Strangely, the role of ego in startups is barely ever discussed, but it has a profound effect on success or failure of any new venture
The dynamics of ego – and how egos clash, compete or complement one another – is key to understanding why so many startups fail. In this article, I will offer a way to identify and harness our primal “drives” as entrepreneurs and hopefully reduce the frequency of startup failure and the pain this causes. It starts with learning to harness our ego-state and better reading the ego-states of others, and by having authentic, adult-to-adult conversations
Facing Reality
The stats don’t look reassuring in the discussion about how startups survive in this VUCA, covid-damaged world. The stark facts are clear:
- 20% of startups will fail in year 1
- 50% will fail in year 5
- 65% will fail in year 10
(Investopedia; Startup Playbook)
In the UK, these numbers are lower because of the stigma (and costs) associated with bankrupting a company. So the UK has a much longer tail of “zombie businesses”, unable to generate sufficient income nor able to grow.
Neither universities keen to maximise employability, nor politicians keen to shift the onus of economic growth on to young founders, tend to mention these things. The stark reality is that even in the UK, the ratio of business births to deaths has deteriorated in recent years, despite the hype around startups.
As a former founder myself and later coach and mentor to many startups over 20+ years, I don’t believe that we’ve ever really got to grips with the underlying reasons for these patterns. Moreover, I think we’ve normed that high levels of business failure are just a “reality” and an acceptable cost to pay. I don’t believe this is the case, and we can do more to increase the frequency of success and mitigate the consequences of failure.
Failure sucks!
The startup stats are not a reason not to start a business or social enterprise. It is a reason, though, to be very attentive to why so many smart, promising companies break up, often with high personal and professional costs. The “fail fast” mantra of the (now rich) startup gurus glosses over the painful reality: Failure sucks! Closing a business means high anxiety, broken friendships, debt, repetitional damage, and a loss of productivity to the economy. Even worse, the truth is that we don’t learn from failure. Some research suggests that failure might even reinforce negative or unproductive patterns in some situations by making us more defensive.
It’s all about people
The reasons offered are surprisingly vague and superficial, with everyone agreeing that more research is needed. Global consultancy CB Insights researched this and produced a “laundry list”, rather unhelpfully headed with “Ran out of cash”. A middling factor was “Not the right team”, and trailing at the rear was “Lack of passion”, almost as if there was a parallel process.
In my view, this is where such quantified research is flawed. It is self-evident that in a new business, the reasons for failure relate entirely – 100% – to the quality and functioning of the founder team. Unlike legacy corporations operating in complex, competitive markets, startups are by definition the product of the founder team’s skills, decision-making effectiveness, drive and agility. For example, if the startup was “outcompeted”, the third factor listed, the founder team chose to enter a crowded market and failed to build differentiating features into their proposition.
This direct personal accountability suggests that all startup failure relates in some way to the dynamics of the startup team and what’s happening beneath the surface.
Starting up is primal
The modern startup industry premise is that entrepreneurship is a rational act governed by principally economic motives, “the scientific method”, lean startup, market research, A/B testing, and validated learning. While this approach has some efficacy, it completely ignores the power of the unconscious mind. This relationship was described by psychologist Jonathan Haidt as like a child rider atop an elephant, trying to steer the beast in a direction it doesn’t want to go. Nobel-prizewinner economist Daniel Kahneman used a different metaphor, that of the monkey mind, to highlight the dangers of distractability and attention deficit.
Being more rational in one aspect of running a business won’t offset irrationality in another. It doesn’t matter how smart or well educated you are; your mind comprises both a rational, conscious part and an unconscious part governed by emotion, intuition and psychic drivers. Without realising it, what seems to us logical and objective can turn out to be misguided energy from the unconscious.
Indeed, anecdotally, founders use terms like grit, passion, drives, and so on to describe what fuels them and keeps them going. While these drivers can be overwhelmingly positive, they can also generate strong adverse effects in team settings, such as…
- a reduced capacity to listen,
- Distractability
- Emotional volatility and anger management
- being excessively competitive,
- continually outsmarting coworkers, and
- being “locked-on” to specific outcomes rather than being open to options.
These micro-behaviours are the tiny fractures that can appear in the shaky fuselage of rapidly built startup machines.
Understanding Our Unconscious Minds
The unconscious mind has long been a subject associated with the work of Freud and Jung and the realms of psychoanalysis and mental health pathology. Freud and Jung are such giants in the field that few people could name any other psychologist. This is like trying to understand contemporary biology by referencing Darwin.
Fortunately, more accessible and scientifically validated ways exist to understand and work with the unconscious mind. One of the most accessible and best integrated is the field of Transactional Analysis (TA), developed by Eric Berne in the 1950s and ’60s following his experience as an army psychologist during WWII. Berne developed Freud’s thesis that the mind functions according to three distinct elements: the id, ego and superego. Berne reformulated this model and linked it to contemporary theories of developmental and cognitive psychology, and described how our unconscious minds were driven by three dynamic components, each trying to ensure its needs are met:
- The child ego-state: Our creative, playful and energetic aspect, but also our vulnerability and fears
- The adult ego-state: Our mature, capable, free-associating aspect, but also our wandering and restless spirit
- The parent ego-state: The commanding and controlling aspect, with our memories, warnings, and tendency to interfere and sometimes derail our best endeavours.
Our unconscious minds are a function of the interaction of these elements and the extent to which they are in concert with one another or in conflict. Berne further realised that the dynamics within our own unconscious mind were impacted reflexively by the social relations surrounding us, and we, in turn, impacted others. Understanding this psychodynamic interaction is what transactional analysis is all about.
Games, strokes, ruses, ruptures and rackets
Unlike Freud, Berne showed the practical everyday effect of these psychodynamics in a famous book, ‘Games People Play”, published in 1965. Research in this field has now gone global and spawned an industry of identifying and researching unconscious psychological games played unwittingly by people to get what they want without seeming to get what they want. In everyday behaviours, our unconscious minds communicate with each other via all sorts of means:
- Social cues and “personal chemistry”, chit-chat
- Games, power “plays” and manoeuvres, rackets and ruses
- Cold-shouldering and avoidance
- alliances, cabals and schemes
- Gossip, back-chat, innuendo and jokes
- inclusion/exclusion
- body language
- voice tone
- word repetition
- emotionally-laden
- metaphors
For Berne, the key is strokes: Those units of recognition and affirmation we give each other to say, “you’re ok, I’m ok, we’re ok”. I’ll write more on this in future posts (here’s one post I’ve written already on games: link), but I’ll mention here, under the intense pressures of the startup, with its continual anxiety about “run rates” and “burn rates”, the scope for game-playing is virtually endless. Games that go wrong, “ruses” that are exposed and “rackets” that get busted lead to ruptured relationships and team breakups.
We need social intelligence, not just smarter machines
It is ironic that in an age when we seem obsessed with the intelligence of machines, we have almost given up on exploring the enormous potential of our own minds. Partly this results from pathologising the unconscious and seeing it only as a dangerous and unknowable place. Jung always disagreed with Freud, seeing our unconscious minds as a source of creativity, renewal, inspiration and passion. Eric Berne showed us this even more clearly, and in pragmatic everyday ways. Using TA, we can start to listen for and manage our unconscious minds at work.
Growing our social intelligence, self-awareness and attunement with others will help us establish greater self-control and emotional maturity. For young tech founders, this growth is at least as necessary as their scalp in their social media or financial results if they want to build a sustainable business.
There are several methods to grow social intelligence, as we’ll explore in other posts, but here’s a quick checklist:
- Reflective journaling
- Mindfulness and labelling feelings
- Creative activities, like drawing and music
- Psychometrics
- “Body keeps the score” metrics
- Observation (of ourselves and others)
- Contextual listening (of ourselves and others)
- Powerful questioning (of ourselves and others)
- Dialogue, both 1-2-1 and in groups (the “triad” method is highly effective in respect)
- Deep reading
- Feedback and feedforward
- Being coached and mentored
Critical Incident Exercise:
One of the best ways to understand how our unconscious mind is acting upon our everyday behaviours is to reflect on the recent past and recall specific instances or events in detail – called critical incidents.
You can do this as a stand-alone or as part of an ongoing journal. You can also do this as a purely personal activity or as a team activity in which you share your reflections. But always with kindness.
Q1: Think about a time in the past 90 days when you experienced strong positive or negative emotions whilst working on your startup.
- What caused the emotion?
- How did it impact your behaviour?
- What was the effect on others?
Q2 Think about a time in the past 90 days when you acted in a totally unexpected way.
- What do you think caused this unexpected behaviour?
- What impact did this have on you and the rest of the team?
- How might this affect your team’s behaviour from now on?
Q3 Think about a time in the past 90 days when a member of your startup team acted unexpectedly.
- What do you think caused this unexpected behaviour?
- What impact did this have on you and the rest of the team?
- How might this affect your team’s behaviour from now on?
Simply, write down your answers in either short or long form, and think about ways you can share this in discussion with others. Repeating the activity often will train your mind to observe and listen to the unconscious mind at work.
Conclusion
By challenging our assumptions about startup failure and not accepting the current norms as acceptable or “normal”, we can create space to think about the deeper repetitive patterns that sometimes cause promising businesses to fail.
As a former founder, coach and mentor, I observed that the powerful primal emotions that drive founders on are also the forces that create dissonance and conflict within teams, generating a combustible mix.
We have the tools and methods to understand and manage our unconscious minds better than we’re doing now, with obvious benefits to our economic and mental health.
Transactional analysis is a pragmatic and intuitive framework for working 1-2-1, in small groups or with whole teams. It’s one way we can learn to be more intelligent than the machines we’re building.
Dr Andrew Atter
