The Strength of Being Misunderstood

A founder recently asked me how to stop caring what other people think. I didn’t have an answer, and after reflecting on it more, I think it's the wrong question.

Almost everyone cares what someone thinks (though caring what everyone thinks is definitely a mistake), and it's probably important. Caring too much makes you a sheep. But you need to be at least a little in tune with others to do something useful for them.

It seems like there are two degrees of freedom: you can choose the people whose opinions you care about (and on what subjects), and you can choose the timescale you care about them on. Most people figure out the former [1] but the latter doesn’t seem to get much attention.

The most impressive people I know care a lot about what people think, even people whose opinions they really shouldn’t value (a surprising numbers of them do something like keeping a folder of screenshots of tweets from haters). But what makes them unusual is that they generally care about other people’s opinions on a very long time horizon—as long as the history books get it right, they take some pride in letting the newspapers get it wrong. 

You should trade being short-term low-status for being long-term high-status, which most people seem unwilling to do. A common way this happens is by eventually being right about an important but deeply non-consensus bet. But there are lots of other ways–the key observation is that as long as you are right, being misunderstood by most people is a strength not a weakness. You and a small group of rebels get the space to solve an important problem that might otherwise not get solved.


 

[1] In the memorable words of Coco Chanel, “I don’t care what you think about me. I don’t think about you at all.”

PG and Jessica

A lot of people want to replicate YC in some other industry or some other place or with some other strategy. In general, people seem to assume that: 1) although there was some degree of mystery or luck about how YC got going, it can’t be that hard, and 2) if you can get it off the ground, the network effects are self-sustaining.

More YC-like things are good for the world; I generally try to be helpful. But almost none of them work. People are right about the self-sustaining part, but they can’t figure out how to get something going.

The entire secret to YC getting going was PG and Jessica—there was no other magic trick. A few times a year, I end up in a conversation at a party where someone tells a story about how much PG changed their life—people speak with more gratitude than they do towards pretty much anyone else. Then everyone else agrees, YC founders and otherwise (non-YC founders might talk about an impactful essay or getting hired at a YC company). Jessica still sadly doesn’t get nearly the same degree of public credit, but the people who were around the early days of YC know the real story.

What did they do? They took bets on unknown people and believed in them more than anyone had before. They set strong norms and fought back hard against bad behavior towards YC founders. They trusted their own convictions, were willing to do things their way, and were willing to be disliked by the existing power structures. They focused on the most important things, they worked hard, and they spent a huge amount of time 1:1 with people. They understood the value of community and long-term orientation. When YC was very small, it felt like a family.

Perhaps most importantly, they built an ecosystem (thanks to Joe Gebbia for pointing this out). This is easy to talk about but hard to do, because it requires not being greedy. YC has left a lot of money on the table; other people have made more money from the ecosystem than YC has itself. This has cemented YC’s place—the benefits to the partners, alumni, current batch founders, Hacker News readers, Demo Day investors, and everyone else around YC is a huge part of what makes it work.

I am not sure if any of this is particularly useful advice—none of it sounds that hard, and yet in the 15 years since, it hasn’t been close to replicated.

But it seems worth trying. I am pretty sure no one has had a bigger total impact on the careers of people in the startup industry over that time period than the two of them.

Researchers and Founders

I spent many years working with founders and now I work with researchers.

Although there are always individual exceptions, on average it’s surprising to me how different the best people in these groups are (including in some qualities that I had assumed were present in great people everywhere, like very high levels of self-belief).

So I’ve been thinking about the ways they’re the same, because maybe there is something to learn about qualities of really effective people in general.

The best people in both groups spend a lot of time reflecting on some version of the Hamming question—"what are the most important problems in your field, and why aren’t you working on them?” In general, no one reflects on this question enough, but the best people do it the most, and have the best ‘problem taste’, which is some combination of learning to think independently, reason about the future, and identify attack vectors. (This from John Schulman is worth reading: http://joschu.net/blog/opinionated-guide-ml-research.html).

They have a laser focus on the next step in front of them combined with long-term vision. Most people only have one or the other.

They are extremely persistent and willing to work hard. As far as I can tell, there is no high-probability way to be very successful without this, and you should be suspicious of people who tell you otherwise unless you’d be happy having their career (and be especially suspicious if they worked hard themselves).

They have a bias towards action and trying things, and they’re clear-eyed and honest about what is working and what isn’t (importantly, this goes both ways—I’m amazed by how many people will see something working and then not pursue it). 

They are creative idea-generators—a lot of the ideas may be terrible, but there is never a shortage.

They really value autonomy and have a hard time with rules that they don’t think make sense. They are definitely not lemmings.

Their motivations are often more complex than they seem—specifically, they are frequently very driven by genuine curiosity.

Project Covalence

Almost every company and non-profit working on COVID-19 that I offered to help asked for support with clinical trials—for companies focusing on developing novel drugs, vaccines, and diagnostics, rapidly spinning up trials is one of their biggest bottlenecks. 

Science remains the only way out of the COVID-19 crisis. Dramatically improving clinical trials, which are usually time-consuming and cost tens to hundreds of millions of dollars, is one of the highest-leverage ways to get out of it faster.  

The goal of this project, in collaboration with TrialSpark and Dr. Mark Fishman, is to offer much better clinical trial support to COVID-19 projects than anything that currently exists.

Project Covalence’s platform, powered by TrialSpark, is uniquely optimized to support COVID-19 trials, which are ideally run in community settings or at the patient’s home to reduce the burden placed on hospitals and health systems. Project Covalence is well-positioned to tackle the operational and logistical challenges involved in launching such trials, and supports trial execution, 21 CFR Part 11 compliant remote data collection, telemedicine, biostatistics, sample kits for at-home specimen collection, and protocol writing. 

Researchers across academia and industry can leverage this shared infrastructure to rapidly launch their clinical trials. To facilitate coordination between studies, we will also be creating master protocols for platform studies to enable shared control arms and adaptive trial designs.

If you’re interested in getting involved or have a trial that needs support, please get in touch at ProjectCovalence@trialspark.com or visit www.projectcovalence.com.

Idea Generation

The most common question prospective startup founders ask is how to get ideas for startups. The second most common question is if you have any ideas for their startup.

But giving founders an idea almost always doesn’t work. Having ideas is among the most important qualities for a startup founder to have—you will need to generate lots of new ideas in the course of running a startup.

YC once tried an experiment of funding seemingly good founders with no ideas. I think every company in this no-idea track failed. It turns out that good founders have lots of ideas about everything, so if you want to be a founder and can’t get an idea for a company, you should probably work on getting good at idea generation first.

How do you do that?

It’s important to be in the right kind of environment, and around the right kind of people. You want to be around people who have a good feel for the future, will entertain improbable plans, are optimistic, are smart in a creative way, and have a very high idea flux. These sorts of people tend to think without the constraints most people have, not have a lot of filters, and not care too much what other people think. 

The best ideas are fragile; most people don’t even start talking about them at all because they sound silly. Perhaps most of all, you want to be around people who don’t make you feel stupid for mentioning a bad idea, and who certainly never feel stupid for doing so themselves.

Stay away from people who are world-weary and belittle your ambitions. Unfortunately, this is most of the world. But they hold on to the past, and you want to live in the future.

You want to be able to project yourself 20 years into the future, and then think backwards from there. Trust yourself—20 years is a long time; it’s ok if your ideas about it seem pretty radical. 

Another way to do this is to think about the most important tectonic shifts happening right now. How is the world changing in fundamental ways? Can you identify a leading edge of change and an opportunity that it unlocks? The mobile phone explosion from 2008-2012 is the most recent significant example of this—we are overdue for another!

In such a tectonic shift, the world changes so fast that the big incumbents usually get beaten by fast-moving and focused startups. (By the way, it’s useful to get good at differentiating between real trends and fake trends. A key differentiator is if the new platform is used a lot by a small number of people, or used a little by a lot of people.)

Any time you can think of something that is possible this year and wasn’t possible last year, you should pay attention. You may have the seed of a great startup idea. This is especially true if next year will be too late.

When you can say “I am sure this is going to happen, I’m just not sure if we’ll be the ones to do it”, that’s a good sign. Uber was like this for me—after the first time I used it, it was clear we weren’t going to be calling cabs for that much longer, but I wasn’t sure that Uber was going to win the space.

A good question to ask yourself early in the process of thinking about an idea is “could this be huge if it worked?” There are many good ideas in the world, but few of them have the inherent advantages that can make a startup massively successful. Most businesses don’t generate a valuable accumulating advantage as they scale. Think early about why an idea might have that property. It’s obvious for Facebook or Airbnb, but it often exists in more subtle ways.

It’s also important to think about what you’re well-suited for. This is hard to do with pure introspection; ideally you can ask a mentor or some people you’ve worked with what you’re particularly good at. I’ve come to believe that founder/company fit is as important as product/market fit.

Finally, a good test for an idea is if you can articulate why most people think it’s a bad idea, but you understand what makes it good.


This is from my notes for a talk I gave at a YC event in China in 2018. Thanks to Eric Migicovsky for encouraging me to post it!

I wrote it when I thought mostly about startups; now I think mostly about AI development. I am struck by how much of it applies, particularly paragraphs 5-9.

Please Fund More Science

Experts on the COVID-19 pandemic seem to think there are three ways out—that is, for life, health, and the economy to return roughly to normal. 

Either we get a vaccine good enough that R0 for the world goes below 1, a good enough treatment that people no longer need to be afraid, or we develop a great culture of testing, contract tracing, masks, and isolation.

I wish that the federal government were doing much more—it would be great to see even a few percent of the recent stimulus bill go to funding R+D.  But they don’t seem to be funding enough science, and although I think concerns about the private sector and philanthropy doing what the government is supposed to be doing are somewhat valid, there isn’t a great alternative right now.

On the positive side, I have never seen a field focused on one problem with such ferocity before.  The response of biotech companies and research labs is amazing, and the speed they are operating at seems to have increased by more than 10x.  It’s the best of the spirit of innovation, and it’s inspiring to see what these companies and research labs are doing.

Scientists can get us out of this.  What they need are money and connections.

Investors and donors—this is where we can help.  Please consider shifting some of your focus and capital to scientific efforts addressing the pandemic.  (And future pandemics too—I think this will be a before-and-after moment in the world, and until we can defend against new viruses quickly, things are going to be different.)

The learning curve is quick, and there are a lot of experts willing to help you with diligence.  It feels good to do something that might be useful, it’s interesting to do something totally new, and it will make you more optimistic.

If you make it known to your network that you want to fund efforts working on COVID-19, you’ll get flooded with opportunities.  And it’s always good to invest where the best founders are congregating.

Funding for COVID-19 Projects

I’m trying to fund startups/projects helping with COVID-19, because it’s basically the one thing I know how to do that can help.  I think we will soon have enough testing capacity, so now I’d like to start funding more startups working on:

  1. Producing a lot of ventilators or masks/gowns very quickly.  This will require a lot of repurposing and creativity but thankfully is an engineering problem not a scientific ones.
  2. Screening existing drugs for effectiveness.
  3. Novel approaches to vaccines (i.e., not doing what the big pharma companies are already doing).
  4. Novel therapeutics that the big pharma companies are unlikely to work on.

We tried this public spreadsheet but it didn't work that well; please email me instead.

Also, if anyone knows of a contract research company that can run a viral challenge against SARS-CoV-2 in a humanized ACE2 animal model, that would help a startup I’m working with.  Please reach out!

And of course, I think the best thing to do is still to get people to stay home.

The Virus

Although I still hope things will go differently, the experts I’ve spoken to think we are likely to face a global tragedy—hundreds of thousands of deaths from Covid-19.

I hope that society views this as a warning for the future.  Covid-19 is bad, but only a warm-up.  I think it’s unlikely that this is the worst new pandemic (human-created or otherwise) we’ll see in our lifetimes.  We need to be ready to deal with it much better next time.

In the meantime, young healthy people should try to avoid getting Covid-19 for as long as possible.  It’s true that it doesn’t seem to be very bad for young people, but more people getting it—particularly people who don’t get sick enough to stay home—will accelerate the spread, and this virus seems quite bad for old people and people with pre-existing conditions.

I expect society will shift to a new normal pretty fast.  Some of these elements—e.g., much less business travel, much less handshaking, much more handwashing—I expect to just stick.  Some others—e.g., people working from home all of the time—I expect to not stick. 

The economic disruption is still probably under-appreciated and will remind us that our systems are more fragile than we think.  For example, I do not think the recent plunge in US Treasury yields is explained by Covid-19 alone, but rather a reminder of cascading effects that can happen in a complex system.

Hard Startups

The most counterintuitive secret about startups is that it’s often easier to succeed with a hard startup than an easy one.  A hard startup requires a lot more money, time, coordination, or technological development than most startups. A good hard startup is one that will be valuable if it works (not all hard problems are worth solving!).

I remember when Instagram started to get really popular—it felt like you couldn’t go a day without hearing about another photo sharing startup.  That year, probably over 1,000 photo sharing startups were funded, while there were fewer than ten nuclear fusion startups in existence.

Easy startups are easy to start but hard to make successful.  The most precious commodity in the startup ecosystem right now is talented people, and for the most part talented people want to work on something they find meaningful.

A startup eventually has to get a lot of people to join its quest.  It’s usually reasonably easy to get the first five or ten people to join—you can offer large equity grants and areas of responsibility.  But eventually, what you have to recruit with are the mission of the company, the likelihood of massive success, and the quality of the people there. [1]

Few recruiting messages are as powerful (when true) as “the world needs this, it won’t happen any time soon if we don’t do it, and we are much less likely to succeed if you don’t join.”

There is a derivative of the Peter Principle at play here—your startup will rise to the level where it can no longer attract enough talented people.  (This sometimes holds true for careers too—the limiting factor for many careers eventually becomes how many talented people you know and can get to work with you.)

An easy startup is a headwind; a hard startup is a tailwind.  If people care about your success because you seem committed to doing something significant, it’s a background force helping you with hiring, advice, partnerships, fundraising, etc.

Part of the magic of Silicon Valley is that people default to taking you seriously if you’re willing to be serious—they’ve learned it’s a very expensive mistake, in aggregate, not to.  If you want to start a company working on a better way to build homes, gene editing, artificial general intelligence, a new education system, or carbon sequestration, you may actually be able to get it funded, even if you don’t have a degree or much experience. 

Let yourself become more ambitious—figure out the most interesting version of where what you’re working on could go.  Then talk about that big vision and work relentlessly towards it, but always have a reasonable next step. You don’t want step one to be incorporating the company and step two to be going to Mars.

Be willing to make a very long-term commitment to what you’re doing.  Most people aren’t, which is part of the reason they pick “easy” startups.  In a world of compounding advantages where most people are operating on a 3 year timeframe and you’re operating on a 10 year timeframe, you’ll have a very large edge.


 

Thanks to Luke Miles for reviewing drafts of this.

[1] Another solution to this problem is to think about startups that can become quite successful with less than ten people.  As compensation packages from the giant tech companies continue to increase, I suspect this will become a trend.


How To Invest In Startups

There is a lot of advice about how to be a good startup founder.  But there isn’t very much about how to be a good startup investor.

Before going any further, I should point out that this is a particularly hard time to invest in startups—it’s easier right now to be a capital-taker than a capital-giver.  It seems that more people want to be investors than founders, and that there’s an apparent never-ending flow of capital looking for access to startups.

The law of supply and demand has done its thing.   Valuations have risen, and the best investment opportunities are flooded with interest.  As a friend of mine recently observed, “it’s much easier to get LPs to give you money for your seed fund than it is to get a meaningful allocation in a ‘hot deal’”.

That said, to do well as an investor, you need to do three things: get access to good investment opportunities, make good decisions about what to invest in, and get the companies you want to invest in to choose you as an investor.  That’s it! You can often help the companies you invest in become bigger than they otherwise would have been, but the sad reality is that your best investments will do quite well without you.

Access

Getting access to investment opportunities is the easiest of the three categories: you can just work hard.  It’s surprising that most investors don’t work hard, but it’s true, and a bug that you can exploit.

Putting a lot of energy into networking actually works, as long as you aren’t just trying to touch base when people can find some time away from their crazy calendars to grab coffee.  If you actually figure out how to help other investors you respect, and to really help good founders, then good investment opportunities will come your way.

If you’re starting out as a full-time investor, make it your full-time job to figure out how to help people that will become your future investment-sourcing network.  Instead of just asking your contacts to tell you about investment opportunities, ask them if you can spend a day per week helping their best company. In general, early-stage investors can help a lot with closing candidates, future fundraising, customer introductions, and generic advice.

A brand is the other way to get access.  There are a lot of ways to build one, but by the same principle of working hard, a good example is to write long-form content (hard, few people do a good job at it) instead of tweeting (easy, everyone does a pretty good job at it). 

Decisions

Great founders are the key to great startups.  One way to do really well as a startup investor is to get good at predicting who is going to be great before they are—the market rewards finding great but inexperienced people.  You can also do well by investing in people who are already proven, but the price of the shares you buy will reflect that.

So how do you identify future greatness?

It’s easiest if you get to meet people in person, several times.  If you meet someone three times in three months, and notice detectable improvement each time, pay attention to that.  The rate of improvement is often more important than the current absolute ability (in particular, younger founders can sometimes improve extremely quickly).

The main question I ask myself when I meet a founder is if I’d work for that person.  The second question I ask myself is if I can imagine them taking over their industry.

I look for founders who are scrappy and formidable at the same time (a rarer combination than it sounds); mission-oriented, obsessed with their companies, relentless, and determined; extremely smart (necessary but certainly not sufficient); decisive, fast-moving, and willful; courageous, high-conviction, and willing to be misunderstood; strong communicators and infectious evangelists; and capable of becoming tough and ambitious. 

Some of these characteristics seem to be easier to change than others; for example, I have noticed that people can become much tougher and more ambitious rapidly, but people tend to be either slow movers or fast movers and that seems harder to change.  Being a fast mover is a big thing; a somewhat trivial example is that I have almost never made money investing in founders who do not respond quickly to important emails.

Also, it sounds obvious, but the successful founders I’ve funded believe they are eventually certain to be successful.

In addition to learning to predict who will become great founders, you have to be at least okay at predicting what markets will be good.

Startups are likely to happen in many more industries—startups can win wherever costs can be low and cycle time can be fast.  Startups do particularly well in industries with rapid technological change, because their fundamental advantages over large competitors are speed and focus.  A higher rate of change gives startups more opportunities to be right and the large competitor more opportunities to stumble.

Like the founder, and like a company, what you should care about is the growth rate and eventual size of a market (I don’t know why most investors are so obsessed with the current size of a market instead of how big they think it will be in ten years, but it’s an opportunity for you).

The best companies tend to have the courage to lead the market by a couple of years, but they know the secret for telling the difference between a real trend and a fake trend.  For a real trend, even if there aren’t many users, they use the new platform a lot and love it. For example, although the iPhone was derided for not having many users in its first year or two, most people who had an iPhone raved about it in a way that they never did about previous smartphones.

The very best companies tend to ride the wave of a new, important, and rapidly growing platform.

The spectral signatures of the best companies I’ve invested in are remarkably similar.  They usually have most of the following characteristics: compelling founders, a mission that attracts talented people into the startup’s orbit, a product so good that people spontaneously tell their friends about it, a rapidly growing market, a network effect and low marginal costs, the ability to grow fast, and a product that is either fundamentally new or 10x better than existing options.

You should try to limit yourself to opportunities that could be $10 billion companies if they work (which means they have, at least, a fast-growing market and some sort of pricing power).  The power law is that powerful. This is easy to say and hard to do, and I’ve been guilty of violating the principle many times. But the data are clear—the failures don’t matter much, the small successes don’t matter much, and the giant returns are where everything happens.

The central learning of my career so far has been that you can and should scale up things that are working.  The power of scale, and the emergent behavior that sometimes comes from it, is tremendous. I think about the potential energy of future scale for every investment I make.  Most people seem terrible at this, so it’s another bug you can exploit.  

Although good ideas are understandably seductive, for early-stage investing they are mostly valuable as a way to identify good founders.  However, sometimes bad founders have good ideas too, and investing in them is the chronic investing mistake that has been hardest for me to correct.  (My second biggest chronic mistake has been chasing investments primarily because other investors like them.)

Close rate

The better the investment opportunity is (i.e., expected value relative to valuation), the harder it usually is to get the company to choose you as an investor.

Traditional sales tactics works pretty well here.  Spend a lot of time with the founder, explain what you’re willing to do to help them, ask founders you’ve worked with in the past to call them, etc. 

A reputation for being above-and-beyond helpful and accessible is worth a lot here, and rare among all but the best investors.  A reputation for being founder-friendly helps too. What helps most of all is other founders you’ve previously invested in saying “that person was my best investor by far”.

In addition to helping get access to investment opportunities, a strong brand also helps close them.  It’s a nice tailwind if you can get yourself to the place where simply taking your money helps a company get taken more seriously.

Decisiveness also helps—everyone wants to be wanted, and most investors wait for someone else to act first.  If you decide quickly, and especially if you decide before others do, founders tend to appreciate that. The two most recent significant investments I made were 1) telling people I’d previously backed and had huge conviction in that I would do their Series A before they finished telling me what their idea was, and 2) offering to do the seed round of founders I’d never met before at the end of a one hour meeting.  I don’t recommend doing that very often, but when your conviction is strong, let it show.   

The best way to have a poor close rate is to not treat founders like peers.  If you’re picking well, you should be investing in founders that you think of as your peers at least.  Founders have a sixth sense for who is going to treat them like a peer and who is going to treat them like a boss.  And if they’re good, they know you’re failing an intelligence test if you act like their boss.

Help them

The most important way to help founders is to get them to be more ambitious—to think bigger and to have more self-belief.  Help them set ambitious but achievable goals. Momentum is important and self-reinforcing—most people set goals that they expect to be just out of reach, which is usually demotivating.  It’s better to continuously set goals that you can just barely hit.

The second most important thing to do is to give them specific, tactical advice (instead of general strategy) about how to achieve their goals.  Good tactical advice is something like “it seems like you’ve figured out yourself how to do sales for this company, so here is where to look and what to look for in your first sales hire, and here is the sales tool you should use”.

There are a lot of specific things you can do to help—make introductions, help them hire, help them find other investors, help them find an office, etc.—but generally you should wait to do these until asked. 

A big exception is that you should proactively let them know when you have very high conviction that they’re about to make a big mistake, especially once things are working and they aren’t setting themselves up to scale.

In theory, another big exception is actually helping founders come up with good new ideas.  The first investor I ever watched in action was PG and so I assumed this was something all investors were fantastic at.  But it turns out he is a sui generis idea generator, and even most great investors are usually still bad at telling founders what to work on.  It’s worth trying to be self-aware.

Finally, I’ve found that most of the time when founders call asking for vague help, what they are really asking for is emotional support from a friend.  Invite them over to your house, make them tea or pour them a drink, and start listening to their struggles.




Thanks to Jack Altman, Max Altman, and Luke Miles for reviewing drafts of this.