
Startup School And Survivor Bias - bdb
http://jfornear.co/startup-school-and-survivor-bias/
======
ezl
I love this comment, but probably for the wrong reason:

 _For every successful startup that has ran their bank account down to $100,
maxed out their credit cards, had trouble fundraising, etc., dozens
(hundreds?) more have done the same but ended up in the deadpool._

For me it highlights the insanity of our pursuit. Not only do founders
struggle, experience the trough of sorrow, and often not emerge... there are
often not even any indicators that things are going to turn around. The
feedback you get from being $100 away from failure and $100 away from almost
turning around and being huge might often be the same.

It's like fate's deliberate and cruel punishment to those who have elected the
startup path, telling you that you can't quit, no matter how bleak it feels,
because, well ... you don't even have a way to know if it _IS_ bleak.

It's not over til it's over.

~~~
rhizome
Yeah, those kinds of situational stories were much less interesting to me than
the nuts and bolts of pitfalls and potholes on the way to success that Jessica
and Spolsky described.

------
confluence
Startups: never have so many understood so little about the statistics of
variance present in the outcomes of small samples.

People like to speak of 10x productivity, non-stop work and geniuses - but the
reality is much less interesting. A large number of small teams working on
many different problems will by definition have a great variance in outcomes
just by random extraneous factors (also known as the law of small numbers and
insensitivity to sample size).

> _A certain town is served by two hospitals. In the larger hospital about 45
> babies are born each day, and in the smaller hospital about 15 babies are
> born each day. As you know, about 50% of all babies are boys. However, the
> exact percentage varies from day to day. Sometimes it may be higher than
> 50%, sometimes lower.

For a period of 1 year, each hospital recorded the days on which more than 60%
of the babies born were boys. Which hospital do you think recorded more such
days?

1) The larger hospital

2) The smaller hospital

3) About the same (that is, within 5% of each other)

56% of subjects chose option 3, and 22% of subjects respectively chose options
1 or 2. However, according to sampling theory the larger hospital is much more
likely to report a sex ratio close to 50% on a given day than the smaller
hospital.

Relative neglect of sample size were obtained in a different study of
statistically sophisticated psychologists_

\-- <http://en.wikipedia.org/wiki/Insensitivity_to_sample_size>

> _A deviation of 10% or more from the population proportion is much more
> likely when the sample size is small. Kahneman and Tversky concluded that
> "the notion that sampling variance decreases in proportion to sample size is
> apparently not part of man's repertoire of intuitions. For anyone who would
> wish to view man as a reasonable intuitive statistician such results are
> discouraging."_

\-- <http://www.decisionresearch.org/pdf/dr36.pdf>

Taking lessons as gospel from these "10x" events is by definition foolhardy
and merely an extension of the bullshit pushed by the entire "Good To Great"
Jim Collins business book industry.

It's like taking lessons from survivors of the Titanic on how to survive the
sinking of a ship. It's quite simple - be a young female child with a life
vest and rich parents (or in startup land - a young upper-middle class male
living in California during a venture bubble, a cyclical investment in the
Valley with a convergence of secondary technologies, above average
intelligence and a college degree from a reputable university).

I have a personal rule with any kind of advice or explanation coming out of
anyone working in a "soft" industry - if it's vague - it's bullshit. All of
the advice given at these events are bullshit by this definition. So are many
other things - and yeah it doesn't preclude me from spouting it. Or using the
advice at my discretion.

But honestly - startup founders literally have no idea why things take off and
they have no idea why they win. That's why they have to keep pivoting - it
increases their luck surface area and their ability to gain traction - after
which they simply must hold on tight while surfing the wave.

YouTube was a dating site - didn't work - pivot - video traction - venture up
- ride.

PayPal was a Palm Pilot app - didn't work - pivot - traction - venture up -
ride.

Google sold corporate search - didn't work - pivot - copy PPC from Overture -
lever up - traction hits - ride.

Instagram - started with a location checking HTML5 app 2 years too early -
pivot - copy PicPlz and Hipstamatic - hit traction - lever up - ride.

Angry Birds - fail at hitting nearly every game in the past decade - pivot -
take a shot at the iPhone - hits traction - lever up - ride.

Of the startups that didn't pivot - they either skipped the pivot thanks to
previous side projects/companies or already had traction - and all they had to
do was lever up and ride.

I'm going to make this clear - there is absolutely, positively nothing wrong
with this - not at all - it is merely reality and not particularly unfair.

People stating pointless platitudes that success is due to things like "Be 10x
more productive", "Commitment" and "People, product, and philosophy" are
simply wasting their breath, other people's time and confusing what actually
happens. These things may or not be either actionable, predictive or
sufficient for success.

Here's my list of startup advice:

Be alive. Be male. Be young. Don't have health issues. Be born in America or
move there. Enter the cycle after a recession. Speak English. Enter a
growing/new field where the level of competition is low and so is the
sophistication of your competition. Surf cost trends down from expensive to
mass consumer markets. Work bottom up - on small things. Be of above average
intelligence. Have family support. Have a college degree.

Oh and most importantly of all: Get fucking lucky.

The hindsight/survivorship biases in combination with faulty causality and the
narrative fallacy will completely hose your thinking - so be careful.

More interesting stuff:

[http://en.wikipedia.org/wiki/List_of_biases_in_judgment_and_...](http://en.wikipedia.org/wiki/List_of_biases_in_judgment_and_decision_making)

<http://en.wikipedia.org/wiki/Black_swan_theory>

<http://en.wikipedia.org/wiki/List_of_fallacies>

<http://en.wikipedia.org/wiki/List_of_memory_biases>

<http://www.econ.yale.edu/~shiller/behfin/2000-05/rabin.pdf>

Disclaimer: Biases rule your thoughts and mine - this post is also subject to
both bullshit and biases (mostly bullshit - I do love that word). Think for
yourself.

~~~
tisme
What a great comment. It's worth more than most of what is currently ranked on
the homepage, and likely the best thing I've read today. Reality checks like
these are sorely needed to offset the glorious stories of the few that made it
which are vastly outnumbered by the untold stories of the many that did not.

> Get fucking lucky.

That is the most important factor in business success, and nobody, not even YC
with all their algorithms has been able to consistently increase this factor.

All other factors will have some impact on your chances but without luck
you're stranded.

YC has become a proxy for luck, _if_ you get into YC that in itself counts as
you being lucky and your chances for a future success go up enormously. Not
because YC has some kind of magic sauce but because others see it as you
having been vetted.

But with that in mind, what I really find shocking is that there are quite a
few stories of people that _did_ get lucky and managed to throw it all away.

So another factor in failure is quite probably the extent to which people are
able to recognize and capitalize on their luck. There is probably no life
without opportunities but they're few and far between.

If you're asleep at the switch when luck passes right in front of your nose
then all your execution skills and connections will amount to nothing.

~~~
napoleond
While "luck" (especially the sort that leaves you relatively healthy) may be
considered a factor in any business endeavour, I think it's worth pointing out
that most levels of business success require several orders of magnitude less
luck than a successful startup (of the "enormous growth" variety) does. That
may be obvious (and in fact it follows pretty directly from most definitions
of what constitutes a startup IMO) but it's an important distinction; many of
the people reading this could create a "lifestyle business" with an excellent
chance of "success" by the normal definition.

~~~
tisme
That's absolutely true, but the discussion here centers on home-run style
start-ups, which tend to be all or nothing affairs.

One of the reasons for that is that very few start-ups are sustainable in the
longer term without acquisition by a larger partner. And if they are they are
by definition home-runs, but only very very few (< 1%?) manage to get that far
under their own power based on only the initial investment at the time of
founding.

And as soon as additional investment is accept the conditions around the
company change substantially.

'lifestyle businesses' (which I'm a huge fan of) usually do not require big
capital outlays, have a significant chance of staying afloat compared to what
is referred to as start-ups on HN and can make more than enough money to make
the start-up risk look like it isn't worth it for most players.

------
notlisted
Somewhat off-topic, and then again, maybe not.

Interesting Concept/Term. I'd been looking for an official term to describe my
problem with The American Dream(sm) and the Bootstrapping myth.

I feel the reason why large parts in our society simply don't care for the
plight of the failed (poor/bankrupt/downtrodden) is a combination of
Survivor(ship) Bias combined with the "I did it all by myself, which means you
can do it too, now get off my lawn" myth/mechanism.

This is also a major issue in the startup world. So often we are led to
believe that successful startups are the result of mere perseverance, blood,
sweat and tears (and a little bit of luck), instead of'I got money from my
uncle/grammy/mommy/daddy/mentor'.

It irks me that there are many self-reflecting stories on startup failure and
what went wrong, but so very few on the financial contribution received from
family, so often described as 'investors' or summarized as 'self-funded'.

Don't get me wrong, it's great to start off with positive thoughts, but for
anyone to make an informed decision, it makes sense to have all the facts, not
just the myths.

------
dxbydt
>"Startup School is mostly an exercise in survivorship bias"

Life itself is mostly an exercise in survivorship bias. Startup goes into
deadpool, you don't hear about it. Similarly, John Doe dies, and nobody (
other than his family & relatives ) hear about it. I mean, what are you going
to say to the world at large ? John Doe was born, John Doe went to accountancy
school, John Doe became bean counter at big-corp, John Doe died, ergo John
Doe's 401K = $xyz => goes towards Junior John Doe's accountancy school. Repeat
cycle. GOTO 1.That's what the obituaries are for.

------
jasonshen
The issue with Survivor Bias is that we don't really have other great guides
for doing startups. It's natural to ask a great writer what they did to get
published or a programmer what they did to build their first app. While we
should take the retrospective stories of winners with a grain of salt, there's
probably more good than bad to be gained from following what has worked.

~~~
voidfiles
Isn't the point of the article that we do have other great guides, the
failures. They are a great example of how things when wrong. Maybe by paying
closer attention to the failures we can see how to fix what they did wrong and
fix it.

~~~
jasonshen
Well the issue with "fixing failures" is the same as "following success". You
don't know how many people did what the failures did and succeeded - and even
if the actions the failures took were wrong, it's unclear what exactly are the
_right_ actions to take.

~~~
dasil003
Yeah, I think the biggest danger is paying too much attention to what other
people are doing. It's not that you can't learn from success or failure, but
these days that information is far too accessible. The talent and conditions
that lead to success in one case are probably completely inactionable for
anyone else by the time the story is told.

What you really need is to hone your ability to recognize success and failure
on a minute-by-minute basis in your own startup.

------
brianmcdonough
I agree. it would be great to hear from smart people who made critical
mistakes, the cautionary tales often warned against, but not often told by the
players who played and lost.

Jessica Livingston's book ([http://www.amazon.com/Founders-Work-Stories-
Startups-ebook/d...](http://www.amazon.com/Founders-Work-Stories-Startups-
ebook/dp/B001C30BH6/ref=tmm_kin_title_0)) goes into some detail on this topic.
Very insightful and enlightening.

I did meet one audience member at startup school during lunch this weekend who
briefly related his story of a recent startup failure and commented that he
was recovering from the painful experience. Is it too painful to share???
Could be. But it is the one out of fifty 10 minute conversations I remember
most.

Only the very brave are willing to share.

Let's celebrate failure, though, because it is only through many small
failures that the path to big success makes itself known.

------
31reasons
Are there any smart entrepreneurs who have tried non-stop for 25 years and
have not achieved any success. Success being 10+ million dollars. It seems to
me that because the world is changing so fast, we have become very sensitive
to the span of time. 2+ years sounds like eternity to people if you have
started a startup and hasn't hit a hockey stick yet.

What if we look at starting a startup from a different perspective in which
success nor failures exists. Its a work you do everyday to solve some problem.
At the end you might not solve the problem but you reconfigured the universe
in which the problem you were trying to solve has been little bit more
"digested" for you or others. Doing hard work for many years does matter, at
least if you enjoyed doing it.

If you start a company just to make money in a very short time, working hard
for many years and still failing sounds terribly scary.

------
anateus
I've been saying for a long time that things like Startup School and YC (I
went through YC S09) aren't about teaching you the path to success, but rather
to teach you about known paths to failure.

It's always a little disappointing to me to hear stories about how someone
succeeded, that's likely to contain relatively little replicable information.
A story of failure however tends to contain plenty of examples of concrete
things to avoid doing! Not a universal precept of course, many of those who
succeed do so by violating known rules, but after hearing many failure stories
you start to better understand common threads.

------
saym
> Combinator has funded over 460 startups, the vast majority are unheard of
> and presumably not breakthrough successes like Airbnb or Dropbox (yet?).
> This number alone was one of the more interesting data points of the day.
> Will Dropbox and Airbnb pay for it all 10x over?

I'm no accountant, but say they give every startup $18k * 460 = $8,280,000.
AirnBnB gets valued at 1.3 Billion * .07 = $91,000,000.

There are generalizations aplenty in my reasoning, but I'm sure that
ycombinator being profitable isn't an issue.

~~~
nico
I don't know the details of YC's investments, but usually investors get
diluted on each successive round, which means that YC probably doesn't own 7%
of AirBnB, but much less than that.

~~~
drusenko
They could own 1/10th of that and still be profitable based on a single
company, and it's extremely unusual to see 90% dilution.

So while you're technically correct that they don't own 7%, it's unlikely to
matter in this example.

------
tonymillion
Startup = 10% being really good at what you do, 90% luck.

~~~
Harj
How do you know it's not the other way around?

~~~
diego
VC funds see a power law distribution of returns (including YC). This is
unusually lopsided, and suggests several possible explanations. For example:

\- All these startups compete in winner-take-all markets, where the luck
factor would amplify enormously. This may be true for consumer web startups
where people vote with their fingers, but it's hard to imagine how it would be
true for all startups in every industry VCs invest.

\- All VCs are really bad at identifying people who are really good. This is
very doubtful, especially for YC. YC seems to be better than most at
identifying very competent people.

\- Luck is really a huge factor. So far, all the evidence I've seen suggests
this is the more plausible explanation.

------
gojomo
This is a valid criticism, but is mitigated a little by the fact that some of
these success stories include within them wisdom from preceding (or
competitive-contemporaneous) failures.

This is even the case, indirectly, where the Startup School presentation can't
fit the speaker's whole story.

For example, I think the Travis Kalanick presentation about Uber at Startup
School was great. (I'd love to see the time-unconstrained 'two-hour' version
of the same talk.) But, it was just about Uber: a current big success.

Kalanick also did a shorter -- and perhaps even better -- talk about his
previous ventures at the 2011 FailCon:

<http://www.youtube.com/watch?v=2QrX5jsiico>

Combined with the SS12 Uber presentation -- indeed, perhaps best viewed just
before -- it provides real context, and a much better idea of the range of
outcomes and challenges startups face. And, of the entrepreneurial qualities
that gave Kalanick repeated chances at Uber-like success.

------
pbiggar
I thought this while watching them too: everyone here is doing great. As
someone who publicly screwed up my first startup, and doing well on my second,
it would be good to see more stories like that.

------
mehulkar
This was the highlight of Jessica Livingston's talk:
<http://teespring.com/fundraising>

~~~
pbiggar
I like it. Wear that to a partner meeting!

------
JarekS
Does anyone here have a link to recorded videos? I would love to see the
actual presentations, not just a written summary.

~~~
jfornear
It's supposed to be on <http://www.justin.tv/startupschool> soon.

------
grogenaut
I completely zoned when I saw "Killing it Bro". That and 7 "Zucs" in 1
paragraph and I'm out in 2 parrys brah. Learn to write and maybe more people
will read it.

------
wilfra
"Zuck also mentioned that he can't relate to wanting to start a company for
the sake of starting a company. I thought it was notable that Paul Graham
interjected that he wished more people wanted to start companies"

That is not what pg interjected with. He said he wished more people had
companies that started themselves, like facebook did. As in, I have to build
this company because this little project is growing like a weed and it's my
responsibility to see it through - as opposed to more founders who just want
to be founders.

~~~
rhizome
That was touched on by someone else, whoever was talking about persistence,
where there are tons of people who do a project for 6mos and then abandon it.
Maybe a "company" can be defined in this context as something that effort is
put into sustaining, e.g. "a company follows from committing to an idea."

~~~
dkokelley
I believe that was David Rusenko of Weebly.

