Motley Fool Hidden Gems Investing - Harvard's Judgment Professor: Why Numbers Don't Make Decisions, People Do

Episode Date: September 13, 2026

Investors pour over income statements and cash flow trends — but the person deciding what happens to those numbers next matters more, and it's the thing almost nobody knows how to evaluate. Motley Fool's Rachel Warren sits down with Reza Satchu, HBS senior lecturer and six-time company founder, to unpack why judgment — not intellect or data — is the scarcest asset in the age of AI, whether it can actually be taught, and the real story behind walking away from a billion-dollar buyout offer on his student housing company, only to sell it a year later for $1.7 billion.  Host: Rachel Warren  Guest: Reza Satchu  Producers: Dennis Golin, Lauren Budabin  Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode. Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Judgment is not something that you can observe or that you can learn through osmosis. It has to be done by actually exercising it and making decisions, stepping into risk, and thinking about what the consequences are of those. That was Reza Satchu, serial entrepreneur, investor, and senior lecture at Harvard Business School on why judgment, not numbers, is the thing that most investors overlook. I'm Motley Fool analyst Rachel Warren. Reza has built six companies across multiple markets. at cycles, achieving billions and exits, and teaches two of Harvard Business School's most

popular courses, the founder mindset and founder launch. I sat down with Reza to talk through why judgment is becoming the scarcest asset in the age of AI, whether it can be taught, and how he personally walked away from a billion-dollar buyout offer and made it pay off. We hope you enjoy part one. Welcome back to Motley Fool Conversations. I'm Rachel Warren. When we evaluate businesses to buy and hold for the long term, we often spend hours pouring over income, statements, balance sheets, cash flow trends, and that's important, but numbers don't make decisions. People do. And our guest today argues that investors often spend more time studying a company's numbers than evaluating the judgment of the people deciding what happens to those numbers next.

Reza Satchez is a serial entrepreneur, investor, and senior lecturer at Harvard Business School, where he teaches two of the university's most popular courses, the founder mindset, and founder launch. Over Rez's career, he has built six companies across multiple market cycles, achieving billions and exits. He is the founder and managing partner of a line vest management corporation and the host of Harvard's The Founder Mindset Podcast. Rezlo, welcome to the show. Thank you, Rachel. Thanks for having me. I want to lean a bit into this core idea that investors often spend so much time studying a company's numbers, but maybe not so much evaluating the judgment of the people deciding what happens next. And I'd love to hear your thoughts on why do you think that

the investing community or the markets in general tend to be so hyper-focused on the math, but often ignore that human judgment as driving it. Look, I think it's a great question, Rachel, and I've spent a lot of time thinking about this. And in fact, if you think about the courses I teach, some would say, well, Ray, why are you so focused on the mindset and not on the venture? Because ultimately, what I'm trying to help is students launch their ventures. And what I would tell you is, having done this, this is my 24th year teaching, there is far more traction and learning and improvement of probability of success that I can have

by evaluating and improving one's mindset, okay, as opposed to spending a whole bunch of time evaluating their business. And so what that really means is what is that characteristic in the mindset that we're looking for? And it all comes down to judgment. And I'd say it's even more important in the age of AI where so much can be replicated other than judgment. And so there's no question that judgment is something that investors, employees, customers are desperately trying to evaluate. The question is, how do you evaluate it? How do you build it? And what I would say is that judgment is not something that you can observe or that you can learn through osmosis. It has to be done by actually exercising it and making decisions, stepping into risk, and thinking about what

the consequences are of those. So I think, I think, first of all, everyone agrees, I think people would agree that judgment's very important. I think the reason the market shires away from it is because it's so hard to evaluate it. It's a very hard, it's sort of this nefarer, you know, sort of this thing that you can't actually put math around. But it is, if I had to say, what is the single most important thing that I'm looking for when I make an investment in a business or whether to spend time with a founder or not, it is my evaluation of their judgment. And invariably, what that is, is evaluating previous decisions that they've made and understanding how they calibrated risk and trusted their judgment in that decision.

Well, and that kind of leads me into this idea. How do you define the anatomy of good judgment? What are the differentiating factors you look for? Okay. So the first thing is, let's just say, you can live a life where you never really make a decision, right? You sort of let things happen to you and things sort of, the status quo stays the same. And most people, frankly, see an idea and just assume that there's no way that they could possibly, that could be a real idea because they don't have the resources to, and I'd say every business you know, if a founder felt that way, that business wouldn't exist today, okay? Meaning, I often say to people that you really want to be opportunity driven and not resource constrained, okay? But to your question around what does it

look like in terms of how do you, you know, how do you actually build or exercise judgment? At the end of the day, it's really around, are you putting yourself in situations where you're making real decisions. Are you actually feeling the risk calibration? I also would say to you that there's a, you know, there's so much of human psychology here where human beings massively overestimate their downsides typically in terms of what they're capable of when they actually commit to things and underestimate the upside nodes. And so what ends up happening is I have a phrase which says, if in doubt, act. Okay. Now, some people would say that's very reckless. I'd say it's not reckless at all. I'm just, I may decide to stay with the status quo.

But I'd much rather say I'm making an active decision trusting my judgment to go with the status quo, as opposed to what most people do, which is sort of a deer and headlight approach, where you just kind of sort of freeze or get paralyzed and just stay the course. And so I think this active learning by doing where you've got someone who's actually, frankly, living a life where they're constantly stepping into risk, seeking risk and calibrating it and making decisions is what I really look for. New from Nespresso. Blend wellness into your coffee routine with the coffee plus range, infused with functional benefits. Choose the coffee you love with added B vitamins, like coffee plus B12 to help support immune function, and coffee plus B6 to keep your day moving. Or go with the flow and choose ginseng delight. Our new double espresso with ginseng extract.

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I'm participating A&W locations in Ontario. That's really interesting as well. I'm curious, you know, as you meet with founders and in your experience, you think leadership judgment is something that can be taught. Do you think it's an innate trait? Yeah. So this is a great question. And Rachel, what I'd say is I would have wasted 24 years of my life if I thought you were born with it. Okay.

And it would have just this whole 24 year teaching adventure of mine would be sort of an exercise in futility. So what I would say is I have now taught thousands of students. I can look at my own life. And I really believe much of this is learnable, okay? Meaning I do, I don't believe that people are born with. this with this, you know, certain trait where that allows them to lead or to found, okay? Meaning I've seen too many stories of people who have come from backgrounds and situations where you just think, wow, they are not going to be able to rise up and lead.

And frankly, sometimes it's precisely because of that adversity that they have been able to lead. But my point is, is I do think that it's teachable. I do think people can choose to learn it. And I will give you an example. So you could imagine in today's day and age, you could almost think about, what is learning today? And so it used to be memorization. It used to be sort of listening to a professor lecture. I would actually say all of those skills are replicated far better by AI. Okay. Learning today

is making consequential decisions that you are accountable for. Okay. So because it's in those moments where you're calibrating risk and trusting your judgment. And, and I believe judgment is much more like a bicep than it is sort of this thing you get at birth, meaning I believe the more you exercise it, the bigger it gets. Okay. So what it means is you must seek risk. You must seek discomfort. You must push yourself into situations of uncertainty where you are being forced to test and trust your judgment. One thing that's interesting that you mentioned briefly earlier, this idea that, you know, executive judgment becomes drastically more important in the age of AI. There's so much data is commoditized. I'd love if you could lean a bit more into your

your thoughts on that. Yeah. Yeah. So I think, I think actually how you've articulated is dead on, which is that data is becoming more and more commoditized. There is no differentiation when it comes to sort of math and numbers and sort of raw intellectual horsepower. Okay. The differentiation is in taking that data and figuring out what are you going to do with it, okay? And what is the, what are the judgments you're going to make around, around that? And so I think, you know, I often say that When I look at the lens from a founder, which is really no different from a CEO of a public company, if I had to say, like, what are the differences in terms of when I evaluate founders versus a CEO of a public company in this day and eight? It's really around, if I had a crystal ball, if there was one trade I could measure in order to give someone a dollar, it would be judgment.

It would literally be judgment, okay? And so what I'm constantly asking founders is tell me how you're exercising your judgment. Tell me about time, what you learn from flawed judgment. Tell me how you benefited from actually stepping into the arena and making these decisions. Okay. And so I think the first thing about judgment is you have to actually want to exercise it. Like, you know, the thing about judgment is there's a downside to judgment, right? Like there's a downside in that you may get it wrong.

That's why it's a judgment. And so it's not costless. But I'd also say that it is incredibly arrogant to think that you could have any outperformance or impact without calibrating and seeking and operating with risk. Right? The world is too efficient to do that. And so it's become a world where it's judgment that becomes the sort of marginal differentiation. And so, you know, the fascinating part here, Rachel, is how do you evaluate it?

Like, how do you know when someone, because there's no, there's no Excel spreadsheet that's going to give you the answer to this? it's it's your own judgment on someone else's judgment. And so, but here's what I will say, and you see it with, you know, people like Elon Musk or Jeff Bezos or Michelle Zatlin at Cloudflare, which is, I also believe judgment isn't linear. I think it's exponential, meaning I think the reason you can see Mark Zuckerberg's never managed anyone and suddenly builds Facebook and at the age of 30 is managing 10,000 people or whoever it may be. it's because of the cumulative decisions that he or she is making in that arena. Okay. And that's leading to better and better judgment precisely because you're effectively going to the gym more often.

You're effectively exercising that judgment more often. Right. And so, but I do think the impact of AI is just massive efficiency. And so, and massive commoditization to use your word, which, which will, which, which, therefore, will only leave in terms of outperformance will lie in people's interpretation and judgment of what of data which that otherwise looks that's available to everyone right now new from nespresso blend wellness into your coffee routine with the coffee plus range infused with functional benefits choose the coffee you love with added B vitamins like coffee plus

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And what better way than with a delicious pratt organic coffee? Starting with just $1 all day, every day now until December 31st. You gotta try breakfast at A&W. I participating A&W locations in Ontario. Going back to this idea of operating on, you know, calibrated risk rather than a fear of regret, I was reading about, you know, the sale of the line-bust student housing, the $1.7 billion deal. And I was reading the story behind this that initially there was a buyout offer that exceeded a billion. Almost everyone around you told to take it, you walked away and that there closed the sale for $1.7 billion.

dollars. How do you tell the difference between holding out for true upside? Again, this idea of calibrated risk versus potentially succumbing to, you know, concerns and judgment. Right. You know, it's interesting. I actually taught this case, I teach this case to my class in Harvard Business School, and literally 100% of my students say you should sell at $1.1 billion, okay? Meaning, they were like, you make a lot of money. It's a, you know, we had both Blackstone and TPG as bidders in that business at the time, okay? So, but here's what I think. say is from my perspective, you know, I'm the founder of the business, the controlling shareholder of that business. And so I have a lot of information. Okay. You know, there is, I have this phrase which is like

tension is your friend, okay, meaning it's like love. You've got to walk away and it'll only close if someone really chases. Okay. So in this case, I think I, you know, I'm a big fan of orchestrating tension and any sort of a deal. And so I think here, I felt like there was a lot left on the table. and my partner and I felt like that we could build more. Now, there was risk, right? You could imagine that the market could turn or the buyers could go away. But it was calibrated, meaning we were like the upside here feels like the downside was we couldn't imagine the business trading it south of a, you know, at anything worse than

a five cap, which meant that our downside was that it was a billion dollar business. Okay, so maybe we would lose $100 million of equity value. But the upside was if we could actually execute on the things we could do, there could be several hundred million dollars. And so it felt like a very good trade. Okay. And ultimately, I think the other interesting thing I would say to you, Rachel, I've, four of the five businesses I founded, I did not use a banker, okay, to invest in bank. So this is a billion and a half dollar deal with no investment banker. You know, I'm a big believer in, you know, Paul Graham's calls it founder mode. I'm a big believer in founder mode, meaning like, why would I outsource one of the most important decisions of

my founder journey to a 30-year-old associate at Goldman Sachs, you know, who is completely conflicted and who just wants to get a deal done to get paid. And frankly, we'll do much more business with the strategic that's going to acquire me than with me, right? And so I just think, I think the more interesting, so, yeah, so I think from our perspective, it was, it made sense, and I think we sold it at the right time. But I'd also say we, we were getting information directly from the sellers or from the buyers, such that I could process it and make a decision, as opposed to getting it filtered through intermediaries that may have a very conflicted situation, meaning I'm entirely sure that if I had a banker at that point in time, I would

have sold the business because they would have convinced me to sell it. Yeah. No, it's an interesting story. I wanted to ask you about that. I think a lot of times as investors investing in public companies or otherwise, we often only see leadership through earnings calls. I want to talk more about maybe a framework for distinguishing, you know, genuine judgment, which we've talked about a bit, of course, today from polished storytelling. You have a personal framework for that. So it's a great question. And I think a lot about this, because you can imagine that, especially in the public scenario, you can polish it up in a way that it's very hard to discern.

So the times when judgment matters most is in times of crisis, which inevitably happens to every founder and every CEO. So if I have one shot to evaluate someone's judgment, what I want to do is understand how they behaved in moments of crises, okay? When, when it felt incredibly uncertain, when the world wasn't the way it was supposed to be, when they lost that major customer or their CTO went to another competitor, or there was a scandal that happened, something, something that was unexpected, that wasn't scripted, that they can't sort of polish. And in that moment of crisis, how did they behave, okay? That's the, that's where I'm going very deep with someone, okay? And same thing with the founder where that's the moment, the inevitable, because you know leadership, leadership only

shows up in moments of crisis. I mean, when there's no crises, there's no leadership isn't warranted. So the point is, is you want to know how people behave in moments of crises. And the thing about leadership is you and I both know that leadership is full of crises. Like, we're full of crises. And And so what I'd be evaluating is how did they behave in those crises? And what I'd say, you know, I'd say that the thing about a crisis is it's not just downside. There's also tremendous opportunities that crises have. Okay. And so I'd say you're looking not just for how they were defensive in that moment and how they

protected the franchise, but also what did they do in the culture or the organization to reposition it and take advantage of what? whatever that crisis was, such that their probability of success is better and they've emerged stronger. And so I think how people behave in times of crises, how leaders behave in times of crises, is critically important to evaluating judgment. That was part one of the discussion. Tune in next week for part two. As always, people on the program may have interests in the stocks they talk about,

and the Motley Fool may have formal recommendations for or against, so don't buy ourselves stocks based solely on what you hear. All personal finance content follows Motley Fool editorial, standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For the Motley Full Conversations team, I'm Rachel Warren. Thanks for listening. We'll see you next time.