The Bias of Success
I've noted previously that 0.2% of startups have a chance of having an IPO of more than $1 billion (very different from companies that at some point were valued at more than $1 billion). Naturally, when there are articles and advice on how to be successful it is from this very few, a rarified group that the advice comes.
As results of the unscientific nature of articles on anecdotes about success, we get a bias of success in understanding startups and business building. While a few companies have started to focus on failures, the vast majority of remarks on success are focused on the upside.
This makes sense at some level... but is missing a bunch of issues at another level. When people who are successful are asked they tend to say generic things about hard work or genius or something. Being successful creates a bias of their own misunderstanding.
Bill Gross of Pasadena's idealab did a TED Talk on reasons for success, which perhaps the most scientific version and timing turned out to be the top thing. Most individual successful people probably wouldn't want to say this, because you want to attribute your success to your skill, not your luck.
That said, most of the biggest winners in startups (like Google or Facebook or Apple) were not innovation pioneers at the beginning. They were part of a phase and they out-executed their competition, but they also had luck, timing, and more.
- Google: didn't invent search; there were a dozen search engines
- Facebook: not the first social network
- Apple: not the first computer
- Dropbox: not the first file sharing tool
Timing is key. Networks are key. Investment and sheer luck are both key. PayPal almost went bankrupt, but instead, they went public and then ultimately were acquired by eBay. Google tried to sell themselves to Yahoo at one point.
In my own case, where I would say we had a solid success (~6.5 times return on invested capital), but the world-changing success of the above example, we had several moments of near failure we turned into something better. We met our ultimate acquirers at a small booth at a conference, where I happened to have decided to go and where we luckily had a good conversation.
There was a ton of hard work and all the rest in there, but a bit of timing and luck played into as well. Recognizing the components of past success is critical to understanding future options and capabilities.
What worries me most about success bias is whether past success helps or hurts future success. If you simply believe success begets success I think you are more likely to fail. Many of the most famous founders thrived and succeed after pretty good flameouts on the first try.
By understanding what when into initial success and by being ever-vigilant for signs of timing, luck, and pure gutsy decision-making, I believe success can be repeated. I just hope I'm not biased about the causes.