Business and finance 27 September 2019 Mad, bad and a great investment: the allure of the lunatic CEO Why investors love a loose cannon. getty images / Kelly Sullivan Sign UpGet the New Statesman\'s Morning Call email. Sign-up In March 2014 the enigmatic founder of Tesla Motors, Elon Musk, travelled to London to announce the sale of his company’s Model S electric car in the UK. After the launch, I asked Musk if he knew that Larry Page, the founder of Google, had recently said he would leave his fortune – more than $30bn – to him. What, I asked, would he do with the money? “I’d use it to build a city on Mars,” he said. Then he shrugged, grinned, and stared at me in an odd, intense way. Before he was ousted as the CEO of The We Company this week, Adam Neumann appeared to exhibit a similar mindset. Neumann described WeWork not so much as a company than as a mission to change the lives of hundreds of millions of people, to “elevate the world’s consciousness”. And not just this world: in 2015, Neumann also declared his intention to open a WeWork on Mars. This tendency is particularly strong among the Silicon Valley start-ups that have supplied much of the growth enjoyed by stock markets in the past decade, and there are good reasons to think that it is part of their success. In an economy drunk on the promise of innovation, leaders who are prepared to make outlandish promises – and to make them with staring, unshakable conviction – are the ones most likely to secure venture capital. Some investors actively encourage this mindset. When Neumann received a $3bn investment from SoftBank’s Masayoshi Son, he was told that he was “not crazy enough”. This was to a CEO who was said to roam WeWork’s offices barefoot, smoking marijuana and issuing tequila shots, who declared his intention to become the world’s first trillionaire, who has invested in a company that he thinks will help him to live forever. Elizabeth Holmes built a medical technology company called Theranos without submitting any of the company’s technologies for peer review or presenting data to support its claims. Instead, its success seems to have been driven almost entirely by the charisma and the self-belief of Holmes herself, who described her company’s Edison machine as “the most important thing humanity has ever built”. Holmes’s planet-sized confidence was also paired with idiosyncrasies. She adopted an unusual, artificially deep voice and obsessively copied the clothing and mannerisms of Steve Jobs. But far from deterring investors, Holmes’s obsessive manner and unblinking stare helped persuade some of the world’s richest people, including Rupert Murdoch and Betsy DeVos, the current US education secretary, to put hundreds of millions of dollars into her company. By 2014 it was valued at $9bn. It is not only that transgressive leaders bewitch investors. A megalomaniac at the helm will drive the company faster than a cautious listener. When the competition is moving fast and breaking things, an appetite for speed and destruction becomes an asset. And if the person at the top is sufficiently unpredictable and unscrupulous, those around them also feel empowered to overstep the normal boundaries. When Uber executives threatened to spend a million dollars investigating the personal lives of any journalist whose reporting they deemed negative, or ignored repeated complaints of sexual harassment within their company, they acted within a culture enabled and led by the brash, cheerfully amoral Travis Kalanick, who nicknamed the company “Boober” and boasted that he could identify users that had had one-night stands. But as Uber’s “bros” held push-up competitions between their desks and visited escort bars, the company moved at exceptional speed, seemingly unfettered by moral qualms or public protests. The rewards for this rapid growth were huge; investors joined funding round after funding round until Uber became the most valuable privately owned start-up company in the world. CEOs of this mindset have always been part of business culture, which rewards certain personality types, but they appear to be becoming more common. If the market for rapid, profitless growth needs unstable, unethical people to drive it, is it a stable, ethical thing to invest in? Shareholders are loyal primarily to their own pockets, and a highly effective lunatic is only useful for so long. Neumann and Kalanick, among others, oversaw periods of explosive growth and excitable investment, but were rapidly unseated when they had served their purpose. Not long after I met Musk I interviewed another tech CEO, Palmer Luckey, the founder of the virtual reality company Oculus. Luckey arrived at the interview in Los Angeles shoeless, his eyes bloodshot. He was 22 years old and his company had just been acquired by Facebook for $3bn. As in other cases it seemed it might even be a selling point for Oculus, and by extension Facebook, that they had bet the GDP of a small country on a person with almost no experience of business. And as in other cases, Luckey left rapidly when his personality and views became bad PR. Nobody could really be expected to feel sorry for these people, who typically continue to enjoy fabulous wealth after they leave their companies. But it may be time to question the health of a system that gives the most ammunition to the loosest cannon. › Rosie Winterton becomes ninth candidate for Speaker Will Dunn is business editor of the New Statesman. Subscribe For more great writing from our award-winning journalists subscribe for just £1 per month!