What the Mob can teach the startup industry

July 16, 2011

— Connie Loizos is a contributor to PE Hub, a Thomson Reuters publication. This story originally appeared here. The views expressed are her own. —

Forty-four-year-old Louis Ferrante hasn’t led a life that might naturally lead to business consulting. As a teenager growing up in Queens, New York, he stole car batteries that he “sold for $10 to get a slice of pizza and play video games.” Later, Ferrante moved on to stealing cars for joy rides, then taking orders from body shops looking for cheap parts. From there, it was a short leap to hijacking trucks and selling their contents through a neighborhood “fence.”

Eventually, Ferrante ran his own crew as an associate of the Gambino family. “When you’re hijacking trucks on the street in Queens, the Mafia is going to hear about you,” he tells me. “It’s not like they come down and say, ‘We’ll kill you if you don’t pay us.’ They take you under their wing.”

In fact, Ferrante might still be a mobster today had state law enforcement and federal agents not taken him down while he was still in his 20s. But even high-powered defense attorneys like Barry Slotnick couldn’t save Ferrante from what would eventually be more than eight years in prison, where he says he fell in love with books -– and out of love with the Mob.

Explains Ferrante: “When someone was killed, you didn’t ask what happened because if you did, they’d want to know why you asked and you’d be dead, too. But I always assumed the guy deserved to die.” In jail, playing cards with “the killers of people I knew,” Ferrante says it became apparent that most of the murders were fueled instead by simple greed. He decided that “however long I have to do (in jail) I will, but when I get out, I want to be done.”

Luckily for Ferrante, his old cohorts let him go his own way when he was released from prison in 2003. Using his life experiences as fodder, he’s gone on to become a successful writer. His newest book, “Mob Rules”, offers surprisingly insightful lessons about what the Mafia can teach legitimate businesspeople. I reached Ferrante in New York yesterday to talk about how his advice might be applied to startup founders and VCs.

Q: Your new book offers 88 leadership lessons gleaned from the Mafia. One of them is about how to build trust within an organization. I think venture firms, where partners try outdoing one another, could learn something from this. What’s your advice?

A: You have to spend time with people outside of work. You can pull a heist with someone or work on Wall Street with them every day, but to really get more insight into a guy, grab dinner with him; go on vacation together. You have to get to know someone on a more intimate level. I think about the guys who became rats, who became cooperating informants, and there was always something I saw in them but didn’t believe or explore at the time — something where I should have said, ‘Whoa, that’s a little weird.’

Q: It sounds like your advice includes to trust your instincts.

A: Absolutely. You can also ask his neighbors, if you really want to know somebody. (Laughs.)

Q: You also talk about the importance of avoiding office politics.

A: I learned that through a father figure, Artie the Hairdo, an old-timer who was really from the old school. When Sammy (Gravano) was first appointed the underboss of the (Gambino) family, I asked Artie what he thought. He was eating dinner, and he just paused, gave me a stare and kept eating. He obviously had distaste for Sammy, and he was basically communicating to me not to get too deeply involved with him. But Artie himself pretty much stayed away from Sammy, and unlike a lot of others who took sides and got killed, he died of natural causes.

Q: Speaking of your old friend Artie, you suggest mnemonics as a way to remember things. Can you elaborate?

A: We all did it. It was this untaught, unwritten thing you did. It’s how you remembered 500 people: Fat Franky and Skinny Franky and Franky Flippers, who goes diving once in a while with his wife. You never forget a name that way.

When I was in the Mob, I could tell you how much 50 people owed me and on what day they owed it. I had to remember it all because I couldn’t write it down in case I got pinched. I will tell you that the more you rely on your mind, the more your mind rises to the occasion.

Q: This is a stretch, admittedly, but do you see parallels between the way that VCs and mobsters decide to back businesses?

A: I think in both cases, someone has to vouch for someone else. On the street at least, your verbal resume is everything. To me, if someone brings me a guy (looking for money), he’s somewhat responsible for how that guy behaves. He may be paying alimony; he has child support. But if someone tells me he’s good, that he pays all his bills on time and that he’ll pay me (I do the deal). It’s still a risk, but it was very rare that if somebody vouched for somebody else it turned out bad.

Q: What about knowing when someone is wasting your time? I think a lot of entrepreneurs would accuse VCs of doing exactly that.

A: It’s so easy. You know if someone has a real interest in what you’re talking about. You just sense it. If I call a guy and I ask, ‘Did I catch you at a bad time?’ and he says, ‘No, no, no, Louie, what’s going on?’ I know he’s interested. If I call him and he says, ‘Sorry, you caught me at a bad time,’ I don’t’ want to talk with that guy again. He’s done. He’s off my Rolodex. On the street, too, you get a sense of a guy in a heartbeat.

It definitely helps to appeal to people’s specific interests. If you want to open a nightclub and you know someone who wants to be Don Cheech and he’s dating 25-year-olds, chances are he’s going to listen to you.

Q: You also talk about the importance of having “an inside guy.” Could that be interpreted as advising companies to place a mole at a competing startup?

A: It looks underhanded, but it’s not. Look, it’s a competitive world, and the best tips I had came from inside guys. It was, ‘I’m working at this place, and every Friday the payroll is so much money and nobody is watching it.’ Sometimes, people just wanted to do me a favor. Other guys, I’d go to and say, ‘I have an end (a bonus) for you.’

If you’re just willing to listen to people, you can glean a lot of information without having to pointedly ask: ‘Give me the dirt.’ Just go hang out with somebody and listen. Everyone is willing to talk if you’re friendly, especially if you’re in a similar business. They want to be your friend, and they’ll tell you stuff, and that inside information can be crucial, like: ‘This is the rock-bottom number our company will take.’

Every company would do it back to you if they could.

Q: OK, last question. You also say in the book that “three can keep a secret if two are dead.” I’m sure plenty of entrepreneurs and VCs can relate to wanting to protect trade secrets, but what’s the best way to do that, practically speaking?

A: We had this rule in the Mob: If you didn’t go, you shouldn’t know. So whoever the guys were who went on a heist with me were the only people who should know it was happening. You didn’t tell your wife or brother or best friend. That rule isn’t applied as much in the Mob as it used to be, but it should be.

When John Gotti did the hit on Paul Castellano (head of the Gambino family before Gotti took over), he didn’t ask the families. He didn’t tell the hit men what they were doing until they were doing it, because all you need is one guy talking, and John’s dead by the end of the week. Instead, the night of the hit, he said to them, ‘Put on these Russian hats and these trench coats. We’re taking somebody out.’

In a company, whoever has to know should know, but only as much as they need to know. You can’t control who knows your information entirely. People just can’t keep their mouths shut. It’s just human nature. But you can limit your vulnerability.


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Posted by Rest Day – True Fitness | Report as abusive

if you run your company like this you will create a horrible culture… who wants run a company like a mop… vow what a waste of time…

Posted by Ocala123456789 | Report as abusive

The fact that this book is even in print is testament to the mob/greed culture already in existence.

I doubt he has much to teach, given the Mafioso “untouchables” who travel through the revolving doors of Government, SEC, Banks, the FED, big business already showing that greed is good, but yes I am sure that startups would like to join that club so they can also steal other peoples money.

Posted by hsvkitty | Report as abusive

Something that reminded me of the old triad and clan associations of overseas chinese. Mobs evolve their cultures and existence. Today, chinese and other asian triads and clans continue because of preserving certain heritage i.e community, protection and business connects.
It may be totally against modern society but we are who we were. Hence, knowing your roots and your souls will hedge in trying times.

Posted by lphock | Report as abusive

[…] Mafia or start up? […]

Posted by Monday Morning Breakfast Links | Points and Figures | Report as abusive

Ocala- You may do better, by thinking, whom is already running major influential organizations and insitutions..much like the Mob runs theirs.

Then look at the viability, of those same ones, you chose which, and the life period, of those you have chosen.

THen decide whether those Orgs. really care what you or I think.

Posted by Chivelry | Report as abusive

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Posted by What the Mob can teach the startup industry | Entrepreneurial « Mind Your Business | Report as abusive

This guy makes it so easy. Well it might be after all. Communication shouldn’t be left out in cases like these.

Posted by totipota | Report as abusive

[…] the mob can teach us much of this is pretty sound advice What the Mob can teach the startup industry | Entrepreneurial jh var addthis_config = {"data_track_clickback":true}; var addthis_share = […]

Posted by what the mob can teach us – Practical Machinist – Largest Manufacturing Technology Forum on the Web | Report as abusive

Sounds like the typical corporate tycoon to me.

Posted by 1AngryAmerican | Report as abusive