See show notes for this episode: S 02 | Ep 38 Why Your Childhood "Programs" Are Tanking Your Startup.
Alex: Welcome to Experience-focused Leaders. I am delighted to host Dave Hersh. A unique combination of somebody who founded and led a company that ended up going public, somebody who is and was an active investor, and somebody who is a thought leader and has written one book and has another one coming. Dave, welcome to the pod.
Dave Hersh: Thanks so much for having me. Excited to be here, Dave.
Alex: Well, I think you're the perfect combo of the guests that we like to have who've thought really deeply about important topics. And I think they're two themes, one from your past book and one from the current that we would love to cover. And then, also for me personally, one of the things that really fascinated me is that you're focused on coaching and really being incredibly thoughtful about how we approach human relationships both at work and beyond. So maybe you could tell us ah, a bit of the story behind how did you to combine all these magical qualities?
Dave Hersh: Yeah, I guess this can serves a little bit of my background and how I got to where I am. The objective side of my background is that I started as a management consultant for, you know, a handful of years and realized I didn't like working for other people as much and then became an entrepreneur and started a company called Jive Software with a couple other guys. we bootstrapped it for five years, built out a very healthy business and then decided to turn it into something much bigger. So we raised money from Sequoia and Kleiner on a path to go public on the NASDAQ in 2011, which it did. And then I had moved out of the business in advance of it.
Alex: And I'll just interject quickly for our audience. Like Jive was one of the pioneers in the community space and one of the leading broadly SaaS oriented leaders that went public and you know, took some of the, you know, my favorite colleagues from Success factors and other places ended up working at Jive at some point. So you've, you've, you've created a magnet for great talent there.
Dave Hersh: Ah, thank you. Yeah, it was a great company for a long time, but kind of died on the public markets. Started getting too focused on hitting quarterly numbers and less focused on innovation and it kind of lost its edge after my time. But I, I sowed those seeds early on. You know, I always, I'm not going to point the finger at other people. you know, I was the one who started that process of going enterprise and ultimately that's what slowed its, its growth down over the long run. And after Jive I struggled and went to. I worked at Andreessen Horowitz for a couple years as a venture partner. I worked in private equity. I did everything under the sun of incubating, advising, sitting on boards, being chairman of companies and all the rest of it. And could never seem to find my happy place and got increasingly frustrated with the state of the financial ecosystem, especially venture Capital, where only 10% of companies are successful. And I didn't really like those odds. So I started acquiring stuck companies that had maybe raised too much money and nursing them back to health. And then learned a lot about why companies get stuck and how to get them unstuck. And that's really what the first book was about. And so I wrote Reignition, my first book about the act, of building a startup and why only 10% are successful. So systemically why that happens and psychologically why that happens and then how to get them back on track if they do feel stuck. And that became a thrust of my work. People really enjoyed the psychology part of that, which is, you know, this big learning that I had that companies, don't fail or get stuck for the reasons that we talk about, like they didn't have product market fit or they ran out of money or the founders didn't get along, they got out, competed. That's what we talk about. But what I found was that under the surface of those issues were a very consistent set of psychological patterns of the founders that led to the decisions that m got them stuck in those ways. So that thread of the psychology of entrepreneurship became a lot of the work that I did. And as AI started becoming, you know, the, the massive seismic transformation that it is, I saw this opportunity for leaders and companies to become a lot more conscious because it was the human creativity and connections that would hold businesses in place over the long run. And so it became clear to me that the traditional moat or competitive advantage would die thanks to AI because everybody
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Dave Hersh: has access to the exact same raw materials. But it's the relationships that hold the systems in place over the long run. And so companies that learn to become black belts and human connection, are the ones that are going to bear fruit in this next era. And so this book is really a deep dive into what the future business looks like seen through the lens of the subconscious. So what are the, you know, six sigma of humanity? That's a good way to look at it. I like that. Yeah. So it's really fun to work on it. We can talk about that today. But I'll stop That. But that's the thumbnail on who I am.
Alex: Yeah, that's brilliant. And I love the journey and the honesty. And so let's dive in, into the book, and maybe your own examples of what you ran into with jive and what you've seen your other investments and companies and CEOs you coach struggle with. So I'll quote, and then let's dive into that. I think this echoes something you've said. Scaling prematurely is the primary existential challenge faced by startups and growth companies. It's easy to diagnose in hindsight, but hard to see when you're in the fog of war, surrounded by hypergrowth obsessed culture and anxious investors. The desire to win or to survive drives impatient decision making around scant data points, which snowballs into, flailing, overweight, organizational structure that burns through cash while not hitting its goals. And I think you just said that that's roughly, a fate for maybe a good chunk of that 90% of companies that don't have their successes. Not everyone, some of them, some of them don't, don't even get that far. But, let's dive into the psychology of the founder that scales prematurely and the environment which they live in that guides them towards doing that almost, you know, universally, unless they think really, really hard.
Dave Hersh: Yeah, well, our cultures shape us deeply, for better or for worse. And entrepreneurship is a good example of that. And when I graduated college 32 years ago, venture capital was maybe 7 or 8 billion dollars a year, and now it's closer to 330 billion a year. It obviously goes up and down, but it, it became the language that people speak. It became the expectation and the measurement of a successful company for a lot of founders. In other words, they were taught that to build a successful company, you have to go after a big market, raise a lot of money, scale aggressively. What I learned is that the exact opposite is true.
Alex: Okay?
Dave Hersh: The successful companies learn to go after a very small market initially and be very successful in that as a beachhead, and then use that to start to expand organically, to raise as little as money as possible for as long as possible, and to scale very thoughtfully for a long time until you really have a tiger by the tail. And it's irresponsible not to grow quickly. So those were the mechanisms that I saw in looking at hundreds and hundreds of companies, both stuck in successful companies, and which ones were more enjoyable, a ride for the people involved. So that became a lot of what I looked at and what I saw in the venture ecosystem. And I'm not against venture capital. I think it's a very important source of funding. I'm against too much venture capital too soon. And I'm against the lazy shorthand that it became as what entrepreneurs are supposed to do.
Alex: Right. So like this sort of factory, you know, see, precede, see they be exactly preset metrics and that's what you're supposed to be. And you know, the, at the same time still like some kind of a big we're going to change the world story, but really like kind of bullshitty version of that that doesn't feel, you know.
Dave Hersh: Yeah.
Alex: Authentic.
Dave Hersh: right.
Alex: Because you're, you're, you're kind of at the same time really talking to VCs and it's just there to, to kind of virtue signal to potential investors that you're, you're ambitious enough. Is that kind of the, the underlying.
Dave Hersh: Yeah. And I don't fault the entrepreneurs. They're growing up in a culture, they're, they're, you know, being raised in a system, a system that values this kind of metric for are you successful. Right. And so especially a lot of, you know, first time founders, younger founders, for them the company is a means to validate them as a human. Right. So there's a lot of
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Dave Hersh: gravity on it. Right. If this company is successful, I am successful as a human. So that over identification with the company is a lot of weight and it sits over all the decisions we make, funding being one of them. So if my goal is to validate myself through the company
Alex: as much as possible because yeah, if I go raise money, I'm worthy. Finally, finally Andreessen thinks I'm great, you know, therefore I must be great. My parents will be very proud.
Dave Hersh: Yeah, exactly. I will live up to my parents or my older sibling or So subconsciously what's happening is that we are seeking validation through this entity that we've created and therefore are much more prone to do things that look good on the surface in the short run, but sow the seeds of its destruction in the long run. And that may be raising too much money too quickly. So what I found was that yeah, on the one hand you have the 10% of venture backed startups that are successful. On the other hand you have maybe 30 or 40% that really fail to launch a product and find product market fit. But in the middle you had 50 or 60% of companies that had promise. Right. They had a real product, but it was almost like they were middle distance runners that were forced to run A sprint because they raised venture capital too early. Right. So when in essence they should be running a mile, they're running like it's 100 meter dash and they never make it around the track and they burn. yeah. So the companies that can be thoughtful, patient and experiment for much longer than you think you need to and that actually start getting traction in a small market, those are the ones that do better in the long run. Sort of. That's the hockey stick element of it. If you can be thoughtful and scientific during that phase and reconcile with some of the demons that may push you to raise too much money or try to scale prematurely, you're putting yourself in the best position in the long run. But if you are actively over identified with a company, you are trying really hard to prove how great you are and trying to scale quickly and go after big companies, A, it's very low likelihood it's going to be successful, B, you're not going to enjoy the ride at all. And see, you're going to burden all of your decisions with this existential gravity. Right. And I saw this happen over and over and over again. And it was the same set of patterns. There were different ones, you know, warrior, hero, you know, savior, teenager, procrastinator, like, you know, there were different ones that were out there, but it was a lot of the same ones that I saw over and over and over again. And it was these old programs running in the background, usually ones that are developed in childhood that were burdening the decisions and causing people to make strategic decisions that were not in the best long term interest of the company.
Alex: So, so if, if I hear you correctly, what you're outlining is that there is our internal psychology which, whether it's in venture or some other high performance kind of space may, may guide us towards suboptimal career decisions. And then there is the zeitgeist of the industry that we are in, that we choose to participate in. And I think some kind of combo of those two where a lot of people drawn to entrepreneurship were drawn to some of these decision styles. And then the environment created this perfect storm that led a lot of high potential companies go astray, which they shouldn't have.
Dave Hersh: Yeah, yeah. We were raised in a system of scale and believed that our worth equated to how much scale we could accomplish as individuals. But the reality was, and I share this a lot, 90% roughly of founders suffer some emotional, and mental health issue while running their companies for a 10 chance of success. And even if they are in that 10% and do really well financially. They have an 85% chance of suffering for 10 years after a financial windfall.
Alex: Oh. So tell us more about that. And I actually was going to react on your thing that you mentioned, first time founders. I'm a member of a group of post exit founders. Where the f. Yeah, there's a bunch of folks. All right, great. We're both in it. there's a bunch of folks that are kind of on their second and third and some are a little bit more aligned with their spiritual and personal growth and some are, you know, I have a big chip on my shoulder again because I did it wasn't as successful as I could have been in the first one that I didn't do this right and wrong. And so I'm going to prove that I'll do better. So it feels like there is there. It's not necessarily a given that the second time founder is not going to go down the same path.
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Alex: some of the time at least. So I'm curious what your observation is on the. The traps for the first time versus the second time found.
Dave Hersh: Yeah, well, once you realize that money doesn't really make you happy, you're gonna have an existential crisis, right?
Alex: Yeah.
Dave Hersh: So what do you do with those raw materials? Right. You're happy for about two months and you're like, wait, what am I doing with my life? What's going on? And you know, people respond in different ways. In some cases it may be I need to do it again and maybe they do it differently this time. In some cases maybe they go through a spiritual process. I, think either way there needs to be growth.
Alex: Right.
Dave Hersh: There needs to be a transition. Right. An exit is really just an entrance to a transition. And that's ah, what I help people understand. And a transition in life is there is a death of an old self and there's a period of grieving that self and really grieving and feeling the emotions. And then there is this liminal place where you're kind of empty, right. You don't know who you are yet because it takes a while for the new self to be born. It doesn't. You can't force it. Right. So it's this in between stage. So on the one hand you have death of an old self and on the other hand you have birth of a new. But in between is this dark forest of transition. And what happens for a lot of people is that they get into that dark forest, they realize the void of identity and they get scared and they want to go back. And so they go, they want to go back to how I was loved before, what served me well before. Right. What was my identity? And I think as Americans we're not great at this, right. We tend to identify professionally, right.
Alex: Like we identify when, we introduce yourself in us. We say, I do this, I'm like, it's very much career driven identity. Is that, is that what you're referring to?
Dave Hersh: it can be personal too, right? It could be somebody who's getting plastic surgery to look 27 forever. Right. Or buy a sports car, you know, whatever it is, right? The midlife crisis, it's the same elements, right? Professional is an example of that. And I think that's very true in our culture. Certainly for, you know, males. It's very true. Right. Males are devoid of emotional groups and over identify with their professional work a lot of times. Not to say it doesn't happen for females too, but it's just in our culture we saw that happen a lot. It's a very consistent theme. And so, yes, if we're not capable of really doing the emotional work that is required for a transition, both of grieving the old and you know, stripping down all of these egoic, layers of clothing, which you do emotionally, to kind of put ourselves in a position where we can be reborn, where we can open up to a new phase of life. And that's really what that spiritual journey should be for a lot of these people. Then we are going to repeat a lot of the same old patterns, thinking it's going to produce something different, but we're still just doing the same thing.
Alex: So in this VC industrial complex, Dave, that you kind of were describing, you hear a lot about some particular skills, like maybe like, hey, here's how you stay fit so you could do more, you know, like, so they're increasingly, some investors are helping you perform, better. But I don't hear a lot of depth along the lines of what you're describing, of kind of identifying where you are in your journey, really trying to de. Identify yourself, from, from your, the company that you're building. Maybe, the folks that have families have a little bit easier time doing that or have some strong religious faith, maybe have easier time doing that because they have other kind of pillars of their identity. But why do you think, you know, when you say this, I'm going, this is super interesting. Why do I not hear enough, other people talking about this topic?
Dave Hersh: Because it didn't make them money historically. And that's what's changing. That's what my next book's about. Right. So if you think about capitalism historically, the humans were the processors inside that computer, right? We were the motivated and rewarded for playing a role of computer processor. And computer processors are rewarded for being really powerful. The engine, the energy you can use in that world is one of ego. So you got ego fueled leaders creating big companies and that's what succeeded in that era. M and venture capitalists would often prey on this because they would. And I've, I've seen the strategy. They go after people who are, you know, mildly sociopathic, right. Who are so obsessed
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Dave Hersh: about something they can't do anything but that. Right. They are investing in a human computer processor. Fast forward to today and what's happening is that we are no longer the processors inside that computer. Right? So trying to get an ego fueled lunatic who's playing out childhood fantasies through their company isn't going to work anymore. What's going to make money now are conscious leaders who can set the relationship infrastructure in place. The network of humans who want to be together, who are transforming and growing together. That's what buyers are going to go to and that's what employees are going to go to. And those are the systems that can be held in place over the long run when everything else is the realm of commoditized computers and systems. Right. So human relationships.
Alex: Human relationships is going to be the only thing that is not commoditized. And if you can authentically build those with your partners, customers, employees, that's the alpha. And that requires spiritual maturity.
Dave Hersh: Yeah, you can't copy and paste relationships. Yeah, it's not going to work. Everything else pretty much can be copied. Now obviously there is still some room for technology, ip. There's always going to be some of that.
Alex: Yeah.
Dave Hersh: But not anything like what we've had historically. Right. The stack is changing by the day. Systems are being rewritten all the time. Everybody has access to Claude. Code is eating everything. Right. So trying to rely on software as your moat the long run is a fool's errand. But relying on the thing that matters, which are human relationships connected through time and space, that has a lot more staying power. Right. That can hold systems in place over the long run. So I think that is going to be what makes money and it is also going to be what makes us happy. So we're starting to see those things, hopefully convergence where it's the end of the era. Right. There's still obviously some that are out there, right. We still see them every day. But I think that's what's going to change is that there's nothing for them to hide behind anymore. If you can't hide behind huge sums of money or technology, IP or supply chain networks, all these things that we've relied on as moats historically, then you actually have to be a good human because otherwise people are going to go somewhere else. The switching costs are next to nothing.
Alex: So it's interesting, I reflect on my own journey. Around the time when you, started Jive. I was at a company called SuccessFactors. And I remember having, I was not the founder, but I remember talking to Lars, the CEO when I was coming on board. And the values said, you can have an asshole, just don't be one. And I said, hey, this, this company not only doesn't have the problem was being better humans, but also has a sense of humor, which was kind of an important dimension. And so I liked it. I joined and it was a great journey. But ironically, I think Lars would probably agree with this. He was the biggest asshole in the company because he was driving, pushing change and he was learning how to know not be that. And he was you know, creating a system, including that rule to, to partially instill a culture, but also to manage himself and his instincts. And I find, I find that I appreciate that a lot more right now. I think sometimes I need to, you know, do things that are uncomfortable either for me or for other humans, to propel change. And obviously there's a compassionate way of doing it in a less compassionate way. But I kind of wanted to double click on two things. One, it feels to me like in some types of businesses, the most famous are like the Patagonias of the world and some B2B businesses where you really needed to build trusted relationship with customers. There is a history of having, yes, having motivated sales reps and pushing things, but there's a history of also building a community, and you know, having a mission beyond, you know, just the, the pure selling more product. And so what can we learn from those early examples that were on the, on the path, you know, what worked, what didn't, and you know, what, what are those companies doing now, right, in the, in the era that you're describing? Are they upgrading their playbook significantly in terms of being more humanly oriented or are they just too stuck in their old ways?
Dave Hersh: No, I'm seeing a fair amount of companies that are starting to experiment and do some really interesting things. I think we're
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Dave Hersh: still suffering a lot of the hangover from the last phase of capitalism, what it looked like. But you're starting to see the first wave of companies doing really interesting things. So the chapter I'm writing right now is about how do you hold relationships in place over the long run? And I'm looking into relationship psychology as the analog is the basis for that. And so how what are great relate? We've learned a lot about what it means to be in a romantic relationship over the last 30 years. It's wildly different than what I grew up with. Right. It's having, you know, the foundation of safety. it is about being the most yourself, but also surrendering to the system that you're in. it is about focusing on your own growth, showing up as the best version of yourself, because the best thing that you can do for the other person. Yeah, it's about being in deep attunement with the other person, understanding how they feel. So there's all these big things that were happening in relationship psychology that I think can serve as a beacon for where we need to go to when it comes to holding customer relationships in place. And a lot of that is that, right? Is what does it mean to be in deep connection with the other, and not just one other person, but at scale in a community, through the system that your company represents. How do you see your customer and your buyer for who they really are? So I think to me those are the most interesting stories and those are a lot of the ones that I'm starting to get connected to and see, which is if you invest in sales and service, and just internal collaboration, right? If you invest in becoming black belts in human connection, you start to identify ways to grow that are very differentiated in the market where everybody is still using the old models.
Alex: The old model.
Dave Hersh: So whether it's sales led growth or product led growth or marketing led growth or network effects or virality, like all of these things that we, you know, there are very different ways of doing that now when seen through the lens of human connection. And that's what I'm seeing.
Alex: And so, and sometimes I feel like we're brothers from another mother. I, I have this notion of transactional versus relational approach, to, to doing things. And I think what you're describing is this relational DNA. And I also found it intriguing that you know, something appealed to me in this, you know, from I think first, first, undergrad philosophy course where I ran across Martin Buber and, and you know, we were talking about, I Am thou. And that had like the fundamental theory. And then because I'm probably cerebral consultant, you know, type of person. While I liked it, I don't think I had the skills to go and apply it. And only as you kind of go further in relationships and run into some issues in those relationships, you start rediscovering the frameworks, whether it's Gottman or Esther Perel. I recently came across the work of Terry Real, which is I found very easy to digest, and apply and, and then I, I absolutely love this connection that I could figure out how I could be a better spouse. Which I have a lot of improvements left on the, on that, in that direction. But it, like it, it very clearly I could see how the way I show up in my family relationships, you know, sometimes reflects on how I show up at work. Right. And I, and I think there's a lot of parallels. I don't think there you're just shifting environments or becoming completely different human being. So to me this is really an inspiring part of what you're writing on and the work that you're doing is that you know, by creating a culture of leaders, that are, that are really thoughtful about this, these leaders are happier in their whole lives, potentially with their children or partners, you know, extended, extra, extended family. And then they're creating a culture of people in their company who are also getting trained up on this and coming home, being better partners and, and parents and, and so there's this positive dynamic that we could create in the society by, by you know, emphasizing this. But I, I still struggle with finding like where, you know, how can you get this done earlier? Because you know, I think like I was saying, I was intrigued by this pretty early on. It sounded appealing on a personal level, but I made a bunch of mistakes in my 20s and 30s, that were you know, lack of sophistication
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Alex: in this relational component. How do you help people grow on this journey faster?
Dave Hersh: I let them know that this is how you're going to succeed. Right. That to me is the big difference. Right. I'm not out preaching conscious leadership for the sake of conscious leadership.
Alex: Yeah.
Dave Hersh: I'm saying this is the only path left for you to be successful. So the thing that you want.
Dave Hersh: That your ego wants. Right. The thing that is going to validate you. I'm going to help you get that. I'm going to help you win all those things that you want. But there's also a fringe benefit to doing my path, which is that you're going to enjoy the ride a lot more.
Alex: Yeah.
Dave Hersh: and you may not want those things as much at the end of the day, you may find that, you know, it gets you somewhere else and that's okay too. Right. So my path is to help people find competitive advantage. Right. To give them the tools to build a successful, thriving, flourishing organization in a world of rampant sameness. But my path to do it is one that does come with showing up as your best self.
Dave Hersh: Right. So the two are intertwined. I'm trying to meet people where they are.
Alex: Right. So you basically, you're not like, hey, you know, you gotta go quit your startup, you know, go do a 12 day silent retreat, you know, and a bunch of drugs to figure out, you know, like figure out your inner self. So you're saying, hey, we'll help you on this journey. but it, it, you know, this journey will expand and will resonate, you know, may maybe value to you in other parts of your life. That's, that's the value proposition. But this is, but the compelling event is, you know, everything has changed. So while this was probably nice to have and would have, you know, or what probably would have made you happier and, and more, more, more fulfilled was, your last startup 10 years ago. Right now it's the only way to build, a sustainable business and a sustainable career.
Dave Hersh: Yeah, yeah. Basically I, I focus on aliveness. Right. And I think aliveness is the key to building out organizations that have sustainability, that have staying power.
Alex: Tell us more. How do you do it's all a lot?
Dave Hersh: Well, the book is called the Eros Advantage. So Eros was, you know, the Greek God of desire. and, and it's really about human desire. Eros is often, connoted with sexual desire, but the reality is it's just the life force that propels us forward. Right. It is the thing that makes us want to create in the world.
Alex: Right.
Dave Hersh: The purest form of that. So think about Eros as the inexhaustible fuel source that's in us. Where ego and trying to prove ourself is like burning coal. Eros is like the dilithium crystals in Star Trek. Right. It's like the inexhaustible fuel source that propels us forward. Where the most interesting, most creative, most alive ideas and creations come from. We're not attached to them, they come through us. Right. So that's really what it's about. It's not just our own, but creating systems of aliveness through the people that Work with us, through the people that we serve. And so when seen through that lens, you can really reimagine what a company does and how it functions. And if you're able to do this, especially in this era while people are still operating using old capitalist principles, you're going to pull way more people into your orbit because it's so unique. And so that to me is what's most important. And you're going to enjoy it so much more. You're going to be a better leader, you're going to build more value in your company, you're going to enjoy the ride a lot more. You will much have a much higher likelihood of having an exit if that's your goal. And you're going to have a great life post exit. Right. What you've seen, a lot of people don't have. Yeah, Right. So we have been tricked into believing that we are a cog in a machine and that our value and self worth and happiness is going to come from being a really good cog. That's a lie.
Dave Hersh: What matters is the feeling of being alive on this planet and being in that place of doing what we were put on this earth to do. And now it's the confluence of that energy of being truly alive that is going to differentiate and distinguish the organizations that we create. People want that, they're going to seek that out. They want to feel alive. They want to be part of something that makes them feel alive. Whether you're an employee or a customer or a partner. Right. This is something I want to be a part of. We were talking about Patagonia and they're in my book, as one of the first stories, like they, they did that, right. They created this really unique entity in the world because they weren't burdened by the cap structure of investors.
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Dave Hersh: And yeah, sure, they were the first, but they did this like 30, 40 years ago, right before any of this happened. Now you're going to start to see these lessons when combined with the powerful technology that we have, start to create systems of flourishing that are going to be uncopyable. Right. Just things that nobody else could do. And I think that's what I'm trying to paint a picture of for people is like what is this healthy, thriving organization where finally success and consciousness are going to go hand in hand, go together.
Alex: So one of the concepts that, that you shared with me, that, that really resonated with me is a modern version of product market fit. Because this is kind of where you begin. Typically the this organization, right. And, and you know what draws the founder to it because they, they want to have emotional connection was the, was the vision for the product. The, the types of people that join, you know, probably want to connect emotionally. So tell us a little bit about, you know, why product market fit needs to, to be replaced with emotional market fit.
Dave Hersh: Yeah, so emotional market fit was a concept that I came up with a year ago and has a whole set of practices that go along with it. But instead of just thinking about pain points and solving problems and testing and iterating, it goes deep into the current state of the people that you're serving. Like, what are they feeling m. What is it like to be them? Whether they're a group, if they're, you know, like an enterprise, or whether it's an individual, what do they love about their life? What are they struggling with? What is the current situation? How does it feel to use the products in this, this space? And then what is their desired state? What do they really want to feel like? How will they know that it's different, right? What's the identity that they want to inhabit through the use of these products? And so it's going deep and I use anthropology as the science to help people understand what it looks like to do ride alongs and to go deep with customers to really understand the rituals and the language and the subconscious patterns that are going on under the surface. Because that's what you need to understand in order to start building products around that. For example, I just acquired a business in December called Plan. It's an old social media marketing company. They did, it was for creators software for creators to go out and market themselves through social channels. And so I do emotional market fit interviews with creators, like what's it like to be you? You know, what is it like today? And instead of just saying what do you want to do and how do you want to make it work? I'm asking what does it feel like? And tell me stories, right? And what I get a sense of is they're lonely, they're isolated, they are ashamed that they're not producing enough content. They're ashamed when their content doesn't do well. They're worried about AI taking over their work. There's a very consistent set of themes that are the emotional raw materials I'm working with. What do they want to be like? Well, I want to feel like I'm on top of things. I want to feel competent, right? I want to feel connected to other people. I want to feel creative. I want to focus on the work that I really like to do, not the block and tackle work. Right. I want to feel like I'm just on top of my life. That's emotional market fit. Because then you start thinking, okay, how do we serve as the bridge between their current emotional state and their desired emotional state? What does that look like? How do we weave that into the product? And that starts to go into everything that we do from the messaging and the storytelling and how we build our world or our community. How do we do service? and you start thinking much more creatively about the ways of uniqueness that you're building in, how you differentiate, how you create a community around what you're doing. And so it's woven throughout the entire process of the company. We look at it from a product and innovation standpoint, right. How are we creating uncopyable products? But it becomes part of this new system for how we are developing relationships and coming through on a promise to help people become who they want to become and to feel the way they want to feel.
Alex: And so historically, that level of sophistication was probably available for a super pricey brand campaign, and never really got that deep into the product development architecture or finding the types of people that are really deeply connected to the mission and to moving people through this transformational journey.
00:40:00
Alex: So we knew something about this. There has been anthropological studies brought to marketing, but it just stayed in marketing. Is that,
Dave Hersh: Well, they were trying to manipulate.
Alex: Yeah, right. Or they, or they were genuine. Okay. Or they were like. Yeah, we were.
Dave Hersh: They were trying to use emotional signals to measure them.
Alex: Okay, got it. Okay, so tell us more. So before it was coming from a place of.
Dave Hersh: Yeah, sorry if I interrupted. It was. It was more just saying that if the desires are coming from an egoic place, if you have a company that is being held accountable to certain growth metrics, if that to them is the goal, then anything you do around understanding people's emotions is going to be burdened by this ridiculous goal of arbitrary growth rates and profitability. Right. So that's going to come through if you have a founder whose calling is deeply aligned with the business, who cares so much about the customers they're serving and is going deep into their lives to say, I really want to help. And we're going to build a product that aligns, with this, that is very different. You can't fake it is my point. You can't fake the culture.
Alex: Yeah, yeah, yeah. And so product market fit. That's the point. It's m. Me, it's a little bit more measurable in some contexts, but it's, it's a lot harder to defend in this environment.
Dave Hersh: Yeah, exactly. So I may have done that before, like. So in the case of Plan Lee that I just talked about. Yeah. I learned that they're lonely.
Alex: Yeah.
Dave Hersh: But if I'm just like owned by a private equity firm that just wants certain growth rate, what do I do with that information? Well, maybe I use it for marketing language, you know, but that's it. It's not woven through everything I do because I don't care enough. Right. It's clear who the master of this company is. And it is growth. Right. It's very different when this is coming from a place of love and calling and a group of people who want to see change in the world because they're going to take these raw materials and actually make something beautiful out of it, they're going to create with it versus a company that's just like, yeah, we understand some of the same data points and we're going to use that to create content and messaging for the homepage and you know, maybe do a webinar or whatever. Very different.
Alex: You know, I think that there has been a, a framework in, in the Valley. Some, some, some missionary versus mercenary. And I think you're really taking the notion of what missionary leaders and founders are doing to a whole new level. I think it was, it was there like, hey, I'm passionate about this, but I think there's a difference between passion and still playing the, the, the kind of the, the growth game. And here I think you will get through the growth, but not by aiming for the growth. You're by aiming to intimacy and deep relational connection with your stakeholders.
Dave Hersh: Yeah, intimacy is the new moat.
Dave Hersh: Right. And I, in the past I would go to the conscious capitalist conferences too and I would hear a lot of people speaking to themselves, but it's not really creating any change. What I'm seeing happen now is this is the last frontier.
Alex: Right.
Dave Hersh: All your other moats are going away. So like it or not, this is what's going to succeed in the future. That's the difference.
Alex: So one of the things that, you know, would be helpful for people to spot, you know, where they are right now and I think earlier in the conversation you mentioned there's different archetypes of founders and you know, where, what is the way to diagnose what is my kind of blind spot today so that I could start opening up and you know, going forward on the journey that you're, you're saying is the only one that's left for us, which I think is a really compelling message because it's, it's, it's way beyond nice to have and you know, beautiful for your soul and you know, combines. That was the impact in the world. So some people may also just really, you know, maybe, you know, very impact oriented. and I think historically that that could be technology. Right? Like there's some sort of, you know, technology, other approaches to this. And what you're saying is if you want to have impact, there, this is where you need to go deeper. So what's the science behind unlocking where you are today?
Dave Hersh: Reading my book and my newsletter.
Alex: Okay, no, the book is not out yet.
Dave Hersh: So the book is not out yet. But the newsletter is teasing out a lot of book.
Alex: So let's, let's, let's, let's guide people. Where can they find the newsletter?
Dave Hersh: On my site, Dave Hirsch.com H E R S H and that's a newsletter really about human first advantage. So it's all about giving you ideas for how to weave human first moats into your business. The first book does have a lot, at least the second chapter
00:45:00
Dave Hersh: on the psychology of founders and what typically tends to go wrong. You know, it's how, how things get out of control. And I do workshops on a form of parts work. I call the inner board meeting and I have a set of cards that I developed with a friend which are almost like tarot style cards, but they're leadership archetypes. So when you have an inner board meeting, for example, should I sell my company? Right. It's a big thing I'm dealing with. Well, the inner board might say, who's at the table right now? Right. Who feels emotionally charged by this? And it could be, well, I have a warrior that really wants to keep going and, and grow even bigger and bigger. I have a child self that really wants safety and security. I have a hero self that wants to rescue my whole family financially. Right. I have an insecure part who really wants to have a good story to tell that we were sold for a certain amount of money. I have a CFO part who's worried that this is the last chance we're going to have to sell a company some. What happens is these are all just programs running in the background. Right. Neuroscientists would just call them kind of inherited patterns from childhood, that it's like a pattern recognition machine for us. Right. When we see a problem, we go to the database inside us and say, where have we seen this before? And let's pull from that. But it happens subconsciously without us knowing. And so this workshop helps people parse out these different programs that are running and then figure out where the interlock is, like which ones are in disagreement, just like an actual board meeting and then being able to find a way to compromise across those different parts that are in conflict with one another. So that's one of the ways that I help people do it. It's really not meant to replace therapy or anything else. It's meant to shine a light on this decision and where the work is and how to start finding compromises that can be a good middle ground for all of these different parts of ourselves.
Alex: So the challenge was most therapists is, I assume they, they have very little direct applicability in, in business decisions. Right. And here what you just described is a very common, you know, decision, challenge for, for founders. Right. And then you're connecting them to, to various patterns. Now one of the things about parts work is that you, you kind of need to learn to accept and you know, make peace with various parts of yourselves and like, you know, not try to get away from them, you know, not judge them too much. How are you finding that resonates with sort of the go getter mindset, you know, of ah, of a founder. Are they, are they particularly struggling with some of the acceptance work? Because it's almost the opposite of where they've been most successful historically, that they have to accept and discover the first place to your point, but then accept those parts of themselves?
Dave Hersh: Yeah, well, when I do my presentation, I talk about how I lost many, many billions of dollars with jive by not being able to do this.
Dave Hersh: So if you think about these three categories, and this could be the case for conscious leadership too, you have people that are already converts, they believe it and they want to be conscious leaders. You have people that are maybe conscious curious, you know, they're starting to lean in because they understand the inherent benefits. And then maybe you have naysayers who don't understand yet. And I think for at least the latter two camps, telling my story helps them understand how this will directly impact the thing that they want. And so that tends to pull them in and it's a fun exercise to go through and they always leave with something really valuable and a tool that they can use ongoing. And so it actually I would say it would be hard at first if I just came in and said, let's we're going to do parts work. Right. There's going to be some that are naturally going to be resistant doing it on the heels of my presentation. So they understand how I lost billions and if I had just had access to this, it would have changed everything. At least I get their attention and then we can go through and make it really simple for them to understand. It's just like running a board meeting.
Alex: Yeah.
Dave Hersh: And this is all science. Right. This is all neuroscience. Right. Like, there are things that you can do that are really simple and straightforward and start moving you in the right direction towards being a more, enlightened leader and just going to enjoy it more. And it's kind of a fun thing to do. So, yeah, there's some naysayers, but it's very rare that I get somebody who really is so resistant they don't even want to do it. Yeah.
Alex: Well, it's like inside the movie. Inside out for CEOs, right. Like, so that one, it's, it's a kids movie, but it really works great for adults, I think. And you're just doing a version of this for.
Dave Hersh: Yeah, for business. The parts work has been around forever. Right. It's polytheism. right. Was parts work. Right. It's the same thing. We all have these things running in the background. It's not that hard to understand. You're right. It's just like inside out, but instead of emotions, it's almost like sub personalities inside of us.
Alex: Well, one of the other fun things that I found in your newsletter is, it's fun and you bring examples like goodbye to marketing and
00:50:00
Alex: hello to world building, where we could start imagining that we're all building our own Star wars universe, which, by the way, Star wars does, you know, as I reflect more and more to tap on a lot of things that you're describing. and so tell us a little bit about, the opportunity to build a world together with your customers and your, your team.
Dave Hersh: Yeah. I just got really fascinated by this idea of world building as the new way to create these systems of shared flourishing. Right. So if you're doing the emotional market fit and you really understand the journey that customers want to go on and how they want to identify and how they want to feel the world becomes the place in which they do that. How do I see myself reflected in this world? So I talk about things like, you know, the anime, manga, otaku culture. Right. That was really amazing at creating world. And this has become a massive, you know, $60 billion a year industry because they Tapped into something really powerful, that people wanted to not just enter the world from a consumption standpoint, but to play a role in it, to be a part of it, to see myself reflected in this world. And that, to me, the elements of understanding what it means to create a world with its own rules and language and humor and identities and archetypes and stories like that is really powerful. Not just storytelling anymore.
Alex: Yeah.
Dave Hersh: But myth making at a level where people want to be a part of it. They identify with it, because those are the people that are going to share this idea out. They're going to bring more people in, and it's very, hard for them to leave that world once they're in it because they feel a deep connection to it. So, to me, there's something really amazing in that. And in that chapter, I tell the story of my editor, actually, who had gone through breast cancer and had a breast removed. And suddenly buying a bra became exceedingly painful for her. And she felt like most bra companies hate me. And then she found this company called Anna Ono that is made for people who have different shapes and sizes and, you know, have been through what she's been through. And it was like everything suddenly made sense. And she's like, they love me. This is a world that I want to be a part of. I believe in. I'm never going to buy a bra from anybody else. Right. So it sounds simple, but that idea is. Is world building. It is saying, this is what we believe and it's unique, but our uniqueness is going to meet other people where they are.
Alex: Right.
Dave Hersh: And they're going to find that strangeness, something that they want to be a part of, and it reflects that desired growth curve that they have. It doesn't mean trying to please everybody.
Alex: Right. You're thinking it's the opposite.
Dave Hersh: Yeah. I mean, you're writing Star Wars. Star wars is really unique. Right. That world had never been created. The reason it was so powerful was because it tapped into very universal themes. Powerful archetypes, a journey myth, that was well constructed, but the flavor of it, the feeling of it, you know, down to the rusty, you know, equipment that they were flying around in. All of it was so unique, and it pulled people in in a way that was magical. And look what it's done over time. Right. And I think all companies have a chance to define their world in a very unique way. And that is going to be what pulls people in, away from the standard vanilla marketing messaging.
Alex: I love. I love this. And I. I think, you know, the contrast is Almost that our default media consumption pattern that we live in, maybe as consumers, not as CEOs, but is, is an NPC. Right. We're just kind of constantly bombarded by more and more information. We can, we're not really acting on anything real, and we can't make that much meaning out of that, you know, volume of information. And what you're saying is, hey, let's create, you know, a meaningful universe, that really speaks maybe not to everybody to your point, but really speaks to a select group. And then you know, start getting some Esther Perel superpowers to build really deep relationships with both your team and your customers and other stakeholders in that group. and that is a very empowering message in the world where I think right now the empower, like the biggest motivator for an average CEO is probably fomo that they're going to lose everything to AI. Right. And so they wake up and thinking did I buy my mini Mac? And you know, am I an open claw enough? And I'm this, am I that? And what did you know, what does Jason Calacan is doing? Was his podcast promotion some, some other like some version of that where like it's all FOMO
00:55:00
Alex: driven and it has to be the latest where everything is changing and it almost could lead to, for most people either to running this, this, this sprint when you need to be training for a marathon. Right. And then burning yourself out from worry or the world that you're proposing is to kind of go ground yourself into what matters and what you could be really calling a, calling create a universe around that that will attract others and then get some superpowers to, that you could bring into your family and other parts of your life to, to help build that as a sustainable, living, breathing organism. That's sort of my interpretation of what I've heard.
Dave Hersh: Yeah, that's exactly right. It was very good actually. Yeah. if you think the book structure is really understand your calling.
Alex: Yeah.
Dave Hersh: Be able to integrate your shadow parts. Right. Because that's what I see happen a lot of most companies fail because the shadow parts get in the way be in collective calling with other people such that you can let imagination design a vision, build the uncopyable products through emotional market fit. Build a world around that offering that pulls people in and makes them part of a, you know, I guess a massive multiplayer role playing game as opposed to a non player character. Right. That idea, you know, and I actually interview a game designer in there. then it's about relationship Building, right. And that's where we get into Esther Perel and John Gottman and everybody else. Like, what does it mean to be in deep relationship? How do we hold the relationships in place over the long run? Like once we get them into our world, M. How do we make sure that we are staying in deep connection with them? And then I get into internally, what does that look like? How do we organize ourselves to live up to this promise of this unique entity that we built? how do we get through really hard times? What happens when it's not working, you know, and we have these existential crises and then how do we set ourselves up for a generational company making this sustainable over the long run, building the business that we want to be in, building the world that we want to be in and making sure it can stand the test of time. So that's really it. It's the arc of a company as seen through the lens of the subconscious and looking forward into the future of what this can be.
Alex: And I think that's interestingly the right answer for the, you know, for the, for that growth question that we started with at the beginning. Right. Be the change you want to see in the world and build an epic company, but through a very different set of incentives and motivations, than what would have existed in the kind of late stage capitalism that you were describing in the vc, to use a buzzword. now, I think this is an amazing work, a book that needs to be written. I'm really glad that you're writing it because you, you, you know, you're bringing this really authentic passion, which comes out of your, this conversation, but also the depth of experience that you brought up of, of having worn so many hats. if, if you know, other than signing up to your newsletter, which I think anybody who wants to get a head start on the future should be doing, what are three things that I could do today? if I'm curious about this mode of leadership, right. I'm not on the bleeding edge yet like you, but like, let's say I'm curious. What are three things that I could do that are sort of easy wins that will start, you know, pacing me on this journey?
Dave Hersh: It's a good question. Let me think about that. I think one is how am I really feeling when I'm running the company? Like what's going on for me?
Dave Hersh: Right. What's the, what's my, my standard state of being in this company? Is it just I'm stressed all the time. Right. If we could tap into the emotional landscape of what's going on. For us as leaders, that helps a lot because then we could start to dig into how can we show up better if we're going to be burdened all the time by, you know, something happening inside ourselves, some shame or, you know, voice that's telling us we're not good enough, like that's going to burden everything. And so I think that's one of the first things. Just Start to feel out the current emotional state that you're in such that you can start working with that raw material. I think a second would be to maybe focus on the buyer and go through a process of having deep conversations with a few buyers. Get into what it's like, you know, and they could be yours, they could be other customers, other companies. But understand how it feels to be them. And don't just do it as a product research interview. Do it as a deeply curious, vulnerable, empathetic exchange where you're going in and understanding what it's really like to be them. And I find those to be very fascinating. It may give you some ideas
01:00:00
Dave Hersh: for how to go deeper into that realm and do more interviews and what that might look like. At the very least, it's going to inform a lot. And most people don't take the time to do that is just sit and go really deep with somebody, do a ride along and ideally with them in person. It's fascinating.
Alex: That's the pro tip on that, is these. If these end up being your early customers, you're like bonded for life. These are your friends, right? Like pretty much this is like you, you wake up and you think of these people. When you're building your next features, you name your, your product features after them and, and the pain, the pain peaks that they may have experienced. It's beautiful. you get a lot of energy from that. This is not a burden at all. Right?
Dave Hersh: Right. Yeah, yeah. And those may become. I, in the book, the chapter on world building, I talk about the early acolytes, the people who come in and help you co create. Right. But it has to be that level of exchange. It has to be a very vulnerable, open, emotional exchange with those people to understand what's really happening under the surface.
Alex: Okay, so your state going deep was, was really, deep was the customers. And the third.
Dave Hersh: And the third. Let's talk. Maybe we go with employees, right? Which is what's one thing we could do this year that would make it a lot easier for all of us to be emotionally vulnerable. And open with each other. Because what happens is strategic decisions. There's an organizational plaque.
Alex: Yeah.
Dave Hersh: Because feelings get in the way and people don't deal with them. Right. And so decisions get stuck. People don't do hard things. They want to hold on to stuff over the long run. So the level of freedom to experiment and just be a really healthy, productive organization comes through the ability to work through hard things as a team. And so I would say let's. What's one thing that we could do as a team to improve our ability to, work together in a healthy way? What's the WD40 that is going to provide the collaborative lubricant we need as an organization for a very challenging time with constant rebuilding and new decisions and life threatening existential, situations that we're going to be put in. So I would think about that. You really just need to show up as your best selves during this period of time. Think about what that looks like and how you could do it in a way that's maybe a little unique for your industry.
Alex: Ladies and gentlemen, Dave Hirsch. This was incredible. Thank you, Dave.
Dave Hersh: A, thanks so much for having me. That was super fun.