How To Think Like An Entrepreneur18th December 2014
Back in early September, I came across an article on hacker news introducing a brand new class at Stanford called "How to Start a Startup". The class, which was hosted by Y Combinator founder Sam Altman, eschewed the traditional lecture model and instead lined up a series of A-list founders and venture capitalists to come and give talks about various aspects of startups and entreprenership. The list of speakers is pretty much a who's who of Silicon Valley - Paul Graham, Peter Thiel, Marc Andreessen, Ben Horowitz, Dustin Moskovitz, Brian Chesky, Aaron Levie. The list goes on. By all accounts it appeared that the class would provide a wealth of information from some of the most successful entrepreneurs in tech to those lucky enough to be in attendance.
But it turned out that the reality is even better, because the whole thing is available online for free.
I'm a huge fan of the online education movement championed by Coursera, edX and others. In fact, I've participated in a number of so-called "MOOCs" (massive open online courses) myself this year and continue to leverage them for my own personal growth and development. But in a way this startup class goes even further. The content in these videos is the type of thing that previously would only be accessible to a select few founders entering Y Combinator's relatively "elite" class. Whereas I could probably find a book or tutorial that covers much of the content avaiable in a typical MOOC if I tried hard enough, it's unlikely that I could simply go out and find first-hand, highly targeted advice from world-class entrepreneurs presented in a cohesive story with almost no effort required on my part. Sam and the various presenters in the class deserve a huge amount of credit for putting this together and having the guts to throw the whole thing out on the web for anyone to use.
Since discovering the class a few months ago, I've been able to keep up as new videos are released and recently reached the conclusion of the lectures. Having now digested around 1,000 minutes of content from a lot of incredibly smart people, my advice would be the following - go watch these videos. Seriously, start watching them right now. Even if you have no interest in doing a startup. Even if you have no interest in ever becoming an entrepreneur. The information is so valuable that even though it's targeted at tech startups that intend to become large companies, there are many elements that can be applied to virtually any business, and at any level. If nothing else, hearing the stories of how these founders got started and became successful should motivate and drive you to pursue your own goals, whatever they may be.
Below are a few of the most interesting takeaways that I got from the class. Honestly there's so much good information that I'm just scratching the surface, but these are the ideas that have stuck with me at the moment.
Startups are hard
Okay, this one is pretty obvious and you probably don't need take this class to figure that out. It's worth mentioning though because startups have been glamorized a bit by the media and movies like "The Social Network", and the reality is much harsher. Many of the speakers reinforced the notion that building a company is the hardest thing they ever did, and these are the successful ones. Sam has a great quote early on about the chances of success with a new venture:
You may still fail. The outcome is something like idea x product x execution x team x luck, where luck is a random number between zero and ten thousand. Literally that much. But if you do really well in the four areas you can control, you have a good chance at at least some amount of success.
Dustin Moskovitz talked about the motivation behind doing a startup and when you should pursue it: "...basically you can't not do it. You're super passionate about this idea, you're the right person to do it, you've gotta make it happen." Basically you have to be really passionate about your idea, and it should be something that you personally want and wish existed but doesn't, so you need to create it.
The best ideas usually sound crazy
One of the more interesting themes in the lectures had to do with ideas for a startup. It seems intuitive that great ideas might come as sort of a "Eureka!" moment where the soon-to-be founder suddenly has a bout of inspiration and rushes off to start building on his/her idea before someone else has the very same idea and acts on it themselves. It turns out that it's often not like this in practice. In fact, some of the best ideas seem downright crazy before they actually work. As Sam says in one of the lectures:
The hardest part about coming up with great ideas, is that the best ideas often look terrible at the beginning. ...That's why it's also not dangerous to tell people your idea. The truly good ideas don't sound like they're worth stealing. You want an idea where you can say, "I know it sounds like a bad idea, but here's specifically why it's actually a great one." You want to sound crazy, but you want to actually be right. And you want an idea that not many other people are working on. And it's okay if it doesn't sound big at first.
A related thread of disucssion is the notion that ideas don't really need to be big in the beginning. There's a general mantra that was repeated often that Sam summed up early on: "Something that we say at YC a lot is that its better to build something that a small number of users love, then a large number of users like". The theory here is that it's easier to develop from a product that a few people love to a product that a lot of people love, than it is to go from something that a lot of people like to something a lot of people love. In other words, the degree of passion that early users have for your product matters more than having a lot of users.
How does this translate to the world outside of startups? Basically, quality and user experience trumps almost everything else, so when building software of any kind, really pay attention to your users and have an almost manical obsession with quality. This isn't just advice for startups - some of the most successful companies in the world live by this principle. As Sam states in one of the lectures:
Apple, Google, and Facebook have each done this extremely well. It's not about the product, it's about everything they do. They move fast and they break things, they're frugal in the right places, but they care about quality everywhere.
Moving fast while still caring a great deal about quality is extremely hard to do. They seem like mutually exclusive things where increasing one naturally leads to a decrease in the other, and maybe in a purely practical sense that still holds true. I think this point is more about the mentality or the culture of the people doing the work. Looked at from that perspective, it's probably very useful to adopt this idealized viewpoint in a lot of different aspects of work.
Competition is for losers
Peter Thiel's lecture on competition and monopolies was one of the more enlightening moments in the series. The basic premise goes like this: small markets that no one is really going after are easier to capture than large markets that already have lots of competition, and sometimes those small markets can expand into large markets with the right strategy. In other words, one should always strive to be a monopoly in a small market and then work on growing the market. As Peter puts it: "You want to be a one of a kind company. You want to be the only player in a small ecosystem".
The basis for this theory stems from his views on the different types of companies that exist, which even he admits is a bit extreme but makes a lot of sense if you really think about it:
I do think the extreme binary view of the world I always articulate is that there are exactly two kinds of businesses in this world, there are businesses that are perfectly competitive and there are businesses that are monopolies. There is shockingly little that is in between. And this dichotomy is not understood very well because people are constantly lying about the nature of the businesses they are in. And in my mind this is not necessarily the most important thing in business, but I think it's the most important business idea that people don't understand, that there are just these two kinds of businesses.
Peter gives a lot of examples to back this theory up, many of which are fairly compelling. He also discusses the notion of value creation and how businesses succeed (or fail) at capturing some of the value they're creating for the world. Very fascinating stuff.
Work on things that matter
My favorite lecture of the whole series was Paul Graham's talk on the counter-intuitiveness of startups and how to have a mindset that generates novel ideas for startups. He brings up a lot of notable ways that startups tend to contradict our basic intuition, which would be useful to know if you're actually doing a startup, but more fascinating to me was his succint advice on coming up with ideas for a startup:
How do you turn your mind into the kind that has startup ideas unconsciously? One, learn about a lot of things that matter. Two, work on problems that interest you. Three, with people you like and or respect.
The advice is simple and straightforward - be interested in interesting problems and pursue solutions to those problems with people you can actually stand to work with. It seems obvious when you write it out but I suspect that many of us cannot honestly claim to live by this mantra in our professional careers all the time.
I'll conclude this post with perhaps my favorite quote from the whole class, also by Paul, when discussing how he came to work on the things he did throughout his career:
I find it very hard to make myself work on boring things even if they're supposed to be important. My life is full of case after case where I worked on things just because I was interested and they turned out to be useful later in some worldly way. Y Combinator itself is something I only did because it seemed interesting. I seem to have some internal compass that helps me out. This is for you not me and I don't know what you have in your heads. Maybe if I think more about it I can come up some heuristics for recognizing genuinely interesting ideas. For now all I can give you is the hopelessly question begging advice. Incidentally this is the actual meaning of the phrase begging the question. The hopelessly question begging advice that if you’re interested in generally interesting problems, gratifying your interest energetically is the best way to prepare yourself for a startup and probably the best way to live.