Does Servant Leadership work for Searchfund CEOs?

When teaching undergraduates, I challenge them to ask one fundamental question: do you believe the economic world is a zero-sum competition where resources are limited and it's survival of the fittest, or do you want to play the game with a view towards collaboration to increase the size of the pie, to build new markets and new teams? This question can be reduced to a choice between concern for self, ego, and arrogance versus concern for others, compassion, and humility. Are we cavemen and women? Or are we capable of building complex structures based on radical and unconditional love? I don’t ask any of this lightly. In fact, it has been at the center of philosophical debate for centuries. Thomas Hobbs famously stated 425 years ago, like Machiavelli, that life is “solitary, poor, nasty, brutish and short.” Others, like Jean-Jacques Rousseau in the 18th century, part of the romantic age of the Enlightenment, emphasized our common welfare and fundamental goodness. No doubt the history of religion and spirituality centers on this question: should we have faith in one another, and is there a loving God? I want to argue for love, for community, for selflessness. Success on an island is hardly success at all. And the paradox is that not focusing on personal success leads to greater personal success, and putting others first provides an enduring joy that no personal victory can ever match. No doubt assholes succeed, and there is a time and place to be one. However, in my three-plus decades in the trenches, I have come to believe in collaboration. Coaching others, teaching people, is the whole point. Don’t wait until you are 60 to figure this out. If you take calculated risks and do so with people you trust, you discover the power of love and teamwork, and ultimately, deep humility above all else. No matter how good you are at anything, no matter how much success you achieve, humility is a superpower. Not the fake kind of humility where you say the right things but underneath you think you are the shit—the real kind that involves understanding that you are no better than anyone else, that your job is to learn and serve others, and that you should never beat your chest or treat people with disrespect. Ever. In his seminal book, Good to Great, Jim Collins examined 1,435 good companies over 40 years. He identified the 11 that outperformed the market over two complete market cycles, beating the market by a wide margin. This cohort, the top 0.8%, was true outliers in terms of brute force financial returns. His book is about what they did to achieve such success. One central commonality among the great companies was their truly humble leadership, which viewed their central role as serving their team and shareholders, rather than boasting about their achievements or lining their own pockets with cash. Many people serve others and use that service to build their brand. “Look at me, I am suffering for all these people, I must be a great human,” that story goes. That is precisely NOT what I am talking about here, nor what Collins found in his study. What I am talking about is the silent, unconditional love of another—putting the interests of your employees and customers ahead of yourself. Doing the right thing even when it costs you personally. Understanding that you are just the container holding space for the people smarter than you are doing all the amazing work, even if they formally report to you. I want to give you three ways to think of this, two from my business life and one from my spiritual reading. In working with CEOs, the most important topic is always people development. In the search fund world, that means looking at the employees you acquired, identifying who is talented, and gradually building a management team capable of professionalizing your company's growth. The success of the CEO has little to do with what they accomplish and everything to do with whether they can attract people more talented than themselves, help them to grow, and build a strong team culture to inspire them. This is without exception. The most gifted CEOs are those who build the best teams and essentially get out of the way, acknowledging their own limited abilities. At one portfolio company, where it took over five agonizing years to finally assemble the right team and get traction in the business, I knew we were onto something special when I started seeing the Director-level employees at board meetings, two levels below our CEO, and realized that they were literally the most intelligent people in the room. Not long after that, we sold our business for 6.5x our cost basis, despite very long odds and many times when we were an inch away from going broke, literally. It was the team, not the CEO, that did that. He was just great at recruiting, directing, and inspiring greatness as a true servant leader. A second business point here goes to motivation: is it selfish or selfless? In 2010, Will Thorndike introduced me to two Mexican HBS grads building a company in Mexico City. I made my first search fund investment and became best friends and key advisors to the team. For a time, our company was the most high-flying search deal in the market, raising over $1 billion of capital. I do not speak Spanish and had never done business outside the U.S. but my association with this company and team meant that I became the go-to investor for Latin American Search. I embraced this for one simple reason: what I saw in my team in Mexico and then in places like Guatemala, Brazil, and the Dominican Republic. These guys were trying to succeed in search, make money, etc., for sure. But there was something deeper going on. Theirs was national pride. The desire to build economic development, to create jobs, to do something great for their people, so many of whom had absolutely nothing and had suffered profoundly as a result. This humanitarian chip on the shoulder made the desire to succeed much deeper, personal, and profound than what I saw in the average domestic searcher. And that has turned out to be the key to success in these investments. In a call center in the Dominican Republic or a door manufacturing plant in Guatemala, when I walk around with the CEOs, they introduce me to line employees and managers on the floor each of whom greets me with huge smiles on their faces thanking me for their jobs because they pay many times the minimum wage and more than their parents could ever have dreamed of making. These CEOs talk about how important changing the lives of these hundreds, and sometimes thousands of families, is to their mission and their lives. They are servant leaders on a radically different level. For several years, I have been on a spiritual journey, as part of my business and personal life. One of my favorite books, which speaks to this issue of zero-sum game and true humility, is Breathing Underwater by Richard Rohr. In the book, Rohr talks about what he calls the myth of heroic sacrifice. That passage hit me between the eyes because he called me out on my own hypocrisy. Rohr talks about how so many people we hold up as heroes make sacrifices not out of humility but to prove their own worth. For way too long, I obsessively tried to do good in the world with an unconscious eye to how I was being perceived. I wanted to make sure you knew how incredibly my sacrifice and, therefore, what a tremendous human I am. Rohr’s point is that as long as the sacrifice is about me, I am completely missing the point and, in fact, being a hypocrite. I am pretending to be altruistic, but not being that at all. To get underneath this pattern, and it is still very much a work in progress, I had to realize how little I control almost everything. And all I really have is my ability to listen, to witness, and to love unconditionally, especially when that is hard. The less of me that enters the equation, the better off everyone else is, and so too am I. What Jim Collins found, and I have seen repeatedly in real life, is that power and talent generally corrupt. They are a blessing and a curse. Because with increased power and talent, people naturally think more of themselves, and as a result, their effectiveness is greatly reduced. People dislike them rather than being inspired by them. This becomes even more toxic when these leaders talk about humility and mission and values, and obviously do not try to live them at any deep level and instead act out of greed and selfishness. It’s the rare few who resist that temptation to ego, who can double down on true humility again and again. Those few have the largest impact by inspiring and serving others. These CEOs are, paradoxically, the most “successful” in every objective sense, but that is a byproduct, not their focus. The true servant leader positively impacts the most lives, which is ultimately the point. And in turn gives the leader’s life more profound meaning, far greater than any other form of “success.” None of this is a zero-sum game.