Boards & Governance

Reading guide

This excerpt from Xuan Tian's Finance and Innovation: A New Framework examines the kind of capital that supports innovation. VC supports innovation through active governance, knowledge networks, and funding. It tolerates short-term failure and offers substantial rewards for long-term success—precisely the incentive structure innovation needs. A fund's own fundraising structure and liquidity constraints affect its investment behavior: research finds that young firms become more tolerant of failure after successfully raising a new fund. Career concerns can work in either direction, making young managers more conservative or more aggressive; researchers have not reached a consensus. The dates and methods of the studies cited in the book have not been individually verified.

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36Kr reported that Sequoia Capital restructured its US and European businesses on October 26, 2021. It established the permanent, open-ended Sequoia Fund as a parent fund; public-market holdings would return to it rather than face mandatory distribution. Sub-funds would remain closed-end, with investment returns throughout their life cycles flowing back to the parent. LPs could redeem annually, fee and carry arrangements would change, and employees could invest. Long-term ownership addresses the forced exits associated with traditional ten-year funds, allowing Sequoia to keep holdings that continue growing after an IPO. LP acceptance and the risk of concentrated redemptions test the structure, in contrast with traditional approaches such as Benchmark's. Fees, carry percentages, and fund sizes are those reported at the time, not today's terms.

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Robin opens by urging founders to think things through and prepare before fundraising. From Series A onward, VC capital demands rapid scaling and exponential growth, not leisurely product refinement and product-market-fit validation. VC has a sense of urgency. Ideally, everything is ready and only the east wind is missing; money is that wind. If nothing else is ready, do not rush to summon it—it could blow you over. The excerpt from Build asks what the money is for and the minimum needed. Your business may not suit VC. Large VCs are surprisingly risk-averse, scrutinize growth, signups, and cancellations, and answer to LPs. Alternatives include niche or regional VCs, angels, and corporate investment arms. A deal is about the person in the room who will become your director. Once you accept the money, you are tied to that investor: VCs can combine to fire founders, but founders cannot fire investors. Ask founders who have weathered difficult times with the partner what they are really like.

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Entrepreneurship brings difficult problems with no clear path; considering only your own preferences will never untangle them. One useful approach is to build an “inner board of directors”: imagine people with different perspectives sitting in your mind, and examine the problem from their viewpoints. A Shi, who leads Dedao's Listen to a Book Every Day team, imagines six decision-makers: a current paying user, a user ten years from now, an ordinary person without specialist knowledge who has a tribune's veto, a producer, a publisher, and an author. Another approach is to ask versions of yourself in different circumstances: if you had nothing, if you were leaving tomorrow, or if your future self ten years from now were beside you, what would you choose? Robin adds that this resembles Amazon's empty chair representing the customer in meetings.

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An excerpt from Tony Fadell's Build identifies three kinds of board failure. An indifferent board sees obvious CEO problems but avoids solving them because that would create too much work. A dictatorial board intervenes and controls so much that the CEO becomes like a chief operating officer, responsible only for execution. An inexperienced board does not understand the business or ask incisive questions; its companies are always short of cash, and it blames the market. Yet companies still need boards even when they are imperfect. Even the best CEO cannot act unilaterally: everyone needs accountability and a pressure-release valve. A CEO who gets this right can shape the board; the board under Jobs differed from the one under Cook. Robin recommends seeking directors with expertise you can consult and proactively asking for guidance suited to each stage.

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An excerpt from Tony Fadell's Build argues that the best board members are mentors first, giving as much as they take. It identifies four useful kinds of directors: well-connected mentors who have done it before and can recommend talent, such as Nest's Randy Komisar; suitable investors who understand the hardships of building a business and whom you would want to have dinner with; operators who have been CEOs and can explain operational realities when investors criticize; and specialists, such as the Gap CEO Apple recruited when entering retail. Incentives involve more than stock. Bezos even advises against joining other people's boards. Robin closes with a personal observation: average director compensation at Taiwan's listed companies is painfully low. This is a subjective impression without supporting data.

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Beginning with pressures in the Anthropocene, He Fan’s course draws three organizational metaphors from ecosystems. Tolerate failure: nature does not pursue zero mistakes, and small failures are the price of system learning. Embrace diversity: uniform systems may be highly efficient yet fragile, while diversity supports resilience. Adapt locally: solutions emerge on the ground, and small self-organizing networks can respond to change better than central commands. For companies, the question is how to balance centralization and decentralization. Ecological metaphors offer inspiration rather than proof; the claim that zero tolerance for failure inevitably causes greater disaster is the original course’s view.

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A translation published by 36Kr’s translation desk compares Musk’s 2018 Tesla Model 3 production hell with his actions after taking over Twitter: layoffs, sleeping at the office, and bankruptcy warnings. Former Tesla managers and management scholars question whether crisis-driven management can build a stable company, warning of a culture of fear. Robin comments that it may be a good growth strategy for a rapidly expanding startup, but its suitability for a mature company such as Twitter remains to be seen. Perhaps the turmoil is deliberately intended to force transformation. Layoff figures are quotations from reporting in 2022.

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Robin’s personal impression is that YC selects teams for their promise rather than the quality of the initial idea. Airbnb’s idea was doubted, but selling cereal impressed Paul Graham; reportedly, more than a third of teams change ideas during the program. Changing direction early is therefore not the problem—pivoting promptly matters more. A case in Gao Chengzhang Siwei describes Apple’s integration of podcasts into iTunes devastating Evan Williams’s Odeo platform. The board asked whether he had other ideas; a hackathon surfaced Biz Stone and Jack Dorsey’s group-texting project, later Twitter. The YC selection account is Robin’s impression; quotations have not been independently verified.

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Robin’s reading notes on Tsinghua professor Xuan Tian’s Finance and Innovation: A New Framework: statistical analysis, experimental research, and a literature review offer empirical evidence on how U.S. capital markets and venture capital affect corporate innovation. Key points include VC’s contribution to innovation through active involvement, board seats, governance frameworks, and knowledge transfer that help companies avoid detours. Tolerance for failure supports innovation, but fund life cycles and fundraising difficulties constrain VCs’ risk tolerance. The resulting inference is that established, reputable firms face fewer capital constraints and tolerate more risk and failure; funds with lives of 10–12 years can tolerate failure better than those lasting 3–5 years.

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Pixar is synonymous with creativity and innovation, while Steve Jobs participated in, influenced, or led two great industry transitions: mainframes to PCs and PCs to smartphones. Yet even Jobs had to respect capital and its influence when deciding Pixar’s future. He chose to take the company public when its first animated feature, Toy Story, opened, persuading creatives and engineers after intense internal debate. After the IPO, he worked toward Disney’s acquisition of Pixar and became Disney’s largest individual shareholder and a board member. Ten years of exile had made his understanding of capital more mature and perceptive.

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An observation from an afternoon corporate-governance class: topics like this have little to do with an ordinary, cash-strapped person. In this #WhyStartABusiness post, Robin says that if you can talk Alibaba’s 18 founding members into joining, as Jack Ma did, and persuade Joe Tsai to leave a job with an eight-figure annual salary, move to Hangzhou, and accept RMB500 a month, you may be ready to begin that great journey.

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A technology giant’s rebirth. Nokia once dominated smartphones, but lost over 90% of its value in four years after the iPhone and Android arrived. Experts thought bankruptcy was only a matter of time. Yet under chairman Risto Siilasmaa, its enterprise value grew more than twentyfold from 2012 to 2016, and it became the world’s second-largest 5G communications-equipment giant. The book offers a firsthand account of the crisis, courageous changes of course, and the details of rebuilding, reading like an adventure novel. At its core are “paranoid optimism” and entrepreneurial-leadership principles for both prosperity and crisis. Robin’s recommendation is simple: browse it when you have time.

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Two Western oil giants faced decarbonization blows on the same day. A historic Hague District Court ruling ordered Shell to cut total group carbon emissions by 45% by 2030. Meanwhile, a decarbonization-focused investment fund won two seats in Exxon Mobil’s board election. Traditional oil-industry power structures on both sides of the Atlantic faced a major challenge, potentially marking the beginning of the oil giants’ twilight after a century of dominance. A record of governance and ESG forces reshaping an industry, as of May 2021.

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When Robin worked in underwriting, a supervisor remarked that women generally outperformed men of the same age in expertise, depth of thought, and expression. Yet securities work sometimes meant accompanying clients into uncomfortable or risky settings, so the firm lowered its hiring bar for some men to spare female colleagues those situations. Similar differences appeared at school: girls often had stronger grades and greater maturity. But broader conditions meant that 30 years later, most senior executives were again men. Board gender ratios became so unequal that reserving seats for women was actively encouraged and rewarded in governance evaluations and ESG. A candid observation on workplace gender disparities.

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A reprint of Vista magazine’s account of the documentary Monopoly: Who Owns the World? The article argues that the apparent competition between Pepsi and Coca-Cola, or Apple and Android, is an illusion: Vanguard, BlackRock, and State Street, dubbed the “Big Three” in University of Cambridge research, are the largest shareholders of industry leaders across almost every sector and collectively manage more than $15 trillion. It goes on to describe how passive index funds separate ownership from control, BlackRock’s close relationships with the Federal Reserve and the White House, and concerns that concentrated share ownership could weaken competition. (A reprinted article; its figures refer to around 2021.)

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When raising capital, your priority is not just to discuss the business but also yourself. First, you are the real competitive advantage. A Stanford survey of hundreds of investors found that founders, management teams, and their experience and passion were the most important investment factors. Introducing yourself reveals capabilities and values, helping investors assess company culture. Second, closeness builds trust. Baylor research involving 600 executives linked trust to leaders’ technical competence, conflict-resolution ability, and integrity. Share your background, inspiration, motivation, experience, and mission. A Harvard-administered global survey found all institutional investors valued ESG and how corporate purpose was communicated. Third, investors want to know whether you can withstand pressure. Nervousness may be read as an inability to handle difficult business decisions. Begin your presentation by speaking confidently about yourself.

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Excerpts from 領導 (Leadership), coauthored by Manchester United’s legendary manager Ferguson and Sequoia Capital chairman Michael Moritz. Moritz divides the leadership lessons Sequoia learns from other fields into two categories. Internally, they concern recruiting, team building, standards, motivation, avoiding complacency, and removing underperformers. In portfolio companies, Sequoia is a minority shareholder alongside brilliant founders in their thirties who are driven and sometimes volatile; it can help only through persuasion, encouragement, sensible advice, and patience, with results that may not be immediate. Ferguson refused to define Manchester United by its opponents: the club’s destiny was shaped inside Old Trafford, and money could not buy success. The same applies in Silicon Valley. No company becomes great by continually reacting to competitors. Page and Brin built Google because existing search engines dissatisfied them. Successful founders focus on what they control and stay off powerful rivals’ radar for as long as possible. Novell, Netscape, and others learned the cost of attracting Microsoft’s attention at its peak; Google’s low profile meant that by the time Microsoft noticed it, it was too late to respond.

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Andrew Chen’s newsletter explores the dark side of being data-driven. Data measures yesterday rather than tomorrow and can produce analysis paralysis: intuition may provide an answer in seconds, whereas A/B tests take weeks. The tyranny of the majority can reduce a product to a compromise around averages. Noise and false signals abound, correlation is not causation, and historical data struggles to predict a future that has never occurred. Startups competing with giants such as FAANG need intuition, speed, and bold moves rather than copying those companies’ data processes. The ideal is to be data-informed, neither blindly data-driven nor data-ignorant.

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Cai Yu reviews Yang Haoyong’s battle between Guazi and Renrenche, where capital-driven momentum was a key weapon. A month-long stealth expansion into 40 cities and more thanRMB 100 million in advertising produced a gap of 1,700 versus 700 transactions. A Series A of over$200 million then constrained the rival’s fundraising options. Spending created barriers, and capital momentum drove the market toward a 9:1 split. Do not take comfort in “just do your own job well” or “the market is large enough for everyone.” Cai also cautions that capital is only the foundation; data and algorithmic moats form the deepest layer.

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There was no specialist venture capital industry in the late nineteenth century. Breaking with his usual practice, Morgan backed Edison's electric-light venture in 1878 despite his father's objections. At the end of 1880, he invested another US$1 million in a central power station in Manhattan. He also helped Edison restructure his board and remove dissatisfied investors. Their honeymoon ended in 1892: after discovering that Thomson-Houston's profit margin was more than twice Edison's, Morgan backed a merger. Edison learned that he was losing his company without having been consulted; his name disappeared from General Electric. With his stake down to 10%, he angrily sold out. From the founder's perspective, this was capital's ruthlessness; in hindsight, General Electric became one of the twentieth century's great industrial companies. Edison's stubborn opposition to alternating current also suggested that he was not the person to lead the electrical industry into the new century. Robin's takeaway: founders must recognize the limits of their abilities. Success need not be led by me, but I should have a part in it.

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Robin’s commentary begins: when a problem arises, solve it. KKT’s auction was suspended because there were insufficient qualifying lots, and the offering would switch to bookbuilding and allocation. The central issue was how to assign a reasonable value to companies such as KKT. Robin proposed revisiting the introduction of a cornerstone-investor framework: an IPO allocation mechanism for potentially promising startups whose valuation models are unfamiliar to the market. The issue had already been discussed in 2018. Then Financial Supervisory Commission Chair Ku Li-hsiung said the Taiwan Stock Exchange had been asked to collect international examples and study bringing in cornerstone investors before an IPO, within specified ownership proportions and price ranges, to strengthen a company’s investment value and stabilize its share price after listing. Discussions later stopped after GGR listed in the United States; supporting regulations and allocation fairness still needed work. The 2018 report discussed several related issues. Removing the profitability requirement for converting privately placed securities into publicly offered securities after three years could revive problems involving cheap allocations to selected investors and arbitrage opportunities. Unequal voting rights could undermine governance in a market where retail investors accounted for more than 60%. The exchange president had visited Gogoro to understand its needs: its large capital base made an auction unsuitable, and an IPO would require cornerstone investors to subscribe for a large amount. The securities dealers association suggested exempting IPOs of at least NT$2 billion from priority use of auctions, allowing cornerstone investors to subscribe for 40–60%, excluding company insiders and related parties, and imposing a six-month to one-year lock-up.

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Robin compiles Liu Songbo’s views from Dedao’s 30 Lectures on Corporate Governance. Startups easily fall into disputes over interests because business models, the importance of resources, and individual contributions continue changing dramatically after the equity structure is set. Haidilao’s Zhang Yong and Shi Yonghong agreeing to transfer shares after initially holding 50% each is a positive example; the dispute between Li Ziqi and Weinian is a cautionary one. The solution is to leave room for adjustment in equity design. First, reserve an equity pool rather than allocating all shares at once. Second, use vesting, granting equity progressively against milestones. Third, prearrange exit mechanisms, including conditions and prices for recovering equity. Ning Xiangdong also proposes a “pivotal minority”: two shareholders with 50% each give up 0.5% apiece, allowing an impartial third party trusted by both to hold 1% and mediate disputes. The post closes with Xu Xiaoping’s observation: do not pursue shared interests through brotherhood; build brotherhood through shared interests.

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In a July 2012 open letter to partners, Ma Huateng drew inspiration from Ren Zhengfei’s 管理的灰度 (Gray Areas in Management, descriptive title) and distilled Tencent’s fourteen years of experience into seven principles for creating a living organization. Demand alignment: user needs are the product’s core. Tencent product managers follow a 10/100/1000 rule—ten user surveys, following one hundred user blogs, and collecting one thousand user-experience reports each month. QQ Mail turned around after being rebuilt. Speed: take small, rapid steps and iterate quickly, accepting imperfection while moving rapidly toward perfection; nobody stays five seconds behind someone else in understanding. Flexibility: proactive change matters more than reacting to change. Redundancy: tolerate failure and some waste. WeChat emerged from competition among several internal teams. Openness and collaboration: lessons from the 3Q conflict mean a platform must choose what to do and what not to do. Capacity to evolve: Kodak invented the digital camera but organizational rigidity left it on the shelf; mechanistic organizations can become green deserts. Innovation: innovation is an outcome, not a cause, emerging naturally from the gray areas of a living organization.

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This installment of Daily Lessons for the Elite introduces five tools that strategy scholar Richard Rumelt uses for strategic analysis. First, compare like with like: New York subway construction costs US$3.5 billion per mile—seven times the global average, four times London’s, and more than ten times Paris’s. The comparison reveals a problem; Paris has a design review committee that controls costs. Second, understand human behavior: a department manager’s attractive cash-flow forecast serves a competition for headquarters’ resources, highlighting good news and concealing bad. When knowledge, resources, and decision-making authority sit with different people, misleading claims arise. Most people avoid confronting their company’s real difficulties. Third, analyze data: detailed costing at a Brazilian window-blind company showed that large blinds were the real money-makers. A women’s clothing chain’s profitability depended on location and traffic rather than store size. Robin adds that breaking down startup pricing and subscription revenue often reveals losses. Fourth, use established frameworks: shipping’s overcapacity creates a prisoner’s dilemma; airline code-sharing and point-to-point services offer analogies. Fifth, seek insights from the front line: Kodak was defeated not by digital cameras but by a new ecosystem in which people stopped printing photographs.

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The excerpts trace private equity’s ‘vulture’ reputation to deals such as KKR’s acquisition of RJR Nabisco, then present counterarguments: acquisitions by competitors often cause more job losses; private-equity-backed companies perform better after returning to public markets than other newly listed firms; and their bankruptcy rates are comparable with those of other companies. Robin adds Taiwanese examples—Fusheng, Nien Made, and Primax—and recalls participating in Fusheng’s return to the public market. He closes by hoping for more responsible capital markets that pay greater attention to labor, the environment, social issues, and diverse values, and contribute to sustainability.

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Robin observes that May and June are shareholder-meeting season, yet Taiwanese companies generally do not take the preparation of their operating reports—the counterpart to overseas shareholder letters—seriously enough. Leaders of great companies abroad value this annual opportunity to report directly to shareholders in writing. He argues that Taiwan still has a long way to go in corporate governance and can start by taking shareholder reporting more seriously. The closing excerpts describe good shareholder letters: treating readers as business partners, speaking candidly, and emphasizing long-term thinking.

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Andy Grove asked Gordon Moore: If we were replaced, what would the new CEO do? Return to first principles when making major decisions.

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The post ends with a Lao Qi’s Reading Circle tag. It is a Chinese summary of The Ride of a Lifetime, not Iger’s verbatim words. The original post is retained in full; see the notes in the body for source details and limitations concerning figures and quotations.