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Monday, February 23, 2015
Private Equity: How Great Judgment Sets The Best Apart
A startup or young business is really dependent on the quality of its advisors.
Critical needs are having one or two good lawyers, accountants and other general "fixer" type advisors.
But what makes a really good advisor in this sense?
Technical knowledge, certainly. That goes to merit. However, knowledge is often a commodity. That means that ability is often taken for granted...and no longer becomes a difference-maker.
That's right, the real difference that adds value is not know-how.
The true value-added component is great judgment.
This judgment metric is hard to define. However, it is best measured when dealing with the unexpected. That's where the skill set, the gravitas, the experience, all comes into play. And those are the attributes most often poorly measured by conventional, inside-the-box metrics like resumes, academic credentials and so on.
I cannot tell you how many people I've met who have graduated from top-twenty law schools who have absolutely no business being lawyers. Smart, they are, and accomplished they've been, but the judgment and often the basic emotional intelligence has been lacking. (Such people are good, though, at hiding their dysfunctions in large offices where they actually go largely unnoticed except in e-mail in-boxes.)
This judgment value-add goes hand in hand with the other critical component of compatibility. In other words, your advisors and lawyers need to share your values.
This might be an argument against diversity. A business needs to have its people on the same page, and this is particularly critical the smaller, younger and more fragile the venture is.
Diversity doesn't necessarily mean that your advisor isn't "on the same page." However, when you're at that early stage, you need to have the great seamless fit. That is your first top priority.
Picking someone on whatever diversity metric is in vogue (and such metrics often result in the precise opposite!) means you aren't selecting a trusted advisor because you work well with them and think along the same lines. And many business owners and managers make huge mistakes, because they think diversity means they have to look for people who are the most obviously different from them. The result is that small businesses think they have to hire people who think the most differently.
Gee, do you think that is likely to bring people with shared values into the fold? Me neither.
But that's how many businesses, both large and small, end up picking on diversity grounds the very people who are the worst fits in the organization. Is it any surprise those newbies then end up being the most miserable and leaving the soonest?
Simply put, value your values, value compatibility, and choose accordingly.
And if you look closely enough you'll realize you'll have more diversity in the room than you ever intended.
Eric Dixon has been a New York corporate lawyer since graduating from Yale Law School in 1994. He runs his own legal and strategic advisory practice Eric Dixon LLC and is very active in blockchain technology development with Bitcoin clients.