Going back to get an MBA is a safe harbor to try things…that is, once the all-important summer internship that leads to a job offer has been nailed down. This often leaves the opportunity to try new classes and to explore other careers. None so appetizing and “in” than entrepreneurship–it has always sounded sooo cool. From the normally risk adverse MBA crowd, now is the time to try it, because well, you’ll fail and that’s fine because this is just make believe academia anyways (and often, it’s treated as nothing more than an academic exercise to understand what entrepreneurs do–well at least the part that can be taught in class…which is not much). But hey, your job is lined up and if you happen to stumble upon the next Facebook team, well awesome.
Don’t get me wrong, it’s an awesome time to try out and learn about entrepreneurship, it’s just that a “risk mitigated approach” to something inherently risky (and risky for a good reason) typically doesn’t yield the best results.
First, in the best case scenario, a real conundrum happens when/if you really like entrepreneurship and your startup. Now you are faced with either bailing on the career trajectory to continue that startup that doesn’t have the promise of a large starting salary OR you’ll be stopping that startup you love to take the high paying salary at a job that doesn’t have the allure and appeal founding a startup does.
You’ve tasted the freedom of entrepreneurship, and now have to decided whether or not to go back to the warm embrace of golden handcuffs.
Because I can guarantee you that opportunity cost is not a currency the landlord or student loans accept, the choice is pretty easy. Getting on a nice monthly salary makes for a much more secure lifestyle–and we’ve already established MBAs are a secure lifestyle kinda person.
And still, entrepreneurship classes are still filled with students. These types of people who “try out” entrepreneurship get grouped into what is fondly referred to as wantrapreneurs: Those who talk about wanting to be an entrepreneur but will never actually start something, or if they do start, are not willing to do what it takes to be successful.
Luckily, wantrapreneurs can be easily filtered away through simple things like the requirement of an MVP (minimum viable product), participation in weekend competitions, and short time-frame challenges like hacking your way to your first 100 customers as quickly as possible.
It is incredible the magic that happens when people, especially those who have a lucrative job lined up are faced with the requirement of working around the clock, problem solving, overcoming multiple setbacks, canceling weekend plans, and doing whatever it takes to get it done…often in situations where they have no idea what to do, when the timing is bad, and sacrifices must be made.
Tests like these are as though out of a scene from Jaws. Wantrapreneurs just end up disappearing.
I used to take it personally when people who started a team with me jumped ship. I would wonder if I was a poor leader, if I was being lied to the whole time, if I could ever trust this person again, etc. etc. But then I realized that being an entrepreneur is not for everyone. So instead of focusing on those who bailed, I’ve started to focus on those (far fewer) who out swim Jaws and rise to the occasion. When the chips are down, when setback after setback comes up, who is constantly willing to swim faster against the current and find a way to keep going? Who is keeping the momentum and energy up no matter what happens? Who has that finishing mindset and won’t stop until the project is in safe waters?
Those who have survived a swim with the sharks are the types of people I want on my team.
And that’s exactly what I witnessed with this CBS Sharktank Competition. I witnessed the demonstration of passion and energy coupled with problem solving and commitment from someone whom I always believed contained these ingredients to be successful and who needed something like this to bring it out of him.
I no doubt believe that over the short span of a 3-day weekend he grew far more as an entrepreneur, leader and person than he realizes.
I did help to make sure that the project would succeed through leveraging my experience, guidance, and network (shout-out to Corbin and Andras), but without a doubt, the success belongs to him for putting it all together and not stopping.
I’m happy to present the result of the efforts, a short commercial on a startup concept. I have all the confidence in the world that the next time a commercial is required or more importantly, some other task in which he has absolutely no experience in, he will be able to execute even better.
Enjoy:
He wasn’t an entrepreneur before starting this, but he had this overwhelming desire to be one. What about you? Do you have a desire to start something? Do you have what it takes to go from nothing to something, from Zero to One? Or will the Jaws of Entrepreneurship swallow you up?
Peter Thiel’s book Zero to One explores the idea of creating a startup movement in which you create something from nothing, but also create it in a way in which it is the only one to exist in that new market. In Warren Buffett terms, you have a large moat surrounding your castle walls.
- Ask yourself: What important truth do very few people agree with you on?
- For progress to be linear requires just manufacturing improvements, technology provides exponential progress
- Your startup is the largest group of people you can convince of a plan to build a different future
- Party like it’s 1999
- People were doing crazy things like planning IPO’s before incorporating, working on 6 companies at once, just an influx of cash
- Most believe: make incremental advances, stay lean and flexible, improve on competition, focus on product not sales
- Really though
- It is better to risk boldness than triviality
- A bad plan is better than no plan
- Competitive markets destroy profits
- Sales matter just as much as products
- How much of what you know about business is shaped by a mistaken reaction to past mistakes?
- Most contrarian thing of all is not to oppose the crowd but to think for yourself
- Really though
- All happy companies are different: what valuable company is nobody building?
- Monopolists try to hide fact they are small and differentiated tries to claim they are big
- Google: search dominant, but try to make comparison w/ all online ads/all tech companies
- Screenwriter: adventure film but with character x, aspect y, and z in it
- Problem with competitive business is that they lack profits and so hugely competitive, only thing that matters is money, don’t have time to think about making a better world
- Monopolist don’t really need to struggle for money so can spend time thinking about “a better world” and helping employees
- Good for world if monopolists develop new advances to better the world, not just sit on the profits
- And this security of profits is what drives incentive to innovate, because have time to “ponder about a better world”
- If you’re in a competitive equilibrium, death of your company won’t matter
- In business, success is exactly to extent that it does something others can’t
- Monopoly is condition of every successful business solving a unique problem with no competitors
- Monopolists try to hide fact they are small and differentiated tries to claim they are big
- Competition is not natural and healthy but trained in our society
- Smart people compete for I-bank and consulting through one competition and another in school, jobs, internships, just to get a shiny badge
- People fight amongst one another and their companies but they have nothing more or less to fight about because doing the same thing (fighting) and lose sight of what matters
- Google and Microsoft to Apple, e-reader cards
- Competition can make people hallucinate opportunities where none exists (pets.com and rivals)
- It consumes and if done for development sake, great, but often only just destructive and distracting
- May be worth it to merge and de-escalate rivalry
- Sometime have to fight, and when decide, go all out and win quickly, but most time destructive to do so
- Escaping competition will give you a monopoly, but even a monopoly is only great if it can endure in the future
- It’s about NPV of Cash Flows and growth, most startups lose money but then a bulk of it comes in 10 to 15 years (at time of IPO?)
- Important point is company must grow AND endure à enduring is more important
- Characteristics of monopoly
- Proprietary tech (at least 10x better than alternative, new feature, or improvement)
- Through design, available options, cost
- Network effects: must be beneficial/valuable to first users to scale
- FB: valuable b/c all HBS people, then valuable to all college people…
- Economies of scale: non-service based
- Branding: good but can’t be built on it alone
- People, products, traffic, then revenue
- Start small and monopolize a niche (not a non-existing niche)—small group of particular people concentrated tougher and serve by few or no competitors
- Scale up: sequencing markets is underrated and take discipline to expand gradually
- Don’t disrupt: this means going into competition, attracting attention
- Make profitable for anyone you might possibly be disrupting (PayPal sending more referrals to Visa than anyone)
- Last will be first: not about being first, about staying and being only one in market (monopoly)
- You must study the endgame before everything else
- Proprietary tech (at least 10x better than alternative, new feature, or improvement)
- You are not a lotto ticket, despite everyone claiming success is luck
- Shallow men believe in luck, believe in circumstance…strong men believe in cause and effect
- Victory awaits him who has everything in order—luck, people call it
- Stats don’t work when there’s a sample size of one, and can’t even make comparison studies
- US in the 50s (definite and optimistic), US now (indefinite/optimistic), China present (definite, pessimistic), Europe present (indefinite, pessimistic)
- Americans today are taught to have many extracurricular to handle whatever is to come vs. firm convictions
- Problem is indefinite optimism leaves everyone waiting for the progress…who’s going to do it, so give a plan of attack (PE, does nothing but squeeze wealth)
- Chinese growth, everyone in China trying to pull money out of country because too crazy/uncertain
- First appears to be making a contrarian critique of the myth of the self-made businessman, but actually his own account encapsulates the conventional view of a generation that there is a rhyme and reason to everything, explain the success away
- For baby boomers, regardless of what anyone did, things improved
- However today, no one knows what to do, founders money goes to banks who goes to stocks who spread across everything and companies keep their cash because no one knows what to do/what the future holds
- Politics: no one cares about 10-20 years from now, entitlement spending has outpaced discretionary spending since 1975
- Indefinite vs. definite combo with optimistic vs. pessimistic matrix, indefinite life we are trying to solve
- Art of plan of attack much better than pure randomness for random sake
- If you think lotto ticket, why read this book? It’s about power of planning successively and in stages
- Lean model is a methodology not a goal, iteration without a bold plan won’t take you from 0 to 1
- When a big company makes an offer to acquire a successful startup, it’s almost always too much or too little, founders only sell when they have no more concrete visions for the company, in which case probably overpaid, and with a robust plan won’t accept because not enough
- It’s extremely hard to make changes in crowded fields, a startup is largest endeavor over which you can have mastery, agency not just your life, but small and important parts of the world
- Follow the money: 80-20 rule, in which the few small companies make the biggest return
- This means if find one, then have to go all in in them to cover the funding of the others (not succeeding)
- Invest in companies that have the potential to return the value of the entire fund
- The best investment in a successful fund equals or outperforms the entire rest of the fund combined
- Every single company in a good portfolio must have potential to succeed at vast scale
- Power law is hidden as most startups hover around average for so long, that the top producing investment doesn’t break out until much later
- Because don’t want to give up on an investment, VC will spend a lot of time trying to fix/save a not as good investment/company
- VC investment builds 11% of private sector jobs despite .2% of GDP, but invested companies covers 21% of GDP revenue
- This means don’t diversify, go heavy on a winner, which means might sometimes be better to join a rising company vs. trying to start your own because disproportionately better odds of success
- Counter to school system and corporate teachings, trying to make “whole/rounded students” and steady/stable jobs/salary
- One market will probably be better than all others
- One distribution strategy dominates all others
- Time and decision-making follow power law
- Some moments matter far more than others
- Secrets: most underrated part of today’s society, things that are hard
- Lies on spectrum between conventions (easy) and mysteries (impossible)
- Search for search allows trying without certainty, about looking for large gaps in the world, the “important truth very few people agree with you on”
- Urban hipsters claim nothing new is left to find rebel, “there are no secrets left”
- Could be because of geography and no “blank areas of the world”
- Could be school taught us what the minimal was to get the grade, extra work not rewarded
- Risk aversion: scared of the secrets because hasn’t be vetted by mainstream
- Complacency: why search if you’re so profitable/comfortable
- Flatness: someone is bound to have found it who’s smarter than I
- No more cults anymore, so much harder because “secrets/mysteries” harder to come by
- Belief no secrets leads to “perfect markets” which collapse when found out not perfect
- Company is not supposed to be merely watchdogs to ensure all filing/paperwork is done
- There are still plenty of secrets to be found: natural secrets and human secrets
- Nature is most important and authoritative, and potentially scary, but not good for business
- Secrets about people are underappreciated
- What’s not being talked about? What is forbidden or taboo? Aka his question at the start
- Best place to look for secrets is where no one else is looking: once found, do you tell anyone or keep secret?
- Every great company has some “secret sauce” they don’t tell people
- Tell whoever you need to and no more
- A great company is a conspiracy to change the world, when you share the secret, recipient becomes a fellow conspirator
- Setting the foundation is so critical to a startup, screw it up and the company can’t be saved
- Bad decisions made early on compound the failure, don’t join with just anyone
- Everyone needs to get along, not just founder, but also employees and investors
- Ownership: who legally owns the company’s equity
- Possession: who actually runs the company on day to day
- Control: who formally governs the company’s affairs
- It is because these are always separated that it compounds the difficulty
- You’re either on the bus or off the bus, full time commitment, all meeting together, no exceptions
- Board of three is ideal, too big and the board will exercise no real control
- Cash is not king, it is like extracting out the present value and doesn’t encourage long term value creation for those receiving it
- Don’t overpay yourself 150k, set example as the highest comp or as lowest to set tone
- Vested interest is good because focus on LT, milestones are too short sighted, but most people don’t want equity at all, the artist who made 200 mill painting walls, it just works out that way
- The founding is where you are able to set the rules and lasts as long as company is creating new things vs. stewardship of inherited success, sometimes need to compensate to get the star more than that who was there longer, but also don’t discuss it publicly what equity stakes people get
- Make your company a cult-like mafia
- Perks are ridiculous, and you can’t beat Google on them
- Saying you’re working with top talent is same spiel everyone else gives, so what do you do
- Mission and visionà no one else is working on this idea, and you want someone who doesn’t care about hours, rules, want to be as tightly knit as possible, don’t want to hang out with others outside of company, want to hang out with each other
- Think about it as “recruiting conspirators” for the better world/vision
- Need to also explain why a great match for person personally, don’t fight the perk war, just give health insuranceàonly thing is a company is a culture, set it up right, hire from within, don’t outsource to headhunters
- From the outside everyone in company should be different in some way but really one unit (t-shirt uniforms with the logos), enjoy outside activities as well, equally obsessed with a topic/subject
- On inside, everyone should be sharply distinguished by his/her work: in charge of one thing and one thing only, and everyone has a different one, reduces competition and infighting
- Consultants are the opposite of this, they DGAF what happens to company, just in and out, and that’s a byproduct of all cash engagement
- Everybody is a salesperson
- The art of selling is underappreciated and role of coding over appreciated
- If you have the greatest product but no one selling, you fail, greatest sales person and crappy product, still sell
- Selling is hard, persuasion acting, and things don’t sell themselves, as much as nerds would like
- Two metrics that confine your advertising approach: CLV (customer lifetime value) and CAC (Customer acquisition Cost)
- Viral marketing if CAC ~$1-10, Marketing to small businesses if ~$100+
- Direct selling if 10k+, complex selling if 10mil to government
- Also impacts the frequency of doing it, have to have many more for lower transaction values, so can’t spend that much time, vs. one large can go over every detail
- Personal sales: get one person who will lead to many, there’s a white space in which a dead zone where may or may not be worth spending a lot of money to acquire new customer where you may go personal sales, may go digitally
- As a startup you can’t compete with ad budget of a major player, so don’t try by spending big on a spokesperson or ultimately back down to CAC < CLV à but also take into account fact that network effects may come in play
- Viral marketing: works if core users do it to invite their friends
- Find which one works best for your purposes
- Keep in mind that not just selling to customers, but also investors, potential employees
- Play nice with press despite not liking them
- Everybody sells, if you can’t point to a top salesperson, it’s you who does the selling
- Man and machine
- Machine will make demand for human work decrease, but machines don’t consume same things humans value, and so will not take over
- Machine is a tool that does certain things well and not others, need to have humans with great tools (computers) à complements not substitutes
- Cyber security may have algorithm tag suspicious activity/fraud, but it needs human touch
- Seeing Green
- Just because an industry is hot, doesn’t mean that just participating in it will yield success, often times it means that you need to find an even bigger way to differentiate, because so many players in it that all pretty much doing the same thing
- They try to make claim of monopolies of a certain subsector when in reality needs to be considered in the broader market (ex. Solar US energy vs. all energy world-wide)
- Still needs to pass these questions
- Engineering: can you create breakthrough tech instead of incremental improvements
- Order of magnitude 10x not just 20%, because of risk/reward of alternative
- Timing: is now the right time to start particular business
- Monopoly question: do you have the right team—no CEOs in suits, but need to be good sellers/product guys
- Distribution: do you have a way to not just create but deliver your product
- Durability: will your market position be defensible 10 and 20 years from now
- Secret: have you ID’d a unique opportunity that others don’t see
- Engineering: can you create breakthrough tech instead of incremental improvements
- “Social Enterprise” people are tend to follow the same trends and say the same thing, not about being same, but doing things differently, they tend to try to better world and make profit, typically fail at both
- Biggest challenge in a top notch/hot sector is to be able to start small very successfully
- Just because an industry is hot, doesn’t mean that just participating in it will yield success, often times it means that you need to find an even bigger way to differentiate, because so many players in it that all pretty much doing the same thing
- The Ideal founder
- More powerful yet dangerous to be led by an individual leader for interchangeable manager
- Founder tends to be extreme at both tail ends of weak/nerd, idiot savant, disagreeable, outsider, poor, villain, infamous -à strong/athlete, polymath, charismatic, insider, rich, hero, famous
- It’s about being tyrant to lead and execute not play politics and “pass the can”
- People’s persona’s grow and mature more and more based on public perception which they hold on to because it works so well
- So we need founders who are strange and extreme, but for founders, this adulation can turn on a dime at any time from adulation to demonization, don’t overestimate the power of an individual, it’s far better to be a leader that brings the best out of others, don’t fall for myth that you are a god, but instill some sense of myth and mystery to leverage for leadership
- Future, can be a recurrent collapse (cyclical), plateau, extinction, or takeoff
- Question is do we wait for nothing to happen or something? You and your actions collectively add to the something happening, you bring the takeoff