Today, I wanted to talk about some of the most important lessons I’ve learned over the years from my experiences as an investor and entrepreneur.
1. If you aren’t getting rejected on a daily basis, your goals aren’t ambitious enough
My most humbling and educational career experience was when I was starting out in the tech world. I applied to literally hundreds of jobs: low-level VC roles, startup jobs, and various positions at big tech companies. I had an unusual background: I was a philosophy undergrad and a self-taught programmer. I got rejected from every single job I applied to.
The reason this experience was so useful was that it helped me to develop a thick skin. I came to realize that employers weren’t really rejecting me as a person or on my potential – they were rejecting a resume. As the process became depersonalized, I became bolder in my tactics. Eventually, I landed a job that led to my first startup getting funded.
One of the great things about looking for a job is that your payoff is almost entirely a max function – the best of all outcomes – not an average. This is also generally true for lots of activities startups do: raising money, creating partnerships, hiring, marketing and so on.
So, every day – to this day – I make it a point of trying something new and ambitious and getting rejected.
2. Don’t climb the wrong hill
I spend a lot of time trying to recruit people to startups, and I’m surprised how often I see smart, ambitious people who get stuck in fields they don’t like because they sense they are making incremental, day-to-day progress.
I think a good analogy for escaping this trap can be found in computer science, in what are known as hill climbing algorithms. Imagine a landscape with hills of varying heights. You are dropped randomly somewhere on the landscape. How do you find the highest point?
The lure of the current hill is strong. There is a natural human tendency to make the next step an upward one. People fall for a common trap highlighted by behavioral economists: they tend to systematically overvalue near term over long term rewards.
This effect seems to be even stronger in more ambitious people. Their ambition seems to make it hard for them to forgo the nearby upward step.
The lesson from computer science is: meander some in your walk (especially early on), randomly drop yourself into new parts of the terrain, and when you find the highest hill, don’t waste any more time on the current hill no matter how much better the next step up might appear.
3. The next big thing will start out looking like a toy
A majority of the top internet companies a decade ago are barely in existence today. How did this happen? These companies weren’t complacent – they were run by smart executives who were constantly aware that they could lose their lead.
The reason big new things sneak by incumbents is that the next big thing always starts out being dismissed as a toy. This is one of the main insights of Clay Christensen’s “disruptive technology” theory, which has been widely studied but I think is still rarely applied because it is so counter-intuitive to conventional management practices.
Disruptive technologies are dismissed as toys because when they are first launched they “undershoot” their users’ needs. The first telephone could only carry voices a mile or two. The leading incumbent of the time, Western Union, chose not to acquire telephone technology because they didn’t see how it could be useful to businesses and railroads – their best customers. What they failed to anticipate was how rapidly telephone technology and infrastructure would improve. The same was true of how mainframe companies viewed the PC, and how modern telecom companies viewed Skype.
The list of top internet companies in 10 years will look very different than that same list does today. And the new ones on the list will be companies that snuck by the incumbents because people dismissed them as toys.
4. Predicting the future of the Internet is easy: anything it hasn’t yet dramatically transformed, it will.
The Internet has gone through fits and starts – a bubble, a crash, and now a revival. Pundits are speculating that another crash is coming. Regardless of what happens in the near term, what we do know is that every year we will continue to see more and more industries succumb to the transformational power of the Internet.
Already transformed: music, news, advertising, telecom. Being transformed: finance, commerce, TV & movies, real estate, politics & government. Soon to be transformed: healthcare, education, and energy, among others.
Thus far the US has led Internet innovation. There are things the US can do to keep this lead, including: exporting the entrepreneurial ethos of Silicon Valley to the rest of the country, and allowing talented people to go where their skills are most needed – for example by changing US immigration policies.
Most importantly, we have too many people pursuing careers in banking, law and consulting. I personally encounter this bias all the time when I go to college campuses to recruit for startups. We need to convince the upcoming generation to innovate and take risks in sectors that have a direct impact on the quality of peoples’ lives.
So my advice is:
1) get rejected more
2) climb the right hill
3) create an amazing toy
4) grow that toy into something big that transforms an important industry