Why Silicon Valley Tech Wunderkinds Overestimate Their Own Smarts and Abilities

Consumer vs enterprise makes a big difference here - there are a lot of successful repeat entrepreneurs in the enterprise world.<p>the success of consumer startups, especially one that relies on network effects, are often random. That's why so many of the 'How did X get traction' stories on Quora boil down to "It suddenly took off with group foo, we weren't sure why". That's why a lot of these consumer startup founders doing repeat companies fail - they can't replicate the same conditions again.<p>Enterprise startups are a different story. Since the variables (who the customers are, how much they can pay, how they buy, what they want) are better known and existing relationships counting for a lot, repeat entrepreneurs have a better chance of having a success. Of course, enterprise startups have their own separate issues to deal with.

I've helped create two companies with successful exits (Naughty Dog and ITA). When founders with successful exits tell me it was all skill and they didn't get lucky, I ask them if they'll give all their money away and start over, because, of course, it's all repeatable. No takers so far.<p>Being smart, technically good, etc. is all (usually) necessary, but not sufficient. Anyone who thinks otherwise exists in a profound state of self-aggrandizing delusion.

I love it when Venture Capitalists write articles with this claim since they prefer the idea that support from Venture Capitalists is the key to any successful business, not skills, talent, genius, a product, customers or a business plan.<p>A quick search and replace provides the basis for an alternative article called "Why Sand Hill Venture Capitalists Overestimate Their Own Smarts and Abilities":<p>&#62; Venture Capitalists believe that they can recreate their successes again and again, start-up after start-up.<p>&#62; In some ways, Sand Hill is set up to support this way of thinking. If you’re successful financing one company and you were the venture capitalist, you deserve all the money from all the engineers running other businesses in Silicon Valley to go start your next capital firm. After all, who are the engineers going to support? Some failed venture capitalists instead?<p>Makes as much sense.

I've found this in my interviews on Mixergy. If I ask a founder to tell me why he made it, he often exaggerates his abilities and his answers are more B&#38;W. If I ask him to tell me the story of how he did it, the lessons are more nuanced.

"I agree with Mark Zuckerberg that most of us will only have one really good business idea in our lives."<p>I think the founders of Microsoft, Dropbox, Zynga, and many, many others would disagree. Even if we do on average only have one good business idea in our lives, it probably won't be the first one you work on.<p>The author uses Twitter as an example, which was actually a spinoff of Evan Williams' <i>second</i> company.. he'd already had one great idea, Blogger, which was sold to Google.

I mostly disagree with this article. Disclaimer: I live in NYC and not the valley, but I think this just makes my point stronger.<p>Ideas are a dime a dozen. Many can be great. Execution is what separates the wheat from the chaff. And most of the time, the Minimum Viable Product has become cheaper to produce and iterate, than ever. So the startup costs are minimal.<p>I would actually say the opposite. People live lives, companies create products. You will have MANY ideas in your life. Make sure to maximize your chances of succeeding in your first venture. If you do, and then you exit, you will have connections, a reputation, a track record, lots of money, and you will be able to own the crap out of your next companies and do whatever you want.<p>That probably means your first venture shouldn't be the next Google or Facebook, so that you can bear giving away equity in it to people and give them responsibilities. Investors, mentors, coders, designers, marketers, etc. People who do things better than you in their respective fields. If you are reluctant to give up equity, your first startup will be hobbled in its resources, you will have to wear many hats and wear yourself thin. Why do it?<p>Companies create products. People live lives. Enjoy yours while you are young. Create a group around you that is passionate. What was that Aesop's fable? Oh yes:<p><a href="http://mythfolklore.net/aesopica/milowinter/13.htm" rel="nofollow">http://mythfolklore.net/aesopica/milowinter/13.htm</a><p>I think that the individualistic culture in the USA has produced some amazing things, but the power of groups is just beginning. The open source movement is a great example, but as people get better tools to organize themselves, groups will become more and more efficient.<p>The nice thing about groups is that they can do more. An individual is just a group with one person. If set up right, larger groups are also not as fragile, if one member leaves or decides to take a break. They have more connections, they have more resources to grow.<p>In short: you will have plenty of ideas. Don't make your first one into something that you will take responsibility for and take on the risk all by yourself. Rather than letting it consume your life, land your first success. You will always be able to own and enjoy your next ideas, and have more OPTIONS to execute them how you want.

The funny thing is that the author himself talks about having "your brightest idea", as if success only depended on you - and your idea - and not on the right timing, the right team, and all the planets aligning for you.<p>The fundamental attribution error is so ingrained in our thinking, that it's really difficult to obviate it even when you're writing an article about it.

I'd argue this is more about survivorship bias than fundamental attribution error.<p>The tech world buzzes for days and weeks about Instagram being acquired by $1 billion, about securing higher and higher amounts of funding. Often, its deceptively rare that you hear about great people with great ideas that just don't make it off the runway.<p>So when your venture fails, you're tempted to think its a fluke that can be overcome with a large enough sample size.

Funny to mention Ev and not blogger.<p>Also, when you can get Morgan Stanley to eat 2.3 billion to keep launch day stock at the number you want, you're not overestimating your own smarts. You're doing something far more profitable, you're duplicating the mythic reality distortion field.

Perhaps people who are financially set want to just try out new things. The author here rips on the facebook CTO, because whatever else he is doing will not be as successful? If he's the CTO of facebook, I'm sure money almost doesn't even enter the picture here, he's set for life, and wants to see if he can create his own baby. No problem with that.

Maybe entrepreneurial success is driven by luck in the same way that home runs in baseball are: Barry Bonds can swing 100 times and not hit a home run, but he's still a way better home run hitter than I am, in that he can hit home runs at all.<p>This article is kind of like saying that some baseball players overestimate their own skills and underestimate the effects of luck when they hit a home run. But you don't see people writing articles like that because hitting a home run is more obviously difficult than starting a successful company, and you have a lot more data with home runs than you do with companies.<p>Whenever there's an article like this, it can be tempting to conclude either: 1) "it's just a crapshoot, what's the point of playing the lottery?" 2) "it's just a crapshoot, anyone could have done Facebook." But the fact is luck is involved in everything - so perhaps a better takeaway is: 1) I need more practice and 2) I need more at bats.

Why are they singling out Tech people? You ever met a salesperson or a CEO?

Whats a "good" startup idea anyways? One where the VC rocket doesn't crash straight into the ground? This article seems to hint that the only good idea you'll have is one that investors pour money into and it turns into a big hit like Facebook. I see way too many successful companies that didn't take that approach to believe in that.<p>Maybe the problem is too many people believe in that.

<p><pre><code> &#62; I know nothing about Bret Taylor and his new company. However, I do &#62; know that he used to be the CTO of Facebook and he threw it out the &#62; window. Chances are his new venture will never give him the opportunity &#62; he would have had if he’d stayed at Facebook for the next 5 years. </code></pre> Would the same be said for an executive who cashed out of VA Linux? Or Pets.com? Maybe this journalist has some crystal ball showing Facebook's stock price five years down the road.<p><a href="http://imgs.sfgate.com/c/pictures/2001/01/18/bu_valinux2.jpg" rel="nofollow">http://imgs.sfgate.com/c/pictures/2001/01/18/bu_valinux2.jpg</a><p>ChuckMcM's previous comment summed it up perfectly: <a href="http://news.ycombinator.com/item?id=4118949" rel="nofollow">http://news.ycombinator.com/item?id=4118949</a>

This article is remarkably astute. Not necessarily for the details, but just for its <i>statistical</i> instead of <i>individual</i> view into the startup ecosystem.<p>In this highly complex system of companies and customers and ideas, nothing is constant, and very little is predictable. You can't look at individual points and see the trend, or be able to predict anything from that point. You have to look at the ecosystem statistically, and that's effectively what this article is talking about.<p>Everyone should understand statistics. Not Stat-10 intro-to-statistics, but the beauty of statistical understanding in the real world, as it applies to you. This article is a great example. If you think systematically, you'll understand your market better, your company better, your employees better, and yourself better, and you won't fall into the fallacies this article points out.<p>Because that's what they are. Fallacies. Falsehoods. If you believe you fully control your destiny and your outcome, you are necessarily at least partially incorrect.<p>Even if you consider yourself and your own success and what you believe leads to it, you are <i>still</i> part of a complex system you don't fully understand. However, you can get a much better grasp of it if you don't use yourself as a single-point anecdote. Spot on.

The author leaves no room for any concept of "skill" in entrepreneurship, and this is the big flaw in his article. He doesn't so much argue this view as assume it, except to say that person X succeeded only to fail later, and person Y thought they would succeed, but didn't.<p>VCs know more about start-ups than he thinks. They do "care" about whether the ventures they fund succeed (obviously, ha) and even so they fund founders who have failed in the past all the time. The pretty low stigma on failure in the Valley is part of what makes the culture so great and why we get so many successes and, dare I say it, skilled entrepreneurs.<p>As we all know, team and execution are just as important as idea or more so. Once we acknowledge the importance of ability, and the existence of many great successes, successful serial entrepreneurs, and, of course, failures and failed entrepreneurs, it seems like he's just trying to take everyone down a peg.<p>Surprisingly, his first three takeaways are pretty agreeable, basically just be grateful for your successes and acknowledge there was probably a healthy dose of luck in there. I'm pretty sure his fourth point about investing in people despite past failures is already incorporated into Valley thinking.

"When Jack Dorsey left to found Square, he made the biggest miste.... wait no, when Dave Morin left Facebook to start Path he made the biggest mist..... shit"

RE "Zuckerberg's" Facebook idea: When I was at Georgetown University back in the '90s, at the beginning of each year a printed directory of the students came out. In that book, was a photograph of each student and their profile, including name, where from, where went to undergrad, and a few other things. That book was called "the Facebook." So the idea to take the physical facebook and bring it online, with the same name and same initial content, was just lying there on the ground for years, waiting for someone to notice it, bend over, and pick it up. As the concept of social networks speard through the populaton, the ease of noticing the opportunity grew more obvious. Finally, a few years after online social network pioneers launched (Friendster and then MySpace), someone noticed. I'm surprised it took as long as it did. How many other opportunities are hiding in plain sight. Many :) PS: Yes, ideas are "nothing" without execution.

This article could have done with dropping the 'Why' from the title; it was more an exposition of a belief (and an observation from the field of psychology), than an explanation of the root cause of this overestimation.<p>Which, incidentally, everyone is susceptible to. It just makes people bitter when millions of dollars change hands because of it.

"But my point is that I agree with Mark Zuckerberg that most of us will only have one really good business idea in our lives."<p>Not just ideas.<p>You need not only the idea but everything coming together at the right time including being able to team up with the right people, get money, and not to sound like a broken record, luck and the right timing.<p>At one point things get to the tipping point. With twitter it may have been the arab spring let's say. That might have been the point where non-techies and your aunt heard about it and it jumped some shark.

Curious to hear thoughts on the '4 takeaways' ...<p>For instance, do you think investors are 'at least as likely to succeed by investing in “failed” entrepreneurs as “successful” ones'?

I don't doubt the psychology described in the article, but there are other reasons to start a company than believing it will be massively success. These two recent posts come to mind:<p>"Getting Final Cut": <a href="http://log.scifihifi.com/post/25094818476/getting-final-cut" rel="nofollow">http://log.scifihifi.com/post/25094818476/getting-final-cut</a><p>"Why you need your own company": <a href="http://sivers.org/laboratory" rel="nofollow">http://sivers.org/laboratory</a>

I think the attribution to overestimating one's smarts, citing "fundamental attribution error" is a little misguided; most entrepreneurs aren't disillusioned about the success rate of startups. Rather, in the Valley, we call it being optimistic/head-strong/determined and it's a key attribute in entrepreneurs -- one that allows them to continue forward when everyone else is saying "no."

Let's all kneel and psychoanalyze Mark Zuckerberg on a site dedicated to people who love hacking and building things. What a garbage article.

Surprisingly modest comment from Mark Zuckerberg in this article about Viacom, especially at such a young age. Really interesting.

I think when you say "Silicon Valley Tech Wunderkinds Will Only Ever Have 1 Good Business Idea During Their Entire Lives", it seems you mean they'll only have 1 successful business idea. That's what you seem to be getting at, and you argue yourself that a good idea isn't always a successful idea.

This reminds me of the book I just started reading that talks about randomness in our lives.<p>The Drunkard's Walk: How Randomness Rules Our Lives : <a href="http://www.amazon.com/The-Drunkards-Walk-Randomness-Rules/dp/0307275175/" rel="nofollow">http://www.amazon.com/The-Drunkards-Walk-Randomness-Rules/dp...</a>

"The VCs and media don’t care who wins and loses because they’ll still have jobs watching from the sidelines. "<p>Of course why not spread the bets over multiple companies and encourage risky ideas. We are all watching the football game but not suffering the concussions.

Fundamental Attribution Error is a very real thing that definitely applies to SV startup culture.<p>To put it in simpler terms, luck is a far more important factor than skill in determining whether any given entrepreneur or startup succeeds.<p>Unfortunately he had to add a bunch of nonsense commentary like the Bret Taylor stuff, but his main premise is certainly accurate.<p>It also applies to VC's and Angels. They are praised when they get in early on companies that end up making a fortune. Some of them are surely great investors - others are just blindly throwing darts and end up getting insanely lucky. Good luck trying to explain to that TechCrunch.

Everyone (at least 99.9%) Overestimates how good they are.