What if successful startups are just lucky?(blog.ploki.info)
blog.ploki.info
What if successful startups are just lucky?
http://blog.ploki.info/what-if-successful-startups-are-just-lucky/
63 comments
All successful startups are lucky, but they're never just lucky. If they were, we could save ourselves a lot of work reading applications and doing interviews. We could just pick randomly instead. If we did that for one batch, you'd really be able to tell the difference, believe me.
I would absolutely love to see a double-blind randomized experiment with controls for YC applications. In one batch, randomly and secretly assign CONTROL or EXPERIMENT to each application (in whatever proportion you are comfortable with). Of the CONTROL batch, do regular reviews. For the EXPERIMENT batch, randomly accept the same percentage of groups as the control. Then have people outside of the reviewers try to label each group correctly at different stages and see how they do. These people could be: YC alums, YC staff not on the interview loop, VCs making investments, outside experienced CEOs, successful startup founders.
For full double-blindness you could even do interviews with the EXPERIMENT group, then use a program to automatically either use the interview result or not. This might be aggravating for reviewers, though, seeing their work wasted by random choices.
For full double-blindness you could even do interviews with the EXPERIMENT group, then use a program to automatically either use the interview result or not. This might be aggravating for reviewers, though, seeing their work wasted by random choices.
So pg's years of experience getting better than random results is irrelevant and you'll only believe him if he does a long experiment (that would cost him lots of money if it's not just luck) to prove something he already believes?
It's unclear whether he's getting better than random results. You're assuming the consequent.
It's well-known that the most successful startup in a group of startups is likely to earn more in profit than all the rest combined. We're here on HN talking about PG because YC has been the most successful of all incubators. However, there's always going to be one incubator that significantly outperforms all the others as a result of the distribution of startup success.
I don't know enough about how well PG's investments have done to make informed judgments, but only a very select few people are likely to have that info. I suspect those people have also done their due diligence to figure out if YC is a value-add compared to other incubators (it should be possible to do this without a convoluted double blind experiment), but anyone who's not them really can't say for sure that that's the case.
It's well-known that the most successful startup in a group of startups is likely to earn more in profit than all the rest combined. We're here on HN talking about PG because YC has been the most successful of all incubators. However, there's always going to be one incubator that significantly outperforms all the others as a result of the distribution of startup success.
I don't know enough about how well PG's investments have done to make informed judgments, but only a very select few people are likely to have that info. I suspect those people have also done their due diligence to figure out if YC is a value-add compared to other incubators (it should be possible to do this without a convoluted double blind experiment), but anyone who's not them really can't say for sure that that's the case.
Generally, and especially with science, the way things work is that you prove something before believing it.
This is oversimplified. In many cases, it is the conjunction of a reasonably strong prior belief and the absence of preexisting "proof" that motivates a scientist (or mathematician) to try to prove something in the first place.
The key is to perform proper Bayesian updates in the face of evidence in either direction; if you do, as long as your prior wasn't totally insane it doesn't really matter where you started.
The key is to perform proper Bayesian updates in the face of evidence in either direction; if you do, as long as your prior wasn't totally insane it doesn't really matter where you started.
Thankfully for us, business isn't science.
Launching a successful startup is luck BUT selecting entrepreneurs/startups who have luck is no random. You can definitively find some metrics to evaluate the current luck of a startup and expect that the founder has enough skill to continue to maximize luck in the future.
If it were just luck then the companies rejected by YC should statistically perform as well as those selected for interviews which should perform as well as those offered spots in a given batch.
Sorry, not an expert and I have never been an entrepreneur so forgive me if I am misunderstanding, but doesn't YC give them money? In order for this statement to be true either (1) having startup seed money has no bearing on success or (2) YC gives the same money to people it rejects as to people it accepts.
The amount of capital provided by YC is trivial...a rounding error relative to the value of a successful company. But more relevant is that YC almost certainly has some meaningful data on the companies it rejects.
So PG's claim could very well be supported by proprietary information.
So PG's claim could very well be supported by proprietary information.
The amount of capital provided by YC is trivial.
Never been accepted to YC, but I gather that the value of access to YC's demo day and a strong network of investors and alumni is far from trivial.
Never been accepted to YC, but I gather that the value of access to YC's demo day and a strong network of investors and alumni is far from trivial.
Trivial once the company is successful, but isn't the purpose of the money to ensure that the founders don't have to give up and get "proper" jobs before the company succeeds?
But then you're acknowledging that startup success is not solely dependent on luck...
I think you're interpreting the idea of luck incorrectly. Luck in this context is simply the phenomenon of being one of the start ups with high success. To say that success depends solely on luck means that the success of any startup is simply rand(). That doesn't mean all start ups are equally successful.
Giving selected startups money confounds two factors: the selection criteria and the extra funding. This means that any differences in the success rate can't simply be assigned to the selectors choosing wisely.
Unless being a part of YC adds value which I suspect it does. Impossible to really test this unless YC would provide the same level of support and resources to other companies.
Depends on what "luck" entails. Success is measured by something--for the sake of argument, let's sake acquisition price. But there have to be proximal factors; to be a bit reductive, no one is arguing that large companies pick randomly for the world of startups and them for millions of dollars. Perhaps the most immediate proximal factor is number of users or revenue or...whatever. You wouldn't say, "if it was just luck, companies would preform just as well whether they had users or not".
So the question with luck is how far down the causal ladder you start considering things inputs (i.e. things which may or may not influence the outcome) instead of outputs (i.e. things which might be the result of those inputs or of luck). So with YC, is that getting or not getting into YC is an input variable that we could check against success, or is getting a YC spot one of those proximal factors, and the luck was just in getting that, at least in part?
So the "is it pure luck?" question isn't very well defined, but the GP's argument might still be useful in answering it. Moreover--larger questions of luck aside--it would be helpful in determining whether the YC selection process is actually useful. But probably only if they didn't tell anyone about it.
So the question with luck is how far down the causal ladder you start considering things inputs (i.e. things which may or may not influence the outcome) instead of outputs (i.e. things which might be the result of those inputs or of luck). So with YC, is that getting or not getting into YC is an input variable that we could check against success, or is getting a YC spot one of those proximal factors, and the luck was just in getting that, at least in part?
So the "is it pure luck?" question isn't very well defined, but the GP's argument might still be useful in answering it. Moreover--larger questions of luck aside--it would be helpful in determining whether the YC selection process is actually useful. But probably only if they didn't tell anyone about it.
It'd be unfair to great startups in the experiment batch -- not that it's pg's job to make life fair for people, but it'd put a big dent in YC's reputation. Why spend time flying out there if there's a chance your interview doesn't even matter?
You can still do a pretty similar experiment. For instance, startups 1-50 get into yc like normal. Startups 51-100, together with 50 randomly selected startups get grouped together and tagged as "the bubble group". Meaning that they were on the bubble of getting into yc. Pretty high honors. However, they don't get any access, consultation, etc. to yc itself. Then after a few months you unblind which were highly selected and which were random, to see who does better.
You could also accept groups with good interviews in the experiment batch, but not include them in the experiment.
We would only be able to conclude that it's unfair for "great start ups" if the experiment showed that random acceptances performed worse than the interview process.
How can you really do any experiments on this kind of shit, when the real winning investments exist in front of a zipf curve?
You get one or two huge winners out of hundreds, and they are so huge that they are bigger than all the others combined. The investors care most about getting these rare winners, and if YC does any kind of controlled study on who becomes these winners, I don't believe there will be any statistical significance to speak of.
You get one or two huge winners out of hundreds, and they are so huge that they are bigger than all the others combined. The investors care most about getting these rare winners, and if YC does any kind of controlled study on who becomes these winners, I don't believe there will be any statistical significance to speak of.
If there is no statistical significance then it means that there is no difference in picking randomly and doing interviews for the rare winners.
Since the winners are what they are after they can omit the interview process.
Since the winners are what they are after they can omit the interview process.
That's not what "no statistical significance" means.
Sorry, statistically speaking the difference in results of interviewing and not interviewing are insignificant.
I have a feeling that eventually there will be a Vangaurd of startups that will massively outperform traditional VC/incubators due to reduced management fees similar to index funds vs. regular funds.
I have a feeling that eventually there will be a Vangaurd of startups that will massively outperform traditional VC/incubators due to reduced management fees similar to index funds vs. regular funds.
On the one hand, it's probably true that experts overweight their own ability to pick winners. My guess is, PG is likely overestimating the ability of YC staff to actually identify good patterns simply because it's easy to draw conclusions from just a few datapoints but it's hard to draw statistically significant conclusions that hold up out of sample. However, I doubt that a startup index fund will outperform the best VCs and incubators simply because good deal flow is key, whereas in publicly traded markets, everyone has access to all deals. Having said that, I have no doubt that a VC index fund would outperform many of the VCs that are not that good
There's also a question of how do you define the index fund. The S&P is pretty non-ambiguous. How do you define which startups are in the index? By the time they're definable as a real business, they're no longer early-stage startups.
I think the OP's point is after filtering out obviously non-successful startups, the chance of success is potentially non-correlated with other "traits", "characteristics", or "metrics" etc. that people often associate with successful startups/founders.
It would be an interesting experiment if YC lower the acceptance threshold to say twice the original batch, and randomly pick from that bigger pool, and see if there's any difference between the ones that didn't make the original cut and those did. (A/B in its finest :)
It would be an interesting experiment if YC lower the acceptance threshold to say twice the original batch, and randomly pick from that bigger pool, and see if there's any difference between the ones that didn't make the original cut and those did. (A/B in its finest :)
In order for us to "believe you", you would need to test your hypothesis at least once - for example, by selecting a small number the startups you invest in at random and see how they fare compared to the other startups. Keep in mind that most stock pickers would respond exactly like you even though their choices are rarely (if ever) better than chance.
If I was to walk for the first time into your kitchen and tell you that your hotplate was turned on, would you not believe me until I'd also experienced your hotplate turned off? You would discount my previous experiences with hotplates, because maybe, just maybe, your hotplate is hot enough to boil water when it's unpowered?
The idea that the null hypothesis is the only source of information needs to die.
The idea that the null hypothesis is the only source of information needs to die.
But on the other hand, there are well-known cognitive biases and counterintuitive facts that can cause people (including extremely intelligent people and even people aware of the biases and facts) to believe things that scientific experiment can show to be false.
Figuring out that a hotplate is turned on can be done though a very simple and direct observation, so most likely I would take your word for it.
Figuring out what makes people successful at starting companies is extremely complex. And without objective evidence, no level of expertise, be it PG or other VCs, will convince me to take someone's word for it.
Figuring out what makes people successful at starting companies is extremely complex. And without objective evidence, no level of expertise, be it PG or other VCs, will convince me to take someone's word for it.
It's not luck for you, it's luck for entrepreneur.
Your job is to select people who were lucky enough to meet the right people, meet the market, had luck to have enough traction, lived in a country where he could spend time learning and so on...
But when you are entrepreneur, you have to maximize your luck by maximizing number of opportunities.
Your job is to select people who were lucky enough to meet the right people, meet the market, had luck to have enough traction, lived in a country where he could spend time learning and so on...
But when you are entrepreneur, you have to maximize your luck by maximizing number of opportunities.
Spot on. I think it's important to mention the context of Taleb's philosophy. You have to keep in mind that in certain jobs, like trading, it is fairly plausible that successful traders are plain lucky because all traders eventually blow up. In the startup world, this analogy doesn't hold for a number of reasons. If you are genuinely skilled, you will succeed. Perhaps not on the first try, but you will succeed eventually.
The crucial difference might be that the finance world is zero-sum while the startup world (wealth creation) is positive-sum.
> If you are genuinely skilled, you will succeed.
Some skilled people succeed, therefore all skilled people succeed eventually?
Alternatively, it's a tautological statement that defines "genuinely skilled" people as those who succeeded, therefore unsuccessful people must not be skilled.
Some skilled people succeed, therefore all skilled people succeed eventually?
Alternatively, it's a tautological statement that defines "genuinely skilled" people as those who succeeded, therefore unsuccessful people must not be skilled.
I was discussing a somewhat related subject yesterday, on an in-company product development workshop.
For a DropBox-like product, feeling safe you won't lose your files is the baseline. If you cannot reliably ensure the files won't get randomly deleted, you don't have a product. Once you have a product, the value you add gets increasingly more subtle - better metadata capture, nicer ways to organize your files, an outstanding slideshow or music app - and what determines your ultimate success may feel completely random and totally unrelated to the original way you defined your product.
It would be interesting if we could measure luck based on previous YC batches.
For a DropBox-like product, feeling safe you won't lose your files is the baseline. If you cannot reliably ensure the files won't get randomly deleted, you don't have a product. Once you have a product, the value you add gets increasingly more subtle - better metadata capture, nicer ways to organize your files, an outstanding slideshow or music app - and what determines your ultimate success may feel completely random and totally unrelated to the original way you defined your product.
It would be interesting if we could measure luck based on previous YC batches.
Basically, the random choice is pulled from the pool of all the talented and productive people. So the best we can do is try our best to continuously be talented and productive, and hope we get lucky one of the times.
You just need to let in exclusively the crazy startups, the insane ones. That's the only metric.
90% failure rates, but the remaining 10% (5 startups) is all Dropboxes and AirBNBs --> Average YC startup valuation up 10-fold.
90% failure rates, but the remaining 10% (5 startups) is all Dropboxes and AirBNBs --> Average YC startup valuation up 10-fold.
Why not try it? http://www.investorhome.com/darts.htm
That would actually be a rather interesting, if costly, experiment for you guys to try.
All you stat nerds keep on talking about statistical significance. While you are busy waving your hands, PG will keep raking in millions.
"Your best? Losers always whine about their best. Winners go home and fuck the prom queen."
"Your best? Losers always whine about their best. Winners go home and fuck the prom queen."
This makes me wonder if there's some kind of fantasy football for startups played behind the scenes by some people.
It's best if founders are all up to get some fun, and investors are in to get lucky, not vice versa.
So you're saying my app that helps hamsters connect via foursquare has a chance?
[deleted]
What about if given enough time and access to enough resources?
More interesting than double-blind test is if each of the yc partners play fantasy startup.
a) each pick his/her top 5 yc companies per batch that they think will be most successful (and main drivers why) b) each pick his/her bottom 5 that they think will be least successful (and main drivers why) c) each assign the value of each of the 5 most successful companies 5 years from now. (and build a bridge as to how that value will be achieved).
and then run some fun numbers on your predictive capabilities.
when i ran "c" for my private equity firm on all investments made over 20 years in various vintages and industries, i found my answer as to why my job of building complex financial models was pretty much worthless number painting. very low predictive ability in value drivers and financial projections being met (these are later stage businesses, too). also, i realized that i should get out when every newer vintage had a larger % of the driver of value stemming from leverage (i.e. financial engineering) than ebitda outperformance.
a) each pick his/her top 5 yc companies per batch that they think will be most successful (and main drivers why) b) each pick his/her bottom 5 that they think will be least successful (and main drivers why) c) each assign the value of each of the 5 most successful companies 5 years from now. (and build a bridge as to how that value will be achieved).
and then run some fun numbers on your predictive capabilities.
when i ran "c" for my private equity firm on all investments made over 20 years in various vintages and industries, i found my answer as to why my job of building complex financial models was pretty much worthless number painting. very low predictive ability in value drivers and financial projections being met (these are later stage businesses, too). also, i realized that i should get out when every newer vintage had a larger % of the driver of value stemming from leverage (i.e. financial engineering) than ebitda outperformance.
NB: There is a lot of hard-earned wisdom distilled in man_bear_pig's comment.
This has been on my mind lately as well, for some reason. That, and the point of this story http://sivers.org/horses which is basically that even after the fact, it's really hard to know anything[1].
I don't know if it's just from growing older but I feel a lot more humble when looking at peoples ideas and actions than earlier. I literally feel that I have no clue whether they will succeed or not whereas I used to quickly get quite strong feelings in one direction or the other. In one way, this feels more mature and zen but at the same time, it annoys me a bit. I feel that conviction is the trait of a leader and something I need to possess if I want to convince anybody to engage in my projects. Maybe I'll just practice faking it and hope they didn't read this comment :-)
Edit: [1] One of my favorite examples of this is in Felix Denis' book How To Get Rich where he describes that the problem with Apple is Steve Jobs. This was written 7 years ago when Apple was struggling and it looked like Steve Jobs was driving it into the ground with his stubbornness. (The book is excellent by the way, in spite of the tacky sounding title)
I don't know if it's just from growing older but I feel a lot more humble when looking at peoples ideas and actions than earlier. I literally feel that I have no clue whether they will succeed or not whereas I used to quickly get quite strong feelings in one direction or the other. In one way, this feels more mature and zen but at the same time, it annoys me a bit. I feel that conviction is the trait of a leader and something I need to possess if I want to convince anybody to engage in my projects. Maybe I'll just practice faking it and hope they didn't read this comment :-)
Edit: [1] One of my favorite examples of this is in Felix Denis' book How To Get Rich where he describes that the problem with Apple is Steve Jobs. This was written 7 years ago when Apple was struggling and it looked like Steve Jobs was driving it into the ground with his stubbornness. (The book is excellent by the way, in spite of the tacky sounding title)
Really love your comment. Thanks for the link, it's really interesting
My intuition is that it's very random. A business professor and economist (Luigi Zingales) once commented that lots of firms tend to find new ideas all at the same time. When the market is ripe and the arrows point in the same direction, everyone seems to find it. Execution is important, but a lot of randomness hits the process too.
Thank you for posting a link to that story. It reminds me a bit of Boethius:
"It's my belief that history is a wheel. 'Inconstancy is my very essence,' says the wheel. Rise up on my spokes if you like but don't complain when you're cast back down into the depths. Good time pass away, but then so do the bad. Mutability is our tragedy, but it's also our hope. The worst of time, like the best, are always passing away."
"It's my belief that history is a wheel. 'Inconstancy is my very essence,' says the wheel. Rise up on my spokes if you like but don't complain when you're cast back down into the depths. Good time pass away, but then so do the bad. Mutability is our tragedy, but it's also our hope. The worst of time, like the best, are always passing away."
Otherwise expressed as
This too shall pass.One important point to realize for the author is that games are not services, they are works of art. As such, you can't say this is an incredible game with the same objectivity as this is an incredible service.
Ryzom was a great game, but MMOs are built on one thing: atmosphere. Blizzard made WoW precisely because WarCraft was its longest running and most popular brand to date. Blizzard already had a massive fan base of WC fans ready to play WOW. The lore was considered a masterpiece, which immediately immersed the players in the world before they even played it.
With services, things are much more objective, because we don't care about branding. Using a service like Dropbox is not a deeply emotional experience, but it does work very well. Apple is one of the few companies that can instill emotion into its services and hardware, and that is due to their marketing and design philosophies, which are considered the best in the world. However, this is nowhere near the level of emotion that art invokes.
As such, I would advise the author to carefully distinguish between art and service. When making art, you should never make it with the expectation that others will like it. You should make it such that it satisfies your own tastes. If others like it, you know that your taste is shared. If not, your tastes are unique. It's a win win.
Don't regret making works of art. It is all that succeeds us when we leave this realm.
Ryzom was a great game, but MMOs are built on one thing: atmosphere. Blizzard made WoW precisely because WarCraft was its longest running and most popular brand to date. Blizzard already had a massive fan base of WC fans ready to play WOW. The lore was considered a masterpiece, which immediately immersed the players in the world before they even played it.
With services, things are much more objective, because we don't care about branding. Using a service like Dropbox is not a deeply emotional experience, but it does work very well. Apple is one of the few companies that can instill emotion into its services and hardware, and that is due to their marketing and design philosophies, which are considered the best in the world. However, this is nowhere near the level of emotion that art invokes.
As such, I would advise the author to carefully distinguish between art and service. When making art, you should never make it with the expectation that others will like it. You should make it such that it satisfies your own tastes. If others like it, you know that your taste is shared. If not, your tastes are unique. It's a win win.
Don't regret making works of art. It is all that succeeds us when we leave this realm.
>Don't regret making works of art. It is all that succeeds us when we leave this realm.
Scientific discoveries also persist after your death. While making art is fine, it's hardly the only thing that people are known for.
On top of that, practically any action can leave a lasting impact, even terrible ones. So "effects persisting after you die" isn't really a way to determine value of your actions.
Scientific discoveries also persist after your death. While making art is fine, it's hardly the only thing that people are known for.
On top of that, practically any action can leave a lasting impact, even terrible ones. So "effects persisting after you die" isn't really a way to determine value of your actions.
> When making art, you should never make it with the expectation that others will like it. You should make it such that it satisfies your own tastes.
I don't know, to me both are businesses and have to deal with things such as user acquisition, user retention, average revenue per user, etc.
We've read about the author releasing the game, but don't know the back story about user acquisition - what channels were used, what was the performance of those channels, what viral mechanisms were put in place, what A/B tests were run, how user stickiness was determined and improved upon.
Behind every "luck" story there's some dude or team of dudes whose entire job is user growth.
I don't know, to me both are businesses and have to deal with things such as user acquisition, user retention, average revenue per user, etc.
We've read about the author releasing the game, but don't know the back story about user acquisition - what channels were used, what was the performance of those channels, what viral mechanisms were put in place, what A/B tests were run, how user stickiness was determined and improved upon.
Behind every "luck" story there's some dude or team of dudes whose entire job is user growth.
"Don't regret making works of art. It is all that succeeds us when we leave this realm." Good words my man!
Don't regret making works of art. It is all that succeeds us when we leave this realm.
Until someone turns off the hosting servers.
Until someone turns off the hosting servers.
Why would anyone do that unless they were dead? :-)
Don't regret making works of art. It is all that succeeds us when we leave this realm.
Sometimes I feel this is our main differentiation from other species.
Sometimes I feel this is our main differentiation from other species.
Yeah, any member of animal kingdom can rationally analyze situations and make logical decisions based on facts, but art, on the other hand, is unique to humans. </s>
"I am a great believer in luck, and I find the harder I work, the more I have of it."
-- Thomas Jefferson (apocryphal; see [0])
[0]: http://www.monticello.org/site/research-and-collections/i-am...
-- Thomas Jefferson (apocryphal; see [0])
[0]: http://www.monticello.org/site/research-and-collections/i-am...
And buying more lottery tickets increases the chances of winning the lottery.
LUCK is also defined as 'Labor Under Correct Knowledge'
"The results of hard work and dedication always look like luck to saps."
-- leveling up in Morrowind (no idea who to attribute this quote to)
-- leveling up in Morrowind (no idea who to attribute this quote to)
Bizarre - the last link I was on was a random ESPN quiz with UVa star Joe Harris in which that quote was one of the questions. (I realize this is a pretty meaningless and useless comment, but seeing this quote 2 times in less than 10 seconds was too much not to mention).
I'm unable to find a definitive reference, but Gary Player (golfing legend) is also attributed with the quote: "The harder I practice, the luckier I get." Perhaps that's why it was on ESPN.
Pretty sure George Simmons has this quote of Player's on one of the chapter pages in his "Precalculus Mathematics in a Nutshell" book.
Pretty sure George Simmons has this quote of Player's on one of the chapter pages in his "Precalculus Mathematics in a Nutshell" book.
Quote Investigator has tackled this one:
http://quoteinvestigator.com/2010/07/14/luck/
The upshot is that its origin is unknown, but goes back at least to a Walter Winchell column from 1949. Gary Player used it and became associated with it. The attribution to Jefferson is nonsense, of course.
http://quoteinvestigator.com/2010/07/14/luck/
The upshot is that its origin is unknown, but goes back at least to a Walter Winchell column from 1949. Gary Player used it and became associated with it. The attribution to Jefferson is nonsense, of course.
Jefferson and Einstein, never trust a quote attributed to them!
It was just because Thomas Jefferson said it and Joe Harris goes to the University he founded, it's just bizarre that I saw it 2 times in less than 10 seconds.
Luck is when preparation meets opportunity.
– Seneca
Fools wait for a lucky day but every day is a lucky day for an industrious man.
– BuddhaCritics said he won many battles simply because of luck; Napoleon responded, "Give me lucky generals," aware that "luck" comes to leaders who recognize opportunity, and seize it.
(wikipedia - Napoleon)
(wikipedia - Napoleon)
It takes both. luck is a constant that can range between 0 -> inf, and work is the multiplier 0 -> 1.
Chance favors the prepared mind.
--Louis Pasteur
--Louis Pasteur
They wait for IT to come. I became IT.
You turned into a Segway?
[1] http://en.wikipedia.org/wiki/Segway_PT#Early_history_and_pre...
[1] http://en.wikipedia.org/wiki/Segway_PT#Early_history_and_pre...
As a former player, and customer service representative of the game, i can say confidently that the reason Ryzom failed had nothing to do with bad luck, and everything with bad decisions and incompetence.
They had no qualms about changing large parts of the game. The prime example being that they changed the experience distribution in the game such that where it was first that any large group of players could play together and cooperate, after beta it was changed such that only squad-sized groups could cooperate and squads being in the same area only meant difficulties, since experience could not be shared anymore.
On the technical side they had a lot of terrible code as a result of much of their 50 man staff being students doing an internship for free there. They also had a very bad attitude towards volunteer support staff, where, for example, an issue on the web site would be reported, the dev in question would say nothing, and when asked five minutes later would say "What problem, i see none?" after obviously having fixed it.
Lastly, they also had a very bad attitude to players. The game had guilds and an ingame browser (kind of hidden, since it was the backend for 90% of the game UI), so some enterprising players had figured out how to use that to provide guild forums. The result being legal threats.
As much as i love the game still to this day, and still hold on fondly to the screenshots and memories i collected in its wonderful world, it wasn't luck that killed it. It was Nevrax' incompetence and shortsightedness.
They had no qualms about changing large parts of the game. The prime example being that they changed the experience distribution in the game such that where it was first that any large group of players could play together and cooperate, after beta it was changed such that only squad-sized groups could cooperate and squads being in the same area only meant difficulties, since experience could not be shared anymore.
On the technical side they had a lot of terrible code as a result of much of their 50 man staff being students doing an internship for free there. They also had a very bad attitude towards volunteer support staff, where, for example, an issue on the web site would be reported, the dev in question would say nothing, and when asked five minutes later would say "What problem, i see none?" after obviously having fixed it.
Lastly, they also had a very bad attitude to players. The game had guilds and an ingame browser (kind of hidden, since it was the backend for 90% of the game UI), so some enterprising players had figured out how to use that to provide guild forums. The result being legal threats.
As much as i love the game still to this day, and still hold on fondly to the screenshots and memories i collected in its wonderful world, it wasn't luck that killed it. It was Nevrax' incompetence and shortsightedness.
Well, according to statistics (see Kahneman) CEO 'performance' has very low correlation with perceived CEO performance. Also, past success has low correlation with future success. In other words, there isn't really a 'CEO skill', or a 'successful manager' skill. In other words, company success is not repeatable given the same set of people. In other words, yes, luck is extremely important.
There is no moral of the story other than: failure does not mean that you didn't do well.
There is no moral of the story other than: failure does not mean that you didn't do well.
Are those statistics for startups or Fortune 500s? Because the way I see it, at a small scale you are much more in control of your own destiny simply due to high agility and low communication overhead.
Yes, we (should) all know that but somehow we are still deluged with books and blog posts from these lucky few telling the rest of us how to do it. Worse yet too many are taking it as gospel when they really should just do it their own way.
We are deluged by these narratives because they are easy to understand. Same thing with a lot of money is synonymous with success; money is easy to quantify.
When we start talking about randomness and luck, my sense is, that people begin to feel uncomfortable because it makes the world a much more less understandable place.
When we start talking about randomness and luck, my sense is, that people begin to feel uncomfortable because it makes the world a much more less understandable place.
"There is no moral of the story other than: failure does not mean that you didn't do well."
While this lesson is pretty well internalized, I think there's some difficulty with the converse: just because you succeeded, doesn't mean what you were doing was right. Life is contingent.
While this lesson is pretty well internalized, I think there's some difficulty with the converse: just because you succeeded, doesn't mean what you were doing was right. Life is contingent.
Oh yes, that might be even more important. See the Superinvestors of America: http://www.tilsonfunds.com/superinvestors.html
This is really just semantic. You can play around with definitions and construct all sorts of truisms:
Just because your company ran out of money and ceased to exists doesn't mean you failed.
Just because your company grew very quickly, IPO'd at a high price, and had consistently large profits for many years, doesn't mean you succeeded.
Just because your company ran out of money and ceased to exists doesn't mean you failed.
Just because your company grew very quickly, IPO'd at a high price, and had consistently large profits for many years, doesn't mean you succeeded.
I know it's not the point of the article, specifically, but it's very difficult to draw any startup conclusions based on a game company. Games are notoriously difficult to make into successful products, even more-so than your average startup.
That said, I do think the author has a lot of good points. Surely there is a portion of "randomness"/luck, but there's also a healthy dose of focus & determination that make things work.
To play a bit of devil's advocate, I do feel that in the last few years the idea of "success" has somewhat diverged from what it used to mean. Is Twitter successful? To their founders & early investors, certainly they are. In 5 years, will Twitter still be relevant & a worthwhile investment to their millions of new stockholders?
Was Zynga "successful"? Again: to early investors, they were wildly successful. They were able to dump their shares onto a greater fool.
To me, those are two examples of "lucky" startups. A startup like Salesforce is less "lucky" and more a well-executed product. It's not as sexy as a Facebook/Twitter/Zynga, but it's a solid business addressing a specific need. It isn't reliant on "scale massively and figure out a sustainable business model later", which to me is what the aforementioned companies are.
To paint a picture, some startups have fisherman tactics: throw as wide of a net as possible, catch as many things as possible and some small portion will be valuable. These would be startups to whom luck would seem to play a larger role (in my opinion).
Others are more focused: identify a specific set of targets to go after, and hunt them down. This would be more like Salesforce. To me, these are the startups that don't rely as much on luck.
That said, I do think the author has a lot of good points. Surely there is a portion of "randomness"/luck, but there's also a healthy dose of focus & determination that make things work.
To play a bit of devil's advocate, I do feel that in the last few years the idea of "success" has somewhat diverged from what it used to mean. Is Twitter successful? To their founders & early investors, certainly they are. In 5 years, will Twitter still be relevant & a worthwhile investment to their millions of new stockholders?
Was Zynga "successful"? Again: to early investors, they were wildly successful. They were able to dump their shares onto a greater fool.
To me, those are two examples of "lucky" startups. A startup like Salesforce is less "lucky" and more a well-executed product. It's not as sexy as a Facebook/Twitter/Zynga, but it's a solid business addressing a specific need. It isn't reliant on "scale massively and figure out a sustainable business model later", which to me is what the aforementioned companies are.
To paint a picture, some startups have fisherman tactics: throw as wide of a net as possible, catch as many things as possible and some small portion will be valuable. These would be startups to whom luck would seem to play a larger role (in my opinion).
Others are more focused: identify a specific set of targets to go after, and hunt them down. This would be more like Salesforce. To me, these are the startups that don't rely as much on luck.
I'm the author. Thanks for the comment.
I agree with you, I don't know the Saleforce history but I'm quite sure that at the beginning of the company, they had lot of luck. I'm sure at least 10 other companies tried to address the same problem on the same market and failed.
Execution is mandatory but lot of the execution is also based on lot of uncontrollable parameters, hire the right guy at the right time.
Look at Evernote for example, they were almost bankrupt even if the execution was good, the market here and so on. It's a pure luck if the are still there and so strong.
I agree with you, I don't know the Saleforce history but I'm quite sure that at the beginning of the company, they had lot of luck. I'm sure at least 10 other companies tried to address the same problem on the same market and failed.
Execution is mandatory but lot of the execution is also based on lot of uncontrollable parameters, hire the right guy at the right time.
Look at Evernote for example, they were almost bankrupt even if the execution was good, the market here and so on. It's a pure luck if the are still there and so strong.
Have you heard of the concept of increasing your luck surface area? If my memory serves me correctly is that all of the work, networking, etc. you do the more opportunities you have to get lucky. You can't have chance encounters in your basement. You can't stumble onto investors for a product that doesn't exist.
I think it goes along the lines of the quote from The entertainment industry that every overnight success is a result of years of hard work (paying your dues in the form of acting/music lessons, community theater/coffee house performances, tons of auditions).
I think it goes along the lines of the quote from The entertainment industry that every overnight success is a result of years of hard work (paying your dues in the form of acting/music lessons, community theater/coffee house performances, tons of auditions).
Yes I heard of the concept of increasing your luck surface area and yes it's clearly what everyone should do.
The game industry is a special case because it is at an intersection between technology and entertainment. Success is very difficult to predict or repeat. You can't just fill a need in a niche because any other game, really any other form of entertainment, is a substitute for your product.
I used to think I was really smart and that my intelligence would carry me when I finally set out to start a company.
Wrong, while I still consider myself to be smart, I don't think I'm savvy enough to rely upon good decisions to carry me. There are plenty of people smarter than me that have failed in their ventures. So, I've reverted to a brute force strategy coupled with an unrelenting resolve to see projects to completion.
Just lucky? Not just. When you build your companies with a willingness to change, frequently self re-evaluating, you will amaze yourself with how much you grow as an entrepreneur. It is ridiculous what I know today when compared against my assumptions 2 years ago.
When the author was talking about the failed MMO, I took him at his word when he said his team created an amazing game. So the point of failure is obviously marketing. Who knows what could have been if those game developers had a comparable marketing team in their corner. What if they launched a beta 1 year into development to help develop a core user group as well as aid in gamer feedback which could then be redigested by the marketing team to help them create buzz.
I love this rumored quote assumedly from Jack Dorsey "It only took 10 years for me to become an overnight success." The entrepreneur that doesn't die is hardened and polished in failure over a number of years. When luck finally strikes, he will have the tools, experience, insight, vision to take full advantage.
I'm 2 years into this journey, hopefully I'll find luck in year 3, and hopefully I will have grown enough to take full advantage of it.
Wrong, while I still consider myself to be smart, I don't think I'm savvy enough to rely upon good decisions to carry me. There are plenty of people smarter than me that have failed in their ventures. So, I've reverted to a brute force strategy coupled with an unrelenting resolve to see projects to completion.
Just lucky? Not just. When you build your companies with a willingness to change, frequently self re-evaluating, you will amaze yourself with how much you grow as an entrepreneur. It is ridiculous what I know today when compared against my assumptions 2 years ago.
When the author was talking about the failed MMO, I took him at his word when he said his team created an amazing game. So the point of failure is obviously marketing. Who knows what could have been if those game developers had a comparable marketing team in their corner. What if they launched a beta 1 year into development to help develop a core user group as well as aid in gamer feedback which could then be redigested by the marketing team to help them create buzz.
I love this rumored quote assumedly from Jack Dorsey "It only took 10 years for me to become an overnight success." The entrepreneur that doesn't die is hardened and polished in failure over a number of years. When luck finally strikes, he will have the tools, experience, insight, vision to take full advantage.
I'm 2 years into this journey, hopefully I'll find luck in year 3, and hopefully I will have grown enough to take full advantage of it.
You missed the point of the article. Ultimately, the universe is unfair. No special insight, ability, breakthrough, or perseverance is sufficient to change that.
I didn't say anything about fair. I didn't even say that you don't need luck. I believe you do need luck. But, you can remove a lot of your dependence on luck by getting better at the game over time, as well as by playing a lot. Just ask anyone that plays Texas Hold'em.
Want to score more? Get your number of shots on goal up. Luck is just the positive result of chance being realized. Chance to succeed vs chance to fail. So as long as you don't care about the number of failures you stack up, you just keep rolling the dice until you succeed.
Perseverance is sufficient as long as it is accompanied by adaptability. You simply need the ability to recognize your strengths/weaknesses/personality type and play the game accordingly. Either invest in improving your weaknesses, or spend time networking to find a partner to complement them. Even better, pick an idea where your weaknesses will not be a factor.
What makes startups so hard is all the opportunities to fail that come along as you try and build something new. Every month, or every week, there is a new thing that wants to kill you. Sometimes these things have nothing to with the company. But, there are sooo many ways to mitigate these problems and you learn how to do so better and better the longer you play the game.
If you'd like me to go into some more personal details to show some examples, just let me know.
Edited: minor edits.
Want to score more? Get your number of shots on goal up. Luck is just the positive result of chance being realized. Chance to succeed vs chance to fail. So as long as you don't care about the number of failures you stack up, you just keep rolling the dice until you succeed.
Perseverance is sufficient as long as it is accompanied by adaptability. You simply need the ability to recognize your strengths/weaknesses/personality type and play the game accordingly. Either invest in improving your weaknesses, or spend time networking to find a partner to complement them. Even better, pick an idea where your weaknesses will not be a factor.
What makes startups so hard is all the opportunities to fail that come along as you try and build something new. Every month, or every week, there is a new thing that wants to kill you. Sometimes these things have nothing to with the company. But, there are sooo many ways to mitigate these problems and you learn how to do so better and better the longer you play the game.
If you'd like me to go into some more personal details to show some examples, just let me know.
Edited: minor edits.
"Success in [indie] game development is lucky like poker, not lucky like the lottery."
I forget where I read this; it may have been on Twitter, but it could apply to startups and probably many other facets of life.
Edit: Found the source. https://twitter.com/MattRix/status/401072871323086848
I forget where I read this; it may have been on Twitter, but it could apply to startups and probably many other facets of life.
Edit: Found the source. https://twitter.com/MattRix/status/401072871323086848
Of course they are lucky. Luck is not the only thing, you really do need something useful and it has to work so you need to know your audience, but luck is a big part of it.
You have to be in the right place at the right time. That is all luck.
You have to be in the right place at the right time. That is all luck.
You have to be in the right place at the right time.
You also have to recognize the opportunity and take it. That's what "making your own luck" is all about - exploiting opportunities to their full.
You also have to recognize the opportunity and take it. That's what "making your own luck" is all about - exploiting opportunities to their full.
This, to me, implies an extraordinary claim of prophetic insight.
The person who "recognizes" the opportunity is still doing a lot of guesswork, and good luck has as much to do with his recognition of the opportunity as it does anything else.
Networking and having a head start are also key factors--show me a successful tech startup and I'd lay better-than-even odds on the founder(s) coming from a life of (relative) privilege (and also being white, if in America). What could be luckier than being born to the "correct" parents?
The person who "recognizes" the opportunity is still doing a lot of guesswork, and good luck has as much to do with his recognition of the opportunity as it does anything else.
Networking and having a head start are also key factors--show me a successful tech startup and I'd lay better-than-even odds on the founder(s) coming from a life of (relative) privilege (and also being white, if in America). What could be luckier than being born to the "correct" parents?
Though the right place at the right time is almost never at home watching TV. Getting out and meeting a lot of people greatly increases the chance that you will be in the right place at some point.
It keeps me up at night that you could work your entire life in startups, do everything right and even work on good ideas, and you could still never really succeed. Then I realize that success (in terms of an exit or something similar) can't be the goal: I work on startups because I like building things (edit: things that have the potential to have a tremendous impact) and I want to change the world.
What about "changing the world" (for the better, presumably) doesn't require financial independence AND a good chunk of luck on top of that?
Changing the world doesn't mean changing EVERYTHING about the world, or the entire world, just a part of it. I want to make huge changes, but you also have to find a level of satisfaction in making smaller changes
Well, of course it's fickle to define what exactly constitutes changing the world. As per the butterfly effect, anything could be said to change the world, but let me attempt a definition: I'm thinking it has to be major (substantially different from what was before and affecting a lot of people, most of whom are and remains perfect strangers to you), deterministic (ie. what you did caused the change) and lasting (still identified as a change by strangers at least a few years after the fact).
Making that kind of change is really quite difficult and requires both luck and financial success (which in itself requires luck).
That said, I think it's perfectly honourable to be a good guy and do a good job without changing the world. My argument is merely that in my view, changing the world is a quite higher bar than "just" being successful.
Making that kind of change is really quite difficult and requires both luck and financial success (which in itself requires luck).
That said, I think it's perfectly honourable to be a good guy and do a good job without changing the world. My argument is merely that in my view, changing the world is a quite higher bar than "just" being successful.
> Then I realize that success (in terms of an exit or something similar) can't be the goal: I work on startups because I like building things and I want to change the world.
While the above might be a commendable personal goal, startups are indeed created for their possible exit value. The vision, the tech and the kind of things you end up working on are commanded or at least heavily influenced by these circumstances. In that sense there isn't too much difference from working for an innovative established company (except you don't get a shot at the money pot).
While the above might be a commendable personal goal, startups are indeed created for their possible exit value. The vision, the tech and the kind of things you end up working on are commanded or at least heavily influenced by these circumstances. In that sense there isn't too much difference from working for an innovative established company (except you don't get a shot at the money pot).
The startups I work on have that as a top level goal, absolutely and 100% - as a person, you have to focus on and reward the process as much as the potential result, or it won't work. Paul Singh is fond of saying "we always celebrate the result, but we need to celebrate the process". Putting more people in the right process will produce more positive results, even if not all those people can achieve the massive results we're learning for.
>> I work on startups because I like building things and I want to change the world.
That's nice, but you also need to be able to pay the bills, right?
That's nice, but you also need to be able to pay the bills, right?
I don't think "and of course, I also have to pay the bills" is an instructive part of anyone's life mantra. "The bills" are whatever you decide they're going to be - there's a very low fixed cost to staying alive, what you decide you need beyond that is up to you.
I have no trouble paying the bills now, but I've gone through times working on a startup where I lived on less than $4 a day, for example, without any regrets. That's not my life now, but the point is my life's goal isn't to maintain the high standard of living I enjoy now, it's to build things, try to change the world, and be happy. Having a decent amount of money does help the third thing in that list, but not without the other two.
I have no trouble paying the bills now, but I've gone through times working on a startup where I lived on less than $4 a day, for example, without any regrets. That's not my life now, but the point is my life's goal isn't to maintain the high standard of living I enjoy now, it's to build things, try to change the world, and be happy. Having a decent amount of money does help the third thing in that list, but not without the other two.
It's great that you are in this situation. When its only you, well it comes down to the lowest denominator for living costs.
I think there is a lot of people that didn't start young with the entrepreneurship bug and ended up married with kids. With these people, paying the bills has a direct and noticeable impact on their family. I would say there is a lot of people in this situation and the dynamics of going "all in" with their idea just doesn't work the same.
I don't think you would argue with what I am saying at all, but there are many people that have obligations to others and we are not all single and only responsible for ourselves.
Being in this situation myself, I look at it as a optimization problem. Given the constraints I have, how can I optimize my situation to be successful with a company.
I think there is a lot of people that didn't start young with the entrepreneurship bug and ended up married with kids. With these people, paying the bills has a direct and noticeable impact on their family. I would say there is a lot of people in this situation and the dynamics of going "all in" with their idea just doesn't work the same.
I don't think you would argue with what I am saying at all, but there are many people that have obligations to others and we are not all single and only responsible for ourselves.
Being in this situation myself, I look at it as a optimization problem. Given the constraints I have, how can I optimize my situation to be successful with a company.
I understand that, and I'm trying to be as general as possible: paying the bills isn't part of your world view, what "paying the bills mean" is shaped and reified BY your worldview and goals. That's all I'm saying: "that's great, but you still have to pay the bills" doesn't have anything to do with a mantra by which you live your life, it's something you fit around and is shaped by what is core to how you want to live.
No, not really.
About being too complex to be controlled, yes maybe, but there is very good people controlling complexity.
I know lots of entrepreneurs, as I am one myself.
The best entrepreneurs will learn from other people. Take for example Steve Jobs, he was not born knowing it all, he had fckng Robert Noyce as mentor, and all his life was spent learning from the best he could, like Polaroid inventor or Sony founder.(every year he will take 100 people from his company to learn from)
No matter were you are, there is always someone 10 to 20 years over you on a topic, and the best thing you could do is learn from them instead of thinking you are inventing gunpowder(Spanish expression that means you are inventing something revolutionary nobody knows about).
I personally know a man called Warren Buffet. This man, who is super rich old(normal old people believe they know it all) and famous will cold call you if he is interested in something you do for please explain it to him, and then he will start asking you deep questions about your business like crazy and if you ask him, he would do the same for you for anything you ask. This man has amazing amounts of valuable knowledge. In public he could not say what he really things because his word alone is capable of making markets go up or down.
Successful people do something called "masterminding", that is very similar to "pay it forward" in Silicon Valley. They learn form each other what works and what does not. They do it officially or by networking and just talking.
About being too complex to be controlled, yes maybe, but there is very good people controlling complexity.
I know lots of entrepreneurs, as I am one myself.
The best entrepreneurs will learn from other people. Take for example Steve Jobs, he was not born knowing it all, he had fckng Robert Noyce as mentor, and all his life was spent learning from the best he could, like Polaroid inventor or Sony founder.(every year he will take 100 people from his company to learn from)
No matter were you are, there is always someone 10 to 20 years over you on a topic, and the best thing you could do is learn from them instead of thinking you are inventing gunpowder(Spanish expression that means you are inventing something revolutionary nobody knows about).
I personally know a man called Warren Buffet. This man, who is super rich old(normal old people believe they know it all) and famous will cold call you if he is interested in something you do for please explain it to him, and then he will start asking you deep questions about your business like crazy and if you ask him, he would do the same for you for anything you ask. This man has amazing amounts of valuable knowledge. In public he could not say what he really things because his word alone is capable of making markets go up or down.
Successful people do something called "masterminding", that is very similar to "pay it forward" in Silicon Valley. They learn form each other what works and what does not. They do it officially or by networking and just talking.
For anyone arguing that there is some causation behind a startup's success besides "luck", I challenge you to prove it.
It is not easy to prove causation.
For example, startup says "We did X and this was the direct cause of Y", where X is some random thing, and Y is "success". That is difficult to prove. And startups never say that. They just say "We did X." Maybe they also say they believe this was crucial somehow to their success. But they never try to prove causation.
Of course, no one demands anyone to prove causation when it comes to the actions and the success of any startup. The scientifc method does not apply here. We are happy to listen to someone tell us about what a startup did, about their eventual success and then let our imaginations make the supposed causal connections.
I do not think it's unreasonable to question, as does the OP, whether "luck" is a proper explanation for the success of a startup. If it were, then that leaves startups free to make their own rules instead of believing they must do X in order to produce Y. And I say that is fine. The fact is, doing X might not bring about Y for every startup that does X. Clearly there is more to this than a "formula", whether it is the YC's or someone else's.
It is not easy to prove causation.
For example, startup says "We did X and this was the direct cause of Y", where X is some random thing, and Y is "success". That is difficult to prove. And startups never say that. They just say "We did X." Maybe they also say they believe this was crucial somehow to their success. But they never try to prove causation.
Of course, no one demands anyone to prove causation when it comes to the actions and the success of any startup. The scientifc method does not apply here. We are happy to listen to someone tell us about what a startup did, about their eventual success and then let our imaginations make the supposed causal connections.
I do not think it's unreasonable to question, as does the OP, whether "luck" is a proper explanation for the success of a startup. If it were, then that leaves startups free to make their own rules instead of believing they must do X in order to produce Y. And I say that is fine. The fact is, doing X might not bring about Y for every startup that does X. Clearly there is more to this than a "formula", whether it is the YC's or someone else's.
This meme is particularly viral among game devs. They say "Notch was lucky", but what they really mean is that Minecraft resonated with the market more than they can comprehend. They say "my game failed, and I can't see why, so I must be unlucky", rather than saying "my game failed, because people didn't like it more than the alternatives".
Short of people being forced to purchase it, the only thing that makes a product successful is when people want it. How the product stands on its own merits is dependent on customers knowing about it, and choosing it over the alternatives.
When it comes to games, works in the same genre may not even be competing against each other because of the way gamers buy games. Plenty of gamers will buy Battlefield AND Call of Duty, or will buy Minecraft AND all of its derivative clones. They just won't buy things they don't want.
MMORPGs in the same genre, though, are often competing against each other. People can only play so many MMORPGs because of the time and social aspects.
Short of people being forced to purchase it, the only thing that makes a product successful is when people want it. How the product stands on its own merits is dependent on customers knowing about it, and choosing it over the alternatives.
When it comes to games, works in the same genre may not even be competing against each other because of the way gamers buy games. Plenty of gamers will buy Battlefield AND Call of Duty, or will buy Minecraft AND all of its derivative clones. They just won't buy things they don't want.
MMORPGs in the same genre, though, are often competing against each other. People can only play so many MMORPGs because of the time and social aspects.
To echo the monkeys writing Shakespeare analogy, if a hundred startups are throwing darts at a dartboard, there's a decent chance that at least one of them will hit the bullseye.
Where network effects are involved, they may not even need to hit the bullseye - just getting closer to the bullseye than anyone else may be enough.
Where network effects are involved, they may not even need to hit the bullseye - just getting closer to the bullseye than anyone else may be enough.
IMHO, luck is only a factor in success. Failure is much more frequently pre-determined. For example, a startup with a great idea and a great execution still might fail, while a startup with a terrible idea or poor execution will almost definitely fail. I think of startups as needing to be not good but good enough: if the idea and execution are good enough, other factors start mattering. However, if they are not good enough, then no amount of luck will change that in the long run.
For example, the Color app had all the resources (funding, contacts), but the basic value proposition was just not there. They never had a chance. OTOH, Turntable.fm had a great product, but as luck would have it, they did not make it. Either the timing wasn't right or something else, but despite everything they are having to pivot.
For example, the Color app had all the resources (funding, contacts), but the basic value proposition was just not there. They never had a chance. OTOH, Turntable.fm had a great product, but as luck would have it, they did not make it. Either the timing wasn't right or something else, but despite everything they are having to pivot.
It's doing-the-right-things plus luck.
You do need to be good at marketing. You do need to get product-market-fit quickly. You do need to have a good product, and so on.
The better you are at these things, the less luck is required. But you cannot get the amount of luck needed down to zero.
You do need to be good at marketing. You do need to get product-market-fit quickly. You do need to have a good product, and so on.
The better you are at these things, the less luck is required. But you cannot get the amount of luck needed down to zero.
Seems like this is kind of a parallel to his "lottery" analogy - doing those things is sort of like buying another ticket. Your chances might be better but it doesn't mean you're going to win.
"Think of it like a lottery. In this case the obvious decision is to buy more tickets in order to get more chances to win."
I like what Seth Godin has to say on failing until you succeed:
http://www.youtube.com/watch?v=fDtkBsWgzWE
And this article by Scott Adams:
"What's the best way to climb to the top? Be a failure."
http://online.wsj.com/news/articles/SB1000142405270230462610...
I like what Seth Godin has to say on failing until you succeed:
http://www.youtube.com/watch?v=fDtkBsWgzWE
And this article by Scott Adams:
"What's the best way to climb to the top? Be a failure."
http://online.wsj.com/news/articles/SB1000142405270230462610...
If successful startups are just lucky, I have some questions:
- What's the expected monetary return for someone wishing to enter the startup game? In particular, is it positive or negative? For example, the usual platitude "you miss 100% of the shots you don't take" also applies to the lottery, where the expected return is negative. Could it be the case that rational people just shouldn't do startups?
- What's the expected return after adjusting for diminishing marginal utility of money? For example, a person with 2 million dollars is not 2x happier than a person with 1 million. This increases the impact of the previous point: even if the decision to a startup gives you positive expected money, it could still lead to negative expected change in happiness. Most of the monetary wins go to a lucky few, which doesn't raise their happiness enough to compensate for the unhappiness of the unlucky many.
- What's the expected return if you take the previous two points into account, and also compare against the next best thing you could've done instead of a startup? For example, is there anyone on Earth who's deciding whether to do a startup and who wouldn't get higher expected money, happiness... everything, just by getting hired at Google?
- Given the above points, is it ever morally okay to advise someone to do a startup? What advice would you give people if you were truly, honestly immune to survivorship bias?
- What's the expected monetary return for someone wishing to enter the startup game? In particular, is it positive or negative? For example, the usual platitude "you miss 100% of the shots you don't take" also applies to the lottery, where the expected return is negative. Could it be the case that rational people just shouldn't do startups?
- What's the expected return after adjusting for diminishing marginal utility of money? For example, a person with 2 million dollars is not 2x happier than a person with 1 million. This increases the impact of the previous point: even if the decision to a startup gives you positive expected money, it could still lead to negative expected change in happiness. Most of the monetary wins go to a lucky few, which doesn't raise their happiness enough to compensate for the unhappiness of the unlucky many.
- What's the expected return if you take the previous two points into account, and also compare against the next best thing you could've done instead of a startup? For example, is there anyone on Earth who's deciding whether to do a startup and who wouldn't get higher expected money, happiness... everything, just by getting hired at Google?
- Given the above points, is it ever morally okay to advise someone to do a startup? What advice would you give people if you were truly, honestly immune to survivorship bias?
It's not random in the sense that "anybody who tries has an equal chance at success." The prior you're missing is a person's ability, current mind, and biological mental capacity. Some people are just waaaaaaaaay smarter than other people. "All people are created equal" is a fantasy when you reach extremes (sport abilities, mental abilities, creative abilities).
Now, once you have a baseline genius startup mind, no success is guaranteed anyway. Twitter would be nothing without an Internet-famous founder and techcrunch hyping it up constantly its first few years of existence.
That's not saying you can't be rich. Anybody can always get dumb success (especially these days) with things like advertising or affiliates or ebooks.
The money doesn't enable your happiness — the freedom money provides enables your happiness. You can substitute being rich with having a job/life you don't hate plus a good salary.
Now, once you have a baseline genius startup mind, no success is guaranteed anyway. Twitter would be nothing without an Internet-famous founder and techcrunch hyping it up constantly its first few years of existence.
That's not saying you can't be rich. Anybody can always get dumb success (especially these days) with things like advertising or affiliates or ebooks.
The money doesn't enable your happiness — the freedom money provides enables your happiness. You can substitute being rich with having a job/life you don't hate plus a good salary.
"That's not saying you can't be rich. Anybody can always get dumb success (especially these days) with things like advertising or affiliates or ebooks."
People that are doing this should speakup but I don't believe "anybody" can do the above. Your statement is general to a certain extent and could apply to many areas but I don't think successful people in these areas are any less smart, hardworking, determined than startup founders.
People that are doing this should speakup but I don't believe "anybody" can do the above. Your statement is general to a certain extent and could apply to many areas but I don't think successful people in these areas are any less smart, hardworking, determined than startup founders.
I know people who write really low quality populist fiction on the Amazon Kindle store and bring in over $3k/month. Over time, the old books still sell, so you have recurring revenue that gets compounded as time goes on.
There are other examples, but that's the easiest to understand.
There are other examples, but that's the easiest to understand.
Luck and skill tend to have the same distributions (generally a normal curve). As an outsider looking in, it is difficult to tell the difference. In fact, it can be difficult as an insider as well. We may have a plan, and attribute our success, or failure, to the plan rather than to luck. Or something could look like luck to an outsider because they don't understand all of the intricacies that go into making a system work.
Great blog Vianney. I just attended a conference last week full of silicon valley's best and brightest (http://warmgun.com/). I don't think that things are totally random, but I was struck by the million different ways to success (and failure). Chance definitely has a lot to do with it. It allows the really hard work to pay off.
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Luck by definition is based on chance, something one cannot fully control. A startup of course involves luck, simplify because no company can control all the factors involved in becoming a success. So yes, I completely agree that successful startups are lucky. However, it's not "just" lucky as your title suggests. Just like playing lottery or gambling, there are ways you can maximize your chances of winning. Buy more lottery tickets as your blog post says, is one way to maximize the chance. In the startup world, obtaining the right skills, choosing the right features to implement, making the right connections and a million and one others are all the things you can do to maximize your chances of building a successful startup. I think your post illustrates the right idea that there is luck and chance involved at building a successful startup. But isn't that the case for everything in life? In the end, the rule of thumb is, "do whatever you can, and the rest is luck".
To put a little finer point on it, what if successful startups have enough randomly-uncontrolled and untracked things happen to them to make them successful as to be not reproducible?
So you do all the right things, and you still only have a 1-in-20 chance. Or the other guy does all the wrong things, and he sells out in two years for 20 Million. A third guy does some good things and some really bad things, still manages to grow and flip, then he writes a book on "How to have a successful startup" that claims to know the answers.
As far as I can tell, this is pretty close to the state of things, and that's okay. It just means 1) you can't give up, and 2) you need to choose your strategy based on this state of affairs.
What you don't want to do is to acknowledge there is randomness, then throw in the towel. Or to go on some jag where you hero worship Zuckerberg or some other rich schmuck simply because the startup lottery hit for them. The truth is much more complicated -- and involves a lot of hard work.
So you do all the right things, and you still only have a 1-in-20 chance. Or the other guy does all the wrong things, and he sells out in two years for 20 Million. A third guy does some good things and some really bad things, still manages to grow and flip, then he writes a book on "How to have a successful startup" that claims to know the answers.
As far as I can tell, this is pretty close to the state of things, and that's okay. It just means 1) you can't give up, and 2) you need to choose your strategy based on this state of affairs.
What you don't want to do is to acknowledge there is randomness, then throw in the towel. Or to go on some jag where you hero worship Zuckerberg or some other rich schmuck simply because the startup lottery hit for them. The truth is much more complicated -- and involves a lot of hard work.
Obviously successful startups are lucky. I think the idea of releasing quickly/efficiently is to test the market to see if a larger, more complex product is desired (IOW can you get lucky?). In the example provided, a beta release of one level of Ryzom could have saved years of dev time if it was not well received.
They did a beta release. People loved it. Then they did a massive change to XP distribution shortly before release that forced people to run in single squads, because experience couldn't be shared among multiple squads cooperating anymore. People hated it. Nevrax didn't give a fuck and released anyhow.
If successful startups are just lucky then you should have as many startups as you can to get more chance at winning. That could mean focusing on quantity instead quality. Also that can be the reason behind MVPs: do something minimal that works then move onto the next project.
High growth start-ups are nothing but luck. How does a company built in a garage with practically no marketing budget get such high growth numbers in the initial stages (facebook, twitter, snapchat, instagram,etc)? They manage to go viral. Pure herd mentality.
"Even if it's not random, it's too complex to be controlled." - OP.
I think it's this realization that gives rise to quotes like, "Talent hits a target no one else can hit; Genius hits a target no one else can see." by Arthur Schopenhauer.
I think it's this realization that gives rise to quotes like, "Talent hits a target no one else can hit; Genius hits a target no one else can see." by Arthur Schopenhauer.
A start founders charisma points must be very high. You have to get others(co-founders, future employees, investors, ealry customers) to believe in your vision. And I'm not sure that's teachable. But, there are many ways to pull it off.
What if successful startup founders have high IQs? Or particular personalities making them persevere? It's entirely possible that all those methods and practices count for nothing or are completely eclipsed by IQs, luck, networks...
This argument is being made against education. How much education really matters and how much outcomes are just a matter of raw cognitive ability of students and (self-)selection?
Truth is that we don't know. So most people choose to follow in the footsteps of those who have demonstrable achievements and hope for the best.
BTW This might be the first time I'm seeing a ghost blog in the wild. Just browsing the Internet, not looking at ghost blogs specifically.
This argument is being made against education. How much education really matters and how much outcomes are just a matter of raw cognitive ability of students and (self-)selection?
Truth is that we don't know. So most people choose to follow in the footsteps of those who have demonstrable achievements and hope for the best.
BTW This might be the first time I'm seeing a ghost blog in the wild. Just browsing the Internet, not looking at ghost blogs specifically.
As you said, we don't know.
I moved to ghost 2 days ago and for the moment, it works quite nicely!
I moved to ghost 2 days ago and for the moment, it works quite nicely!
I think that it is some misunderstanding between be successful and have money. Money is the consequence, but the objective of a business should be create real value. In this sense, if you have only a few customers but you are delivering real value, you are successful. Take youtube, for example. They were a very successful company in the beginning, delivering a delightful experience. Now, if you consider money as objective, they are still successful, but they are not. They now deliver a awful experience, with Ads in the beginning, middle and the end of each video. For me, no matter how much money they are making, they just not successful anymore.
The problem is that it is hard to give each project any real chance of success without spending your full effort on seeing it through. A strategy like this will make you abandon your good projects at the first resemblance of a road block.
Honestly, this is poorly written. The author ends up giving advice even though he starts out claiming that is a problematic thing to do. His advice is not so different from common startup knowledge-- success is proportional to the number of swings of the bat. That I think any founder can take to the bank. It is true regardless of what your personal situation is. Obeying a simulated annealing algorithm rapidly through life keeps you from looking too far ahead and from getting stuck in ruts. There are many other generalizations largely independent of your personal story that are very helpful.
Just because OPs game floundered does not mean that startups must be lucky to succeed.
OP was quite proud of his game, is confident is was great because there were 15 talented people working on it... but ultimately the idea didn't resonate with the public in the way they implemented it.
Notch on the other hand resonated with the public incredibly well. By giving away completely free versions and listening to, even literally interacting with game players: He now heads a very successful software company where most of the original code was written by one man.
I don't think a successful company necessarily involves luck at all.
OP was quite proud of his game, is confident is was great because there were 15 talented people working on it... but ultimately the idea didn't resonate with the public in the way they implemented it.
Notch on the other hand resonated with the public incredibly well. By giving away completely free versions and listening to, even literally interacting with game players: He now heads a very successful software company where most of the original code was written by one man.
I don't think a successful company necessarily involves luck at all.
If you define luck as the happening of an event that the probability of not happening is greater than the probability of happening. Then all depends on how well you can calculate your probabilities of success and how much risk you want to take.
Of course you can't be 100% sure that you are going to be successful. But you must try to increase your probabilities as much as you can, trying to predict your probabilities as accurate as you can.
As Laplace said: "Life's most important questions are, for the most part, nothing but probability problems".
Of course you can't be 100% sure that you are going to be successful. But you must try to increase your probabilities as much as you can, trying to predict your probabilities as accurate as you can.
As Laplace said: "Life's most important questions are, for the most part, nothing but probability problems".
I think luck is a trivial factor in a startups success if you're smart. If you think about success more reductively, and ask yourself "what has to happen for me to succeed?" and "can I accomplish those things?", you'll see that luck isn't too big a factor. I wrote an article that talks about this: https://medium.com/i-m-h-o/cd29597704f9.
This argument compares apples to oranges. Your game was not the same as World of Warcraft. It had completely different graphics, different marketing, distribution, gameplay, etc. Facebook is not Google+. Windows is not OS X.
Lottery tickets are apples to apples. Yes, the problem domains for these start-ups may overlap, but these are not apples to apples. Your MMO was not the same as WoW.
The differentiating factor between your MMO and WoW was not just luck. They're different games.
Lottery tickets are apples to apples. Yes, the problem domains for these start-ups may overlap, but these are not apples to apples. Your MMO was not the same as WoW.
The differentiating factor between your MMO and WoW was not just luck. They're different games.
It seems weird to be shocked that success in a startup depends on luck. Of course it does; we already know that from seeing how widely the returns fluctuate. But that doesn't mean successful startup founders aren't smart. A good way to put it would be that, while your chances of success are random, if you're smart and determined your chances are higher. If you aren't smart or determined, you don't qualify for the lottery at all.
"I am a great believer in luck, and I find the harder I work, the more I have of it."
— Thomas Jefferson
"The harder I work, the luckier I get." — Samuel Goldwyn
"The harder I work, the luckier I get." — Samuel Goldwyn
The more lottery tickets you buy, the higher chance you have to win the lottery.
Chance favors the prepared mind.
Great post and I'm totally agree. Once I got a idea, i do it quick and release it earlier, that's cool than just talking. but i usually lost after I release my first version of my project. I don't know how to promote my product, how to raise traffic and how to let people know my product, that makes me really confuse. I think marketing knowledge is also very important for engineer
The only startups that are "lucky" are those that never validate before development and still find traction.
I define validating as getting 3 paying customers before building a viable app.
You could have built an abridged or simpler version of your game and asked people to pay you to play it. If that posed problems, you could have pivoted to a different premise for the game.
I define validating as getting 3 paying customers before building a viable app.
You could have built an abridged or simpler version of your game and asked people to pay you to play it. If that posed problems, you could have pivoted to a different premise for the game.
Are famous artists such as musicians and actors just lucky or do they actually need the talent as well?
You can have all the talent in the world but not lucky to be in the right place at the right time. However, when you are at the right place at the right time you better make sure you bring the talent.
One doesn't exclude the other, you need both: talent + luck = success
You can have all the talent in the world but not lucky to be in the right place at the right time. However, when you are at the right place at the right time you better make sure you bring the talent.
One doesn't exclude the other, you need both: talent + luck = success
1/3 Talent, 1/3 Effort, 1/3 Luck
My essay on the subject, cast in terms of climbing a fitness landscape and getting stuck in local optima:
https://plus.google.com/u/1/+RayCromwell/posts/5bhdU8hF68t
I've noticed that people who win the lottery are the ones who bought tickets. Also the ones that win usually play every week, increasing their chances.
So at this point how are you defining lucky? They might be lucky but then they also worked harder and longer (i.e. bought more tickets)
So at this point how are you defining lucky? They might be lucky but then they also worked harder and longer (i.e. bought more tickets)
The lottery analogy made me think of this: Even if most startups fail, is the expected value nonetheless positive?
Guy releases a unfun game with less then half the budget of his competitors and no name recognition along with poor marketing. Also program was technically ambitious. Then claims its random chance.
THIS IS precisely why its not random!!!
THIS IS precisely why its not random!!!
Among the best, luck is more important for winning than between best and mediocre (where skill is more important).
I thought this was common knowledge after being described in so many pop.sci. books like black swan,etc.
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It's similar to a video going viral. Luck is always a factor, but you need less of it as the quality of your video increases.
"I'd rather be lucky than good - but nothing beats lucky and good."
Obviously it can't be about luck, because that would deflate a lot of egos.
It all depends on what -- exactly -- you define as "luck."
of course they are. But you have to have been working hard all those months/years, so you can capitalise on the luck when it comes.
First you are lucky, then you have a network.
There is no lucky
http://en.wikipedia.org/wiki/Outliers_(book)
http://en.wikipedia.org/wiki/Outliers_(book)
This is what I always thought.
Interesting topic, but the blogpost lacks data.
Michael Jordan and Lebron James definitely get lucky...
But I'd bet on them hitting that lucky shot more than 99% of other basketball players because they just know how to execute. One of my friends was a top 10 high frequency equity futures (snp minis) trader in the u.s. i used to think damn he gets lucky all the fking time. i mean at best it's like 70/30 ratio. just pure luck. how does he just call the tops and bottom and never read a sec filing or financials of a company?! nope he is really that good at execution, and that's why he's only right 70% of the time whereas others are just coin flipping.
a lot of times. timing is luck. but a lot of people get lucky on timing... it's like if the bubble bursted next year then people would have said there was never an easier market to raise money / take risks / make quick money in mobile,social, etc. but i'm pretty sure there's a ton of smart people with luck on their side that's trying to do that right now; and 100 other variables besides luck will make majority of businesses fail.
how do you define luck? break down the components of luck.
a lot of times. timing is luck. but a lot of people get lucky on timing... it's like if the bubble bursted next year then people would have said there was never an easier market to raise money / take risks / make quick money in mobile,social, etc. but i'm pretty sure there's a ton of smart people with luck on their side that's trying to do that right now; and 100 other variables besides luck will make majority of businesses fail.
how do you define luck? break down the components of luck.
there is definitely an element of "luck" (timing, what other actors in the relevant space are doing, etc.)
but the way you hedge against that is by exposing yourself to lots of things with a potential net upside. both in parallel and serially. you might have bad luck with one thing, then good luck with another thing. just like the reasoning behind YC-style investment bets, it only takes one of your little bets to pay off huge in order to more than make up for all the other little failures. which leads to the other complimentary tactic: minimize your spend (money,time,energy) you're willing to risk on any given thing before you see an ROI from it. Also, you never have to completely give up on a thing --- in the software/digital world especially you don't have to destroy/delete/throwaway things, you simply passivate them (put on the backburner), press Pause, etc.
but the way you hedge against that is by exposing yourself to lots of things with a potential net upside. both in parallel and serially. you might have bad luck with one thing, then good luck with another thing. just like the reasoning behind YC-style investment bets, it only takes one of your little bets to pay off huge in order to more than make up for all the other little failures. which leads to the other complimentary tactic: minimize your spend (money,time,energy) you're willing to risk on any given thing before you see an ROI from it. Also, you never have to completely give up on a thing --- in the software/digital world especially you don't have to destroy/delete/throwaway things, you simply passivate them (put on the backburner), press Pause, etc.
LOL...
sorry to laugh, but casual perception should tell you that if you have a startup and your first product's release is a PC game with a date that is four years out (Four YEARS?) - You are going to need more than just luck to be successful.
If successful startups are just lucky, then getting an A on your project/exams in school was all luck. Can someone show us someone making money with shitty products today? Yeah, it's possible to get popular with an incomplete buggy product, but if it's filling a need, it's better than nothing. You will still have to work hard and improve to maintain your position.
Say what you might about how facebooks earlier/current code was/is horrible and in PHP, Facebook has done amazing things to be able to handle a billion users every second/every day. Say what you might about how simple instagram or snapshot is, they filled a need and grew. Their products doesn't "suck", sure they might be valued ridiculously by some groups of investors, but don't discount their work.
Successful startups are not JUST lucky. There is always an element of lucky, but there is also the hardwork. One mistake a lot of "failed" startups make is thinking and believing that they failed. If your goal is to create an application that solves a certain problem and you do so. You have succeeded. A lot of startups have this goal, they don't really have a goal of making money. After they achieve a goal of building their app, then they want to make money and when they fail on that end, they consider everything a failure. The truth is that making money is not just about your apps or how smart you are or hard you worked to designed.
It takes a very different set of skills to market, hustle, and sell. A lot of programmers don't have those business skills, and they whine and cry when the world don't rush to their door for the better mouse trap. Don't cry, the world didn't know because you failed to market or they have heavily vested in another one because you started late.
If you want to really realize that startups are not just lucky, find the other group we don't talk about on HN that make money off the internet. The hustlers, these are guys with little to zero tech knowledge. They do whatever they can, outsource via internet, basic wordpress sites, they sell actually products, their business is rarely based on ads, their business is physical products, software as a service or ebooks etc. Technology is usually a small part of their game, maybe 10%, the other 90% is pure sweat and hustling. We don't hear for them, but there are many of them out there, making very good money.
Successful starts are not lucky, they out hustled the rest and that's just what it is. So if you wish to make money, don't just stay a hacker, become a hacker and a hustler.
Say what you might about how facebooks earlier/current code was/is horrible and in PHP, Facebook has done amazing things to be able to handle a billion users every second/every day. Say what you might about how simple instagram or snapshot is, they filled a need and grew. Their products doesn't "suck", sure they might be valued ridiculously by some groups of investors, but don't discount their work.
Successful startups are not JUST lucky. There is always an element of lucky, but there is also the hardwork. One mistake a lot of "failed" startups make is thinking and believing that they failed. If your goal is to create an application that solves a certain problem and you do so. You have succeeded. A lot of startups have this goal, they don't really have a goal of making money. After they achieve a goal of building their app, then they want to make money and when they fail on that end, they consider everything a failure. The truth is that making money is not just about your apps or how smart you are or hard you worked to designed.
It takes a very different set of skills to market, hustle, and sell. A lot of programmers don't have those business skills, and they whine and cry when the world don't rush to their door for the better mouse trap. Don't cry, the world didn't know because you failed to market or they have heavily vested in another one because you started late.
If you want to really realize that startups are not just lucky, find the other group we don't talk about on HN that make money off the internet. The hustlers, these are guys with little to zero tech knowledge. They do whatever they can, outsource via internet, basic wordpress sites, they sell actually products, their business is rarely based on ads, their business is physical products, software as a service or ebooks etc. Technology is usually a small part of their game, maybe 10%, the other 90% is pure sweat and hustling. We don't hear for them, but there are many of them out there, making very good money.
Successful starts are not lucky, they out hustled the rest and that's just what it is. So if you wish to make money, don't just stay a hacker, become a hacker and a hustler.