Tuesday, March 24, 2009

Start-ups = Shortwave radio

Start-up Static, a post by Joel Sposky at Inc.com

The problem is that trying to copy one company's model is a fool's errand. It's hard to figure out which part of the Starbucks formula made the business a smash hit while so many of its rivals failed. In investing, the phenomenon of looking too closely at success and not at all at failure is known as survivorship bias.

Jessica Livingston, co-founder of Y Combinator - Startups... "all fail for the same reason: People just stop working on their business." Um, yeah, well, sure, and most people die because their heart stops beating.

Paul Graham, Jessica's husband and partner in Y Combinator, has tackled this subject on his website. "The biggest reason founders stop working on their start-ups is that they get demoralized," he writes. "Some people seem to have unlimited self-generated morale. These almost always succeed. At the other extreme, there are people who seem to have no ability to do this; they need a boss to motivate them. In the middle there is a large band of people who have some, but not unlimited, ability to motivate themselves. These can succeed through careful morale management (and some luck)."

Joel Spolsky then goes through a great analogy:

In my mind, an entrepreneur is like a kid playing with his first shortwave radio. He takes it home and turns it on, and what does he hear?
Nothing. Static.
This might be demoralizing. So he tries a different frequency.
Nothing. Static.
Meanwhile, the determined founder will start playing with the dials -- rethinking the menu, trying new promotions, and adjusting prices. And what he'll find is that, just like the tuner on a radio, certain aspects of a business can be off by only a little bit and then, one tiny adjustment, and BING! The thing starts working.

Note: The analogy works much better when you read the whole thing.

No comments: