There are two reasons why people tend to speak with needless complexity
There are two reasons why people tend to speak with needless complexity
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Struggling with who should be on your board?


Call an electrician.


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May 3, 2021 


Thanks to our friend and colleague Adam Epstein


There are two reasons why people tend to speak with needless complexity about most issues:
(1) They have a vested interest in making others believe the issue is more complicated than it really is; or 
(2) They don’t actually understand the issue.
Case in point: nearly every discussion about the composition of corporate boards.
I recently listened to a boardroom “expert” try to explain who should and shouldn’t be on corporate boards to a smorgasbord of bemused looking Zoom attendees.
About 300 seconds into a 45-minute presentation, a former buy-side colleague texted me: “Is there some app to decode this?
We could give our electrician example in, what, 90 seconds, and everyone would understand this issue for the rest of their lives!”
He was right. Here’s the electrician example.
An electrician is working in your basement, and someone asks you to go downstairs, observe the electrician, and report back whether they are doing a good job.
Since you’re devoid of any electrical knowledge you’ll probably try and deduce their expertise from contextual clues.
For example:
(1) Is the electrician’s appearance professional and consistent with a skilled tradesperson? 
(2) Does their body language connote confidence and purpose? 
(3) Do they seem to have the proper tools for the job? 
(4) Are there any clear signs that they are unskilled (e.g., flummoxed comportment, sparks, flickering lights, burning smell, etc.)?
When you return from the basement, you report back that based on what you saw they seem qualified and proceeding ably. The futility of the entire exercise is laid bare, however, when someone asks the seminal question, “In actuality though, how can we rely on your assessment of the electrician, when you don’t… know anything about electricity?”
And the answer, of course, is: you can’t.
Yet this happens every day in thousands of public companies.
Consider most biotech companies for example. One key enterprise risk they typically share is a recurring need for external growth capital. Yet the overwhelming majority of biotech companies have no board members who are experts in capital markets or corporate finance.
So how do they oversee that key enterprise risk for shareholders?
Well, since they lack the requisite expertise, those boards are limited to some version of deductive steps one through four. In other words, they can’t possibly know whether the company’s capital formation strategy and tactics are good for shareholders or not.
[Cue image of smoldering wires in the basement wall.]
With that, I have to get back to the boardroom chair explaining board composition; only 40 more minutes to go...
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