Tales about the role of ego and narcissism in startup entrepreneurship
The game of big egos
For years it has been in fashion to portray startup founders in the media as eccentric and egotistic maniacs driven by a vision to rattle the world and their ego. Particularly stories of high-profile failures often focus on the hybris aspect of their founders as a key narrative of their explanation.
Roaming startup events and conventions, we can spot founders motivated by egotistical motives and narcissism. Though, we also see shy and humble entrepreneurs who appear to be the opposite. The conclusion that the narcissists are the businesspeople and the humbles are the techies is oversimplified since there is also a fine line between narcissism and healthy overconfidence.
When avoiding working with narcissists, we need to be better educated. The same is true when we want to figure out how to manage our egos best to provide value to our companies.
Narcissism and Ego
A study by Arijit Chatterjee of the ESSEC Business School in France found that narcissistic tendencies can impact a company’s results. However, it is important to note that different types of narcissism can manifest in startup entrepreneurs.
The first type of narcissism in startup entrepreneurship is the grandiose narcissist. A sense of entitlement and superiority characterizes this type of narcissist. They believe that they are unique and deserve special treatment. They are often preoccupied with fantasies of success, power, and recognition. They tend to be very charming and charismatic, which can help them win over investors and employees. However, their grandiose sense of self can also lead them to take unnecessary risks and make impulsive decisions.
The second type of narcissism in startup entrepreneurship is the vulnerable narcissist. A deep-seated sense of insecurity and inadequacy characterizes this type of narcissist. They are often hypersensitive to criticism and rejection and may lash out when threatened. They may also engage in self-pity and martyrdom, portraying themselves as victims of circumstance. While they may be less outwardly confident than grandiose narcissists, they can still be challenging to work with and may struggle to build successful businesses.
The third type of narcissism in startup entrepreneurship is a communal narcissist. A need for admiration and recognition from others characterizes this type of narcissist. They are often driven by a desire to be seen as generous and altruistic and may use their company as a platform to promote their image. They may also be overly concerned with their employees’ well-being, neglecting the company’s needs. While communal narcissists may be well-liked by their employees, they may struggle to make tough decisions and prioritize the business’s success.
The tale of the narcissistic entrepreneur
Narcissism is an extreme form of a feeling of grandiosity, overconfidence and a lack of empathy, among others. As entrepreneurs, we are familiar with those three effects from time to time. While an entrepreneur gets punched in the face most of the time (figuratively – I hope), the highs in between spark a certain feeling of grandiosity. Founders need overconfidence to start a company against all statistical odds and to persevere when nobody but themselves believes in the vision. And in tough decisions, it helps to distance from the topic to retain a calm mind emotionally. So does this make founders narcissistic?
In a representative study, we found that founders are not more or less prone to narcissism than other demography. This finding remains true when corrected for other factors like gender, age, or education. The difference in perception is caused by the situational necessity to show parts of a narcissistic personality during the journey of founding a startup. In fact, narcissism drops slightly for late-stage company founders.
Productivity boost through narcissism
In general, narcissism has adverse effects over the long run on startup entrepreneurship. We found a model in which we find that narcissism has a negative impact on the ability to raise funds. Apparently, the startup community and venture capitalists have an excellent bullshit radar. The whole truth, though, is more nuanced than this.
At the beginning of the entrepreneurial journey, narcissistic tendencies can boost productivity. Higher narcissistic tendencies correlate with an ability to self-motivate and put in long hours for a vague business idea. IT also positively correlates with a capacity to convincingly present an early business idea to investors, prospective clients and employees. The more advanced the journey, these effects turn negative. Leading teams and building strategy is a subspecialty negatively affected by narcissistic leaders and often results in a high personal turnover.
All of us show narcissistic tendencies from time to time. Those tendencies are not static but change with time and circumstance. Thus, there is no means of suppressing those tendencies but to use them to our advantage. When feeling narcissistic, we should learn to be aware of our appearance and its effect on others and act accordingly. We should also turn to tasks that profit from it, like motivational speaking and concentrated work. When we feel humbled, on the other hand, we should do the same and focus on leadership and strategy work instead.
The basis of these claims
We conducted a study among 650 startup founders from Germany, Austria and Switzerland in 2022. The survey responses are representative of the overall German startup landscape.
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