#426 Waverly Deutsch: Love and Logic—Building Businesses That Actually Work—Part Two

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Hi everyone, welcome to our show, Chief Change Officer.

I'm Vince Chen,

your ambitious human host.

Our show

is a modernist community for change progressives in organizational and human transformation from around the world.

This episode is the second part of our three-part series titled Love and Logic, featuring Waverly Deutsch as our special guest.

Here, she explores from three perspectives, how the intricate balance of love and logic shapes our career decisions and life choices.

The last episode delve into Waverly's personal journey, looking into the love and logic that have guided her career path and experiences.

In this episode, which focuses on her role as a teacher and expert guide, we'll dive into a major chapter of her life.

22 years at Chicago Booth.

There, she taught and coached a sharply focused group of highly logical talents,

all deeply engaged in the passion for innovation, change, and entrepreneurship.

Since leaving that structured academic environment, she has transitioned to her current role as a coach for a more diverse and larger group of entrepreneurs.

Throughout my personal experience, having both official and unofficial mentors and coaches has been profoundly beneficial.

It's not just about the outcomes, about the process.

And more importantly, I've learned so much from the real-life experiences of humans.

My supervisors, teachers, colleagues, classmates, and even my life partner, who was once my teacher.

These individuals have provided me with immense love and helped me refine my logic.

Human experience has always been critical to my personal and professional development.

As we enter the age of AI,

Waverly and I will also discuss the role of human coaches.

In this still developing scenario, AI is the powerhouse of logic.

While easy coaches like Waverly represent love, providing that essential human touch in the coaching process.

Without further ado, let's get started.

Now, let's dive into a significant chapter of your career at Chicago Booth.

Where you've dedicated 22 years to teaching and coaching.

The environment there was highly structured.

And students, ranging from college undergrads to full-time MBAs, about mid-20s and late 20s,

and executives who are mid-30s to mid-40s.

All of them represented a distinctly logical and talented group of people.

Many of these students, like myself, came from very strong corporate backgrounds where we were primarily trained to think with our heads over our head.

With that in mind, I'm curious about your perspective about them.

They came to you very eager to explore and explode their passions for innovation, for change, and for entrepreneurship.

What common challenges did you observe them facing?

That's the first part of my question.

For the second part,

given those challenges you've identified,

how have you leveraged your own experiences to guide them?

Do you find yourself offering more love, i.e.

emotional support,

over logic, i.e.

calculated strategies?

Or is it a mix of both?

Or depending on individuals or segments of individuals?

That's a great question.

I think that the cohorts and the individuals all faced some

similarity of challenge and and some difference of challenge.

So

I'll give you an example.

The undergraduate population is hugely innovative because they haven't gone out into the work world yet to see the obstacles that are put in the path of creativity, right?

So we all think about innovation in a large corporation.

Have you done your homework?

What's the market analysis?

Do we have the resources for this?

You know, and oh, by the way, we have to get approval from 17 layers of corporate to even have a conversation about this or create a working group about this.

And eventually, the person with the ideas, never mind.

There's a lot of process that's layered on top of things in the corporate world that sets up obstacles to innovation, I think, that every corporation is aware of and battles as they want to become more innovative, but also that people become aware of as they progress in the work world.

So that being said, the undergraduates don't know what's possible.

They don't know what's impossible.

They don't have the foundation for a lot of that logic.

And so the challenge with them is to give them

a process.

And I believe entrepreneurship is a process.

It's a process of taking an idea or identifying an opportunity and turning it into

an organization, a company, a not-for-profit that brings a specific type of value to a specific community.

in a sustainable way, right?

So either profitability or fundability in the not profit world.

It's a process, right?

It's a process of evaluating opportunities, it's a process of testing solutions, it's a process.

So, with undergrads, what you're really doing is you're giving them

the process by which they can learn to add the logic, the data, the research to their passions.

It's almost exactly the opposite with, say, the executive MBAs.

The ideas often lack innovation and lack creativity are incremental to the way things are being done

because they are so aware of the barriers to innovation and the challenges of getting new things through.

But then you say, why does the world need a company a tiny bit incrementally better than the way you've seen things done in the past, right?

So it's really hard to break through

brand loyalty

comfort without having something that's really innovative, right?

How do you overcome the liability of newness?

So you're right that a balance that you have to use between managing a person's tendency to go with their heart versus their tendency to go with their head to help them bring those two things together in the set of complementary qualities that an entrepreneur has to have.

which is both the vision and the execution, right?

You have to see the potential for the future, but also be able to figure out the tiny step-by-step that's going to allow you to build the foundation of a company that can reach that vision.

It is different across different cohorts, different people, whether they're

goal or they're entrepreneurs in the world, but certainly at Booth.

dealing with a range of students from, I taught high school students through Boots for a while, all the way to very senior seasoned executives.

It is your job as a teacher, as a coach, as a mentor to figure out where the strengths and weaknesses are and bring techniques, tools, and advice that balances the strengths and weaknesses for that particular individual.

Can you share with us some specific examples?

Let me start with some examples from the executive level MBA program.

Very often, because they've been in the corporate world,

they don't want to present anything that isn't

absolutely doable,

low risk.

They feel super confident in, and so they say,

if you give us

$5 million to build out this software, we can generate

$7 million

in five years.

I feel pretty comfortable that if you built out this software, you could get to $7 million

in five years.

That's, by the way, most companies never get to a million dollars in revenue.

That's a pretty interesting company.

But it doesn't create a return on investment for a $5 million investment.

So it's a mismatch of the resources you'll need to get there and the outcome that you're telling the investors you're going to be able to create for them.

So that's a very common story with the executive MPAs.

We don't want to say that we can be a $50 million company because we don't know if we can be a $50 million company.

If you, the entrepreneur, don't believe that you can be a $50 million company.

If you, the entrepreneur, don't believe that this is a powerful, disruptive, high-value add to your customers in such a way that if you're given this kind of capital, $5 million plus dollars, that you can't bring it to market in a way that in five years gets you to $50 million.

What's the investor going to think about the business?

Yep, right?

Yep.

Yep.

Then you have at the other end of the spectrum,

the young entrepreneurs who are so excited about their product.

And they've showed it to their friends and their friends are so excited about their product.

And they're like, if you give me

000 to put this product into the market i will be a billion dollar company in five years this is going to go viral everybody's going to want it it's going to just catch fire and you say okay

how does that happen

can you show me an example where for so little money somebody's been able to get so big, so fast because the product was so exciting.

And they'll say, Groupon got to a billion dollars in a year.

And I said, yeah, Groupon had tens of millions of dollars of venture backing.

They got there that fast by acquiring a lot of companies.

That took a lot of money.

So what makes you think for a very small amount of money, you're going to be able to do it?

That's a case where you're bringing the logic into it.

In the case of, we are only going to get to 7 million.

You got to bring the emotion into it, the excitement, the thrill, the FOMO, as it's called in Silicon Valley, fear of missing out.

With the younger entrepreneur, you've got to bring the logic back into it.

What's the step-by-step?

Has anybody else done it?

Is there a path that you can follow, a playbook you can follow?

You're definitely bringing different things in.

With the full-time and part-time MBAs, it can be a little bit of both.

I'll give you an example that I've used many times.

And I, Caitlin, forgive me if I'm getting this wrong but I'm going to talk to you about the conversation that I had with the founder of Simple Mills, Caitlin Smith.

Caitlin came to

Booth because she was working on a startup.

She was working on making gluten-free baking mixes for people who suffer with celiac and gluten issues.

And she had created

using nut flour instead of many of the other gluten substitutes, a really fabulous muffin mix.

I mean, it was delicious and I hate gluten-free baked goods, but I really liked her for muffins.

She came and pitched in the New Venture Challenge class and she said, here's what I've done.

Here's how I did it.

I'm in about 13 health food stores in North Carolina.

I've got another 14 signed up.

So we'll be in 27 healthcare stores and healthy stores in North Carolina area.

Thank you very much.

And everybody paused and said, what do you want from us?

I'm not sure I want anything from you.

I'm not sure I want to raise money for this.

I'm not sure that

I need anything from you.

So the judges for the New Venture Challenge are angel investors, venture investors.

They're thinking, okay,

good luck to you with your nice little lifestyle business, but there's not much we can help you with.

Caitlin and her New Venture Challenge team and I were sitting in a conference room and I was saying to her, Caitlin, I understand that you haven't thought about taking on money and scaling this business and that you're not even sure that's what you would want to do.

But you'll get the most out of this learning process and you'll get the most out of the resources of the coaches and mentors and judges that we put in front of you.

If just for the sake of this exercise, you imagine.

the possibilities.

You think big,

what could this look like if you did want to take on venture capital money, if it was available to you?

What's the upside?

What's the biggest you can imagine?

Because to me, this shouldn't be just in health food stores or on gluten-free shelves.

This is a very delicious, healthy breakfast option for anybody who wants higher protein, higher fiber, good for you muffins.

So to me, this should be.

on every grocery store shelf.

What's the biggest independent baking goods company you can think of in the 20th century?

And she immediately said, Betty Crocker.

And I said to her, why shouldn't Simple Mills be the Betty Crocker of the 21st century?

What if just for the sake of the new venture challenge, you modeled that out?

What would that look like?

What capital would it require?

What distribution channels would you use?

And I could see her getting defensive.

I could see her getting a little angry.

I don't know if that's what I want to do.

Why are you making me think about being like, I could imagine the things that are going on behind her eyes.

Her team is literally like

chewing their fingernails.

They've tried to have this conversation with her, I can tell, and they're really nervous about her reaction.

And she comes back later and she says, you know what, I'm going to try it out.

Let's maybe think about raising a couple hundred thousand dollars.

And for her second pitch,

in the class for the new venture challenge,

she starts to talk about distribution at Whole Foods and she starts to have conversations with people at Whole Foods and she starts to think about the fact that gluten-free is coming on other

grocery store shelves and maybe there is bigger distribution and maybe with a few hundred thousand dollars she can expand the number of SKUs or number of products she's offering.

So she pitches that at the second round and she gets selected to go into the finals.

And by the finals, she's really thinking about a seed round of $600,000.

Guess what?

Simple Mills is a

billion-dollar valuation company.

It is in every grocery store you can imagine in the United States.

They've gone from baking mixes to snacks, cookies, crackers, all gluten-free.

Caitlin is still the CEO of that company.

It is remarkable what she's accomplished.

And that was really a

part.

Let's work on the fear of the challenge of big.

Let's work on what we really want to do with this and head.

What's possible?

What's your model?

How would you do it?

And by opening up just the completely low-risk experiment of just pitch it in the NVC as a big business, it enabled her to bring her heart and head together around a very different business than the one she had imagined coming into the process.

For listeners, NVC stands for New Venture Challenge.

That's what Waverly referred to in her example.

NVC is a top-ranked flagship accelerated program for entrepreneurs that's a programmed under Polski Center for Entrepreneurship and Innovation.

at the University of Chicago.

I'll attach the web link in the show notes in case anyone is interested.

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Now,

let's step away from the structured environment of a business school.

You're now an independent consultant and coach.

You are not dealing with a defined group of talents.

The world has become your client base.

Entrepreneurs of varying ages, generations and cultures and educational level, each with their unique venture ideas.

While some may resemble MBAs using more logic than passion, than love, others might remind you of younger MBAs or even undergrads.

Yet the audience you engage with now is much broader and more diverse.

I'm curious about how you've adapted or scaled your approach in this new role.

How do you tailor your methods to meet the needs of such a varied audience, especially when it comes to refining their pictures and developing their venture ideas?

Great question.

I think that

having had 22 years of experience with the incredibly diverse populations of the best and brightest high school kids that I worked with in a summer program, the kids that choose the University of Chicago.

undergrad,

folks who come for MBAs or executive MBAs, I've been exposed not only to the diversity of age groups and education levels, also I've been exposed to business models from all over the world and new ventures from all over the world because the executive MBA program is taught in Chicago, in London, in Hong Kong, and draws from all over the world.

The University of Chicago is a well-known for having a very large international cohort of students.

So our undergrad, I believe, is close to a third international.

Our graduate programs are very international.

This foundation of exposure to people and business models from all walks of life really feeds into what I do now.

I think the

biggest gap in my

experience is the fact that every single person that I've dealt with through the University of Chicago has been incredibly bright, right?

We're talking about top-tier intelligence, the high school students that were chosen for the program, the people who get accepted into the University of Chicago,

the people who get accepted into the Booth School of Business.

We're talking about exceptionally bright people.

So, the basic level of intelligence is very high.

So, coaching entrepreneurs in

the real world, outside of this world of exceptional levels of intelligence,

has to bring into play a different set of challenges for me personally.

One of the things that you have to be able to do as a teacher

is explain things in a bunch of different ways for people who learn differently.

You have to be able to teach things at different levels and you have to

be able to adapt what you're doing for the capabilities of the person that you're doing it for.

I

am now coaching people with different backgrounds, different education, different levels.

And I have worked with, particularly through the Polski Exchange, small business owners in Hyde Park

who have very different backgrounds and very different education.

And in my coaching,

I would say that's a gap for me.

Like,

that I, if I were to take on a lot of

small business clients in Wise Heart Advisory, I would have to become

attuned to the limitations that they face, the reality of their situation.

Fortunately, the process of entrepreneurship is the same.

You have to identify the opportunity, you have to marshal the resources, you have to serve the customer, you have to do it in a way that generates enough economic return that you can sustain the business.

So it's a matter of

being careful about

my

vocabulary,

my

expectation that they have a grounding in things like accounting

or business strategy or social media.

I have to find out where they are and match them and meet them where they are.

I think that the biggest skill that I've developed over my career that works for me in this setting is that I am a very active listener.

That

I

hear what someone is saying.

I make sure that I repeat back to them so that I'm understanding what they're presenting to me.

That's how I will learn the language of different entrepreneurs.

of the kind that I have not encountered extensively in my career at booth.

I think that's what I will do.

You really are an excellent listener.

I think part of that comes from your deep understanding of the situation at hand.

And another big part is your communication skills.

You're not just articulate.

Once you

understand what someone is going through, you take the time to think and analyze before responding in a way that really resonates with them.

I think that's what makes you such a good listener.

It's not just about using your ears, but also engaging your brain and then responding thoughtfully.

I can definitely vouch for that.

Thank you.

Thank you.

Because I think that is the critical skill set for learning.

You learn when you listen.

It's funny, I coach my entrepreneurs when they're pitching, particularly they're pitching in the practice rounds right yeah in the q a yep shut up

yes talking answer the question briefly and either get more questions or get feedback because when you're talking you're not learning

absolutely as a coach i've realized that true listening is

rare.

We often hear about the importance of listening skills on social media, but ironically, social media by itself is a one-way means of communication.

Switching back to coaching, I've done a fair amount of coaching myself, working with entrepreneurs and professionals.

What I've noticed is that I can make a strong impression right from the first meeting.

Often,

the subject spends 10 or even 15 minutes sharing the problems and situations,

and I listen intently.

Then, I'll distill everything they've said into maybe 5 to 10 sentences, at most.

They're usually amazed and say, yes, exactly, that's exactly what I meant.

It goes beyond verbal or written skills.

It's about truly listening, capturing the essence of what they are saying,

and then reflecting it back to them in their own language.

That's how they realize, wow, you really get me.

That's how you build trust as a coach.

That's been my experience.

Yeah, it's funny that you say that because that's what I do for people, right?

So when I'm helping them tell their story, I listen to their story and then I tell it back to them in a way that's more concise, powerful, and compelling.

And they're like, Can you just pitch it for me?

I often joke with them that one of my strongest talents is translating English to English.

I don't know any other languages, unlike you, Vince.

I am not multilingual, but I am a really good English-to-English translator.

Do you think AI could be your competitor in coaching?

Is multilingual and has incredible computational abilities.

With our theme of love and logic, where AI represents logic and you, as a human coach, embody love.

How do you see AI supporting your coaching efforts?

And on the flip side, How could it possibly diminish the distinctiveness of your skills?

I think that's a fantastic question.

I am

super glad that I got out of teaching at the time when generative AI is emerging on the market.

I think teaching is going to have to change dramatically.

The written assignment.

I remember when I was growing up, we memorized the multiplication tables.

When we get to high school, they say, okay, now you don't have to do your long division.

Now you don't have to do it all on pencil and paper.

You can finally use a calculator.

We needed you to learn how to do it so that your brain would actually understand what the calculator was doing for you.

Right?

But you can now use a calculator.

And then you get into college,

particularly nowadays.

Well, you can now build an Excel spreadsheet.

So what has happened to math

and teaching math and the role of memorizing the period, the multiplication tables is what's now happening with English, right?

What's happening with language.

Not just English, but any language.

And that is, I can prompt a chat GPT

to write a paper on Moby Dick.

without even reading the book.

If I don't read the book and write the paper, I'm not, my brain is not actually growing into the pathways

that

reading and thinking and doing your own analysis allows it to do.

And then every kid's paper about Loby Dick says exactly the same thing.

How the world is gonna deal with this is completely beyond me, but I'm really glad it's not my problem to solve.

So let me go to the question that you asked.

How do I think it relates to the coaching?

Ultimately,

Building a business is a human-to-human engagement.

You have to acquire customers, you have to take care of those customers,

you have to have stakeholders who believe in you, who help you build your business.

You have to have investors that you report to, and you have to have a deep understanding of your business to succeed in all of those things.

So, let's imagine that you create a brilliant pitch deck using AI,

and it gets you a meeting with an investor.

What's that conversation look like?

I'm convinced that we're in a world now, particularly around HR,

where AI is going to write my resume.

I'm just going to answer questions about what I've done in my life, and an AI is going to write my resume, and I'm going to ship it off to a company where an AI is going to evaluate my resume.

And when it rejects my resume, I'm going to feed my resume through an AI that understands why resumes are accepted or rejected.

And I'm going to submit a different AI written

resume that's going to pass the AI standards.

I'm going to find myself in an interview with the hiring manager.

I'm not going to have the slightest idea what my resume says, how it was positioning me, how it was presenting me.

What's going to happen?

What's the interview going to look like?

That's where entrepreneurs are.

AI can absolutely help them write a polished business plan that appears to answer all of the questions.

But if they haven't done the research, if they haven't figured out what the analogs tell them, if they haven't interviewed the customers, if they haven't attempted the exercises, experiments in social media marketing that will help them figure out what their customer acquisition cost is going to be, if they haven't done the work,

The meeting with the investor is going to be a disaster.

I'm actually writing a book right now.

It's called Picture Pitch, an Entrepreneur's Guide to Winning Coffee Dates with Investors.

And I use the dating

analogy, the dating metaphor throughout the book to say, you're not creating a pitch deck.

You're not creating a 10-minute presentation.

You're not creating a story

because someone's going to hear your 10-minute pitch deck and write a check for you.

You're writing this.

pitch deck.

You're creating this story.

You're creating this messaging in order to intrigue somebody to want to know more, to have a conversation with you.

You can think of the new venture challenge, 10 minutes to pitch, 15 minutes to answer Q ⁇ A, like a half an hour coffee date.

You've got to get the dinner date.

You've got to get invited to that one hour meeting with the partners.

And you don't get invested in after the dinner date.

There's a courtship.

Are you right for me?

Am I right for you?

Do the economics make sense?

Does the market make sense?

Does our partnership make sense?

A term sheet is just an engagement ring.

We still haven't decided to consummate the relationship.

That's when the contracts are signed and the checks in the bank.

And guess what?

You are now married to that investor.

They now have a say in your business the way your spouse has a say in your life.

Right?

If marriage is till death do us part, an investment is till exit do us part.

AI is never going to be able to build those kinds of human relationships.

AI is never going to substitute for the homework you have to do to tell a good story that begins that conversation, that begins that relationship.

It might help you improve the writing of that story.

It might help you clean up your deck.

but it's never going to build that story for you.

I think the smart people in AI are starting to talk about AI-human partnership.

How does our job evolve

to use AI to make us better?

The human brain, we've already talked about this, is firing off billions of neurons.

There's no computer that's doing the magnitude of what the human brain is doing.

Quantum computing maybe has the potential to deliver some of that, but for the foreseeable future, generative AI needs to be a human partner, not a human replacement.

We kick off today's episode with Waverly sharing how her roles as a teacher, coach, and guide have helped different kinds of entrepreneurs and business people strike the right balance between logic-driven calculations and emotionally driven desires for new ventures.

Then, we shifted the angle, stepped up, and looked into the role of human coaches in the age of AI.

In this still developing scenario, AI is the powerhouse of logic, while seasoned coaches like Waverly represent love.

providing the essential human hut in the coaching process.

As we speak, we are already seeing a new wave of tech products called AI agents.

So, what will happen with this new norm?

As Wavely argues, building a business is fundamentally about building human relationships.

She likens it to caution,

moving from one stage to the next.

So, while the future might be digital, human connections will remain at the heart of business and personal growth.

In the third part of our series, we'll come full circle and focus back on Waverly herself.

She's now more than a coach.

She's an entrepreneur herself, actively building her own new venture.

It is a fascinating mix of her ever-changing experiences.

Stay tuned, we'll explore that in the next episode.

Thank you so much for joining us today.

If you like what you heard, don't forget to subscribe to our show, leave us top-rated reviews, check out our website, and follow me on social media.

I'm Vin Shen, your ambitious human host.

Until next time, take care.