Recent events in the technology sector suggest that investors and lenders should be demanding a premium to cover the risk that a star entrepreneur will become an egomaniacal dictator. With each business cycle, it seems, old lessons must be relearned.
LONDON – Companies have long had to manage “key person risk,” even taking out insurance against the possibility of losing top executives through death, illness, or injury. But the collapse of the crypto exchange FTX, Meta’s plummeting share price, and the chaos at Twitter following its takeover by Elon Musk suggest that “key people” can pose a very different kind of danger. Call it “Napoleonic founder” risk. Perhaps investors and lenders should be demanding a premium to cover the risk that a star entrepreneur will one day become an egomaniacal dictator, burning money along the way.
LONDON – Companies have long had to manage “key person risk,” even taking out insurance against the possibility of losing top executives through death, illness, or injury. But the collapse of the crypto exchange FTX, Meta’s plummeting share price, and the chaos at Twitter following its takeover by Elon Musk suggest that “key people” can pose a very different kind of danger. Call it “Napoleonic founder” risk. Perhaps investors and lenders should be demanding a premium to cover the risk that a star entrepreneur will one day become an egomaniacal dictator, burning money along the way.