Startups and the Death of Expertise

There are many startup-related myths out there. These myths occur when the rare and exceptional events become assumed to be the mundane and normal. This is to be expected; if an event were mundane it would not be reported in the media or shared among people. Mundane events are ignored.

It's through these exceptions that the majority of the country view startups. Speaking a bit out of turn; this has accelerated in the years since Facebook's founding and the premiere of The Social Network. Let's be clear: everything about Facebook is an exception. The market cap for Facebook (as of this writing) is $557.88 Billion dollars. That is massive and, at the end of the second quarter of 2018, this put Facebook at fifth most valuable public company in the world. The companies with higher value than Facebook are Apple, Amazon, Alphabet (Google), and Microsoft. This means that all those tech/founder stories we talk about are the five most valuable companies; not the average fair.

There is nothing normal about the Facebook experience. Let's give all credit to Mark Zuckerberg (and similar to Steve Jobs, Jeff Bezos, Larry Page & Sergey Brin, and Bill Gates). An amazing technologist, who is also an amazing business person, who has a solid background, quality education, a host of good luck, great timing, and, effectively, flawless execution, is how you get to be founder and leader of one of the world's most valuable companies (and one of the richest individuals in the world).

One lesson that people seem to take away from stories like Facebook is that the prototypical founder should be like Mark Zuckerberg: male, young, Harvard (or Stanford, etc.) educated. I won't call Mark Zuckerberg white, because he is ethnically (if not always religiously) Jewish, but he does have a lot of classic things going for him. (A future rumination on white vs. Jewish is coming at some point.)

Let's zoom in on the "young" part of this profile. When you start a company between the ages of 18-22, you're probably not very experienced (at much of anything). I hear people make this leap from young and inexperienced to believing that lack of experience is the cause of the startup's success. This is a theory that cuts both ways.

A lack of experience provides several advantages in starting a new business:

• Ability to think of new solutions to user problems due to coming at the situation/problem/market with no preconceived notions
• Ignorance of previously tested solutions that may not have worked in the past, but may work now
• Ignorance of rules and regulations that prevent certain solutions from being attempted (*N.B.* experienced entrepreneurs can always chose to break laws/regulations)

A lack of experience also creates disadvantages:

• Trying solutions that have previously been tried and don't work
• Not understanding external requirements that can integrated
• Not knowing with whom to speak to gain experience
• Much more...

The point I want to dive in on is the double-edged sword of not knowing what won't work/what you can't do and knowing what will work/what you can and cannot do.

This is near and dear to my heart in financial services, which is a highly-regulated industry. When I started Wallaby, I was sure I knew enough to make my dream of a single card for all your credit cards come true. In reality, I wasn't successful at ignoring some of the restrictions. In this case, I somehow got a bit of the worst of both sides.

As I think about new startups and engage with founders I am torn between seeing that their lack of experience will enable to them to break through or that it will harm their success. The idealism surrounding the no-experience/no-expertise founder is part of a broader societal wave that even has its own book. That review puts it well.

This is part of a larger wave of anti-rationalism that has been accelerating for years — manifested in the growing ascendance of emotion over reason in public debates, the blurring of lines among fact and opinion and lies, and denialism in the face of scientific findings about climate change and vaccination.

I want to believe that certain parts of expertise carry over from field to field. If I am good at building teams and building software-based technology products in Financial Services, I want to believe that I can do so in another field (human resources, for example). On the opposite side, I believe that my long experience, network, and knowledge in financial services technology makes me uniquely empowered to advance solutions in that field. I don't know if I can (or should) be able to have it both ways.

Simply put: I want to think that expertise and experience matters, but it must also be acknowledged that a new look or a lack of knowledge can help. My favorite example here is Stripe, which is a private merchant processing company worth more than $9 Billion as of last report in 2016. Someone mentioned them to me years ago when they were founded and I thought: "What a terrible business! Merchant processing is low margin, commoditized, and controlled by very few large players." I didn't give the founders credit for finding a new solution to an old problem that the existing players had ignored. Merchant processing is still low-margin, but Stripe has grown very quickly and grabbed unique market share with quality product. That makes it a good business for them. They didn't know enough to talk themselves out of what an experienced person would think is bad idea.

I don't have enough knowledge on this issue to decide what the answer is. I'm currently taking the middle position: Sometimes experience helps, and sometimes it hurts. The key to success lies in knowing where to do something new and where to use knowledge (your own or others) to advance your goals.