B00AFPTSI0 EBOK (3 page)

Guess which one David Hornik turns out to be?

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After Danny Shader signed with the other investor, he had a gnawing feeling. “We just closed a big round. We should be celebrating. Why am I not happier? I was excited about my investor, who’s exceptionally bright and talented, but I was missing the opportunity to work with Hornik.” Shader wanted to find a way to engage Hornik, but there was a catch. To involve him, Shader and his lead investor would have to sell more of the company, diluting their ownership.

Shader decided it was worth the cost to him personally. Before the financing closed, he invited Hornik to invest in his company. Hornik accepted the offer and made an investment, earning some ownership of the company. He began coming to board meetings, and Shader was impressed with Hornik’s ability to push him to consider new directions. “I got to see the other side of him,” Shader says. “It had just been overshadowed by how affable he is.” Thanks in part to Hornik’s advice, Shader’s start-up has taken off. It’s called PayNearMe, and it enables Americans who don’t have a bank account or a credit card to make online purchases with a barcode or a card, and then pay cash for them at participating establishments. Shader landed major partnerships with 7-Eleven and Greyhound to provide these services, and in the first year and a half since launching, PayNearMe has been growing at more than 30 percent per month. As an investor, Hornik has a small share in this growth.

Hornik has also added Shader to his list of references, which is probably even more valuable than the deal itself. When entrepreneurs call to ask about Hornik, Shader tells them, “You may be thinking he’s just a nice guy, but he’s a lot more than that. He’s phenomenal: super-hardworking and very courageous. He can be both challenging and supportive at the same time. And he’s incredibly responsive, which is one of the best characteristics you can have in an investor. He’ll get back to you any hour—day or night—quickly, on anything that matters.”

The payoff for Hornik was not limited to this single deal on PayNearMe. After seeing Hornik in action, Shader came to admire Hornik’s commitment to acting in the best interests of entrepreneurs, and he began to set Hornik up with other investment opportunities. In one case, after meeting the CEO of a company called Rocket Lawyer, Shader recommended Hornik as an investor. Although the CEO already had a term sheet from another investor, Hornik ended up winning the investment.

Although he recognizes the downsides, David Hornik believes that operating like a giver has been a driving force behind his success in venture capital. Hornik estimates that when most venture capitalists offer term sheets to entrepreneurs, they have a signing rate near 50 percent: “If you get half of the deals you offer, you’re doing pretty well.” Yet in eleven years as a venture capitalist, Hornik has offered twenty-eight term sheets to entrepreneurs, and twenty-five have accepted. Shader is one of just three people who have ever turned down an investment from Hornik. The other 89 percent of the time entrepreneurs have taken Hornik’s money. Thanks to his funding and expert advice, these entrepreneurs have gone on to build a number of successful start-ups—one was valued at more than $3 billion on its first day of trading in 2012, and others have been acquired by Google, Oracle, Ticketmaster, and Monster.

Hornik’s hard work and talent, not to mention his luck at being on the right sideline at his daughter’s soccer game, played a big part in lining up the deal with Danny Shader. But it was his reciprocity style that ended up winning the day for him. Even better, he wasn’t the only winner. Shader won too, as did the companies to which Shader later recommended Hornik. By operating as a giver, Hornik created value for himself while maximizing opportunities for value to flow outward for the benefit of others.

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In this book, I want to persuade you that we underestimate the success of givers like David Hornik. Although we often stereotype givers as chumps and doormats, they turn out to be surprisingly successful. To figure out why givers dominate the top of the success ladder, we’ll examine startling studies and stories that illuminate how giving can be more powerful—and less dangerous—than most people believe. Along the way, I’ll introduce you to successful givers from many different walks of life, including consultants, lawyers, doctors, engineers, salespeople, writers, entrepreneurs, accountants, teachers, financial advisers, and sports executives. These givers reverse the popular plan of succeeding first and giving back later, raising the possibility that those who give first are often best positioned for success later.

But we can’t forget about those engineers and salespeople at the bottom of the ladder. Some givers do become pushovers and doormats, and I want to explore what separates the champs from the chumps. The answer is less about raw talent or aptitude, and more about the strategies givers use and the choices they make. To explain how givers avoid the bottom of the success ladder, I’m going to debunk two common myths about givers by showing you that they’re not necessarily nice, and they’re not necessarily altruistic. We all have goals for our own individual achievements, and it turns out that successful givers are every bit as ambitious as takers and matchers. They simply have a different way of pursuing their goals.

This brings us to my third aim, which is to reveal what’s unique about the success of givers. Let me be clear that givers, takers, and matchers all can—and do—achieve success. But there’s something distinctive that happens when givers succeed: it spreads and cascades. When takers win, there’s usually someone else who loses. Research shows that people tend to
envy successful takers
and look for ways to knock them down a notch. In contrast, when givers like David Hornik win, people are rooting for them and supporting them, rather than gunning for them. Givers succeed in a way that creates a ripple effect, enhancing the success of people around them. You’ll see that the difference lies in how giver success creates value, instead of just claiming it. As the venture capitalist Randy Komisar remarks, “
It’s easier to win
if everybody wants you to win. If you don’t make enemies out there, it’s easier to succeed.”

But in some arenas, it seems that the costs of giving clearly outweigh the benefits. In politics, for example, Mark Twain’s opening quote suggests that diplomacy involves taking ten times as much as giving. “
Politics
,” writes former president Bill Clinton, “is a ‘getting’ business. You have to get support, contributions, and votes, over and over again.” Takers should have an edge in lobbying and outmaneuvering their opponents in competitive elections, and matchers may be well suited to the constant trading of favors that politics demands. What happens to givers in the world of politics?

Consider the political struggles of a hick who went by the name Sampson
. He said his goal was to be the “Clinton of Illinois,” and he set his sights on winning a seat in the Senate. Sampson was an unlikely candidate for political office, having spent his early years working on a farm. But Sampson had great ambition; he made his first run for a seat in the state legislature when he was just twenty-three years old. There were thirteen candidates, and only the top four won seats. Sampson made a lackluster showing, finishing eighth.

After losing that race, Sampson turned his eye to business, taking out a loan to start a small shop with a friend. The business failed, and Sampson was unable to repay the loan, so his possessions were seized by local authorities. Shortly thereafter, his business partner died without assets, and Sampson took on the debt. Sampson jokingly called his liability “the national debt”: he owed fifteen times his annual income. It would take him years, but he eventually paid back every cent.

After his business failed, Sampson made a second run for the state legislature. Although he was only twenty-five years old, he finished second, landing a seat. For his first legislative session, he had to borrow the money to buy his first suit. For the next eight years, Sampson served in the state legislature, earning a law degree along the way. Eventually, at age forty-five, he was ready to pursue influence on the national stage. He made a bid for the Senate.

Sampson knew he was fighting an uphill battle. He had two primary opponents: James Shields and Lyman Trumbull. Both had been state Supreme Court justices, coming from backgrounds far more privileged than Sampson’s. Shields, the incumbent running for reelection, was the nephew of a congressman. Trumbull was the grandson of an eminent Yale-educated historian. By comparison, Sampson had little experience or political clout.

In the first poll, Sampson was a surprise front-runner, with 44 percent support. Shields was close behind at 41 percent, and Trumbull was a distant third at 5 percent. In the next poll, Sampson gained ground, climbing to 47 percent support. But the tide began to turn when a new candidate entered the race: the state’s current governor, Joel Matteson. Matteson was popular, and he had the potential to draw votes from both Sampson and Trumbull. When Shields withdrew from the race, Matteson quickly took the lead. Matteson had 44 percent, Sampson was down to 38 percent, and Trumbull was at just 9 percent. But hours later, Trumbull won the election with 51 percent, narrowly edging out Matteson’s 47 percent.

Why did Sampson plummet, and how did Trumbull rise so quickly? The sudden reversal of their positions was due to a choice made by Sampson, who seemed plagued by pathological giving. When Matteson entered the race, Sampson began to doubt his own ability to garner enough support to win. He knew that Trumbull had a small but loyal following who would not give up on him. Most people in Sampson’s shoes would have lobbied Trumbull’s followers to jump ship. After all, with just 9 percent support, Trumbull was a long shot.

But Sampson’s primary concern wasn’t getting elected. It was to prevent Matteson from winning. Sampson believed that Matteson was engaging in questionable practices. Some onlookers had accused Matteson of trying to bribe influential voters. At minimum, Sampson had reliable information that some of his own key supporters had been approached by Matteson. If it appeared that Sampson would not stand a chance, Matteson argued, the voters should shift their loyalties and support him.

Sampson’s concerns about Matteson’s methods and motives proved prescient. A year later, when Matteson was finishing his term as governor, he redeemed old government checks that were outdated or had been previously redeemed, but were never canceled. Matteson took home several hundred thousand dollars and was indicted for fraud.

In addition to harboring suspicions about Matteson, Sampson believed in Trumbull, as they had something in common when it came to the issues. For several years, Sampson had campaigned passionately for a major shift in social and economic policy. He believed it was vital to the future of his state, and in this he and Trumbull were united. So instead of trying to convert Trumbull’s loyal followers, Sampson decided to fall on his own sword. He told his floor manager, Stephen Logan, that he would withdraw from the race and ask his supporters to vote for Trumbull. Logan was incredulous: why should the man with a larger following hand over the election to an adversary with a smaller following? Logan broke down into tears, but Sampson would not yield. He withdrew and asked his supporters to vote for Trumbull. It was enough to propel Trumbull to victory, at Sampson’s expense.

That was not the first time Sampson put the interests of others ahead of his own. Before he helped Trumbull win the Senate race, despite earning acclaim for his work as a lawyer, Sampson’s success was stifled by a crushing liability. He could not bring himself to defend clients if he felt they were guilty. According to a colleague, Sampson’s clients knew “they would win their case—if it was fair; if not, that it was a waste of time to take it to him.” In one case, a client was accused of theft, and Sampson approached the judge. “If you can say anything for the man, do it—I can’t. If I attempt it, the jury will see I think he is guilty, and convict him.” In another case, during a criminal trial, Sampson leaned over and said to an associate, “This man is guilty; you defend him, I can’t.” Sampson handed the case over to the associate, walking away from a sizable fee. These decisions earned him respect, but they raised questions about whether he was tenacious enough to make tough political decisions.

Sampson “comes very near being a perfect man,” said one of his political rivals. “He lacks but one thing.” The rival explained that Sampson was unfit to be trusted with power, because his judgment was too easily clouded by concern for others. In politics, operating like a giver put Sampson at a disadvantage. His reluctance to put himself first cost him the Senate election, and left onlookers wondering whether he was strong enough for the unforgiving world of politics. Trumbull was a fierce debater; Sampson was a pushover. “I regret my defeat,” Sampson admitted, but he maintained that Trumbull’s election would help to advance the causes they shared. After the election, a local reporter wrote that in comparison with Sampson, Trumbull was “a man of more real talent and power.”

But Sampson wasn’t ready to step aside forever. Four years after helping Lyman Trumbull win the seat, Sampson ran for the Senate again. He lost again. But in the weeks leading up to the vote, one of the most outspoken supporters of Sampson’s was none other than Lyman Trumbull. Sampson’s sacrifice had earned goodwill, and Trumbull was not the only adversary who became an advocate in response to Sampson’s giving. In the first Senate race, when Sampson had 47 percent of the vote and seemed to be on the brink of victory, a Chicago lawyer and politician named Norman Judd led a strong 5 percent who would not waver in their loyalty to Trumbull. During Sampson’s second Senate bid, Judd became a strong supporter.

Two years later, after two failed Senate races, Sampson finally won his first election at the national level. According to one commentator, Judd never forgot Sampson’s “generous behavior” and did “more than anyone else” to secure Sampson’s nomination.

In 1999, C-SPAN, the cable TV network that covers politics, polled more than a thousand knowledgeable viewers. They rated the effectiveness of Sampson and three dozen other politicians who vied for similar offices. Sampson came out at the very top of the poll, receiving the highest evaluations. Despite his losses, he was
more popular than any other politician
on the list. You see, Sampson’s Ghost was a pen name that the hick used in letters.