A few warning signs that the CEO is burned out

Many intelligent, ambitious, creative people suffer episodes of burnout. When this happens to the CEO, the results for the startup can be serious.

This was back in 2018.

A friend put me in touch with a fellow named Alfred, a software developer who seemed to bounce from one project to another, always something interesting, but always with a kind of loose, part-time engagement. Alfred was looking for some help for a new client, a guy named Kennu, who was CEO of a fascinating startup which I’ll call PrivacyBlockchain. They were working on ways to use blockchain technology to help people manage their data privacy rights. They’d been hard at work for two years. In the same way we’ve become, over the last 60 years, a civilization that depends on people’s credit scores, Kennu was dreaming of a happy future in which his startup would be just as indispensable, a crucial utility that all corporations and governments would need to consult to find out whether or not they were allowed to access someone’s data.

I was being brought in by Alfred, on a part-time basis, with the idea that if we liked each other, then I would be brought in on a full-time basis. I prefer this arrangement with startups because I've worked at several broken, badly run startups, and so I prefer to make an initially limited commitment, unless I'm being given the full authority to actually fix the problems that I find.

The first meeting I was invited to was supposed to consist of myself and Kennu, plus Alfred, who was going to take over most of the software development, and Maguire, who was the Head Of Product (he'd been hired 6 months before). However, at the last minute we got a message from Kennu saying he could not make it. He lived in New Jersey, near Princeton, with his wife and two young children, so it took him nearly two hours to get to the office in Manhattan.

Maguire started the meeting by bringing up some slides on the screen.

Maguire: I think a lot of the problems we have are because the user interface is confusing. Not an accusation, to be clear, I'm not saying that Robots and Pencils did a bad job. I'm just saying, I find this interface confusing, and if I think it is confusing, then a normal user is probably going to be frustrated by it.

Alfred: Absolutely. I find it confusing.

Maguire: Suppose I want to open up my health records? Suppose I want to give a specific doctor permission to see all of my health records? Where do I go? I have to click this link, "Permissions," and then go to "Access," and then go to my health records, then click "Grant new access?" and then figure out what that form means?

Alfred: I find it confusing.

Maguire: And yet, managing health records is one of our main use cases. So how to manage the permissions needs to be obvious and intuitive.

Alfred: I agree. We need to make this easier.

Maguire: So, I've been working on some new designs. Let me show you.

And then Maguire brought up some new designs, and showed them on the conference room video. These new designs gave the management of health records a link from the main page.

Alfred: Nice. Yeah, sure, I can change the design.

Maguire: Great. I think this will make things easier to find.

If I had to describe this meeting, I might say it was "pleasant." I could also describe it as "easy going." My initial impression was that the company had a relaxed atmosphere. Is this good? Is this bad? It's not automatically either. But we ended that meeting without setting any hard deadlines. I assumed that if the CEO had been in the meeting, there might have been more specific goal-setting, but surely that would happen at the next meeting?

At the end of the week, we had an almost identical meeting. Once gain, Kennu had planned to join us but then at the last moment he sent us a message telling us that he could not make it into the city. He did not join the meeting by video. So, again, it was just Alfred and Maguire and myself.

Maguire: I've got some new designs.

Alfred: Great, great. I'd love to see them.

Maguire: I've brought more links to the main page. You can find everything here now, which runs the risk of this page becoming cluttered, but I think it's worth it because I've managed to eliminate any page that's more than two clicks away from here. Almost anything the customer wants to do, or find, they can now do it with one click.

Alfred: That's great. Really great. Sure, I can make these changes. No problem.

Lawrence: Did you make the changes we discussed the other day?

Alfred: Not yet.

Lawrence: When will you make those changes?

Alfred: Well... can you do it? Why don't you take the lead on this?

Lawrence: Okay, what's the deadline?

Alfred: Well, when do you think you can do it?

Lawrence: It doesn't seem like much work.

Alfred: Next Friday then?

Lawrence: Next Friday? This is not a week of work. I'll have it done by end of day Monday.

Alfred: Oh! That's great! Super.

Maguire: That's really great. Fantastic. You're amazing.

Alfred: You're incredible. Really fantastic. That would be so, so great.

Maguire: Truly awesome. You are a super star. That's great.

Lawrence: Okay, okay, okay. Let's chat when I get it done.

Look, I've got as much ego as anyone, and I love it when people say that I'm "amazing" and "incredible" but I also felt like this team wasn't moving with the sense of urgency that I typically see at startups, and that worried me.

Only a few tweaks to the frontend were needed to implement Maguire's new vision so I got it done by Monday and we met again that Wednesday and I showed them what I'd implemented. Again, the CEO was not with us.

Alfred: You did great.

Maguire: Yes, this is great. I'm glad you got it done so quickly. Fantastic work. But now that I'm clicking through it, I'm thinking, we can probably redesign some of these forms so they are a bit more intuitive. I mean, we keep talking about HIPPA, but does the average person understand what HIPPA is? Do we make that clear?

Alfred: Excellent idea. Really great. We should talk about their HIPPA rights. Maybe we can do a video that explains all of their privacy rights.

Maguire: I love the idea of doing video.

Alfred: Like a short 5 minute video about the importance of the privacy.

Maguire: And we can release it on YouTube.

Alfred: We can do a shorter version for TikTok.

Maguire: Maybe it will go viral.

Alfred: This is so great. I love this. We've got to do a video.

Maguire: We've got to do a video.

Alfred: People don't read anymore. They watch video.

Maguire: We can't reach the younger generation unless we do video.

Alfred: Unless we do TikTok.

Maguire: Yes! We've got to do more TikTok!

Alfred: That's where the younger folks are.

Lawrence: Do we know that younger people are focused on their privacy rights? Enough to be interested in our app?

Maguire: Well, has anyone educated them about their privacy rights? It's not like they teach this stuff in school.

Lawrence: Do we know our current demographics?

Maguire: I don't know that off the top of my head, but I think it's an older crowd.

Lawrence: How many users do we have?

Maguire: We have 64,000 users.

Lawrence: How many active users do we have?

Maguire: It's about one percent of that, I think?

Lawrence: About 640?

Maguire: About that? I don't really know. I'm not head of marketing.

Lawrence: Who is head of marketing?

Maguire: A woman named Mira. You haven't met Mira?

Lawrence: No, I haven't met her yet.

Maguire: You should talk to her about demographics.

Lawrence: What kind of budget does she have? How much have we spent so far on marketing?

Maguire: On marketing? I want to say it might be something like... uh...

Alfred: Maybe a million?

Maguire: Maybe? Something around a million? But I don't know what her current budget is. You need to go talk to her.

Lawrence: You spent a million dollars to get 640 active users?

Maguire: To get 64,000 users, many of them are active at least sometimes.

Alfred: At least half of them log in once every 6 months. We could reclassify them as active.

Lawrence: Do you know why they are not more active?

Maguire: Well, that's the point of these changes. I think the interface was confusing and it frightened people away.

Alfred: Exactly. No one wants to use a confusing interface. People were confused.

Maguire: They didn't know how to use our software.

Alfred: So they couldn't be active because it was too difficult.

Maguire: Exactly. And that's why we've been simplifying the user interface, with your excellent help. A more intuitive interface would make it easier for people to use the software.

Lawrence: But have you actually spoken to these customers? Have you asked them why they are not more active? Did they say they found the software confusing?

Maguire: I haven't spoken to them yet, but it's on the agenda. I'm going to do some user interviews later this summer.

Lawrence: Maybe we should prioritize that? Maybe we should ask them directly what the problem is?

Alfred: Excellent idea.

Maguire: Absolutely. Excellent idea. We'll schedule some customer interviews for next month. We'll start to set that up.

Which was great, and I was happy they were so open to my suggestions, but I was curious why the CEO had not already suggested something similar.

A one-on-one with the CEO

After that meeting it struck me as important to sit down and have a long talk with Kennu, but Alfred warned me that Kennu was coming into the city less and less often. So I called him and scheduled some time with him, out where he lived near Princeton. We met at the restaurant Mistral and had a fantastic lunch on a blazing hot summer day when the place was empty because all of the students who normally attended Princeton University had gone home for the summer.

Keenu’s reputation was legendary. Unadulterated success followed him everywhere. He’d been part of the leadership team of an earlier startup that had done very well, and he’d been quoted in the New York Times when that startup was sold.

At first we only spoke of personal things, getting to know one another. He filled me in on some of the details about his life that I hadn’t previously known. Apparently his success went far back. Even as a teenager he’d been a natural leader among his peers, admired and sought after. A leader of various organizations in high school and college.

Now married, he spoke with some nostalgia of the ten years that he and his wife had enjoyed before their first child: four weeks in Japan, six months in Australia, a summer in Kenya, a month in Brazil, a year in Paris. She was working as a consultant, which gave her reasons to travel, while he was working on an Internet startup and could work from anywhere.

Finally, we spoke about PrivacyBlockchain. He reiterated his thesis that managing privacy rights would soon be as important as managing one’s credit score. It’s a good thesis for a product, but as Steve Blank said in his book Four Steps to the Epiphany, one has to iterate on one’s thesis until one finds some combination of features that makes customers excited to use the product.

By this point, I’d been engaged on this assignment for three weeks, and I’d had the time to study the software. I was deeply concerned about what I saw going on — not because the technology was bad, but paradoxically, because it was too good. They’d built a fantastic technology a year ago, and then they kept adding more and more features. But they didn’t seem to know what features the customers actually wanted. And they were not talking to the customers.

Early on they’d hired Robots & Pencils, one of the best software development agencies in New York City. After a few brainstorming sessions, a spec was drawn up, and work began. And they built. And they built. Everything about the product was excessively great. I realize that is a strange criticism to make, but the financial penalty of pursuing such excessive greatness was considerable. Kennu had raised $5 million for this startup and, during the first year, had spent more than $1 million on software development, all without showing the product to any potential customers. In what possible sense is that a “minimal viable product”?

After two years of effort they had spent almost $2 million on development and $1 million on marketing. For that investment they’d gotten a very poor response.

“We need to be reliable,” said Kennu. “What if we end up being the main way that people keep control of their medical data? What if we become the main enforcement mechanism for people’s rights under HIPAA? People have to know they can depend on us.”

Okay, that’s a beautiful vision for the future. But there is something dangerously misleading about these kinds of dreams, when they are not grounded in the reality of what customers have said they actually want.

Over the previous year, Kennu had conversations with the lead engineer at Robots & Pencils that went like this:

Kennu: This service needs to be highly reliable.

Lead engineer: Highly reliable? So, if the main service fails, we should have a redundant backup we can switch to?

Kennu: Yes, let’s set up a redundant backup, in case of emergencies. Actually, let’s set up two, in case a backup fails.

Lead engineer: You want two redundant backups that are alive at all times? That seems excessive. We could write “relaunch the service” code that could get a new service up and running quickly, so you’d never have more than a minute of downtime.

Kennu: We cannot have a minute of downtime, not ever, so let’s have two redundant backup services running at all times. But yes, I like your idea, let’s also write the “relaunch the service” code, so if both of our redundant backup services fail, we can relaunch the service quickly.

Lead engineer: You are suggesting multiple layers of redundancy, on top of multiple layers of redundancy.

Kennu: Yes, good. We need this service to be reliable.

Lead engineer: I see. So we will want redundant databases as well?

Kennu: Yes.

Lead engineer: And redundant API gateways?

Kennu: I want everything to be redundant.

Lead engineer: Fortunately we are running on AWS, so it is easy to spin up a lot of redundant services.

Kennu: But what if AWS fails?

Lead engineer: That would be unusual.

Kennu: But it happens sometimes?

Lead engineer: Occasionally there is a problem in one region, but we can follow a multi-region strategy. That way if a data center in one region has a problem, your service will automatically switch to a different region.

Kennu: But what if there are problems with multiple AWS regions simultaneously?

Lead engineer: That is very, very rare. It’s happened maybe once in the last 10 years.

Kennu: But it could happen?

Lead engineer: Anything could happen.

Kennu: We need this service to be highly reliable. Can we also use other cloud services, like Microsoft’s Azure service, and Google’s cloud service?

Lead engineer: A multi-cloud strategy? Yes, we can do that. It’s ambitious.

Kennu: But it can be done?

Lead engineer: Yes, we’d be happy to set that up for you. I’ve never done it before, so I’d be excited for the chance to try it.

Kennu: Great, let’s do that! Anything to make the service reliable.

This is how almost $2 million got spent on what was more of a “maximal viable product” than a “minimal viable product.” Outwardly, Kennu could claim that he simply had high standards and he was holding his product to the same standard as everything else in his life. Inwardly, what other than fear of rejection would cause someone to invest so much in a product, while spending so little time talking to actual customers?

To be clear: when you have a big company, a stable product, and a stable revenue, then it is wise to invest money in redundant fail-overs to make sure the service is both reliable and secure. But doing this during your early days is the kind of perfectionism that should have your team asking, “Why are we doing this?”

A leader is made naked by their spending decisions

One problem with success at a young age is everyone then expects you to go on being successful. After all, a brilliant first act might have merely been luck, so people wonder, can you do it a second time? For someone like Kennu, the question lingered — had his previous success been because of him? Or was it someone else on the leadership team who had produced that previous miracle, at that earlier startup? Maybe Kennu had no real talent, maybe he’d simply been in the right place at the right time? Some internal doubts haunted him.

Working as a consultant means that I am sometimes a kind of therapist. I’ve rarely seen a startup fatally sabotaged by a rational but incorrect assumption; typically a rational entrepreneur will simply pivot and go in a different direction, if their initial hypothesis is proven incorrect. What I’ve seen more commonly is startups sabotaged by something less explicit, something more difficult to put into words — inchoate fears and non-rational motivations. For this reason, I decided to ask about what else he was hoping to do with his life, aside from the startup.

“I’m working on a novel,” said Kennu, catching me a little off guard. “It’s a science-fiction thriller.”

“A novel?” I asked, surprised and curious. “What is it about?”

“A woman who signs away all of her rights, accidentally, one contract at a time, clicking ‘Accept’ on too many agreements without reading them.”

“Interesting,” I said. I, too, have written some fiction, so here was something we had in common. “How far have you gotten?”

“I’m done,” he said. “I’m working with an editor to clean up the rough draft.”

“Can I read it?” I asked.

“Sure, I’ll send it to you. I’d like to hear what you think of it. Please be honest with your feedback.”

Over the next weekend I read it over and drew up some detailed notes for him, commenting on every scene that I thought was good and every scene that needed improvement. I think he was surprised to get such thorough commentary; he seemed appreciative.

Like a lot of science fiction set in the near future, it started with an interesting premise. We all click “Accept” on various software agreements, and most of us click on these without actually reading the agreements. So, what if in the future it were possible to lose all of our rights by clicking “Accept” on too many of these agreements?

What I told him was that the first half of the novel was original and interesting, but the second half became too much of a standard action novel, with the main character trying to escape from an evil corporation and a bunch of security guards shooting guns at her. My sense is that Kennu had an interesting premise for a story, but he didn’t know how to end it.

Rather than focus on the details in the book, however, for our purposes it is more interesting to ask how a busy CEO found the time to write a novel. At the very moment that he should have been in the field talking to potential customers about his new service, he was sitting at home, typing away, imagining an alternate reality.

Partly, I think he wanted people to know that he was creative. He wasn’t just an average business guy who looked good in a suit. He had range. He had insights. And he wanted the world to see him as he saw himself. All of which is understandable. But branching out into new activities is typically what people do after they’ve sold a company, not while they’re arduously trying to get a new company off the ground. Behind his dazzling smile there must have been a certain amount of personal burnout going on, a kind of emotional exhaustion that left him unwilling to focus on the next consecutive steps his startup needed.

But here’s another thing: great science-fiction can influence how we think about certain issues. Isaac Asimov wrote I, Robot, and it influences how we think about the machines we build – do they serve us or do we serve them? Ray Bradbury wrote Fahrenheit 451, and it influences how we think about censorship. Was Kennu writing his science-fiction story to influence how the public thinks about our loss of privacy? But wait, I thought Kennu’s new service was going to solve that problem? Would we still lose all of our rights even if people used PrivacyBlockchain?

So this was the deepest conundrum: on some level, Kennu was having doubts about whether the blockchain could really solve all of the modern era’s problems with our loss of privacy. Every time he talked about the issue in any detail, he found himself thinking that Congress would have to change the laws to give citizens more rights to control their data. There was a limit on how much Kennu could do while the current privacy laws were as slack as they were.

This is crucial to keep in mind: what he was facing is something that every entrepreneur faces. He’d started with a great idea, then he found out that his original idea wasn’t going to work as well as he’d hoped. Yet there was still a lot he could do to help certain kinds of customers better manage their private data. I’m aware of at least six other startups that have made progress in this area over the last few years. Kennu would simply have to pivot towards a smaller demographic with particular concerns. Perhaps he could focus specifically on medical data, where the law is reasonably strict.

But also keep in mind: a leader is made naked by their spending decisions. Every dollar invested, when it’s not in direct response to a request from a customer, is a dollar that says “We are still speculating, because we have no idea what our customers really want.”

The staff was having too much fun (and drinking too much)

Over the months, I got to know the whole staff. They were a smart crew, and they seemed to know the best bars in Manhattan. A whiskey sour has been my go-to drink for many years, and they made a good one at the bar at the NoMo SoHo hotel. That was where Alfred and Maguire liked to meet. I have fond memories of chatting with them; they were both intelligent and funny. At the same time, I wondered if perhaps we were all having too much fun? While we had some great conversations, we were not making great progress on the business.

At some point it occurred to me that Alfred and Maguire thought of the current situation as a bit of a grift. Especially as the months wore on, their humor took on a dark edge, that assumed the failure of PrivacyBlockchain. But they were having fun. I think their attitude became something like, “Let’s make as much money as possible before this thing goes bankrupt.” At least in the case of Alfred, I became aware that he was billing for any hour in which he discussed PrivacyBlockchain, even if they were at a bar when they had the discussion. As a contractor, I love making money, so I don’t mean to sound like a hypocrite, but I felt this kind of billing was unethical.

But why was this even possible? How can a contractor like Alfred do little work and still bill hours? This is a sign that the CEO is not paying attention. In any business, contractors will take advantage of a situation if the CEO is not watching them carefully. And sadly, with PrivacyBlockchain, it became painfully clear that the CEO was not paying attention.

At one point, I left the NoMo at 11 PM and headed home. Myself and Alfred and Maguire had had a fantastic dinner and then some drinks and then an extended conversation about the startup scene in New York City. It was great. I had fun. (I do not bill for such hours.) Those two stayed after I left. The next day we had a 9 AM meeting with Robots & Pencils, at their office in midtown. Maguire showed up, but at 8:45 AM Alfred texted me to say he couldn’t make it, he claimed he’d come down with the flu, and so he needed me to represent him and represent the point of view of the tech team.

I did so. The meeting went fine.

Still, I cannot overstate how surprised I was. I like a good drink as much as anyone, but in my entire life I’ve never missed an early meeting because of something irresponsible I’d done the night before. So I was left wondering: is this the level of professionalism on the team? Is this the level of discipline to be expected? Would there be any consequences? In the end, the CEO must take responsibility for all of it.

An angry, bitter feud

The next part of this story is exceedingly ugly and I’m embarrassed to talk about it, but it’s also an excellent example of how contagious and destructive unprofessional behavior can be, when the CEO allows unprofessional behavior.

A month later I went out to Princeton and had lunch with Kennu again. He had sent me an email asking if I would accept a full-time position. I was going to reject the offer, but I wanted to tell him the reasons face-to-face. I was as diplomatic as possible, but I was also honest: I told him that I felt the startup was aimless and drifting, and he would need to get energized and get focused. He needed to get his head in the game. Otherwise, he should consider resigning his position.

I don’t think he agreed with me, but he politely nodded his head and thanked me for being honest.

Then I told him that I felt some of the contractors were billing too much for the amount of work they were delivering, and so I felt he should review the work he was getting, to ensure that everyone was living up to their obligations. He said he would conduct a review.

After that I went home.

A few days later, Alfred sent me an angry email accusing me of trying to get him kicked off the project (I assume that Kennu had spoken to him about his excessive billing of hours). Alfred told me that I was fired. Since I had been brought in by him, and reported to him, I was basically a sub-contractor to him, and he had the authority to fire me. I’m sure I could have appealed to Kennu, but at this point I was happy to step away from this company and its complicated politics. Perhaps I might have felt differently if I’d felt that PrivacyBlockchain was going to be the next AirBnB or Stripe, but by this point I’d lost all faith in its future.

I wrote back to Alfred with an honest critique of what I thought he was doing: I thought he was drinking too much, I thought he was lazy, I thought he wasn’t doing enough work, and I thought his excessive billing of hours was unethical. I thought it was especially irresponsible to stay out drinking so late that he could not show up for a meeting early the next morning.

We exchanged several emails like this, and they got increasingly nasty.

But those emails are only a personal matter. Let us instead think of this from the point of view of the CEO. As a CEO, would you want to hire contractors who end up feuding in this way? Does this encourage the growth of the startup? Is this productive or healthy? Does it build teamwork?

My point is, many things must have already gone wrong before you end with two contractors engaging in a petty feud, as Alfred and I did.

The Aftermath

PrivacyBlockchain slowly faded away. I assume they used up their money. They never discovered success. This happens to many startups. By the time I had first joined the team, I think the only thing that could have saved the startup would have been Kennu fully re-committing to it (and possibly seeking some appropriate medicine to help with the burnout) or him resigning and a new CEO taking over.

Kennu is one of the most intelligent and creative people I’ve ever worked with, so I don’t doubt he will eventually discover a successful path forward for himself. But I don’t know how long that will take. Over the course of my career I’ve been lucky to work with many brilliant and creative people and I’ve seen that episodes of burnout are exceedingly common. And it is important for people (especially those in leadership positions) to be sufficiently self-aware that they realize they are burned out, so they can then take corrective steps.

Had I been advising a new CEO, my advice for saving PrivacyBlockchain would have been:

• Talk to potential customers. Find the humility to listen, even if they are critical of the original idea.

• Warn your staff that it is forbidden to speculate about what customers might want. Actual conversations with high potential customers or actual customers are the only things that should matter.

• Fire any of the staff who are resistant to the new path, or whose skills are inappropriate for the new direction.

• Restrict spending. Only invest in the product when multiple customers have told you they need something specific. Do not waste any more money on speculative ideas.

Why did I write this story?

Some of you might be wondering why I am telling such a personal story. Isn't this a bit unusual for a business essay? But my point here is that personal factors are also business factors. Indeed, when it comes to the early stages of a startup, personal factors dominate over all else.

I've known many entrepreneurs who obsess about the competition they might face in the marketplace, and yet the majority of all the startups that I have ever worked with have been undermined by the insecurities of the founders. If we are going to have an honest conversation about the path to wealth, we need to talk about the emotional factors, the inner tensions, that sometimes sabotage otherwise great enterprises.

I believe this incident offered an unusually clear example of how personal factors can undermine an early stage startup, which is why I’ve shared it. I hope you found it educational.