I agree that a more rational person has a greater chance, ceteris paribus. Question is, how much greater.
A part of the outcome is luck; I don’t know how big part. Also, the rationality training may improve your skills, but just to some degree.
(Data point: myself. I believe I am acting more rationally after CFAR minicamp than before, and it seems to be reflected by better outcomes in life, but there is still a lot of stupid things I do. So maybe my probability of running a successful startup has increased from 1% to 3%.)
I question the stats that says 1% success rate for startups. I will need to see the reference, but one I had access to basically said “1% matches or exceeds projections shown to investors” or some such. Funnily enough, by that metric Facebook is a failure (they missed the goal they set in the convertible note signed with Peter Thiel). If run decently, I would expect double digit success rates, for a more reasonable measure of success. If a driven, creative rationalist is running a company, I would expect a very high degree of success.
Another thing much more common in rationalists than the common population is the ability to actively solicit feedback, reflect and self-modify. This is surprisingly rare. And incredibly vital in a startup.
Success at startups is not about not doing stupid things. I’ve made many MANY mistakes. It’s about not doing things stupid enough to kill your company. Surprisingly, the business world has a lot of tolerance for error, as long as you avoid the truly bad ones.
It is hard to survey startups. What is usually done is to measure success rates of companies that raised a Series A round of funding. Many companies fail before achieving that, though they necessarily fail faster, producing less opportunity cost.
Here is a chart of returns to a VC, taken from this paper by a different author. 60% of dollars invested are in companies that lost the VCs money (lost them 85%). This is a top VC that managed to triple its money, so this is an overestimate of success of a regular VC-backed company. This is a common bias in these surveys.
Based on the fictitious figure 2, 63% of dollars is actually 69% of companies, because successful companies get more funding. So 31% of companies with a Series A round at a top firm succeed by the metric of a positive return to the VCs. Double digit success would require that at least 1⁄3 of startups get a Series A funding and that companies funded by typical VCs are as successful as companies funded by a top VC.
The appropriate definition of success is comparing to opportunity cost. In particular, the above analysis fails to take into account duration. Here is a paper that makes a reasonable comparison and concludes that running a company with a Series A round was a good decision for people with $700k in assets. Again, skipping to the Series A round is not a real action, thus overestimating the value of the real action of a startup. There is an additional difficulty that startups may have non-monetary costs and benefits, such as stress and learning. Edit: found the paper. According to Figure 2, that 75% of VC-backed firms exit at 0, not much worse than at the top VC considered above.
I agree that a more rational person has a greater chance, ceteris paribus. Question is, how much greater.
A part of the outcome is luck; I don’t know how big part. Also, the rationality training may improve your skills, but just to some degree.
(Data point: myself. I believe I am acting more rationally after CFAR minicamp than before, and it seems to be reflected by better outcomes in life, but there is still a lot of stupid things I do. So maybe my probability of running a successful startup has increased from 1% to 3%.)
I question the stats that says 1% success rate for startups. I will need to see the reference, but one I had access to basically said “1% matches or exceeds projections shown to investors” or some such. Funnily enough, by that metric Facebook is a failure (they missed the goal they set in the convertible note signed with Peter Thiel). If run decently, I would expect double digit success rates, for a more reasonable measure of success. If a driven, creative rationalist is running a company, I would expect a very high degree of success.
Another thing much more common in rationalists than the common population is the ability to actively solicit feedback, reflect and self-modify. This is surprisingly rare. And incredibly vital in a startup.
Success at startups is not about not doing stupid things. I’ve made many MANY mistakes. It’s about not doing things stupid enough to kill your company. Surprisingly, the business world has a lot of tolerance for error, as long as you avoid the truly bad ones.
It is hard to survey startups. What is usually done is to measure success rates of companies that raised a Series A round of funding. Many companies fail before achieving that, though they necessarily fail faster, producing less opportunity cost.
Here is a chart of returns to a VC, taken from this paper by a different author. 60% of dollars invested are in companies that lost the VCs money (lost them 85%). This is a top VC that managed to triple its money, so this is an overestimate of success of a regular VC-backed company. This is a common bias in these surveys.
Based on the fictitious figure 2, 63% of dollars is actually 69% of companies, because successful companies get more funding. So 31% of companies with a Series A round at a top firm succeed by the metric of a positive return to the VCs. Double digit success would require that at least 1⁄3 of startups get a Series A funding and that companies funded by typical VCs are as successful as companies funded by a top VC.
The appropriate definition of success is comparing to opportunity cost. In particular, the above analysis fails to take into account duration. Here is a paper that makes a reasonable comparison and concludes that running a company with a Series A round was a good decision for people with $700k in assets. Again, skipping to the Series A round is not a real action, thus overestimating the value of the real action of a startup. There is an additional difficulty that startups may have non-monetary costs and benefits, such as stress and learning. Edit: found the paper. According to Figure 2, that 75% of VC-backed firms exit at 0, not much worse than at the top VC considered above.