Creative Types and Management Types

the tension between the two

Marc Andreessen said,

the people who are qualified to be managers of large organizations are not themselves the kind of people who become bourgeois capitalists. They’re the other kind of person. And so they’re often good at running things, but they generally don’t do new things. They generally don’t seek to disrupt, or seek to create, or seek to invent.

He was riffing on James Burnham’s distinction between what he called bourgeois capitalism and managerial capitalism. In the former case, an owner runs the firm. In the latter case, a class of managers run the firm. Elon Musk is an owner who tries to run his businesses. Nowadays Google appears to be run by managers.

The personality difference between a creative person and a manager has long been an issue for me. I realized quite late that I am strongly in the creative camp. This would seem to be a fit for academia, but that turns out not to be the case. Academia is actually very resistant to original thinking. Max Planck reputedly said that science advances one funeral at a time.

Creativity is even a worse fit at the Fed, where I had my first job. That is understandable. A central bank’s job is to promote stability, not to run experiments. But in practice what the Fed tends to stabilize is its bureaucratic outlook, procedures, and turf, which may or may not prove conducive to stability in the banking system or the economy.

In my next job, at Freddie Mac, creativity was welcome in the areas concerned with financial strategy. That was because Freddie was transitioning from a sleepy government agency to a shareholder-owned firm, and there was now an incentive to seek out profit opportunities.

Other people recognized my creative impulses, and they assumed that I could not manage. “You have no idea how to implement” was a refrain I heard often.

Now I can see the contrast between the creative person and the manager. A creative person values novelty. A manager values reliability. There is an inevitable trade-off between the two. You cannot maintain a reliable business process if you are constantly tinkering with it.

In Big 5 personality terms, a creative person might be high in Openness, low in Agreeableness and somewhat low in Conscientiousness, while a manager is likely to be high in Conscientiousness, high in Agreeableness, and somewhat low in Openness.

In fact, I am conscientious about keeping promises, but I rarely follow up on my ideas. I would rather keep coming up with new ideas than pursue any one of them to final implementation. Much as I resented it, my critics at Freddie Mac were right about me.

If a creative person is determined to succeed, he may stick with an initiative long enough to achieve success. But somewhere along the way, he either needs to develop a manager’s personality or else find a manager who will handle the functions that the creative person lacks patience to maintain, such as training, accounting, and management systems. At Freddie Mac, accounting was always the poor relation, and that resulted in the ousting of Freddie’s leadership several years after I left. That is a whole other story.

One of my proudest moments as a creative type was convincing Freddie Mac to use credit scoring as the backbone of an initiative to improve the speed and decision quality of its underwriting. But as soon as the project was approved, I was unceremoniously tossed off the project, leading me to leave the firm in humiliation.

I had an idea that the World Wide Web could disrupt the mortgage and real estate industries. This was early in 1994, and I launched one of the first commercial web sites to try to attempt this. I was so determined to prove wrong those who doubted my ability to implement that I did something I had not done before or since: I networked like mad, asking for advice and assistance from many people. In the end, it worked out ok.

I think it is normal in the life cycle of firms for creative types to give way to management types. The result is that incumbent firms have difficulty maintaining their creative edge, and eventually they can be disrupted by start-ups.

This dynamic has played out in interesting ways at various large tech firms. At Google, the company seems to have lost its creative edge. Xerox famously “fumbled the future,” developing the key innovations of personal computing without making more than a half-hearted attempt to turn its inventions into a business. And Google seems to have done something similar with machine learning, developing the crucial “transformer” method but losing the group that was responsible and letting other firms take the lead.

At Facebook, Stripe, and Tesla, the creative founders retained control, so those firms have not transitioned to managers. I think that at Stripe the Collison brothers are working very hard to try to balance creativity with management. I am not sure that Mark Zuckerberg and Elon Musk are as balanced—they may be too excited by novelty and not appreciative enough of reliability.

At Apple and Amazon, the founders are no longer there. It is probably time for the focus to be on management, not on creativity. But the high P/E ratios at those firms indicate that shareholders expect creativity. I think that those shareholders should be careful what they wish for.

My main point is that one should not think simply that creative types are good and management types are bad, or conversely. For startups, creativity is most important. But as a firm matures, it needs solid management. The transition is often painful and unpleasant. A firm will last longer if it can manage the transition from novelty-seeking to process reliability without completely losing its ability to foster creativity.