Rich or King - Lessons from the Founder’s Dilemma
What we can learn from common fallacies of founders and how lessons apply to our own careers
CONTEXT
In 2008, Noam Wassermann first coined the Rich or King dilemma. The concept is about a critical decision founders face: choosing between wealth and control.
Most founders give up control over their companies long before they go public. In fact, a whopping 80% of founders are forced to step down by their investors.
Understanding the Rich or King dilemma involves evaluating one's motivations and making strategic decisions accordingly. Maybe you too should ask yourself: do I want to be rich or do I want to be king?
METHOD
Founders generally fall into one of two categories based on their motivations. Perhaps one resonates more with you than the other.
Choosing Power: Founders motivated by control make decisions that allow them to lead the business, often at the expense of increasing its value. These founders are likely to maintain significant control over the company’s direction, personnel, and operations but may miss opportunities for scaling and growth that require ceding some authority.
Choosing Money: Conversely, a founder who relinquishes more equity to attract investors builds a more valuable company. By sharing ownership and control, these founders can access greater resources, expertise, and capital, ultimately ending up with a more valuable slice of a larger pie.
Fallacies to avoid:
A founder’s motivations and beliefs are often expressed in the following fallacies:
👶 Only I can do this (aka “This is my baby”).
Founders often believe that only they can effectively lead their venture and that they will succeed. This couldn’t be further from the truth: If it’s not them, it is someone else. And studies show clearly that 90% of startups fail.
This belief trickles down to the company culture: up until a certain point, it is typically shaped by the founder’s personality and style. This overconfidence can lead to naivety about future challenges. As the company grows, the leadership team faces entirely different challenges, and the founder’s job security becomes precarious once they lose control of the board.
→ Overcome with competence, not (only) confidence: beware of your own overconfidence and naivety.
🏃 What got you here, won’t get you there.
The moment of truth for founders often comes quickly after they bring in external investors. Founders must recognize that what got them to the initial stage of success won’t necessarily sustain them through subsequent growth phases. That means they themselves have to transition from founder to leader, which requires an almost entirely different skillset. This realization is critical.
→ Overcome with adaptability and agility: The faster you can adapt to a new reality, the more successful you will be.
CLOSING THOUGHTS
Choosing between money and power allows entrepreneurs to understand what success means to them. We should probably know this about ourselves for our own career choices. Then, we can avoid falling prey to common fallacies and create sustainable career success.
Of course, all of this requires a high amount of honesty and self-awareness.
What is something that you can apply to your career path? Share your takeaways!
Resource shoutout: