Okay, first of all I'd say starting a business is not for everyone. My advice, if someone wants to start a company, is that they should bear in mind that the most likely outcome is that it's not going to work, and they should reconcile themselves to that strong possibility. I think that a lot of times people think creating a company is going to be fun. I would say it's really not that fun. I mean there are periods of fun, and there are periods where it's just awful. They should only do it if they feel that they are really compelled to do it.
What tends to happen is it's sort of quite exciting for the first several months of starting a company, then reality sets in, and then it's really hellish for a number of years. Things don't go as well as planned, customers aren't signing up, the technology or the product isn't working as well as you thought, and then that concern has to be compounded by a recession, and it can be very painful for several years. Maybe there are occasionally companies that get created where there's not an extended period of extreme pain, but I'm not aware of very many such instances. I do think that new great entrepreneurs are born every day, and we'll continue to see amazing companies get built. But I would definitely advise people who are starting a company to expect a long period of quite high difficulty.
There’s a friend of mine - his name's Billy - who's a successful entrepreneur and started his career around the same time as I did. He has a great saying about creating a company which is 'trying to build a company and have it succeed, is like eating glass and staring into the abyss.’ and there's some truth to that. The eating glass part is you've got to work on the problems that the company needs you to work on, and not the problems you want to work on. So you end up working on problems that you really wish you weren't working on. That goes on for a long time. Particularly, if you're the CEO of the company, you actually have a distillation of all the worst problems in the company. There's no point in spending your time on things that are going right. So you're only spending your time on things that are going wrong. There are things that are going wrong that other people can't take care of. You have like a filter for the worst crappiest problems in the company. The most pernicious, and painful problems, and seemingly intractable problems come along. That’s the eating glass part. If you don't eat the glass, you're not going to be successful.
The staring into the abyss part is that you're going to be constantly facing the extermination of the company, because most start ups fail. It's like 90%, it could be 99% of start ups fail. That’s the staring into the abyss part. You're constantly saying, OK, if I don't get this right the company will die, which can be quite stressful. So I think you have to feel quite compelled to do it, and have a fairly high pain threshold. It's a lot more painful than most people realize, and most companies die. On a certain level in your brain we evolved to respond to real death. Even though a companies death is not real, we didn't evolve with companies, your brain doesn't quite understand that at the limbic system level, so it's really painful and stressful.
Okay, so that's generally what happens, first there's lots of optimism and things are great. Happiness at first is high. Then you encounter all sorts of issues, and happiness will steadily decline. Then you will go through a whole world of hurt, and then eventually, if you succeed - and in most cases you will not succeed - and Tesla almost didn’t succeed it came very close to failure. If you succeed, then, after a long time, you will finally get back to happiness.
Persistence is extremely important. You should not give up unless you're forced to give up, unless there's no other choice. That principle can be misapplied if you happen to be trying to penetrate a brick wall with your head. So you have to be cautious in always saying that one should persist and never give up. Because there are actually times when you should give up, because you're doing something in error. But if you're convinced that you're doing something correct, then you should never give up. I think failure is bad. I don't think it's good, but if something is important enough then you do it even though the risk of failure is high.
I do think that in terms of creating a company what Edison said which was like “it's 1% inspiration and 99% perspiration” is true. You need to work, you need to work super hard. So what is super hard mean? Like, every waking hour. That’s the thing I would say, particularly if you’re starting a company. I mean, if you do the simple math, you say like somebody else is working 50 hours a week and you’re working 100, you’ll get twice as much done in the course of the year as the other company.
A lot of it in creating a company is execution. You start of with an idea and that idea is mostly wrong, then you adapt that idea and keep refining it.
Listen to criticism, some criticism you discard, try to listen to the correct criticism. Then engage in recursive self improvement, and constantly refine it and making it better. You have to work super hard, it's very important, and keep reiterating on a loop. A lot of life, and in any job in general, you have to do your chores. To be successful in about anything you have to do the tough stuff as well the enjoyable stuff. Basically it's like, it's more fun to cook the meal then to do the dishes, but you need to clean the dishes.
If you're going to create a company you have to come up with a product or service that will be compelling, and serve some need. Really, a great company is just build around a great product or service. That's the whole purpose of a company, to propagate the product or service, and put it into the hands of people that find it useful. That's the main thing, trying to think of the most useful thing for your fellow human beings. And a company is the process of scaling it up in scope and scale.
When you're looking for an opportunity, I think it's important not so much to focus on disruption just for the sake of it. But rather where is an industry either stagnant or in decline, where the product or service has stayed pretty much the same, or maybe even gotten worse over time. It's worth looking at industries which a lot of people think are impossible or think you can't succeed at, that's usually where opportunity is. If everyone thinks you can’t succeed in an industry, they are probably worth diving in. There’s a lot of opportunities in these industries, particularly the ones that have been dominated by a oligarchic set of companies for a long time. Oligarchic, or duopolies and monopolies, are not great at innovation. Innovation comes from new entrance into a arena. When an Industry has the absence of new entrance it tends to have very limited innovation. Which also means that if you do break on through to the other side, that there is a lot of opportunity for a company that is created there. I would recommend people consider arenas outside of the Internet. Because there's a lot of industries that could use that entrepreneurial talent and skills that people have learned in creating companies.
It's like the Nike slogan "just do it" you know showing up is half the battle. I think people maybe have too much fear of failure. You have to say what would really happen if you fail, like you're not going to starve, and you probably will not lose shelter. I think very often people self limit what they are capable of without realizing it. You got to try hard to do it and don't be afraid of failure.
Also you need to be rooted in reality, it's easy to get high on your own supply as Scarface said. You got to not be afraid to innovate, but also don't delude yourself into thinking something is working when it's not, or you are going to get fixated on a bad solution. Don’t be afraid of new arenas. You can get a book learn something and experiment with your hands and make it happen. Find a way to get something done.
In general I do think it's worth thinking about whether what you're doing is going to result in disruptive change or not. If it's just incremental it's unlikely to be something major. It's got to be something that's substantially better then what's gone on before. You've got to make sure that whatever you're doing is a great product or service. It has to be really great.
To go back to what I was saying earlier, where if you're a new company, unless it's like some new industry or new market that's untapped then the standard is lower for your product or service, but if you're entering anything where there's an existing marketplace, against large entrenched competitors, then your product or service needs to be much better than theirs. It can't be a little bit better, because put yourself in the shoes of the consumer and they say why would you buy it as a consumer? You're always going to buy the trusted brand unless there's a big difference. A lot of times an entrepreneur will come up with something which is only slightly better, and it can't just be slightly better. It's got to be a lot better.
I think this is sort of advice I would give to entrepreneurs in general, really focus on making a product that your customers love. It's so rare that you can buy a product and you love the product when you bought it. There are very few things that fit into that category. If you can come up with something like that, your business will be successful for sure.
As long as people stay super focused on creating the absolute best product or service that really delights their end customer, if they stay focused on that, then if you get it such that your customers want you to succeed then you probably will. If your customers love you, your odds of success are dramatically higher.
Be really focused on something that you know will have high value to someone else and be really rigorous in that assessment. When you're building something new there's going to be mistakes, and it's important to recognize those mistakes, acknowledge them, and to take corrective action. The success of the company is very much more about how quick are you to fix the mistakes. If you see the difference between a start up that is successful and one that is not, it's because the successful one recognized the mistakes and fixes them very quickly, and the unsuccessful one tries to deny that the mistakes exist. A natural human tendency is wishful thinking, I think wishful thinking is innate in the human brain, you want things to be the way you wish them to be. You tend to filter information that you shouldn't filter, that's the most common flaw that I see. So a challenge for entrepreneurs is to say what's the difference between real believing in your ideals and sticking to them, versus pursuing some unrealistic dream that doesn't really have merits. That's really difficult, so you need to be very rigorous in your self analysis. I think the most important thing is start somewhere, and then really be prepared to question your assumptions, affix what you did wrong and adapt to reality.
Constantly seek criticism. A well thought-out critique of whatever you're doing is as valuable as gold, and you should seek that from everyone you can, but particularly your friends. Usually, your friends know what's wrong, but they don't want to tell you because they don't want to hurt you. Yeah, they say I want to encourage my friend so I'm not going to tell him what I think is wrong with his product. It doesn't mean your friends are right, but very often they are right, and you at least want to listen very carefully to what they say.. and to everyone. You're looking for, basically, you should take the approach that you're wrong. That you, the entrepreneur are wrong. Your goal is to be less wrong.
I think you can learn whatever you need to do to start a successful business either in school or out of school. A school in theory should help accelerate that process, and I think often times it does. It can be an efficient learning process, perhaps more efficient than empirically learning lessons. I mean there are examples of successful entrepreneurs who never graduated high school, and there are those that have PhDs. I think the important principle is to be dedicated to learning what you need to know, whether that is in school or empirically.
The other thing I’d say is that if you’re creating a company, or if you’re joining a company, the most important thing is to attract great people. If you think about a company, a company is a group of people that are organized to create a product or service. That's what a company is. So, in order to create such a thing, you have to convince others to join you in your effort. They have to be convinced that it's a sensible thing, that there's at least some reasonable chance of success, and that if there is success, the reward will be commensurate with the effort involved. Getting people to believe in what you're doing, and you, is important. In the beginning, there will be few people who believe in you, or in what you're doing.There were certain things that I really believe needed to happen and I was able to convince a lot of great people to join me in trying to solve those problems. A lot of times I think people ascribe to me things where the credit is really due to a much bigger team. Over time as you make progress, the evidence will build and more and more people will believe in what you're doing. In fact, that's I think the real answer, if you can get a group of really talented people together and unite them around a challenge and have them work together to the best of their abilities then a company will achieve great things. So either be with or join a group that’s amazing, that you really respect. I mean, really, all a company is a group of people that have gathered together to create a product or service. Depending upon how talented and hard working that group is, and to the degree in which they are focused cohesively in a good direction, that will determine the success of the company. So, do everything you can to gather great people, if you’re creating a company.
I think it's a good idea, when creating a company, to have a demonstration or if it's a product, to have like a good mockup, or even if it's software to have good demo-ware or to be able to sketch something, so people can really envision what it's about. Try to get to that point as soon as possible, and then iterate to make it as real as possible as fast as possible, if that makes sense. Like you know where you're generally heading for, and the actual path is going to be some sort of zigzaggy thing in that direction. You're trying not to deviate too far from the path that you want to be on, but you're going to have to do that to some degree.
Essentially, it's important to limit the number of miracles in series. You want to start off with something that's the most doable and expand from there. Start with the minimally useful system - something that you think is still compelling - but then leave future technologies for future upgrades.
Unfortunately, one does have to be focused on the short term and money coming in when creating a company, because otherwise the company will die. I don't want to diminish the profit motive, I think it’s a good one if the rules of an industry are properly set up. There’s nothing fundamentally wrong with profit. In fact, profit just means that people are paying you more for whatever you're doing then you're spending to create it. That's a good thing. If that's not the case, then you'll be out of business, and rightfully so because you're not adding enough value. Now there are cases, of course, where people will do bad things in order to achieve profit, but that's actually quite unusual. Because usually the rules are set up mostly correctly, not completely, but mostly correctly.
The best way to attract venture-capital is to have a demonstration of whatever product or service it is. Ideally take that as far as you can, ideally try to see if you can sell it to real customers and start generating some momentum. The further you can get along with that the more likely you will get funding. Start ups are a bit of a numbers game. Typically in Silicon Valley venture capitalists invest in 20 companies, one or two will be a big hit, maybe three or four will be OK and the rest will not make it. That's the way it works.
So, it's true starting a company is like eating glass, and staring into the abyss of death. If that sounds appealing be an entrepreneur. I think it's very difficult, and quite painful. I think that's important to bear in mind. If you go into it expecting it's fun, you would be disappointed, it’s not, it's quite painful. It's much easier to get a job somewhere, much much easier. Much less stressful, you have more time for other things. It's really sort of like, if you are wired to do it, then you should do it, but not otherwise. It's not going to optimize your leisure time so you must feel compelled to do it. Let me put it this way, if you need inspiring words.. don't do it.