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Startup School And Survivor Bias (jfornear.co)
92 points by bdb on Oct 22, 2012 | hide | past | web | favorite | 43 comments

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.

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.

It also illustrates how startup success is mostly random.

So increase your luck surface area, work hard - and most importantly of all time your entry and ideas just before their time.

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:






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

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

> Get fucking lucky.

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

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

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

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

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

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

Thanks. Here's my tool for visualizing the effect of luck. Replace it with "being alive". Or "not being born in Afghanistan". Or even consider this.

How many sperm cells were present during one's conception?

Answer: 200-500 million.

Compound this with the fact that over 125 billion people have lived on this planet since we first evolved. Only 7 billion are alive today.

That's pretty darn lucky. Or more humorously: http://www.youtube.com/watch?v=GvpbzRf99-8

Being rich does wonders for your chances of success, as does being alive. Sadly it does the same with one's ego.

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

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

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

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

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

>All of the advice given at these events are bullshit by this definition. startup founders literally have no idea why things take off and they have no idea why they win

So William Goldman wrote an entire book on this very subject - http://en.wikipedia.org/wiki/Adventures_in_the_Screen_Trade#...

That book has chapter upon chapter upon chapter with the same exact advice - "Nobody knows anything"

Goldman says after he wrote the book, his phone simply stopped ringing for four full years, because he calls everybody a liar - the director, producer, screenplay writer, actor, story consultants, everybody - none of them know why one movie works & another doesn't. Finally, it was The Princess Bride in 87 that salvaged his reputation (http://en.wikipedia.org/wiki/The_Princess_Bride_(film) )

I used to be a Film Major and it was repeatedly banged into our head that "Nobody knows anything", so we couldn't say "your script sucks" when our classmates read their script ideas aloud in class.

Beautiful comment, both insightful and self-aware. I wish this was an article so I'd look through your blog; instead I'll have to make do with looking at your HN comments and try not to be a creeper.

I went to the event with a couple friends (them: corporate + quarterlife-ish crisis) and found the event to be heavy on the inspiration side, with the constituency consisting of those hungry (students, underemployed folks) and those who are in the process of "killing it" and looking for new acolytes.

I had a mildly unsettling feeling that, at the end of the day, like any other domain that celebrates superstars, this celebration serves the interests of the investors who want and need that kind of competition to hone the best of us into market-disrupting entities. And while the interests are completely understandable, they are maximized towards extreme outcomes... good and bad. Some would see it as tough love; others… need to see it.

And to be fair it is what it is -- the ability to efficiently bring about change makers is a net positive to society as a whole. But the vision and expectations of many people in MemAud that day were probably on the prize of greatness and billion dollar valuations, not in seeing what constitutes passion, work, and self-awareness. (Many speakers touched on this, though perhaps it's just poor sampling on my part to the people I interacted; it left nary a mark on them.)

I guess if I had to sum up my thoughts and highlight some advice from SS as a startup survivor (Bellyup School, if you will):

Things are always harder than they seems (Marc Andreessen touched on this with his MJ story).

Dedication does not preclude optimization (focus on your startup only after you get the commitment in terms of users or funding -- see Zuckerberg/Livingston stories on both).

Work hard, and be luckier/opportunistic. For every Dropbox that nailed the vision/execution, is most every other startup that pivoted a bunch till they found their niche.

Hrm, I gotta admit, now that I'm reviewing things, pretty much everyone has warned of how much things would be difficult... but somehow it just doesn't stick with most of us. Caveat emptor. :)

Entrepreneurs are the sperm of venture investors. If you are a venture investor who wants to "conceive" a Google, it helps to have a high count as well as high quality. The perspective of an individual swimmer would be different, of course.

I totally agree; the swim itself is of a lot of excitement and utility too. (FWIW, life doesn't necessarily begin/end after the swim. :) )

Probably my favorite comment I've ever read on Hacker News to date.

What constitutes "getting f..... lucky?" "Luck" happens when opportunity meets preparation. So, you can argue that pivoting is a quest for opportunity, whereas a solid team and ditto work-ethic makes up the preparation part.

fantastic comment!

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.

>"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.

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.

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.

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.

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.

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...) 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.

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.

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.

> 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.

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.

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.

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

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

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.

Sturgeon's Law ;)

If you define 'being really good at what you do' as being driven like mad, never giving up, having a massive tolerance for pain and uncertainty and a gift for recruiting others to join you for lots more pain and uncertainty - then I agree.

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:


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.

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.

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

I like it. Wear that to a partner meeting!

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

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

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.

"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.

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."

I believe that was David Rusenko of Weebly.

I will have to re-watch that part and correct it, thanks for pointing this out.

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