Why That Startup Advice is Useless
Starting companies is a high-risk enterprise, especially so for high-growth, venture-backed companies, which fail more than 90% of the time. Yet people generally talk about successful companies as though their achievements are somehow inevitable and reproducible. We look at Google, Netflix, and Amazon thinking that if we can just copy their practices and decisions, we can also achieve their outcomes. After all, their actions are clear-cut (in most cases), as is their success; what’s missing?
Yet, no amount of studying these companies has significantly increased the win percentage. Part of that, of course, is that every startup is studying the same playbook. I think the bigger part, though, is that we don’t talk about high-growth companies in a way that really reflects the experience. In years of researching growth companies and talking to leaders of thriving and failed enterprises, I’ve found that even the best companies went through what seemed to be life-threatening experiences, and in general, you couldn’t tell from within the company that it would achieve the success that it eventually did. The steps to prosperity are obvious in retrospect, but their rightness is nearly always concealed when looking forward. What follows is a metaphor that helps to explain why it is so hard to think about this clearly.
When we look at a successful company, we can clearly see the path it followed to get where it is. You can look at the key decisions or hires they made, the practices and habits they adopted, the market forces that affected them (or didn’t), and how they worked with and around key players. I call this the ridge they walked. We can look back and say, Wow, that one decision, or person, or market change, really made the difference. What if Google hadn’t gotten ad selling just right just then? It doesn’t matter, because they did. What if Amazon hadn’t invented S3 when they did, giving them the freedom to create all of AWS? It doesn’t matter, because they did. What if Netflix hadn’t been brave enough to switch from DVD distribution to online video? It doesn’t matter, because even though they made some missteps, they made it through.
Looking backward, that ridge is clear.
However, in all of these cases, and countless other equally critical events for these same companies (and for every other growth company), they couldn’t see then what we see now. What they saw then is what everyone leading a growth company sees: an infinite expanse of uncertainty, akin to a field of ice that you have to pick a path across. As the leader of a growth company, you have to believe that there is a path across that ice that leads you to (at least temporary) success. Your job is to find that path. As the company progresses, the ice alongside you falls away. If you are lucky, you are standing on solid ground and it’s only the ice on either side that falls away, leaving a clear ridge behind and below you. If you are unlucky, you picked wrong; you step off the ridge and the ice cracks. If you are really unlucky, there wasn’t any solid ground anywhere, and you’ve led your company to an ignominious end where everyone suddenly realizes the whole company is built on thin ice. Everyone laments the massive mistake that is now suddenly evident. But crucially, until you took that step, the difference between your path and one that was successful was invisible.
I don’t mean to imply that leaders have no visibility into the likely success of their work, nor that the only way to manage risk is to plow forward and hope it works out. This analogy does, however, help to explain why seeing someone else’s clear path to success isn’t nearly so useful as we’d like in helping us navigate the infinite expanse of ice in front of us. It might be that working in small increments and building a lean organization will make the difference between small, correctable errors and catastrophic mistakes, but it might not. Building a great advisor network of people who have done it before might be exactly what you need to navigate the ice fields of entrepreneurship, but no one gets to navigate the exact same ice field twice, so they might just as easily confidently lead you to a crevasse that didn’t exist when they ran this race.
Note that no matter who you are, and how well you’re doing, at some point you will hit a growth wall. All marriages end in death or divorce, and all great companies end up getting bought or going flat in growth, because infinite growth just isn’t possible. At this point, everyone will suddenly say they could see it coming all along. Well sure, you did too. It was one of the possible futures.
When you look to understand a growth company, either because you are hoping their lessons will increase your chance of success, or because you want to share the key lessons with others who are striving, you get limited utility from studying the ridge of non-deadly decisions behind someone. Equally useless is studying the infinite expanse of deadly but featureless ice in front of an organization.
Instead, to get the most out of studying a company’s success, you must live their experience at that seam between the proud success behind them and the scary uncertainty in front of them. It’s not useful to simply understand that Intel pulled off a massive strategic shift in switching their focus to microprocessors. The real value comes from examining what state were they in at the time that enabled them to make that decision. Oh, it turns out that they were having their clocks cleaned by competitors in memory, and microprocessors were already generating a lot of their revenue, so it was less about switching focus and more about shifting identity than business. If anything, Intel failed in making fast enough a decision that observers and many insiders knew was right. When you frame the decision that way, it seems more manifest and relatable. The important lessons are about emotionally wrenching identity changes and making correct decisions with urgency, not some sort of prescience about how the market was moving.
We so often ascribe some kind of mystical foresight to great entrepreneurs, when in fact, they suffered just as any of us do, but for whatever reason, had a different result. The founders of Google had no pretensions to organizing the world’s information, and instead desired to sell their algorithm. They started the company only because no one took the algorithm seriously. Mark Zuckerberg had no particular interest in building a social graph; he was just rating girls on the Internet. He built a company after it became clear he had lucked into something great.
And perhaps most notably, Steve Jobs is considered the exemplar of tech industry triumph, as evidenced by the early success of the Apple I and II, the truly innovative Mac computer, and the wild popularity of Apple products in his second stint with the company. However, to focus our attention solely on these successes overlooks many key aspects that limited or propelled his achievements. For example, the Mac shipped so late and was so expensive that it was functionally irrelevant for a long time, and the rest of the industry caught up. Would a wiser Steve Jobs (or you, having internalized his lessons) have shipped earlier before the competition claimed the market? Would he have made compromises to bring down cost and make the Mac less of a specialist device? Would he team up earlier with someone with operations chops, freeing him to exercise his product design prowess? Can we learn these lessons without spending the decade in the wilderness that Jobs did? Only if we examine his steps and choices in their actual ice-field context rather than with the 20/20 hindsight we tend to use when canonizing our heroes.
In retrospect, the right answers to these questions are often easy and obvious, but the full context that was necessary to see those answers wasn’t available to anyone at the time. We build myths about why people did things, or how evident greatness was at the time. Those myths are not just wrong, they’re pernicious. The simple truisms they provide keep us from examining the real motives and conditions that were in play, and obscure the truly useful frameworks that we can apply to our own situations. They also dramatically underplay the role of luck in success.
Building greatness is a miserable journey, largely because you’re trekking over an infinite expanse of ice with unknown thickness. So much of greatness is being willing to continue pushing forward, even in the face of fear and uncertainty. We do a disservice to people who did important things if we act like fundamentally tough decisions were obvious at the time, or that great entrepreneurs had a single good idea that led them to greatness. In truth, the successful entrepreneur grows their knowledge and experience in ways that no one else can replicate.
I hope that in the future, people will look back and say I built a great company. I hope they laud my good decisions and lambaste my stupid ones. But I also hope that people are honest about the fact that I started the company with small goals, and only through success was I able to build larger goals. I hope that my decisions are studied within the context of hope, fear, and experience that I made them in, rather than their historical obviousness.