What Everyone Gets Wrong About the Better Mortgage CEO

I worked for Vishal and saw a pattern of behavior that also exists in many other industry executives.

Photo by Dustin Humes on Unsplash

I used to work for Vishal at his VC firm, 1/0 Capital (which he ran while also running better) and at Climb Credit when he controlled the company. I was only there for a year, but it gave me a unique perspective on the current situation.

This Problem Goes Far Deeper Than Execution

It’s Friday and I’m seeing a lot about Better on LinkedIn, as well as many people writing about how this situation could have been handled better. For example when I clicked on LinkedIn’s story today, the top post was one discussing how what was needed was “some planning and preparation” is currently at the top of the story I clicked on LinkedIn. Another poster talks about how “[s]ometimes you should save a draft of an email and not send it in the heat of the moment.”

These takes aren’t wrong, but they miss the root cause of the problem. From what I saw, culture was already a problem back in 2017. I don’t want to violate any agreements, so I’ll just say that articles like this one and this one don’t surprise me. This week’s events are part of a pattern of behavior. Yes, it’s true that Vishal should have executed better. But better execution would have been a band-aid. It would have kept things from getting media attention, but it wouldn’t have actually changed anything. 

You Can’t Ask a (Highly Successful) Leopard to Change It’s Spots

Vishal is extremely talented at raising money. Having watched him pitch his ideas, he may be the best I’ve ever seen. He’s also great at coming up with ideas and persuading people that these ideas can work. When he’s on, he’s inspiring. He can fire up the whole company, or that room of investors.

I believe the things that make Vishal succeed here are the same reasons why he did not handle this layoff, or culture generally, well. If you’re going to invest $500 million in someone, you probably want them to be bold, completely confident in their vision, and willing to do anything to achieve it. That fire is amazing when turned outward, toward investors, but it can have terrible results when it’s turned on your employees. 

The Fix Has to Come From Outside the Company

I’ve worked with and for enough talented fundraisers who lacked people management skills to be confident that this dichotomy isn’t unique to Vishal. And this pattern of the public finding out that charismatic CEOS were also terrible managers keeps repeating -- we saw it with Uber, Theranos, and WeWork. It happens at countless s start-ups too small to make the news.

Companies are supposed to be unique entities from their founders. Yet when the founder is the one who raised the money needed to keep the company alive, and keeps raising that money, a mismatched set of incentives develops. From investors’ perspective, the founder is the company -- they were the one who was there during the rough early days, the one person they see the most, and the one who keeps bringing in money. Understandably, until it goes spectacularly wrong it’s hard to question someone who’s generating a return on your investment.

And that’s if the board even has the power to force change. When founders pursued Series A funding, there used to be a control trade-off. In exchange for taking investor money, the founder had to give up control of the board, essentially creating a check on the founder’s unlimited control of the company. But Mark Zuckerberg structured his funding deals so that even today he keeps control of Facebook, and this created a climate where more and more founders are now able to keep complete control of their companies.

I’m not sure what the fix is. Where investors are active, they should exercise more control in separating internal company governance from fundraising. Being good at raising money and generating ideas does not mean you’ll be good at the day to day. Identifying a CEO’s strengths and weaknesses and shoring up those weaknesses by, e.g., hiring someone else, should mean better ROI. 

Maybe It’s Time for Tech Workers to Unionize

If investors can’t fix this problem, maybe we need legislation or regulation. The general argument for regulation is that there are some areas where capitalism, unchecked, is destructive, where it doesn’t lead to optimal outcomes. With so many start-ups, we see a small number of people receiving huge benefits, while many more employees suffer? Why not require more checks on CEO power? 

Unchecked power also makes me question the legal treatment of startups as companies. When someone founds a company, the legal tradeoff is that in exchange for separating the company from themself, the founder receives benefits such as immunity from most lawsuits and different tax treatment. If, in fact, the company hinges on one person and the board is frozen by fear of losing that one person, is it really a company?

I don’t know how to fix this, but one step in the right direction may be unions. Historically, unions have let employees aggregate their voices so that, together, they have enough power to challenge leadership and demand meaningful change. Unions also have the collective power to speak to legislators and regulators. Historically, though, tech has been one of the least unionized industries. Start-up CEOs have said unions threaten their survival, but they say a lot of things, e.g. “dumb dolphins.” It’s time to start pushing back.