By Louis Joseph, M.D. & Denise Joseph, J.D.
Open Sea Institute for Psychiatry, Wellness & Executive Performance Coaching
January 1st, 2024
The tradition of the “New Year” has been celebrated by cultures around the globe for thousands of years. Although the specific date of the New Year throughout the ages has shifted depending on the dominant culture, universal themes have persisted. Many societies tend to view the New Year as a time of rebirth– a time to mend erroneous ways or habits, drive off evil spirits and make room for the good. In fact, the month of January is named for the Roman God Janus who has two faces. One face looks backwards for reflection while another looks forward in time.
It is no surprise that the timing of many functions in the worlds of government and business are dictated by the cultural marker of the New Year. For instance, the tax calendar starts on January 1st. Worldwide, most companies often conduct performance reviews at the end of December or in early January. This is often the time when promotions are offered. Investment manager performance is often measured on an annual calendar year metric in addition to quarterly metrics.
New Year’s resolutions most often fall into the realm of individual improvement, whether it be personally, or professionally for yourself, your employees, and your investment portfolio. What is often overlooked is the mental wellness and personal improvement of start-up portfolio company CEOs and founders. Compared to the general population at large, this group has a significantly higher prevalence of mental illness. Investors often fail to recognize this in part because of the cultural stereotype that such individuals need to be visionary, eccentric, “out of the box” thinkers. Terms like “psycho,” “beast,” or “over-drive” are fondly used in the start-up world. However, the pressures of managing a start-up or newer organization that is rapidly growing and changing can be immense. Many founders created their product or service not necessarily to make money but because they were challenged by solving a particular problem. Their interests may not have been in fund raising, growing an organization, and marketing. More often than not, the business may not be profitable initially, relying on investor funds to establish itself with relatively short funding runways. The sheer stress of a newer business, combined with long working hours, a constantly evolving environment, and financial pressures can prove to be a primordial soup for mental pathology. In fact, research on this topic shows that as many as 72% of entrepreneurs have mental health related concerns. Approximately 50% reported having lifetime mental health conditions including depression, ADHD, substance use conditions, and bipolar disorder.
Yes, you want founders to think outside of the box, thereby expanding the frontier of knowledge, skill, services, and useful products that are offered. However, pathology is not to be romanticized. A founder can effectively perform these functions without falling into depression, severe anxiety, or addiction.
What we can tell you, having worked with many entrepreneurs who have been quite successful and also those that are unsuccessful, is that mental pathology, which often begets physical pathology, never helps. At best, it leads to somewhat diminished business outcomes and at worst, utter failure.
The investment world is not blind to this phenomenon but responses to the dilemma of CEO/Founder mental health fall short. For instance, some firms will conduct various psychological tests on CEO candidates or Founders prior to investments in start-up organizations. The results may show little or no mental pathology. The problem with this limited and dated approach is that it reflects a snapshot in time and is not predictive of the future pathology discussed above. Would you utilize a single existing balance sheet to predict the performance of a company 1-2 years in the future after that company was placed under severe economic pressure?
Another cognitive fallacy that investment firms fall victim to is believing that investing in serial start up entrepreneurs will assure the success of the investment. Yes, initial data from Harvard Business School suggested this group was more likely to succeed in their venture, but data still demonstrated a 70% failure rate. Furthermore, subsequent research conducted by the Centre for European Economic Research suggested that serial founders had no advantage. This group is not immune to mental illness that can lead to devastating outcomes. Take Reddit Co-founder Aaron Swartz, for instance, who died by suicide years after founding Reddit and several other organizations. Austen Heinz of Cambrian Genomics is another tragic example. According to sources, it was revealed that Crypto King, Sam Bankman-Fried, “had been aware of his mental health issues since high school… and that he had been prescribed an antidepressant for the past decade to help manage his mental wellbeing.”[1]
It is entirely possible that mental illness and its ineffective treatment can have devastating effects on the world economy at large and the viability of emerging technology with the potential to change the world for the better.
So what can investment firms do to minimize the chance that mental illness will take hold of the individuals tasked with shepherding their investments? Why not chose a more contemporary, proactive, ongoing approach that can detect and address mental pathology as it evolves? The Open Sea Institute specializes in this approach. OSI-type psychiatry and OSI-type coaching transform environments and people.
This New Year, Open Sea Institute invites you, in the spirit of Janus, to re-examine your current due diligence process when assessing the competence of those you charge to lead and grow the start-ups that you have invested in or are considering for investment. Let us assist you by working with these leaders in an ongoing manner to ensure the stability of their mental wellbeing and your bottom line.
[1] Cryptonews.com, October 2, 2023, “Unpublished Tweets by Sam Bankman-Fried Offer Insights into His Mental Health”