Friday, October 03, 2014

Gaming The System Doesn't Work, And Everyone Has Worries

One of the exciting things about Paul Graham handing over the reins of Y Combinator to Sam Altman is the fact that it gives Paul more time to write.

Paul has long been one of my writing inspirations, and his concise yet conversational style has always struck me a near-perfect fit for his topics.

I'm delighted to report that Paul's latest essay is one of his best.  For the most part, I'll simply quote some key passages, but I will add a few additional thoughts here and there.
"Gaming the system may continue to work if you go to work for a big company. Depending on how broken the company is, you can succeed by sucking up to the right people, giving the impression of productivity, and so on. But that doesn't work with startups. There is no boss to trick, only users, and all users care about is whether your product does what they want. Startups are as impersonal as physics. You have to make something people want, and you prosper only to the extent you do.

The dangerous thing is, faking does work to some degree on investors. If you're super good at sounding like you know what you're talking about, you can fool investors for at least one and perhaps even two rounds of funding. But it's not in your interest to. The company is ultimately doomed. All you're doing is wasting your own time riding it down.

So stop looking for the trick. There are tricks in startups, as there are in any domain, but they are an order of magnitude less important than solving the real problem. A founder who knows nothing about fundraising but has made something users love will have an easier time raising money than one who knows every trick in the book but has a flat usage graph. And more importantly, the founder who has made something users love is the one who will go on to succeed after raising the money."
Growing up, I was always a game the system kind of guy.  Offer me a game, and I'll try to figure out the best way to exploit the rules.  There's a reason why I'm the king of board game night.

When I started my first company, I did the same thing.  I quickly assembled all the markers of success, from my own academic credentials to my successful co-founder, and used my verbal agility and emotional intelligence to raise millions of dollars (in two rounds of funding, just like Paul wrote!) while I was still a b-school student.

The only problem was, nobody really wanted my product.  The sinking realization hit me when our receptionist, a young, recent graduate, asked me to show her the product.  She tried it out, then simply said, "That's *so* not worth it."  And she was right.  Everything after that was simply finding a way to get as much money back to investors as we could.

By the end, I felt trapped, but I also felt an obligation to get as much money as I could for the investors who had placed their faith in me.  I've had a lot more success since then as both entrepreneur and investor, and a lot of it comes from having learned a painful, expensive lesson my first time out.

P.S. Gaming the system is still a lot of fun...when you know that you're playing a game.  Feel free to challenge me!
"Larry Page may seem to have an enviable life, but there are aspects of it that are unenviable. Basically at 25 he started running as fast as he could and it must seem to him that he hasn't stopped to catch his breath since. Every day new shit happens in the Google empire that only the CEO can deal with, and he, as CEO, has to deal with it. If he goes on vacation for even a week, a whole week's backlog of shit accumulates. And he has to bear this uncomplainingly, partly because as the company's daddy he can never show fear or weakness, and partly because billionaires get less than zero sympathy if they talk about having difficult lives. Which has the strange side effect that the difficulty of being a successful startup founder is concealed from almost everyone except those who've done it.

Y Combinator has now funded several companies that can be called big successes, and in every single case the founders say the same thing. It never gets any easier. The nature of the problems change. You're worrying about construction delays at your London office instead of the broken air conditioner in your studio apartment. But the total volume of worry never decreases; if anything it increases."
There have been times in my life when I had enough so that I never worried about money.  There have been other times when I had so little that I constantly worried about money.  But the one constant is that I always had plenty of worries, regardless of the state of my bank account.  (The other fact is that it's not a constant linear progression from poor to rich--entrepreneurship is far more of a rollercoaster, with multiple steps forward and back, at least for most of us)

I have friends who have vastly more money than I do, and I have friends who have vastly less money than I do.  We all have worries.  And as Paul notes, one of the interesting things is that those who have a lot of money get very little sympathy, probably because most people would trade lives with them in an instant (something of which those very successful folks are well aware).

In fact, I've joked that I should set up show as a "First World Problems Counselor," and charge money to lend a sympathetic and understanding ear to Silicon Valley's 1-percenters.  Everyone has problems, and everyone deserves sympathy, no matter how enviable their overall situation.

So if you keep thinking to yourself that you'll finally stop worrying when you become "successful," I've got bad news for you.  No matter how "successful" you become, you'll never stop worrying.  The only way to stop worrying is to learn to stop worrying, regardless of your life circumstances.

The Manic Side of Entrepreneurship

One of my long-term projects is to write a book about the psychology of entrepreneurship.  One of the issues I want to write about is what I call the manic side of entrepreneurship.

Entrepreneurs are innately optimistic; otherwise, they wouldn't jump into a field of endeavor that has a 90%+ failure rate.  I can assure you that every company I've started or invested in, I've felt had a better than average chance of succeeding...and despite that certainty, plenty of them have failed.

HBS professor Howard Stevenson famously defined entrepreneurship as, "The pursuit of opportunity without regard to resources currently controlled."  And therein lies the wonder and danger of entrepreneurship.

Being willing to pursue a goal whose achievement depends on resources beyond your current control is a massive leap of faith.  Yet it is precisely this leap of faith which helps change the world.  In the words of George Bernard Shaw, "The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man."

Entrepreneurs are unreasonable.  They start sprinting as fast as they can, convinced they'll figure out how to fly before they run out of runway.

I'm not going to argue against optimism or risk-taking; these are essential ingredients for success.  What I am going to warn you about is the danger of manic overcommitment.

One entrepreneur whom I work with has an issue with chronic overcommitment.  The instant he has things under control, he starts taking on more commitments.  I joke that like the late Warren Harding, he simply can't say no (I bear more than a passing resemblance to the former President myself, having someone contrived to be a startup executive, venture investor, social entrepreneurship mentor, and author, all at the same time).  He sometimes dreams of the day when he'll be so successful, that he won't have to worry about how to meet all his commitments.

Well, I hate to break it to him, but that day will never come.  Not because he won't be successful (he almost certainly will), but because an entrepreneur's ability to make commitments will always exceed his or her ability to deliver on them comfortably.

Tony Hsieh is an enormous success.  While still in his twenties, he founded LinkExchange and became fabulously wealthy.  Then, he somehow exceeded that wild success when he founded Zappos.  As his third act, he plowed $350 million of his own money into turning Las Vegas into a startup hub.

While he's been able to generate enormous change, he also overcommitted, and recently stepped down as head of Project Downtown, and laid off 30% of his staff.  Even someone as rich and successful as Tony saw his ambitions outstrip his resources.

The manic side of entrepreneurship has its uses, but by making yourself aware of it, and taking steps to avoid overcommitment, you can tap its wild energy without plunging yourself into the depression that seems to be its unavoidable doppleganger.

What Entrepreneurs Should Do Differently To Stay Married

I recently dove into Jay Goltz's New York Times post, How To Be An Entrepreneur, and Stay Married.  I thought it was an insightful piece, but to me, it was missing the most important part: What entrepreneurs should do differently to stay married.

Having recently celebrated my 16th anniversary (and the 18th consecutive year in my career of not selling a company and becoming a billionaire), I thought I'd share some of my perspectives and strategies for staying married.

1) Make family the most important priority, and mean it.

Any of my entrepreneurs who has asked me what to do about family issues knows my consistent refrain: Family is always more important.

Note that this doesn't mean that family is the #1 place where you spend your time; entrepreneurship is time-consuming, and building a company requires sacrifice.  But no matter who you are or what your company does, you should never put your family's health and happiness at risk.

I have made plenty of decisions in my career that reduced my current income, and as a result, we don't live a lavish lifestyle.  But we've never been in danger of ending up on the streets.

And if a health emergency arises, drop everything else.  You'll never regret that decision, and you might regret the alternative for the rest of your life.

2) Spend time with your spouse every day, no matter how mundane the activity.

I don't care how busy you are, you can certainly set aside 30 minutes to do something with your spouse.

This doesn't have to mean a "date night" (though that helps).  Even chatting and watching television together at the end of a long day helps maintain the health of your marriage.

My wife and I often watch some of Conan O'Brian's late night show.  It's not really that funny much of the time.  But it is a ritual that helps end the day on a together note.

3) Take actual vacations.

There's something special about vacationing somewhere new.  Seeing new sights and learning new things helps renew our zest for life.  This is especially true when you vacation with your kids.

We've taken the kids on vacations all over this country, and every time we travel together, it helps build the happy memories to sustain us through the everyday grind of the endless setbacks of entrepreneurship.

This doesn't mean you have to go off the grid; even on vacation, I'm checking emails and taking occasional calls (activities that my wife doesn't relish, but tolerates).  But when you're actually doing something as a family, it means really being present.

Sadly, entrepreneurship is very stressful on a marriage.  But if you actually take steps to protect your relationship, my experience is that strong marriages can survive and thrive despite the stress.

Sunday, September 28, 2014

Hard Choices Are An Opportunity

I'm a big podcast listener because I like to multi-task while I'm cooking and washing dishes (something I do a lot on weekends, since that's when I prepare our family's food for the week).  Today, I listened to a fascinating TED Talk by philosopher Ruth Chang.

It's worth listening to the entire talk, but for the impatient, I wanted to relate the key insight that I took from it.

Chang's talk is called, "How to make hard choices."  Her point is that hard choices are often hard because they aren't quantifiable.  Indeed, deciding whether to become a lawyer or philosopher (the very choice Chang faced when she was in college) is difficult precisely because the options are almost impossible to compare, and thus are "roughly on a par."

Chang's insight is that hard choices are actually an opportunity.  If you can't use reason to logic your way to a "right" answer, a hard choice gives you the opportunity to say something about yourself.  Choosing law school says something very different about you than philosophy grad school (though I would argue that depressed prosperity and angst-ridden poverty are both rather unattractive options!).

I've faced plenty of hard choices in my life, and will no doubt continue to encounter them as the years roll by.  But thanks to Chang's talk, I'll be able to frame the process of making those choices in a way that empowers me to choose my own identity, rather than paralyzing me with trepidation about the future.