Startups: never have so many understood so little about the statistics of variance present in the outcomes of small samples.
People like to speak of 10x productivity, non-stop work and geniuses - but the reality is much less interesting. A large number of small teams working on many different problems will by definition have a great variance in outcomes just by random extraneous factors (also known as the law of small numbers and insensitivity to sample size).
> A certain town is served by two hospitals. In the larger hospital about 45 babies are born each day, and in the smaller hospital about 15 babies are born each day. As you know, about 50% of all babies are boys. However, the exact percentage varies from day to day. Sometimes it may be higher than 50%, sometimes lower.
For a period of 1 year, each hospital recorded the days on which more than 60% of the babies born were boys. Which hospital do you think recorded more such days?
1) The larger hospital
2) The smaller hospital
3) About the same (that is, within 5% of each other)
56% of subjects chose option 3, and 22% of subjects respectively chose options 1 or 2. However, according to sampling theory the larger hospital is much more likely to report a sex ratio close to 50% on a given day than the smaller hospital.
Relative neglect of sample size were obtained in a different study of statistically sophisticated psychologists
> A deviation of 10% or more from the population
proportion is much more likely when the sample size is small.
Kahneman and Tversky concluded that "the notion that sampling variance
decreases in proportion to sample size is apparently not part of man's
repertoire of intuitions. For anyone who would wish to view man as a reasonable
intuitive statistician such results are discouraging."
Taking lessons as gospel from these "10x" events is by definition foolhardy and merely an extension of the bullshit pushed by the entire "Good To Great" Jim Collins business book industry.
It's like taking lessons from survivors of the Titanic on how to survive the sinking of a ship. It's quite simple - be a young female child with a life vest and rich parents (or in startup land - a young upper-middle class male living in California during a venture bubble, a cyclical investment in the Valley with a convergence of secondary technologies, above average intelligence and a college degree from a reputable university).
I have a personal rule with any kind of advice or explanation coming out of anyone working in a "soft" industry - if it's vague - it's bullshit. All of the advice given at these events are bullshit by this definition. So are many other things - and yeah it doesn't preclude me from spouting it. Or using the advice at my discretion.
But honestly - startup founders literally have no idea why things take off and they have no idea why they win. That's why they have to keep pivoting - it increases their luck surface area and their ability to gain traction - after which they simply must hold on tight while surfing the wave.
YouTube was a dating site - didn't work - pivot - video traction - venture up - ride.
PayPal was a Palm Pilot app - didn't work - pivot - traction - venture up - ride.
Google sold corporate search - didn't work - pivot - copy PPC from Overture - lever up - traction hits - ride.
Instagram - started with a location checking HTML5 app 2 years too early - pivot - copy PicPlz and Hipstamatic - hit traction - lever up - ride.
Angry Birds - fail at hitting nearly every game in the past decade - pivot - take a shot at the iPhone - hits traction - lever up - ride.
Of the startups that didn't pivot - they either skipped the pivot thanks to previous side projects/companies or already had traction - and all they had to do was lever up and ride.
I'm going to make this clear - there is absolutely, positively nothing wrong with this - not at all - it is merely reality and not particularly unfair.
People stating pointless platitudes that success is due to things like "Be 10x more productive", "Commitment" and "People, product, and philosophy" are simply wasting their breath, other people's time and confusing what actually happens. These things may or not be either actionable, predictive or sufficient for success.
Here's my list of startup advice:
Be alive. Be male. Be young. Don't have health issues. Be born in America or move there. Enter the cycle after a recession. Speak English. Enter a growing/new field where the level of competition is low and so is the sophistication of your competition. Surf cost trends down from expensive to mass consumer markets. Work bottom up - on small things. Be of above average intelligence. Have family support. Have a college degree.
Oh and most importantly of all: Get fucking lucky.
The hindsight/survivorship biases in combination with faulty causality and the narrative fallacy will completely hose your thinking - so be careful.
Disclaimer: Biases rule your thoughts and mine - this post is also subject to both bullshit and biases (mostly bullshit - I do love that word). Think for yourself.
What a great comment. It's worth more than most of what is currently ranked on the homepage, and likely the best thing I've read today. Reality checks like these are sorely needed to offset the glorious stories of the few that made it which are vastly outnumbered by the untold stories of the many that did not.
> Get fucking lucky.
That is the most important factor in business success, and nobody, not even YC with all their algorithms has been able to consistently increase this factor.
All other factors will have some impact on your chances but without luck you're stranded.
YC has become a proxy for luck, if you get into YC that in itself counts as you being lucky and your chances for a future success go up enormously. Not because YC has some kind of magic sauce but because others see it as you having been vetted.
But with that in mind, what I really find shocking is that there are quite a few stories of people that did get lucky and managed to throw it all away.
So another factor in failure is quite probably the extent to which people are able to recognize and capitalize on their luck. There is probably no life without opportunities but they're few and far between.
If you're asleep at the switch when luck passes right in front of your nose then all your execution skills and connections will amount to nothing.
While "luck" (especially the sort that leaves you relatively healthy) may be considered a factor in any business endeavour, I think it's worth pointing out that most levels of business success require several orders of magnitude less luck than a successful startup (of the "enormous growth" variety) does. That may be obvious (and in fact it follows pretty directly from most definitions of what constitutes a startup IMO) but it's an important distinction; many of the people reading this could create a "lifestyle business" with an excellent chance of "success" by the normal definition.
That's absolutely true, but the discussion here centers on home-run style start-ups, which tend to be all or nothing affairs.
One of the reasons for that is that very few start-ups are sustainable in the longer term without acquisition by a larger partner. And if they are they are by definition home-runs, but only very very few (< 1%?) manage to get that far under their own power based on only the initial investment at the time of founding.
And as soon as additional investment is accept the conditions around the company change substantially.
'lifestyle businesses' (which I'm a huge fan of) usually do not require big capital outlays, have a significant chance of staying afloat compared to what is referred to as start-ups on HN and can make more than enough money to make the start-up risk look like it isn't worth it for most players.
>All of the advice given at these events are bullshit by this definition. startup founders literally have no idea why things take off and they have no idea why they win
That book has chapter upon chapter upon chapter with the same exact advice - "Nobody knows anything"
Goldman says after he wrote the book, his phone simply stopped ringing for four full years, because he calls everybody a liar - the director, producer, screenplay writer, actor, story consultants, everybody - none of them know why one movie works & another doesn't.
Finally, it was The Princess Bride in 87 that salvaged his reputation (http://en.wikipedia.org/wiki/The_Princess_Bride_(film) )
I used to be a Film Major and it was repeatedly banged into our head that "Nobody knows anything", so we couldn't say "your script sucks" when our classmates read their script ideas aloud in class.
Beautiful comment, both insightful and self-aware. I wish this was an article so I'd look through your blog; instead I'll have to make do with looking at your HN comments and try not to be a creeper.
I went to the event with a couple friends (them: corporate + quarterlife-ish crisis) and found the event to be heavy on the inspiration side, with the constituency consisting of those hungry (students, underemployed folks) and those who are in the process of "killing it" and looking for new acolytes.
I had a mildly unsettling feeling that, at the end of the day, like any other domain that celebrates superstars, this celebration serves the interests of the investors who want and need that kind of competition to hone the best of us into market-disrupting entities. And while the interests are completely understandable, they are maximized towards extreme outcomes... good and bad. Some would see it as tough love; others… need to see it.
And to be fair it is what it is -- the ability to efficiently bring about change makers is a net positive to society as a whole. But the vision and expectations of many people in MemAud that day were probably on the prize of greatness and billion dollar valuations, not in seeing what constitutes passion, work, and self-awareness. (Many speakers touched on this, though perhaps it's just poor sampling on my part to the people I interacted; it left nary a mark on them.)
I guess if I had to sum up my thoughts and highlight some advice from SS as a startup survivor (Bellyup School, if you will):
Things are always harder than they seems (Marc Andreessen touched on this with his MJ story).
Dedication does not preclude optimization (focus on your startup only after you get the commitment in terms of users or funding -- see Zuckerberg/Livingston stories on both).
Work hard, and be luckier/opportunistic. For every Dropbox that nailed the vision/execution, is most every other startup that pivoted a bunch till they found their niche.
Hrm, I gotta admit, now that I'm reviewing things, pretty much everyone has warned of how much things would be difficult... but somehow it just doesn't stick with most of us. Caveat emptor. :)
Entrepreneurs are the sperm of venture investors. If you are a venture investor who wants to "conceive" a Google, it helps to have a high count as well as high quality. The perspective of an individual swimmer would be different, of course.
What constitutes "getting f..... lucky?" "Luck" happens when opportunity meets preparation. So, you can argue that pivoting is a quest for opportunity, whereas a solid team and ditto work-ethic makes up the preparation part.
Comments
Startups: never have so many understood so little about the statistics of variance present in the outcomes of small samples.
People like to speak of 10x productivity, non-stop work and geniuses - but the reality is much less interesting. A large number of small teams working on many different problems will by definition have a great variance in outcomes just by random extraneous factors (also known as the law of small numbers and insensitivity to sample size).
> A certain town is served by two hospitals. In the larger hospital about 45 babies are born each day, and in the smaller hospital about 15 babies are born each day. As you know, about 50% of all babies are boys. However, the exact percentage varies from day to day. Sometimes it may be higher than 50%, sometimes lower.
For a period of 1 year, each hospital recorded the days on which more than 60% of the babies born were boys. Which hospital do you think recorded more such days?
1) The larger hospital
2) The smaller hospital
3) About the same (that is, within 5% of each other)
56% of subjects chose option 3, and 22% of subjects respectively chose options 1 or 2. However, according to sampling theory the larger hospital is much more likely to report a sex ratio close to 50% on a given day than the smaller hospital.
Relative neglect of sample size were obtained in a different study of statistically sophisticated psychologists
-- http://en.wikipedia.org/wiki/Insensitivity_to_sample_size
> A deviation of 10% or more from the population proportion is much more likely when the sample size is small. Kahneman and Tversky concluded that "the notion that sampling variance decreases in proportion to sample size is apparently not part of man's repertoire of intuitions. For anyone who would wish to view man as a reasonable intuitive statistician such results are discouraging."
-- http://www.decisionresearch.org/pdf/dr36.pdf
Taking lessons as gospel from these "10x" events is by definition foolhardy and merely an extension of the bullshit pushed by the entire "Good To Great" Jim Collins business book industry.
It's like taking lessons from survivors of the Titanic on how to survive the sinking of a ship. It's quite simple - be a young female child with a life vest and rich parents (or in startup land - a young upper-middle class male living in California during a venture bubble, a cyclical investment in the Valley with a convergence of secondary technologies, above average intelligence and a college degree from a reputable university).
I have a personal rule with any kind of advice or explanation coming out of anyone working in a "soft" industry - if it's vague - it's bullshit. All of the advice given at these events are bullshit by this definition. So are many other things - and yeah it doesn't preclude me from spouting it. Or using the advice at my discretion.
But honestly - startup founders literally have no idea why things take off and they have no idea why they win. That's why they have to keep pivoting - it increases their luck surface area and their ability to gain traction - after which they simply must hold on tight while surfing the wave.
YouTube was a dating site - didn't work - pivot - video traction - venture up - ride.
PayPal was a Palm Pilot app - didn't work - pivot - traction - venture up - ride.
Google sold corporate search - didn't work - pivot - copy PPC from Overture - lever up - traction hits - ride.
Instagram - started with a location checking HTML5 app 2 years too early - pivot - copy PicPlz and Hipstamatic - hit traction - lever up - ride.
Angry Birds - fail at hitting nearly every game in the past decade - pivot - take a shot at the iPhone - hits traction - lever up - ride.
Of the startups that didn't pivot - they either skipped the pivot thanks to previous side projects/companies or already had traction - and all they had to do was lever up and ride.
I'm going to make this clear - there is absolutely, positively nothing wrong with this - not at all - it is merely reality and not particularly unfair.
People stating pointless platitudes that success is due to things like "Be 10x more productive", "Commitment" and "People, product, and philosophy" are simply wasting their breath, other people's time and confusing what actually happens. These things may or not be either actionable, predictive or sufficient for success.
Here's my list of startup advice:
Be alive. Be male. Be young. Don't have health issues. Be born in America or move there. Enter the cycle after a recession. Speak English. Enter a growing/new field where the level of competition is low and so is the sophistication of your competition. Surf cost trends down from expensive to mass consumer markets. Work bottom up - on small things. Be of above average intelligence. Have family support. Have a college degree.
Oh and most importantly of all: Get fucking lucky.
The hindsight/survivorship biases in combination with faulty causality and the narrative fallacy will completely hose your thinking - so be careful.
More interesting stuff:
http://en.wikipedia.org/wiki/List_of_biases_in_judgment_and_...
http://en.wikipedia.org/wiki/Black_swan_theory
http://en.wikipedia.org/wiki/List_of_fallacies
http://en.wikipedia.org/wiki/List_of_memory_biases
http://www.econ.yale.edu/~shiller/behfin/2000-05/rabin.pdf
Disclaimer: Biases rule your thoughts and mine - this post is also subject to both bullshit and biases (mostly bullshit - I do love that word). Think for yourself.
What a great comment. It's worth more than most of what is currently ranked on the homepage, and likely the best thing I've read today. Reality checks like these are sorely needed to offset the glorious stories of the few that made it which are vastly outnumbered by the untold stories of the many that did not.
> Get fucking lucky.
That is the most important factor in business success, and nobody, not even YC with all their algorithms has been able to consistently increase this factor.
All other factors will have some impact on your chances but without luck you're stranded.
YC has become a proxy for luck, if you get into YC that in itself counts as you being lucky and your chances for a future success go up enormously. Not because YC has some kind of magic sauce but because others see it as you having been vetted.
But with that in mind, what I really find shocking is that there are quite a few stories of people that did get lucky and managed to throw it all away.
So another factor in failure is quite probably the extent to which people are able to recognize and capitalize on their luck. There is probably no life without opportunities but they're few and far between.
If you're asleep at the switch when luck passes right in front of your nose then all your execution skills and connections will amount to nothing.
Thanks. Here's my tool for visualizing the effect of luck. Replace it with "being alive". Or "not being born in Afghanistan". Or even consider this.
How many sperm cells were present during one's conception?
Answer: 200-500 million.
Compound this with the fact that over 125 billion people have lived on this planet since we first evolved. Only 7 billion are alive today.
That's pretty darn lucky. Or more humorously: http://www.youtube.com/watch?v=GvpbzRf99-8
Being rich does wonders for your chances of success, as does being alive. Sadly it does the same with one's ego.
While "luck" (especially the sort that leaves you relatively healthy) may be considered a factor in any business endeavour, I think it's worth pointing out that most levels of business success require several orders of magnitude less luck than a successful startup (of the "enormous growth" variety) does. That may be obvious (and in fact it follows pretty directly from most definitions of what constitutes a startup IMO) but it's an important distinction; many of the people reading this could create a "lifestyle business" with an excellent chance of "success" by the normal definition.
That's absolutely true, but the discussion here centers on home-run style start-ups, which tend to be all or nothing affairs.
One of the reasons for that is that very few start-ups are sustainable in the longer term without acquisition by a larger partner. And if they are they are by definition home-runs, but only very very few (< 1%?) manage to get that far under their own power based on only the initial investment at the time of founding.
And as soon as additional investment is accept the conditions around the company change substantially.
'lifestyle businesses' (which I'm a huge fan of) usually do not require big capital outlays, have a significant chance of staying afloat compared to what is referred to as start-ups on HN and can make more than enough money to make the start-up risk look like it isn't worth it for most players.
>All of the advice given at these events are bullshit by this definition. startup founders literally have no idea why things take off and they have no idea why they win
So William Goldman wrote an entire book on this very subject - http://en.wikipedia.org/wiki/Adventures_in_the_Screen_Trade#...
That book has chapter upon chapter upon chapter with the same exact advice - "Nobody knows anything"
Goldman says after he wrote the book, his phone simply stopped ringing for four full years, because he calls everybody a liar - the director, producer, screenplay writer, actor, story consultants, everybody - none of them know why one movie works & another doesn't. Finally, it was The Princess Bride in 87 that salvaged his reputation (http://en.wikipedia.org/wiki/The_Princess_Bride_(film) )
I used to be a Film Major and it was repeatedly banged into our head that "Nobody knows anything", so we couldn't say "your script sucks" when our classmates read their script ideas aloud in class.
Beautiful comment, both insightful and self-aware. I wish this was an article so I'd look through your blog; instead I'll have to make do with looking at your HN comments and try not to be a creeper.
I went to the event with a couple friends (them: corporate + quarterlife-ish crisis) and found the event to be heavy on the inspiration side, with the constituency consisting of those hungry (students, underemployed folks) and those who are in the process of "killing it" and looking for new acolytes.
I had a mildly unsettling feeling that, at the end of the day, like any other domain that celebrates superstars, this celebration serves the interests of the investors who want and need that kind of competition to hone the best of us into market-disrupting entities. And while the interests are completely understandable, they are maximized towards extreme outcomes... good and bad. Some would see it as tough love; others… need to see it.
And to be fair it is what it is -- the ability to efficiently bring about change makers is a net positive to society as a whole. But the vision and expectations of many people in MemAud that day were probably on the prize of greatness and billion dollar valuations, not in seeing what constitutes passion, work, and self-awareness. (Many speakers touched on this, though perhaps it's just poor sampling on my part to the people I interacted; it left nary a mark on them.)
I guess if I had to sum up my thoughts and highlight some advice from SS as a startup survivor (Bellyup School, if you will):
Things are always harder than they seems (Marc Andreessen touched on this with his MJ story).
Dedication does not preclude optimization (focus on your startup only after you get the commitment in terms of users or funding -- see Zuckerberg/Livingston stories on both).
Work hard, and be luckier/opportunistic. For every Dropbox that nailed the vision/execution, is most every other startup that pivoted a bunch till they found their niche.
Hrm, I gotta admit, now that I'm reviewing things, pretty much everyone has warned of how much things would be difficult... but somehow it just doesn't stick with most of us. Caveat emptor. :)
Entrepreneurs are the sperm of venture investors. If you are a venture investor who wants to "conceive" a Google, it helps to have a high count as well as high quality. The perspective of an individual swimmer would be different, of course.
I totally agree; the swim itself is of a lot of excitement and utility too. (FWIW, life doesn't necessarily begin/end after the swim. :) )
Probably my favorite comment I've ever read on Hacker News to date.
What constitutes "getting f..... lucky?" "Luck" happens when opportunity meets preparation. So, you can argue that pivoting is a quest for opportunity, whereas a solid team and ditto work-ethic makes up the preparation part.
fantastic comment!