Andy Vaughn

Credible Signals

Yesterday, I was reading 37signals post on “the difference between truly standing for something and a mission statement” and it echoed similar sentiments I have had with big businesses. I shared this with a friend of mine, and he provided the following response, edited:

This reminds me of a Business School professor who always warned us to look for “Credible signals” sent by companies. In a nutshell, “Credible” meant “Skin in the game”.

Examples: Not Credible: A company says they are “committed” to customer service and spends $20 making 1,000 photocopies of a series of platitudes about service and cleanliness. Credible: An entrepreneur says he believes in his company. When looking for funding, he agrees to eat ramen noodles and take no salary for a year in exchange for keeping more equity.

I’ve taken to looking at almost everything any person, corporation, or government says through the lens of “credible signals” – it’s a remarkably accurate way to predict which statements will be carried through, and which are just BS.

Thank you, Trent. I agree; when evaluating new businesses, especially the throng of small business plans out there, it is important to measure the level of investment the entrepreneur is willing to place in the business – not just monetarily, but all forms of “skin in the game.” Eloquently put.

Posted by Andy Vaughn on April 17, 2009

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