I enjoyed chatting with Joshua Wilson of The PE Podcast about what makes a great PE-backed chief executive. It starts with knowing the game you are playing and applying the First Law of Business:
Listen to more of our conversation →
Learn about ChatCEO and how it helps CEOs see patterns →
In the 1940s, a Dutch psychologist and chess master named Adriaan de Groot ran a simple experiment. He set up a position from a real game, let a player study it for a few seconds, then cleared the board and asked the player to put the pieces back. Ordinary players placed a handful correctly. Masters rebuilt nearly the entire board.
The natural explanation is that great chess players have great memories. In 1973, Herbert Simon, who would later win a Nobel Prize, and his colleague William Chase tested it. They ran the same exercise with one change: instead of a real position, they scattered the same number of pieces across the board at random. The masters’ advantage nearly disappeared.
The masters’ edge came from somewhere else. They had seen positions like the real one thousands of times, and they read it in chunks: the castled king behind its wall of pawns, the bishop on the long diagonal, the knight on its usual square. Where a novice had two dozen pieces to memorize, a master had a few familiar shapes. Simon and Chase estimated that a master carries something like 50,000 of these patterns, built over about ten years of serious study. As Simon summed it up: “Intuition is nothing more and nothing less than recognition.”
I think about that experiment often, because it explains a mistake I see in almost every new CEO, including the one I was.
Watch a short video about this article’s main idea.
Old patterns don’t help the new CEO
Everyone who becomes a CEO got there by mastering something. They were great salespeople, engineers, CFOs or general managers, and they built that mastery the way a chess player does: years inside one function, seeing the same situations until they could read them at a glance. Then a board hands them a job with very little in common with the one that earned it. The patterns from the old job mostly don’t apply, and the ones the new job requires are ones they’ve never had the chance to see.
Most new CEOs sense that the job is different. What they miss is that the difference comes down to patterns. They expect to master this role the way they mastered the last one, by being smart and working hard, so they rarely bring in help. When I ask why, they cite time and money. The real reason usually comes out later: Deep down, they don’t believe anyone they could call is smarter than they are.
On that point they may well be right, since the path to the top filters hard for intelligence. The chess research suggests they’re measuring the wrong thing, and the CEO job makes that mistake especially costly.
The job has an unusual property. CEOs who succeed tend to do it less by making brilliant moves than by avoiding bad ones. A CEO who steers clear of a handful of common, expensive mistakes will do well in most businesses, and nearly every CEO failure I’ve seen traces back to one of them. Those mistakes also belong to the CEO’s job specifically. A great CFO or VP of Sales learns to avoid the traps of that function, and few of them carry over. The only way to learn the CEO’s traps on your own is to hold the job long enough to fall into them.
“Intuition is nothing more and nothing less than recognition.”
The traps repeat more than most CEOs think. Nearly every CEO I’ve worked with is convinced their situation is unique: their industry is different, their board is different, their people are different. In the details, they’re right. The underlying positions come up again and again. An executive runs his department under a side deal with the previous CEO. The leadership team agrees in the meeting and does something else afterward. Sales, product and marketing each explain the missed quarter by pointing at the other two. When CEOs describe these situations to me, I often laugh, because I remember how badly I handled each one the first time I saw it.
Imagine Jack Green, the first-time CEO of Diamond Technologies. Jack is a former Navy nuclear officer with an engineering degree, and he is very smart. In his first talent review, his managers grade 1,823 people and label just 12 of them C players. A first-time CEO has every reason to accept that number, since it came from the people closest to the work. An experienced CEO knows it’s impossible. In an organization that size, with a real bar for talent, the C players number in the hundreds. A count of 12 means the managers are protecting their people, and it means only 12 people will get the rapid coaching and development that C players need. Everyone else below the bar carries on unnoticed, and an organization running that way gets into trouble fast. Jack sends the review back, and the second pass finds a little over 200.
It’s not about how smart you are
If these positions are so common, why doesn’t a smart CEO already know them?
Because very few people spend enough time in the job to see them. A chess master plays thousands of games, and each one ends in a clear result. A CEO gets nothing close to that. Boards expect results from day one, and most CEOs don’t get a chance to see enough patterns before they’re asked to spend more time with their families. The feedback, when it comes, arrives years later and is tangled up with everything else that happened in between. You can be brilliant and still never get enough repetitions in one seat to learn the patterns.
I didn’t have them the first time either. I went through several sales and marketing executives before I figured out how to tell the good ones from the bad. [Joel: a sentence on what you kept missing with them would make this land.] I’ve since been a CEO a half dozen times and have spent nearly twenty years coaching CEOs through the same positions. That doesn’t make me smarter than the people I work with. I’ve had more repetitions, and in this job those count for more than most people expect.
Opening theory for the CEO
Chess has a name for this kind of knowledge. The first dozen moves are where a strong player can drift into a lost position before the real fight starts, so masters don’t work them out at the board. They study opening theory, centuries of catalogued lines and known traps, and reach the middle of the game in a position they understand. The CEO job has its own opening: the first hundred days, the first board meetings, the first talent review, the first attempt to set priorities. Mistakes made there are expensive and slow to undo, and they’re the same mistakes every time.
When world champions prepare for a title match, they bring in “seconds,” strong players who help with the preparation. Nobody takes this as the champion admitting the second is smarter. The second’s job is to know the positions likely to come up, so the champion can sit down at the board already prepared.
That’s what I set out to build with the Chief Executive Operating System and ChatCEO: opening theory for the CEO role. The system covers the known lines for the first hundred days, how to run a board meeting, how to set priorities, and the traps that catch most new CEOs. A CEO still has to play the game. ChatCEO puts them in a strong position for the problems nobody can predict, and it lets them check at eleven at night whether a situation is familiar, without first deciding whether anyone is smarter than they are.
So the next time you’re inclined to work through something alone because nobody you could call is smarter than you, it’s worth asking a different question: who has seen this before?
Which problem on your desk right now have you decided is unique, and what would it cost you to find out it isn’t?