How to survive the thick and the thin
As I listened to this conversation (podcast here) which took place in October 2022 between Reid Hoffman (LinkedIn, Greylock Partners) and Patrick Collison (Stripe Co-founder) about navigating economic uncertainty, I recalled our own FinTech startup at the beginning of 2020, when the Pandemic suddenly hit the world.
We started our company in late 2019. We had just finished our mission statement, a prototype (on paper), and a business plan with a 3-year budget in early 2020. Our first step was to hire an offshore development team to get our prototype ready in four to six months and then recruit beta users.
But then we found ourselves stuck in our house, and not even sure if it was legal to walk out of our home, let alone find and talk to potential users.
There are five key takeaways from the Hoffman-Collison conversation in times of uncertainty. The most important one for me was the company mindset Patrick described as “Micro Pessimism and Macro Optimism” which sees their company through thick and thin.
Let me explain.
1. During good times and bad, startups should continue pushing the boundaries of what their technology can deliver
Patrick explained Stripe’s guiding principle as, “We want to be micro pessimists and macro optimists.”
This refers to entrepreneurs’ ability to admit flaws in their strategy and be critical of their products while recognizing the cyclical nature of their businesses.
Such tension between a startup’s motivation to succeed while being grounded in reality has moved many successful startups through these intensive up-and-down business cycles.
Silicon Valley is famous for being such a productive and prodigious cradle for new technology companies, whereas, in reality, it’s the world’s most densely populated graveyard…but when I look at a five to ten-year time horizon, it seems to me that the really great companies that the Valley built over the last 40 years went through these cycles.
Our startup powered through the Pandemic in terms of product development and user beta-testing.
We are convinced our product will greatly enhance the investment function of many advisors and investors. We used our savings and put our heads down to work.
(Remember Stripe started in 2010 with only nine lines of codes that enabled developers to process credit card payments on their websites. Now, they are THE financial infrastructure company valued at over $60 billion that processes online payments and commerce globally.)
Our offshore development team in Brazil (a separate company) took much longer to complete the minimum viable product (more like 2 years) although we added and flashed out two more modules. Luckily, we agreed on a contract price and had access to their best people.
But with the language difference and the team’s other priorities, it would have been better if we could hire our own offshore developers.
2. Don’t be obsessed with how good you think your product is — a corollary of ONE.
As a startup founder, you have to be extremely attentive to the problem you are solving; yet, you have to be aware of the myriad ways your product sucks.
While everything can look terrible today, you still have the conviction you can make things remarkable in 3, 5, or 10 years. Permit yourself to be extremely critical and not fall into your own illusionary trap.
With investing as our professional background and our 20-plus years of managing experience, we naturally believe we have the best battle-tested methodology/algorithm in the world. This algorithm powers our investment application.
Fundraising to get investors to invest in our funds is one thing. Usually, the investors are sophisticated institutions and if they like our credentials, track record, and risk management, and if our investment approach makes sense, they invest. They have no need to ask us what each investment jargon means.
Getting users to invest in a new technology or solution is poles apart. They ask:
What exactly is your algorithm?Can I beat the market with this?Why should I switch from my trusted process or my usual fund managers to adopt your solution to do it myself?Why don’t others think of this before?Why don’t you have this and that feature?I wish your feature could do X instead of Y.
None of what you have built seems to be perfect for them even though they all like what they see. Somehow, your baby is not good enough for them.
The algorithm and methodology can be great, but will users stick with it after the novelty?
We need to listen, adapt, and paint creatively the mental picture of what this application can do for our users.
When iPods, iPhones, and iPads were still concepts, do you think Steve Jobs conducted market research to test consumer demand?
“None. It isn’t the consumers’ job to know what they want.”
That was Jobs’ response. Consumers do not know they want this new technology. They conjecture new technology is a fancier version of the existing ones. But iPhones are not just better cell phones. They are a wonderful integration of all the digital technology you need in your pocket.
3. The blessing of having a co-founder or business partner in your startup
While Patrick is a scientist and young genius, his brother John, enjoys reading 10Qs and 10Ks (U.S. company financial reports) in bed. They are a natural complement to each other — one focuses on the technology and delivery, and the other focuses on the business model and if what they do makes business sense.
Having someone who knows you so well to split up the work and share both the glories and woes is a blessing. Patrick admires solo entrepreneurs.
My Founder hired me to work in the fund industry from day 1 and I have learned a great deal about investing in the battlefield from him for over 20 years.
Having worked this long together, we almost always understand what each other can contribute and deliver, without much explanation. We can be each other’s confidantes and sometimes punchbags.
Having said that, I always advise co-founders to communicate with each other and express clearly what the roles and expectations including delivery time are. Never assume the other person sees the way you see things.
Being an entrepreneur is hard, and if someone you trust can share your journey and put sense into your head when you need it, it is precious.
4. What Patrick Collison will tell his younger self: You are not your leadership style.
Patrick called leadership and your identity a completely different set of skills. In fact, it is your choice.
When we as a leader receive criticism of our brand, style, product, or service, we should not be defensive and think our identity is under attack.
As writers, we read the finished draft we worked on for days, thought it was perfect, and we hit “Publish.”
BAM! No claps or views for several days and maybe we get a hurtful comment.
Did we ask ourselves before if this piece may resonate or be useful to our readers?
Separate ourselves from the company/product/creation and stay focused on what features we can truly improve on to deliver what our customers need.
Thoughts:
We recently did a roadshow to present our MVP to a bunch of potential beta users. At the beginning of the presentation, an advisor started poking holes at the output of our financial engine that powers our application, questioning its validity.
I could see my Founder’s face growing feverish red. I worried that he treated these challenging questions as an attack on him as he strongly associated himself with the algorithm.
But taking a deeper breath, my Founder rephrased the advisor’s questions. He then created a mental picture for the audience of what this application could do for them to streamline their investment workflow and create an intuitive and customized investment portfolio.
The advisor asked us for another one-hour meeting one-on-one!
5. Innovation and progress are understudied
Patrick Collison wrote this Atlantic article in 2019. His main questions were:
[There] is no broad-based intellectual movement focused on understanding the dynamics of progress*, or targeting the deeper goal of speeding it up. We believe that it deserves a dedicated field of study. We suggest inaugurating the discipline of “Progress Studies.”
What is progress?
*… the combination of economic, technological, scientific, cultural, and organizational advancement that has transformed our lives and raised standards of living over the past couple of centuries.
What should Progress Studies entail?
It would study the successful people, organizations, institutions, policies, and cultures that have arisen to date, and it would attempt to concoct policies and prescriptions that would help improve our ability to generate useful progress in the future.
Patrick described how his home country Ireland had transformed via a series of wise economic policies from the “Sick Man of Europe” and the “poorest of the rich” in the 1970s and 1980s to a prosperous country (much more so than the UK now) by mid-1990s until the 2008 financial crisis hit.
Patrick grew up during this big transformation, witnessing how progress and change completely transformed his nation.
“Progress Studies” appears as nothing new as many fields are already studying progress. However, there is no communication between the fields to share understandings and make a coordinated effort to recommend policies.
This online magazine “Works in Progress” is a great start to bring underrated ideas together to improve the world. Writers, creators, and entrepreneurs can draw ideas from words like these: how to tackle the inconsistency of mental health treatment or how we should think about our [animal] suffering footprint.