🤔 Do Founders Make Bad CEOs?
Why did investors celebrate Twitter's founder CEO Jack Dorsey's exit?
How would you feel if your company celebrates your resignation? That too when you are the founder of the company. Well, that's probably how Jack Dorsey felt a couple of days back. When news broke out that Dorsey would be resigning as Twitter CEO, the company's stock went up 11%!Â
Was Jack Dorsey bad for Twitter?
The Curious Case of Founder CEOs
Bill Gates, Elon Musk, Jeff Bezos, Phil Knight. When we hear these names we think of geniuses that converted their vision into a multibillion-dollar empire. Not only are they extremely successful founder CEOs of some of the world's biggest companies but also the richest people in the world. So, when we see them and their success story, we believe that founder CEOs are the key to success. And the logic makes sense.
After all, who better than a founder to lead the company? The founder knows best why the company was created and what direction it should head in.
But Twitter turned out different. The company's stock has only risen 63% in the past six years of Dorsey's tenure. In comparison, Tesla's stock has grown 3,025% in the past 5 years. Then what wrong did Dorsey do?
Nothing. Yes, really, nothing.Â
Companies don't actually perform all that well under founder CEOs. Elon Musk, Jeff Bezos, Bill Gates are the exceptions and not the norm. And because of these extraordinary exceptions, you my friend, have a confirmation bias (when you interpret data to confirm your already existing beliefs)
According to research, founder-led companies are on an average 9.4% less productive and have consistently low management scores. These scores usually increase once the founder CEO has been replaced. This is probably why most founders don't even last that long in the corner office. Only 25% of founders remain CEOs till the company goes public.
So, Twitter is just another company following this same norm. It isn't really an outlier that couldn't perform well with a founder CEO.Â
But what exactly is going on at Twitter? Instead of being a giant social media company, why could it not perform as well as its competitors?
Slow and Steady Doesn't Always Win the Race
Twitter first launched in 2006, the same time as Facebook became widely available. And despite the tough competition it prospered. From 400,000 tweets per quarter in 2007, it went to 350 million tweets per week in 2010.
While Facebook was just a platform where you shared pictures and made friends, Twitter was where the real action happened.
Even today, a lot of journalists and even officials first break news on Twitter before on any other platform. And tweets by some (read Elon Musk) move stock and crypto prices. So, what's the problem?
The problem seems to be that Gen Z is just not that into Twitter. So, over the years Twitter's user acquisition has stagnated and its popularity has declined. From being the third most popular social media app in 2009 it has gone down to being the 15th most popular social media app in 2021.Â
But why has Twitter's growth stagnated, while Facebook has grown so much? For this, you can blame Twitter's uncertain leadership, which almost seems like a game of musical chairs.Â
 In 2008, Evan Williams, Twitter's co-founder, took over as CEO from Dorsey. He resigned in 2010, with Dick Costolo taking his place. Finally, when Costolo resigned in 2015, Dorsey took back the position of CEO again.
But in the meantime, Dorsey had started another venture, Square in 2010. Many believe that this is one of the reasons for Twitter's lack of growth. They think Dorsey has been "unfaithful" to the platform, focusing more on his side venture.Â
And they're somewhat right. Over the years Twitter has hardly added any new features. And Gen Z, which has been spoilt for choices with apps like Snapchat, Instagram and TikTok, has been ignoring Twitter.Â
For instance, Twitter introduced its version of Stories called Fleets in 2020. The move made the platform seem like a boomer uncle trying to use Gen Z slang. Result? Twitter had to kill it.Â
But Twitter seems desperate to be back in the game. So, it has introduced Super Follows, Spaces, Undo Tweets, and a lot more. Spaces, its paid audio chat feature that was inspired by Clubhouse, aims to not only attract a larger audience but also give the platform a revenue stream other than advertising.Â
Despite the feature-filled year that Twitter has had, it seems investors were no longer happy with Dorsey. Elliott Management Corp, which acquired a huge stake in Twitter in 2020, reportedly was pushing for Dorsey's removal.
Seems like it got its way and we got another Indian-born CEO: Parag Agrawal.Â
But what does the future hold for Dorsey?
Dorsey Block-ed?
Dorsey will continue to remain the CEO of his financial payments company, Square, which was recently renamed Block. The company will now focus on crypto, something that Dorsey has been very passionate about. In fact, Square seems to be Dorsey's one true love. Under his leadership, the company has grown 1,300% in the past 4 years.
The company has exciting future plans including building a better and more affordable bitcoin mining system that everyone can use.Â
Dorsey’s love for Square gives us a peek inside the brain of founders. Founders are passionate problem solvers and dopamine junkies. Give them a problem and they will go that extra mile to solve it. The anticipation of solving a problem gives them that ‘high’ that they crave. But once that problem is solved, they don’t have much incentive to hang around. New problems will give them that spark in the eye and they will move on.
Think about it. Twitter achieved what it set out to. What incentive did Dorsey have to stick through? On the other hand, Elon Musk is nowhere close to solving the set of problems that he has set out to solve. Electric vehicles can get better. We haven’t colonized Mars yet. Long long way to go.
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