Putting your Reputation at Risk
Personal Name - Skin in the Game - Competitive Moat - Accountability
Hello, I am Nicolas Bustamante. I’m an entrepreneur and I write about building successful startups.
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I was recently struck by how powerful leveraging a personal name can be. One of the most valuable things in life is reputation. By using their name, people put their reputation at risk. They have more skin in the game, especially, as Warren Buffet noted that: "It takes 20 years to build a reputation and five minutes to ruin it." It's, of course, easier to hide behind an entity's name in case things go south. However, a good reputation is one of the most potent forms of a competitive moat. One's reputation is unique and thus can't be copied.
Today, calling a company with one's name seems a bit narcissistic - and complicated if there are several founders. There is, however, a long list of companies named after people, such as Air Jordan, Dyson, Bloomberg, or J.P Morgan. Although debatable for companies, I think it's necessary for service businesses such as law firms or financial organizations. Think about venture capitalists such as Andreesen Horowitz, Bezos Expedition, Khosla Ventures, or law firms like Baker McKenzie or Kirkland & Ellis.
The founder of such entities put their reputation at stake. It's so powerful. It's easier to trust someone with such skin in the game. Quoting Nassim Nicholas Taleb: "Products or companies that bear the owner's name convey very valuable messages. They are shouting that they have something to lose." Putting money at risk is essential, but it's nowhere close to putting your reputation at stake. I would argue that committing time and putting one's reputation at risk is the best way to showcase long-term commitment. Warren Buffet wrote decades ago: "We can afford to lose money—even a lot of money. But we can't afford to lose reputation—even a shred of reputation."
Conversely, a red flag should be changing an organization's name while keeping the same team or operating in the same market. There are hundreds of examples of financial firms or companies that blew up and started again after changing their name. They blame their partners, the governance or invoke a "black swan" to avoid taking responsibility.
Putting one's reputation at stake sends a strong signal. I've decided to use my name for every investment I make, every article I write, etc. I was in the process of creating an investment vehicle and thus thinking about a name. Now it's clear that the company should be named Nicolas Bustamante LLC to bear responsibility and put my reputation at stake!
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