Natalie Fratto
1,863,638 views • 6:31

I met 273 start-up founders last year. And each one was looking for money. As a tech investor, my goal was to sort through everyone that I met and make a quick determination about which ones had the potential to make something really big.

But what makes a great founder? This is a question I ask myself daily. Some venture capitalists place bets based on a founder's previous background. Did they go to an Ivy League school? Have they worked at a blue-chip company? Have they built out a big vision before? Effectively, how smart is this person?

Other VCs asses a founder's emotional quotient, or EQ. How well will this person build teams and build rapport across customers and clients?

I have a different methodology to assess start-up founders, though, and it's not complicated. I look for signs of one specific trait. Not IQ, not EQ. It's adaptability: how well a person reacts to the inevitability of change, and lots of it. That's the single most important determinant for me. I subscribe to the belief that adaptability itself is a form of intelligence, and our adaptability quotient, or AQ, is something that can be measured, tested and improved.

AQ isn't just useful for start-up founders, however. I think it's increasingly important for all of us. Because the world is speeding up. We know that the rate of technological change is accelerating, which is forcing our brains to react. Whether you're navigating changing job conditions brought on by automation, shifting geopolitics in a more globalized world, or simply changing family dynamics and personal relationships. Each of us, as individuals, groups, corporations and even governments are being forced to grapple with more change than ever before in human history.

So, how do we assess our adaptability? I use three tricks when meeting with founders. Here's the first. Think back to your most recent job interview. What kind of questions were you asked? Probably some variation of, "Tell me about a time when," right? Instead, to interview for adaptability, I like to ask "what if" questions. What if your main revenue stream were to dry up overnight? What if a heat wave prevented every single customer from being able to visit your store? Asking "what if," instead of asking about the past, forces the brain to simulate. To picture multiple possible versions of the future. The strength of that vision, as well as how many distinct scenarios someone can conjure, tells me a lot.

Practicing simulations is a sort of safe testing ground for improving adaptability. Instead of testing how you take in and retain information, like an IQ test might, it tests how you manipulate information, given a constraint, in order to achieve a specific goal.

The second trick that I use to assess adaptability in founders is to look for signs of unlearning. Active unlearners seek to challenge what they presume to already know, and instead, override that data with new information. Kind of like a computer running a disk cleanup. Take the example of Destin Sandlin, who programed his bicycle to turn left when he steered it right and vice versa. He called this his Backwards Brain Bike, and it took him nearly eight months just to learn how to ride it kind of, sort of normally. The fact that Destin was able to unlearn his regular bike in favor of a new one, though, signals something awesome about our adaptability. It's not fixed. Instead, each of us has the capacity to improve it, through dedication and hard work.

On the last page of Gandhi's autobiography, he wrote, "I must reduce myself to zero." At many points in his very full life, he was still seeking to return to a beginner's mindset, to zero. To unlearn. In this way, I think it's pretty safe to say Gandhi had a high AQ score.

(Laughter)

The third and final trick that I use to assess a founder's adaptability is to look for people who infuse exploration into their life and their business. There's a sort of natural tension between exploration and exploitation. And collectively, all of us tend to overvalue exploitation. Here's what I mean. In the year 2000, a man finagled his way into a meeting with John Antioco, the CEO of Blockbuster, and proposed a partnership to manage Blockbuster's fledgling online business. The CEO John laughed him out of the room, saying, "I have millions of existing customers and thousands of successful retail stores. I really need to focus on the money."

The other man in the meeting, however, turned out to be Reed Hastings, the CEO of Netflix. In 2018, Netflix brought in 15.8 billion dollars, while Blockbuster filed for bankruptcy in 2010, directly 10 years after that meeting. The Blockbuster CEO was too focused on exploiting his already successful business model, so much so that he couldn't see around the next corner. In that way, his previous success became the enemy of his adaptability potential.

For the founders that I work with, I frame exploration as a state of constant seeking. To never fall too far in love with your wins but rather continue to proactively seek out what might kill you next. When I first started exploring adaptability, the thing I found most exciting is that we can improve it. Each of us has the capacity to become more adaptable. But think of it like a muscle: it's got to be exercised. And don't get discouraged if it takes a while. Remember Destin Sandlin? It took him eight months just to learn how to ride a bike.

Over time, using the tricks that I use on founders — asking "what if" questions, actively unlearning and prioritizing exploration over exploitation can put you in the driver's seat — so that the next time something big changes, you're already prepared.

We're entering a future where IQ and EQ both matter way less than how fast you're able to adapt. So I hope that these tools help you to raise your own AQ.

Thank you.

(Applause)