtfully considered so take with a giant gain of ¯_(ツ)_/¯

    • David Cohen

      interesting. my experience and thus comment are mostly product/market fit to pre-IPO, but perhaps it does “curve” on the limits.

  • Kevin Thomas

    I’ve played that role sometimes – find it helps avoid a group think / run away train of ‘this is such a great idea nothing could go wrong’. In the end, good ideas always survive a good, pessimistic review. And the implementation of that idea usually benefits, becomes more successful earlier that it would have otherwise.

    • David Cohen

      “good ideas always survive a good, pessimistic review.” – MONEY.

  • martin anderson

    Maybe the pessimist in the room is ill in formed to the way things are meant to happen, explaining the process that is not fully understood can only lead to a better understanding of the objective and might even save the project from failure.

  • Joyce S.

    If we all listen to all the pessimists in our lives, we will never start a business, invest or even be hopeful about life! One skeptic is better than a pessimist or a cynic. The skeptic is likely more open-minded than the other 2. So I agree that a room full of optimists is better. Imagination is limitless in such an environment and there is always room for growth. 1 “Negative Nancy” is all we need!