Why Investors and Entrepreneurs Need Both Authority and Vulnerability to Heal the World Through Business
One fateful, icy afternoon in Burnsville, Minnesota, I learned the difference between authority and vulnerability.
I was in seventh grade and a friend invited me to snowboard at Buck Hill. I had never snowboarded before, but I figured, how hard could it be? Late that afternoon, I found out. I got off the lift and cautiously slid back and forth, carefully cutting my edges. Then I began to pick up speed on an icy slope. Before I knew it, I was bombing down the hill and lost control. After I regained consciousness, my friends said the crash was “epic,” like a test dummy flying wildly down a hill. I separated my shoulder and had to be carried off the hill by medics.
That day, little did I know when strapping on my boots, I was highly vulnerable to disaster – and the authority of an expert (or even amateur) snowboarder was but a distant dream. For years, whenever I would watch the Olympic games, I would marvel at the exploits of snowboarding legends like Shaun White, who combined the vulnerability of high-flying acrobatics with the authority of an expert snowboarder. The combination of the two led to both drama and admiration. Risk and expertise, I came to learn, was the pinnacle of achievement.
Andy Crouch’s wonderful little book Strong and Weak combines these two ideas – authority and vulnerability – in a beautiful little 2×2 that I believe has tremendous implications for both investors and the entrepreneurs they serve.
The 2×2 has four quadrants: Flourishing, Suffering, Withdrawing, and Exploiting.
I. Flourishing. First, Crouch says human flourishing comes when you combine authority, which he defines as the capacity for meaningful action, with vulnerability, which is exposure to meaningful risk.
Take, for example, parenthood. Parents can shape flourishing families when they have the ability to lead, love, and care for their children, as well as open themselves to the pain of real relationships with their kids. A healthy family requires parents who take action for the well-being of each other, and open themselves enough to pain that love becomes real. Authority and vulnerability together lead to flourishing.
II. Suffering. Suffering comes, however, when we have vulnerability without authority. Crouch describes poverty as the inability to change one’s circumstances. All risk, no power. Suffering can come in many forms – physical, emotional, psychological, social or spiritual. And it’s something every single person has felt at one point or another in their lives.
The best thing you can do to help somebody who’s suffering is to help them build lasting authority. For example, if somebody is in poverty, giving them a chunk of money rarely has a lasting, positive impact. However, giving that person job training, counseling, new social networks, or a sense of hope increases their agency, their say-so over their lives. People are raised out of poverty when they have the means to take meaningful action once more.
III. Withdrawing. Those who have both low exposure to risk and low ability withdraw from the world around them. This could be an addicted video gamer, men who’ve withdrawn from the workforce, or a wealthy person who’s withdrawn to a country club life of golf and long lunches. Safety becomes the sole aim of these people who become, in the words of Theodore Roosevelt, “timid souls who know neither victory nor defeat.”
The temptation for most is not complete apathy, but “busying ourselves” with activities that neither ask much of us nor transform us. We need safety as children to properly grow, but a life without meaningful sacrifice tends to feel empty. Withdrawal is a major problem in the modern workforce, and it’s a temptation that those in rich countries especially face almost daily.
IV. Exploiting. Exploitation is found wherever people maximize power while seeking to eliminate risk, says Crouch. Authority without vulnerability leads to enclaves of separation. On the extreme side, this could be a warlord in sub-Saharan Africa; a more daily experience of this would be hoarding resources for ourselves, hedging our futures against risk through stockpiling money or assets.
Crouch also notes that, in general, risk shed by one group is inevitably borne by others’ suffering. A slumlord who is completely separated from the lives of his tenants, for example, creates unhealthy living environments for his poor renters. Movement out of the exploitation quadrant is characterized by a willingness to take on the risk of those who suffer.
Linking Arms to Move Toward Flourishing
Crouch’s framework is a helpful way to look at both investing and entrepreneurship. In my experience, most investors by default tend to live in the exploiting quadrant, and most entrepreneurs tend to live in the suffering quadrant. Here’s what I mean:
The task of modern investing is sadly often reduced to maximizing returns while minimizing risk. But what does this reduction lead to? Returns at all cost cause for those who allocate capital (either professionally or passively) and the expectation of those returns regardless of the volatility and challenges of real life business. Investors who don’t open themselves to meaningful risk can inadvertently cause oppression by forcing entrepreneurs to make choices that maximize returns, but don’t serve the best interest of employees, customers, or communities. Those who only look at quarterly returns, I’d argue, are at a high risk of finding themselves in the exploiting quadrant by default.
Entrepreneurs, however, usually live in the suffering quadrant. Our culture tends to make entrepreneurs into heroes, people with the utmost agency to chart the course for the future. But entrepreneurship is a wild, uncertain, and highly stressful ride. Take for example, the case of Rivian, the electric vehicle startup. Recently I listened to Guy Raz’s interview with Rivian founder RJ Scaringe. To build a car company, Scaringe had a nearly impossible task: not only invent an electric truck, but raise enormous amounts of capital (over $1B), hire staff (and keep up staff morale), pivot numerous times even when it wasn’t clear what problem they should be solving, and project confidence despite internally struggling with doubts (I bet he was even doing this on the podcast.) Entrepreneurs look powerful from the outside, but are hugely vulnerable, and their authority to make significant change is often far less than the news stories would make us think.
What entrepreneurs need is an investor who truly believes in what they’re doing, is willing to take meaningful risk, and be patient. Entrepreneurs living under returns-at-all-costs investors may be unable to invest in important, long-term choices that are needed for the holistic health of employees, customers, and the broader business. Long-term decisions often must bow to short-term returns, and true growth becomes difficult to fund. Short-term thinking also renders it challenging to build company programs that, say, provide flexible work schedules for single moms or second-chances to ex-offenders. The ‘minimize risk, maximize return’ profile trickles down into decisions that have real, long term impact on the poor and vulnerable.
What would the healing of this dynamic look like? I believe it would look like investors who take meaningful risk, seeking to level the playing field of information disparities between professional investors and entrepreneurs through transparency, and through structuring financing that is a win-win as co-owners of a business alongside the entrepreneur. They’d be willing to invest first in the long-term health of the entrepreneurs they serve, rather than succumb to the all-too-common dynamic of entrepreneurs serving investors. They wouldn’t pressure them for an exit, but would work collaboratively with CEOs to understand what’s best for the business.
It would also mean investing expertise along with capital in entrepreneurs, helping them to deeply understand their customers, lead their employees, and make decisions for the business that lead to long-term health. In short, investors would team up with entrepreneurs to take meaningful risk together, putting the tools in entrepreneurs hands that give greater capacity for meaningful action, so that the investor and entrepreneur can flourish together.
This healed vision of business would also start to remedy the supposed trade off between impact and risk. Business is fundamentally about serving an unmet need, yet for millions around the world, their most basic needs go unmet daily. Moving into “risky” markets, like sub-Saharan Africa, or building businesses in underserved markets, like a low-income area of Dallas, requires investors and entrepreneurs who exercise authority and vulnerability together. When this happens, the enterprise itself becomes thoroughly good, pulling people at all levels of the business from the quadrants of exploiting, withdrawing, and suffering into the realm of human flourishing.
Today, I still marvel at the skiers and snowboarders who expertly conquer moguls or jumps. Yet in Crouch’s book, he asks an interesting question about the skiing metaphor (that I shamelessly borrowed from his book): what if at the bottom of the hill there was an injured child, alone and in the snow, that only the skier could save? Would that change how you view the task ahead, and the risks involved?
To become this expert ‘champion’ who sees business as a noble calling requires forging new alliances between investors and entrepreneurs who have their sights set higher than simply maximizing shareholder return.
In short, it requires courage.
Jeff Haanen is a writer and entrepreneur. He’s also a Creator-in-Residence for Eagle Venture Fund, where this article first appeared.