Some of you who follow me on Twitter may know this already, but in the middle of 2013, I decided to take on a new adventure (since terminated) by becoming the co-founder CTO of a new startup. My CEO co-founder, a former employee of Twitter who was really “in” to the women's fashion scene, had an idea around women's clothing e-commerce that was an interesting starting point; after tweaking the model a bit from her original idea, we signed paperwork in July, and off we went.
(The site went “beta” in November, but by that time she and I had fallen out. I wish her luck, but I'm not involved anymore; we both made a few mistakes that made it impossible for us to work together.)
It's a heady feeling, being a startup founder. The papers and media and the websites all trumpet the startup success stories: Facebook, Yelp, WhatsApp, Instagram, Flickr, and more. You pick an industry, and there's a story there somewhere about a plucky couple of people who “had a vision, built a
(Seriously. Facebook paid more money for WhatsApp than what it would take to buy the entire island nation of Iceland. Not some podunk tiny coral reef in the South Pacific: the European nation in the middle of the Atlantic Ocean right off of England's coast. Think about that for a moment. All that, or an instant messaging app.)
Or, alternatively, we hear about the plucky developer who sat down with a programming book and a laptop, writes code for maybe a week or two, and churns out a game that's so addictively popular that not only does he make $50,000 a day, but pictures of shattered phones - from people who shatter them simply by playing the game and “tapping” the screen too hard - start to crisscross the Internet. All because they found a game where the player taps the screen to make the bird flap its wings just SO AMAZING.
It's enough to make even the most casual developer, preparing for yet another soul-crushing day working in a cubicle for a giant corporation that makes Dilbert's company look sane by comparison, look him- or herself in the mirror and say, “Why not me?”
I mean, after all, if Russell Wilson, the quarterback of the SuperBowl-winning Seattle Seahawks, can say that to himself and win a Super Bowl, why can't you say it to yourself and make 50-Large a day?
Survivorship Bias
The problem, very bluntly, is because statistically speaking, you're not only wrong, you're very wrong. Triumph is made more visible than failure. The news never covers the failures that occur every day, unless they are somehow spectacular failures that eclipse the normal failures we're used to from daily life.
Think about it for a moment: by definition, the news channels we use, be they print, TV, radio, or Web, are looking for things that will attract our attention and draw eyeballs to their sponsors. That means only the most unusual, most interesting, most tragic, most heartwarming, or most some-other-kind-of-emotion get aired. “Cat Stuck in a Tree Again” is not going to get readers to see the new BMW ad. “Lone Developer Makes $50,000 a Day From His Bathtub,” however, is going to draw a lot of attention.
For every successful author, there are thousands of people whose books never get published. For every starlet striding down the red carpet at the Oscars, thousands of struggling actors continue to wait tables at the local diner waiting to get that “one big break” callback that will launch their career...someday.
But because all we hear about are the success stories, and none of the failures, we begin to fall prey to what psychologists call survivorship bias, the tendency to assume that in any scenario where 99 people will fail (or die), and one succeeds (or lives), that you will be that one.
And let's be really clear on something: Our industry, in particular, thrives on this notion of survivorship bias. Startup incubators, like YCombinator, owe a great deal of their fame, income, and success to the fact that people believe that despite the odds, this idea is the one that will generate a Facebook-like return on investment. As a matter of fact, the allure of the startup success story in the tech industry has grown so strong that we now see annual (if not monthly) events emerging built solely around the idea of creating a startup: StartupWeekend, for example, is a Seattle-based organization that holds Startup Weekend events all over the world. Start on Friday night, have a new startup with a Minimum Viable Product or prototype by Sunday night for presentation to a panel of judges, and the winner gets the chance to pitch to investors. Hundreds of people come to these events, seeking their fortune.
Check out those odds for a second, to understand how subtle survivorship bias is: hundreds of people come by, one team (usually of about five or six) wins, and even then that “victory” is just the chance to enter a new competition for investor dollars, which, even if you win that, means you get the chance to throw your idea out into the Internet for a chance to compete for consumer dollars.
Bitterness and Cynicism
When talking about startups and survivorship bias to people in person, I usually get one of two reactions: “you're a bitter and cynical old man who's just mad that you didn't work hard enough to get your startup to succeed,” or solemn head-nodding in agreement, usually from people who've been there before. And to a point, the first group is right: I am cynical, because my usual reaction when presented with startup ideas is to examine all the ways that it won't work. And, truth be told, there's a lot of faith involved in a startup: there's a lot of long hours and sleepless nights involved in getting a minimum viable product together, all on the idea that at some point in the future, there will be a payoff to justify it all. And, let's be really honest about basic startup psychology here for a moment: if you don't believe in your idea, why should anybody else? A startup founder has to project that perception and belief, that this idea is an amazing idea executed well, because almost by definition, nobody else will believe in it as much as its creator.
But this doesn't change the basic fact that the odds of success for a startup are quite strongly lined up against you. And that if bringing a startup to financial success were as easy as YCombinator and other organizations claimed it to be, they wouldn't be “news” anymore, and we'd never hear about it.
Winning formulae
As a matter of fact, organizations like YCombinator add to survivorship bias because they gather the winners together, interview them about what made them successful, and start repeating that as a “formula” for success. Currently, that formula goes by the term “Lean Startup.” A decade and a half ago, I worked for a startup whose founder believed (based on the trade rags coming out of Silicon Valley) that formula went by the term “Folding Chair Mentality” - the startup that spent a ton of money on Aeron chairs was doomed to failure because they were putting their money into the wrong things.
(Ironically, that startup failed because they grew to the point where they invested all their profits into building their own building - and then the DotCom collapse hit, their customer base abandoned them, and that six-story building became an actual ghost town.)
The question is: Were we to visit the graveyard of failed startups, how many of the tenants would be revealed as faithful followers of the “Lean Startup” religion?
Survivorship bias means this: People systematically overestimate their chances of success. The best way to avoid it is to deliberately avoid the success stories, and instead dig for the failure stories and examine them carefully. It's not the path that will bolster your excitement and give you hope, but it will put your hopes into perspective, and clear your mind.
And sometimes, it may even yield a few insights of what not to do.
