The Wrong Way to Start a Startup
A teacher once said to never begin an essay with a quote.
Well… since YF is the place for rebels and misfits, let’s do what we’re not supposed to and start this essay with a quote from Professor Richard Feynman’s paper ‘Cargo Cult Science’.
‘‘During the war the [cargo religion] saw airplanes land with lots of good materials, and they want the same thing to happen now. So they’ve arranged to imitate things like runways, to put fires along the sides of the runways, to make a wooden hut for a man to sit in, with two wooden pieces on his head like headphones and bars of bamboo sticking out like antennas — he’s the controller — and they wait for the airplanes to land.
“They’re doing everything right. The form is perfect. It looks exactly the way it looked before. But it doesn’t work. No airplanes land. So I call these things cargo cult science, because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential, because the planes don’t land.”
I don’t wanna quote the entire paper.. but, and I don’t say this often because I try to summarize it for you, but you should add it to your reading list. It’s quite short and it’ll teach you a lot about critical thinking.
The quote above describes the cognitive error known as the cargo cult phenomenon: The religious movement of the SW Pacific during WW2, characterized by expectations of the return of spirits in ships or planes, carrying goods that will provide for the needs of the followers
In this paper, Feynman explores science that isn’t science.
Pseudoscience, which has all of the sizzle and none of the steak.
We see the same thing happening in startups.
People look at what successful startups did.
They had network effects (meaning the platform becomes exponentially more useful as you linearly add users).
They had a big total addressable market (can’t become a billion-dollar company in a small market).
They disrupted a current industry with a big idea.
They got viral growth.
And so on…
So all of these characteristics get compressed to the following advice:
‘’ If you wanna be successful like those startups, then do what they did:
Build something which has network effects.
Make sure you have a large total addressable market.
Your idea should disrupt a current industry with some big idea.
Make sure a basic reproductive number R0 > 1 is built-in (e.g. have viral growth).’’
This is like seeing sports cars and saying:
‘’Make sure it’s red.
Make sure it makes super loud noises.
Make sure only two people can sit in it.’’
Other people, in an effort to up their status, spread these ideas without investigating them or plagiarize them and pass them off as their own.
Meanwhile, these ideas undergo no critical examining, while at the same time becoming a part of our culture because you hear them everywhere.
This is the problem with common sense… Just because something is common doesn’t make it true. Truth makes it true.
The advice above is good for investors to help them increase the probability that they’ll make a good return on their capital, but it’ll kill your startup as a founder.
Because it’s all lies…
No one actually started that way.*
Peter Thiel made this argument in . Good ideas which seem bad are overlooked by everyone and thus undervalued. You want those.
If you look for some idea which has network effects, a big market, high virality, and is able to disrupt some industry, you’ll come up with trivial ideas.
Ideas that everyone else is having too (which means high competition) or, and this is the real pitfall, ideas that seem good but aren’t.
There is one exception which is obvious ideas which are hard to execute: Curing aging, transporting objects, curing for cancer, quantum computing etc.
Starting Big vs. Starting Small
Andrew Mason even said that this was his biggest mistake when starting The Point.. this grandiose vision which made him ignore the fact that users didn’t like the product.
Andrew at the NY Tech Meetup in 2008:
‘’The biggest mistake we made with The Point was being encumbered by this vision of what I wanted it to be. And taking 10 months to build the product and making all these assumptions of what people would want, that we then spend the next 10 months backtracking on. Instead of focussing on the one little piece of the product that people actually liked. So, uhm, If there’s any advice that I have it’s you’re way too dumb to figure out if your idea is any good. It’s up to the masses. So build that very small thing and get it out there and keep on trying different things and eventually you’ll get it right.’’
Eventually, they shifted to a seemingly dumb idea (Groupon) because they were at risk of losing funding.
Same with the founders of Airbnb. Joe had told Brian they were gonna build a huge company.
After thinking and trying to come up with groundbreaking ideas, they rented out their living room out of necessity.
Rent was coming up and they didn’t have the money.
Later that half-baked ‘project’ became their big company.
Same with Apple. Apple wasn’t meant to be this huge company.
After Steve and Woz’s blue box adventure, Woz just built the thing he wanted… An affordable personal computer (Apple 1 was actually just a motherboard).
Steve thought he could probably sell it, sold 50 to The Byte Shop and it took off from there.
The founders of Stripe, annoyed with online payments wanted to throw together an alternative in a weekend or so. Years later they’re still working on it and it turned out to be a huge idea (and much more difficult).
In a talk at Stanford, John Collison specifically talks about how most companies lie and whitewash their history to seem cool and visionary. But how, in fact, most big companies are much more of an accident than some well thought out and executed business plan.
In all of these examples, the founders solved their own problems.
Problems that initially didn’t seem big at all, but the market pulled them.
Which brings us to the title of this essay.
One of my friends is working on a music startup.
And she’s doing just this.. solving her own problems.
Think about the benefits that has:
You know it’s a real problem and not an imaginary one because you have actually it.
You know where to find your users because they have that same problem.
They’re likely part of the same community you’re part of so you have a warm relationship and trust.
All of these things will make it much easier to get traction.
Will it succeed, maybe, maybe not.
Has she increased her odds dramatically by trying to solve a real problem?
*Business is the field of exceptions so while there might be some extreme outlier, that would be missing the forest for the trees. Unlike mathematics, 1 counter-example doesn’t invalidate a theorem. And with my decade + of experience, I can only think of Jeff Bezos who claimed to have the vision for Amazon day 1 and basically built it out. (There are others who’ve claimed it but it’s falsifiable with a bit of research.)
Feynman, R. (1974). Cargo Cult Science. Retrieved 21 August 2019, from http://calteches.library.caltech.edu/51/2/CargoCult.htm