Why Startups Really Succeed: Strings of Luck

Unicorn Cafe

Luck plays a huge role in everything we do, and where we’re born is the perhaps biggest lottery of our lives. But acknowledging luck makes us feel uncomfortable. Our brain seeks causal stories, and tries to create them from whatever information is currently available. This helps us maintain the illusion that the world is an orderly place we have control over.

Startups are no exception. The stories of those that succeeded, and the post-mortems of those that failed, are always causal stories. In the case of success they are typically stories about visionary founders in a fast-growing market pursuing an idea at just the right time. That’s exactly the kind of story that appeals to our brains (and the press). There’s no mention of luck. Surely, if we could turn back time, and those founders were to start the business again under the same circumstances, it would also succeed, right?

That’s an illusion.

We tend to overestimate the influence that founders, or any element we can control, have on the outcome. I am not discrediting the hard work of startup founders. The intelligence, resilience, resourcefulness, and optimism of the founders certainly play a big role in the success of a startup. But I believe that it’s a required and not a sufficient condition. Let’s take Airbnb as an example. Paul Graham writes:

Airbnb now seems like an unstoppable juggernaut, but early on it was so fragile that about 30 days of going out and engaging in person with users made the difference between success and failure.

There are an infinite number of events, from family problems to legal issues, that did not happen but would have resulted in Airbnb going out of business at some time during its inception. A chance encounter with someone offering an attractive job to the founders would probably have been enough (the founders started renting out mattresses because they couldn’t afford rent in SF). It was lucky that none of this happened.

The combined absence of all events that would’ve resulted in the founders shutting down Airbnb was very unlikely. Similarly, there were a few crucial (lucky) events that had a large impact on Airbnb. What if the initial 2 customers had never seen the website? What if nobody ever recommended that the founders take prettier pictures of the listed places? You can come up with similar examples for most other billion-dollar startups. Google almost sold their company for $750k in 1999 and just barely escaped death.  All companies are fickle in their early days, and it’s usually a stroke of random events that leads the founders to continue instead of shutting down or prematurely selling the business.

In Thinking Fast and Slow, nobel-winning Daniel Kahneman puts it well:

 Narrative fallacies arise inevitably from our continuous attempt to make sense of the world. The explanatory stories that people find compelling are simple; are concrete rather than abstract; assign a larger role to talent, stupidity, and intentions than to luck; and focus on a few striking events that happened rather than on the countless events that failed to happen.

This also gives us the top reason startups fail: Because it’s the default action. In the absence of continuous random events that keep a startup alive there are just too many things that can go wrong, and too many seemingly better opportunities the founders could choose to pursue. Statistically, it is more likely that something leads to the (voluntary or involuntary) shutdown of a startup than it is that everything goes just according to plan. That’s the reason VCs don’t focus on “Will this startup succeed?”, but on “If this startup succeeds, how big could it be?” Some have recognized that there are just too many variables to consider, and that it’s impossible to predict the future of a startup.

The reason so many successful startups come out of Silicon Valley is because it’s a numbers game. SV has the highest concentration of startups anywhere in the world (maybe even more than the rest of the world combined). People move to SV to start risky companies. Statistically it should come as no surprise that most successes start here. To avoid sounding like a hopeless pessimist I want to clarify that  I am not saying that all the other factors (culture, available of talent, etc) are irrelevant. It’s just that we tend to overvalue them because they make for good stories.

Optimism, or blissful ignorance, could be called the secret sauce of startup founders. Being relentlessly optimistic leads the founder to make the (irrational) decision of continuing with their startup when they could be pursuing an opportunity with a higher expected value. And given the large number of samples, this works out just fine in Silicon Valley.

 

How to make decisions, stick with them, and be productive

The list of new technologies I want to learn about grows every day. My Amazon wish list contains hundreds of books on more than a dozen subjects, ranging from Machine Learning to Public Speaking. I have a spreadsheet with over 50 business ideas and associated research. Some I briefly started working on, only to abandon them a few weeks later and move on to the next shiny thing.

What the hell am I doing?

We live in a world of unlimited opportunity. But deciding how to spend our time is becoming increasingly difficult. There are so many choices. How do we pick the best one? Which metric do we use to define best?  And once we’ve made a decision, how can we follow through and avoid getting distracted? I often feel paralyzed. I am scared that whatever choice I make is suboptimal and may lead to misery down the road.

I’ve always admired people who can set their sight on a goal and follow through without getting distracted by other opportunities. I have a couple of friends who are like that. How are some people so incredibly productive? And why do some people feel empty even though they’ve achieved huge success? I figured that learning about human motivation may help me solve my problem. So that’s what I did and what this post is about.

I have’t found one answer that applies to all situations but I thought it would be good share what I’ve learned nonetheless. So this post is a collection of ideas and techniques that helped me become more motivated and productive. Not all of them may work for you. Everyone faces unique challenges after all.

Before diving into the practical stuff let’s try break down our problem. I think there are two subproblems:

  1. How do we decide what to spend our time on?
  2. Once we decided, how do we stick with our decision and become more productive?

Of course, these two problems are interrelated. Picking a project we’re passionate about may lead to increased productivity down the road. And knowing why we do something helps us sticking with it and ignore distractions. Still, I think it’s useful to consider these two question separately.

How do we decide what to spend our time on?

Don’t follow your passion

Successful people will tell you that they love what they do. There clearly is a correlation, but nobody has been able to prove a causation. Don’t confuse the two. In other words, these people didn’t go into deep introspection, figure out what they were passionate about, and then became successful because of that. They learned to love what they were doing. There’s a good chance that you are passionate about what you’re already good it. Because that’s the reason you became good at it in the first place.

Ben Horowitz recently gave a speech at Columbia University about this. Two points that stood out to me are that  passions hard to prioritize and that passions change. Are you more passionate about math or engineering? Are you more passionate about history or literature? What you’re passionate about now may not be the same thing you’re passionate about in 10 years.

In his book So Good They Can’t Ignore You Cal Newport, a computer science professor and the author of the popular Study Hacks blog, suggests looking are your strengths to figure out what you can offer to the world. What are you uniquely destined to do? Passion will be the side effect.

Follow Resistance

If you haven’t read Steven Pressfield’s The War of Art you should. Out of all the resources in this post it’s probably the one that has had the biggest impact on me. The basic idea is that a force called Resistance is trying to prevent us from doing meaningful things in our life. It’s not a scientifically rigorous theory, but a very helpful metaphor to think about human motivation.

Any act that rejects immediate gratification in favor of long-term growth, health, or integrity. Or, expressed another way, any act that derives from our higher nature instead of our lower. Any of these will elicit Resistance.

Goals that commonly evoke resistance include dieting, exercising, starting a business, and creative work like writing or drawing. Resistance is stronger the more meaningful the project is. That sucks, right? Nope, actually it’s great. It allows you to use resistance as a compass. The project you’re most scared about, the one that has been on your list forever, is probably the most fulfilling thing you can do.

I’ll talk a bit more about how Resistance manifests itself later in the post.

Be optimistic and have a bias towards action

When I read the biographies of successful people (Getting There: A Book of Mentors is a good resource) it stood out to me that many zig-zagged through their lives and made drastic career changes several times. It’s important to realize that the decisions you make are not set in stone. It’s usually impossible to determine the best path in advance. You’re better off making a well-informed decision quickly than to overanalyze the situation and do nothing. This is also known as Satisficing. Picking a strategy that achieves a minimum threshold of “goodness” often leads to better outcomes than spending a huge amount of time to finding optimal decision.

One thing to be aware of is that we tend to overestimate the potential downsides of our decisions because we’re naturally loss-averse. We’re  scared to lose our comfort and safety. In reality there are few career choices that will completely ruin your life. There’s almost always a way to recover. Look at upside opportunity instead of downside risk and be optimistic about uncertainty. If an opportunity has a lot of uncertainty (an entrepreneurial venture for example) you are certain to learn a lot from it, even if it doesn’t work out.

Inaction is often riskier than we think. A good example are supposedly stable jobs. They are stable until they aren’t. A market crash, legal dispute or shareholder issues can lead to layoffs that nobody expected. Relying on the stability of your job is riskier than continuously reinventing yourself (e.g. by developing skills currently in demand or switching jobs) and diversifying your activities.

Death

Most of us ignore death. It’s not something we typically think about. We act as if we are in this world forever. That just isn’t true. All of us will die eventually. Once we let death enter our life everything changes.

The moment a person learns he’s got terminal cancer, a profound shift takes place in his psyche. At one stroke in the doctor’s office he becomes aware of what really matters to him. Things that sixty seconds earlier had seemed all-important suddenly appear meaningless, while people and concerns that he had till then dismissed at once take on supreme importance. What about that gift he had for music? What became of the passion he once felt to work with the sick and the homeless? Why do these unlived lives return now with such power and poignancy?

Steve jobs shares a similar experience in his graduation speech at Stanford. Remembering that he’ll be dead soon helped him forget about external expectation, pride, and fear of embarrassment, and figure out what’s important to him. One of the biggest regrets of the dying is “I wish I’d had the courage to live a life true to myself, not the life others expected of me”. Regularly thinking about death is a useful technique that may help us get closer to that.

How do we stick with our decisions and become more productive?

Label Your Enemy

Resistance (as described in the War of Art) manifests itself in many forms: Self-doubt, fear of public evaluation, rationalization, or fantasizing about the outcome of your decisions. My personal favorite is rationalization:

Rationalization is Resistance’s right-hand man. Its job is to keep us from feeling the shame we would feel if we truly faced what cowards we are for not doing our work.

Simply understanding what forms of resistance we experience is helpful. Next time you experience any of the above try to identify and label it. This is also known as affect labeling and has long been used in meditation to manage negative emotions. By noticing “I am rationalizing my behavior right now” you may just be able to get rid of your feeling. Actually noticing a specific feeling when it arises is difficult, often you’re just “swept away” by it, but you get better at it with practice.

Time Blocking and Pomodoro

Time blocking is a technique that has had a huge impact on my productivity. The basic idea is that you divide your day into fixed chunks of time and assign tasks to them. During each block you work on nothing else but the task at hand. If you finish your task early you can work on a secondary task. If you don’t finish within the allotted time you can reschedule your existing blocks or continue tomorrow. It’s important that you evaluate your day based on how well you adhere to your blocks, not based on how many tasks you finish. Cal Newport describes this technique in more detail on bis blog. A side effect of time blocking is that it helps you build habits by using the same block structure every day.

Directly related to time blocking is Parkinson’s Law:

Work expands so as to fill the time available for its completion.

By assigning work to discrete time slots you are forcing yourself to be more productive and cut down on unnecessary actions.

If you have trouble staying focused for a full-time block you can break it down into 25-minute intervals with little breaks in between. These are also known as Pomodoros.

Mastery

Autonomy, Mastery and Purpose. According to Daniel Pink’s Drive these are the three pillars of intrinsic motivation. Most of us already have autonomy and I talked about purpose in the first part of this post. But what about Mastery?

Mastery is the feeling of progression, the feeling that your skills are improving. In video games Mastery often takes on the form of levels, ranks or better items. It’s one element that makes games so addictive. But how do we implement this in our own lives?

In order to gain a sense of mastery from your actions you need to set measurable goals. I like to use Google’s OKR system for this. (Okay it wasn’t invented by Google but at least they made it popular). OKR stands for Objectives and Key Results. An objective is something like “Lose 10 pounds” and its associated key results could be “Go to the gym 15 times for at least one hour” and “Run a total of 50 miles”. Key Results are always fully quantifiable.

An important characteristic of OKRs is that they are ambitious. Achieving 60 to 70% of an Objective at the end of a period is what you’re aiming for.

If you get 100%, you’re not crushing it, you’re sandbagging.

I use a spreadsheet to manage my personal OKRs. I review and update their progress once a week and create new OKRs at the end of each month. The OKRs feed directly into my time blocking schedule. Every time block is related to a Key Result.

Building Habits

According to Power of Habit up to 40% of our waking life may be dictated by habits. During these times we’re on autopilot. Habits are hard to change. This is both good and bad. Once you’ve created a habit of going to the gym every day it’s difficult to break it. But when you’re in the middle of doing your work and somehow end up on Facebook without realizing it, that’s a habit too.

Habits are made up of a cue/trigger, behavior and reward. The reward satisfies some kind of craving you have. It could be hunger, the need for socialization, or boredom. To get rid of a bad habit you can use the following procedure:

  1. Identify the behavior, e.g. visiting Facebook. This is the easiest part because it’s usually obvious.
  2. Experiment with various rewards to figure out your craving. What if you went for a walk instead? What if you listened to music for a few minutes? Does that satisfy you?
  3. Try to identify the cue. It could be location, time, emotional state, other people, preceding action or something else.
  4. Make a new plan based on your cue and try to replace your habit. E.g. “At 3pm listen to music for 5 minutes.” Write it down and follow your plan when you experience the cue next time.

Mindfulness

Regular meditation practice can help with various aspects of productivity. It can help you stay focused for longer periods of time. It will also help you to identify feelings and thoughts (e.g. rationalization) you may not notice otherwise. If you’re looking for an easy way to get started with meditation I recommend the Headspace app.

If you made it this far, thanks for reading. What are your favorite techniques for staying motivated and productive?

Why I’ll never go to an office again

Over the past few years I’ve had the chance to work with many distributed teams. Most of them were startups, but I’ve also done remote projects for larger corporations. I honestly have never been happier with my work-life balance and I firmly believe that distributed teams are the future of engineering organizations. I can no longer imagine living and working any other way. In this post I want to discuss what about remote work had the biggest impact on my personal happiness as well as some of the things I’ve learned along the way.

Increased productivity

Working remotely has helped me to better understand my body. Previously I didn’t have much choice in setting my hours. By tracking my productivity over the course of the day I found that I am most productive in the morning (6-11am) and early evening (4-6pm). I essentially can’t get any intellectually demanding work done during noon or late at night. Being in the office from 11-3 is a waste of time for me and for the company I work for. I don’t produce any output and I feel horrible. Setting my own schedule means that I can take a break at noon, get lunch, work out or go for a run, take a nap, and run some errands. Afterwards I feel happy, re-energized and ready to get stuff done again. I know plenty of people who love to work late at night. So why not let them?

While some centralized teams offer flexible hours with they usually come with limitations. If you have a long commute (next point) what can you really do within 4 hours of free time? What if there’s no gym or track around your office? What if you want to buy groceries for your home? What about the peer pressure of eating and hanging out with co-workers? If you’re the only person in the office at midnight what’s the reason to being there at all?

No commute

Studies have founded that a long commute has negative effects on life dissatisfaction. The longer the commute the more pronounced these effects are. Some people succeed in setting up a home office but for many (including me) it’s rather difficult to get serious work done at home. I typically work from a co-working space pretty close to my house. So it isn’t quite true that there is no commute, but usually the commute is much shorter and doesn’t feel like a commute. For example, I walk to my favorite coffee shop in the morning and enjoy getting some fresh air. That’s pretty different from a 1-hour drive and being stuck in traffic.

Reducing the commute has been huge for me. You may have gotten used to it already, but don’t underestimate the stress that comes from commuting. I no longer worry about when exactly to leave home, whether or not there’s traffic, or when I will arrive at my office. As result I feel less stressed and more productive throughout the day.

Flexibility and ability to travel

Centralized teams have setup a structure of synchronous communication where not being in the office at usual times breaks processes like scheduled meetings. Distributed teams typically designed their communication structure to be asynchronous and less reliant and people being available at the same time. This means that occasionally changing the times you work isn’t such a big deal. When I have an appointment, errands to run, or want to show a friend around town I simply change my hours to make room for it. I can also satisfy my urge to travel to other places or countries. My favorite places to live in are currently Japan and Thailand, and I’ve been traveling back and forth between them.

Office politics and gossip

This point isn’t really a result of working remotely but rather of how distributed teams or typically setup and run. Humans are social animals and as the team grows it’s inevitable that office politics and social hierarchies develop. I am not talking about professional relations, these are usually pretty clear, but interpersonal ones. Things that are seemingly unrelated to work, such as forgetting someone’s birthday, deciding what to get for lunch, or not going out for beers with the others inevitably spill over to professional interactions (sometimes just subconsciously). While some people benefit from these things, they can become a huge factor of stress and work dissatisfaction for others.

Distributed teams don’t avoid office politics completely, but almost. Restricting in-person social interaction and focusing on trackable results and metrics leads to significantly less politics and stress. Separating work and personal life is much easier when working remotely.

What about the employer’s perspective?

To make distributed teams the norm we need to make it lucrative for both sides, the employee and the employer. This post is written from the employee’s perspective and that’s arguably the easier side to convince. The benefits for the employee are pretty well understood and there are enough people who want to work remotely.

However, making distributed teams more productive than centralized ones is hard. Asynchronous communication is probably the main reason for this. Most distributed teams I’ve worked with were probably less effective than if everyone had been in the same space. But I don’t think it has to be this way. With the right processes in place I believe that we can make distributed teams work for both employees and employers. I’ll discuss some of the things I’ve learned from the employer’s side in a future post.

I’d love to hear about your experiences with distributed teams.