The Margin of Trust

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“Bridging the Digital Divide”

What does that actually mean? We reference this term a lot and it's a metaphor that speaks to me. As I think of crossing a chasm, that requires a bridge to the other side (unless your Evil Knievel). The terrain on one side of that chasm can be very different from the other, making it essential for the bridge to level the variance between these seemingly opposing bodies for any one to reach the other side safely.

As we’ve thought about this metaphor for our business, it’s attempting to answer the question “How do we cross the chasm of digital transformation for these industries?”. The past terrain of these industries is universally different from their future paths - it’s not as simple as teleporting to the other side and many have found that out the hard way when attempting a disruptive mindset. As a firm, we believe our role is to help bring these sides together to establish a path that is more manageable and feasible. In practice, that means bringing investors, innovators and incumbents together on a shared journey to cross the digital transformation chasm.

Yesterday, we hosted >400 investors, innovators and incumbents in the climate community with the explicit mandate of facilitating digital transformation of the energy sector. This group represented trillions of dollars of investable capital as well as the leaders of organizations representing millions of employees. This is an incredibly ambitious scope and it was achieved via the network AND work of our 6 person team (with special kudos going to our Climate Product Owner, Grace Penders). Is this work easy? Hell no! 

Some folks question how and why we do events like this and I believe the answer is simple - TRUST. We don’t want to just tell people about the power of our network, we want to show it. We want these stakeholders (founders, co-investors and industry leaders) to know that when we commit to working together, that we can bring different facets of the industry together upon common goals. While we are immensely proud of our research, we recognize that it stands in isolation - it’s insufficient unless we are able to bring together the resources, experts, customers, partners, innovators AND capital to bring those ideas to life. To bring such a diverse set of stakeholders together around a common mission requires trust. 

Many of the stakeholders we work with in our industries (climate or otherwise) are ones that we have known for more than a decade. Yes, they are industry leaders. But they are also folks who saw our early career journeys, know how hard we have worked to get here and know that if we commit to doing something, that they can count on us. When it comes to achieving things that have never been accomplished before, the trust that you will live up to what you promise means a lot. In the most earnest way, I believe it is the trust forged between our founders and the industry partners they work with that are enabling them to do things that have never been done before in their sectors. 

There is a book on Berkshire called the Margin of Trust that highlights the special investment opportunities that unveiled themselves to Berkshire NOT because of their tremendous skill, but because of their tremendous reputation. Deal partners knew they could trust Berkshire to always do the right thing and that means a lot in a world of financial volatility, geopolitical uncertainty and dubious characters. The companies that chose to work with Berkshire never did so because they were the highest bidder, but because they were the most trustworthy. When you combine that with the hustle, rigor and investment acumen of the firm, it’s delivered a remarkable outcome.

As always, we’ll try to emulate Berkshire where we can and I believe that forging trust with our founders, downstream partners and industry partners is a big part of what has enabled Equal to be involved in some of the most exciting companies in our sectors. The incumbents know our commitment to these categories and that we have a sincere interest in partnering with them,  not disrupting them. They see how much work we put in (as a small and scrappy team) to earn their trust and I believe they appreciate that. Many of these incumbents have served as incredible references, advisors and/or customers for our companies, enabling them to hit initial critical mass faster and more efficiently. As we see these companies evolve, they’re becoming bigger and bigger parts of their industries ultimately serving as references, advisors and/or customers for new investments. This is appearing to be a highly effective playbook, one that is built upon a singular concept - TRUST.