Why Your Best Innovators Are Always Out of Bounds: Just Look at Allbirds

Executives from large companies are always surprised when small start-ups go public. They dismiss it as a one-off outlier. They say it’s the financial market being irrationally exuberant. That’s the sentiment for sustainable shoemaker Allbirds. The footwear upstart has filed an initial public offering last week. It plans to raise $100 million through an upcoming IPO. With its previous valuation of $1.7 billion, Allbirds can now reach over $2 billion.

Apparel companies must be aghast. After all, Allbirds makes no money but has all the star power. And its cofounder Joey Zwillinger isn’t shy from poking at big companies like Nike and Under Armour. “One of the worst offenders of the environment from a consumer product standpoint is shoes,” he said. “It’s not the making. It’s the materials.” 

Allbirds is all about sustainability. Its shoes are made with merino wool that is ZQ certified. That demands sustainable farming and high standards of animal welfare. It also uses natural materials like eucalyptus fiber, castor bean oil, crab shells, and sugarcane. It maintains a carbon-neutral supply chain, which means no adding of CO₂ to our atmosphere. And here’s the best part: The insole, SweetFoam, made of carbon-negative green ethylene-vinyl acetate, gives a “walking on a cloud” sensation. It gently carves into the bottom of the sole to distribute your weight as you walk. The insole caresses your arches and makes walking feel like gliding. CNN calls Allbirds an “absurdly comfortable shoe brand.” 

These shoes are not cheap. Priced between $95 and $135, it’s anything but flashy. Its logo is subtle. There’s no swoosh, no stripes. It’s “the opposite of Nike.” And that’s the point. Allbirds is the uniform of tech workers in Silicon Valley. The company’s direct-to-consumer distribution and heavy internet presence has catapulted since the pandemic-driven boom of online shopping. It is even becoming mainstream. The message Allbirds has for its devoted fanbase is this: We are a B Corp, and our sustainability agenda is real. The environment is baked into our governance charter as our stakeholder. The interest of the planet ranks higher than our corporate bottom line. Goodbye to shareholder primacy.

So here’s a growth company with all the right propositions. But Allbirds may not be making money for a long while. It had lost $14.5 million in 2019, which widened to $25.9 million in 2020. Still, early investors are happy because consumers are loving Allbirds even more. Revenue continued to grow from $193.7 million in 2019 to $219.3 million in 2020. After all, didn’t Tesla and Amazon also make no money for a long while? Nike didn’t either decades earlier. 

The key question now then is why a traditional apparel company can’t create their own purpose-driven brands. Traditional incumbents are under enormous growth pressure. The strategic imperative is extremely clear. Consumer surveys have repeatedly revealed their top concerns; sustainable brands like Patagonia are going strong. And if additional money is needed, they can raise it from the outside. 

To be clear, we are talking about creating an offshoot just to hedge against the future. You don’t need to overhaul everything in one go. But for most incumbent brands, even doing that seems impossible. What gives?

Everyone Has Ego, but Successful Founders’ Are Often Bigger

When big companies work on innovation, they obsess over financial modeling, allocation of resources, and the entire budgeting process. They do all things that start-up founders consider as secondary or a total waste of time. What real start-up founders have their entire focus on is executing a product vision and generating market acceptance. Founders must get their product out quickly, and those who succeed will eventually adjust and adapt their offerings. They do so not because some high-level executives tell them to, but out of discernment of what the market is saying. All the while, these founders raise the next round of money from venture capitals. 

Think about this: What sort of person possesses both the conviction and the persuasiveness of an idea that only exists in one’s head? They must also have the tenacity to channel that inner drive into a market reality by building a devoted team. These leaders are not miracle workers who take orders. These are the fiercely independent, wildly creative superstars. They are resourceful. They are enormously productive at their best and sometimes literally change our world. But because they are also human, more often than not, they are insecure. It’s exactly that combination of productive insecurity and healthy paranoia, coupled with an outsized personality, energy, and vision, that makes them charismatic and egoistic at the same time. In short, they are narcissists. 

Being narcissistic sounds like a bad trait. It’s certainly not welcomed in a big organization. A bureaucracy prizes harmony and uniformity where everyone acts nicely. But starting a business is hard work. First, you need to nurture a healthy dose of overconfidence. Ninety percent of start-ups fail. To strike on your own like Steve Jobs or Jeff Bezos or Elon Musk is statistically irrational. So the relentless drive toward a product vision is likely driven by a vision about oneself. It’s the fear of not living up to that personal ideal that propels these entrepreneurs. They fear of not leaving a legacy. They fear there would be no dent in the universe after they are gone. 

Social psychologists tell us that when you combine overconfidence with an outsized ego of self-importance, coated with an unparalleled ability to persuade and convince, you get charisma. But charisma is an outward trait. Narcissists are deeply insecure. Their overconfidence is brittle. Yes, they feel entitled to the world’s attention, and they take risk on projects to fulfill their idealized self-image. But at the same time, they need constant reaffirmation from others. That’s why they are not merely innovators to satisfy some intellectual curiosity. They go to great lengths to curate a distinct self-image and then surround themselves with people who laud them with admiration. They take upon the yoke of the world to gain power and glory. They will insist on getting the respect that is overdue. 

Managing the Narcissistic Innovator

I am not saying remarkable innovators are all narcissists. But it’s difficult to think of many superstar CEOs or start-up founders who are impervious to hurt feelings. Harder still is to find high-powered executives who display a lack of interest in human niceties. Most leaders we see on the news don’t often appreciate when someone directly challenges them. And I think that’s because the pressure of self-selection in the business world is too strong. The executive compensation, stock options, and prospect of IPOs all mold an environment that attracts innovators of a specific kind. 

This in itself is not a bad thing. The world won’t be the way we know it without Andrew Carnegie, John D. Rockefeller, Thomas Edison, Henry Ford, and Edwin Land. A company can certainly harness narcissistic innovators, as they inspire people and shape the future. But for a Steve Jobs to emerge, there are countless fallen stars: WeWork’s Adam Neumann, Better Place’s Shai Agassi, Theranos’s Elizabeth Holmes, and the like. 

These fallen stars all follow the same arc: They somehow figure out an initial product market fit. They rapidly build an organization with a loyal following. They raise external funding further still. Then they either lose focus or insist on a vision that can’t cross from something of a novelty into the mainstream. And while they should focus on working through the technical kinks, they can’t stop seeking the public limelight. Instead of seeking honest feedback, they build an entourage of “yes” people. They value personal loyalty over competence. They become disillusioned and believe in their increasingly outrageous claims. And eventually, reality catches up. The organization implodes, the founders disgraced or indicted. 

Understanding the arc of a fallen innovator is as important as identifying the potential rising stars. For a company to reinvent itself, it’ll all be about the people. Once we understand what motivates the superstars, we can build in the right incentives to attract the needed talents. Meanwhile, understanding the danger that they will bring, you can set guardrails and agreements for ousting a charismatic leader if you need to, fully knowing that they would rather run the organization to the ground than to retire quietly. 

Thank you for reading—stay well. 

Yours,

PS. If you have ever worked with a narcissistic leader, you already know how difficult it is to deal with them. One must also weigh the pros and cons of staying. What’s been your strategy in dealing with such difficult situation? Share with us your thoughts. We love to hear from you.