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What if successful startups are just lucky?

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Re: What if successful startups are just lucky?

#131

Post by hotpockets »

jbooth wrote: post #91
nwhitehead wrote: post #87

Earlier quoted context omitted.

I would absolutely love to see a double-blind randomized experiment with controls for YC applications. In one batch, randomly and secretly assign CONTROL or EXPERIMENT to each application (in whatever proportion you are comfortable with). Of the CONTROL batch, do regular reviews. For the EXPERIMENT batch, randomly accept the same percentage of groups as the control. Then have people outside of the reviewers try to la…

It'd be unfair to great startups in the experiment batch -- not that it's pg's job to make life fair for people, but it'd put a big dent in YC's reputation. Why spend time flying out there if there's a chance your interview doesn't even matter?

You can still do a pretty similar experiment. For instance, startups 1-50 get into yc like normal. Startups 51-100, together with 50 randomly selected startups get grouped together and tagged as "the bubble group". Meaning that they were on the bubble of getting into yc. Pretty high honors. However, they don't get any access, consultation, etc. to yc itself. Then after a few months you unblind which were highly selected and which were random, to see who does better.

Re: What if successful startups are just lucky?

#132

Post by jbooth »

vasilipupkin wrote: post #124
fleitz wrote: post #105

Earlier quoted context omitted.

Sorry, statistically speaking the difference in results of interviewing and not interviewing are insignificant. I have a feeling that eventually there will be a Vangaurd of startups that will massively outperform traditional VC/incubators due to reduced management fees similar to index funds vs. regular funds.

On the one hand, it's probably true that experts overweight their own ability to pick winners. My guess is, PG is likely overestimating the ability of YC staff to actually identify good patterns simply because it's easy to draw conclusions from just a few datapoints but it's hard to draw statistically significant conclusions that hold up out of sample. However, I doubt that a startup index fund will outperform the be…

There's also a question of how do you define the index fund. The S&P is pretty non-ambiguous. How do you define which startups are in the index? By the time they're definable as a real business, they're no longer early-stage startups.

Re: What if successful startups are just lucky?

#133

Post by brudgers »

nwhitehead wrote: post #87
pg wrote: post #71

All successful startups are lucky, but they're never just lucky. If they were, we could save ourselves a lot of work reading applications and doing interviews. We could just pick randomly instead. If we did that for one batch, you'd really be able to tell the difference, believe me.

I would absolutely love to see a double-blind randomized experiment with controls for YC applications. In one batch, randomly and secretly assign CONTROL or EXPERIMENT to each application (in whatever proportion you are comfortable with). Of the CONTROL batch, do regular reviews. For the EXPERIMENT batch, randomly accept the same percentage of groups as the control. Then have people outside of the reviewers try to la…

If it were just luck then the companies rejected by YC should statistically perform as well as those selected for interviews which should perform as well as those offered spots in a given batch.

Re: What if successful startups are just lucky?

#134

Post by dasil003 »

sz4kerto wrote: post #14

Well, according to statistics (see Kahneman) CEO 'performance' has very low correlation with perceived CEO performance. Also, past success has low correlation with future success. In other words, there isn't really a 'CEO skill', or a 'successful manager' skill. In other words, company success is not repeatable given the same set of people. In other words, yes, luck is extremely important. There is no moral of the st…

Are those statistics for startups or Fortune 500s? Because the way I see it, at a small scale you are much more in control of your own destiny simply due to high agility and low communication overhead.

Re: What if successful startups are just lucky?

#135

Post by GigabyteCoin »

Just because OPs game floundered does not mean that startups must be lucky to succeed.

OP was quite proud of his game, is confident is was great because there were 15 talented people working on it... but ultimately the idea didn't resonate with the public in the way they implemented it.

Notch on the other hand resonated with the public incredibly well. By giving away completely free versions and listening to, even literally interacting with game players: He now heads a very successful software company where most of the original code was written by one man.

I don't think a successful company necessarily involves luck at all.

Re: What if successful startups are just lucky?

#136

Post by dangoldin »

brudgers wrote: post #133
nwhitehead wrote: post #87

Earlier quoted context omitted.

I would absolutely love to see a double-blind randomized experiment with controls for YC applications. In one batch, randomly and secretly assign CONTROL or EXPERIMENT to each application (in whatever proportion you are comfortable with). Of the CONTROL batch, do regular reviews. For the EXPERIMENT batch, randomly accept the same percentage of groups as the control. Then have people outside of the reviewers try to la…

If it were just luck then the companies rejected by YC should statistically perform as well as those selected for interviews which should perform as well as those offered spots in a given batch.

Unless being a part of YC adds value which I suspect it does. Impossible to really test this unless YC would provide the same level of support and resources to other companies.

Re: What if successful startups are just lucky?

#137

Post by jxcole »

brudgers wrote: post #133
nwhitehead wrote: post #87

Earlier quoted context omitted.

I would absolutely love to see a double-blind randomized experiment with controls for YC applications. In one batch, randomly and secretly assign CONTROL or EXPERIMENT to each application (in whatever proportion you are comfortable with). Of the CONTROL batch, do regular reviews. For the EXPERIMENT batch, randomly accept the same percentage of groups as the control. Then have people outside of the reviewers try to la…

If it were just luck then the companies rejected by YC should statistically perform as well as those selected for interviews which should perform as well as those offered spots in a given batch.

Sorry, not an expert and I have never been an entrepreneur so forgive me if I am misunderstanding, but doesn't YC give them money? In order for this statement to be true either (1) having startup seed money has no bearing on success or (2) YC gives the same money to people it rejects as to people it accepts.

Re: What if successful startups are just lucky?

#138

Post by icambron »

brudgers wrote: post #133
nwhitehead wrote: post #87

Earlier quoted context omitted.

I would absolutely love to see a double-blind randomized experiment with controls for YC applications. In one batch, randomly and secretly assign CONTROL or EXPERIMENT to each application (in whatever proportion you are comfortable with). Of the CONTROL batch, do regular reviews. For the EXPERIMENT batch, randomly accept the same percentage of groups as the control. Then have people outside of the reviewers try to la…

If it were just luck then the companies rejected by YC should statistically perform as well as those selected for interviews which should perform as well as those offered spots in a given batch.

Depends on what "luck" entails. Success is measured by something--for the sake of argument, let's sake acquisition price. But there have to be proximal factors; to be a bit reductive, no one is arguing that large companies pick randomly for the world of startups and them for millions of dollars. Perhaps the most immediate proximal factor is number of users or revenue or...whatever. You wouldn't say, "if it was just luck, companies would preform just as well whether they had users or not".

So the question with luck is how far down the causal ladder you start considering things inputs (i.e. things which may or may not influence the outcome) instead of outputs (i.e. things which might be the result of those inputs or of luck). So with YC, is that getting or not getting into YC is an input variable that we could check against success, or is getting a YC spot one of those proximal factors, and the luck was just in getting that, at least in part?

So the "is it pure luck?" question isn't very well defined, but the GP's argument might still be useful in answering it. Moreover--larger questions of luck aside--it would be helpful in determining whether the YC selection process is actually useful. But probably only if they didn't tell anyone about it.

Re: What if successful startups are just lucky?

#139

Post by mbetter »

yarou wrote: post #76
pg wrote: post #71

All successful startups are lucky, but they're never just lucky. If they were, we could save ourselves a lot of work reading applications and doing interviews. We could just pick randomly instead. If we did that for one batch, you'd really be able to tell the difference, believe me.

Spot on. I think it's important to mention the context of Taleb's philosophy. You have to keep in mind that in certain jobs, like trading, it is fairly plausible that successful traders are plain lucky because all traders eventually blow up. In the startup world, this analogy doesn't hold for a number of reasons. If you are genuinely skilled, you will succeed. Perhaps not on the first try, but you will succeed eventu…

> In the startup world, this analogy doesn't hold for a number of reasons. If you are genuinely skilled, you will succeed. Perhaps not on the first try, but you will succeed eventually.

This is complete bullshit on its face.

Re: What if successful startups are just lucky?

#140

Post by argonaut »

jxcole wrote: post #137
brudgers wrote: post #133

Earlier quoted context omitted.

If it were just luck then the companies rejected by YC should statistically perform as well as those selected for interviews which should perform as well as those offered spots in a given batch.

Sorry, not an expert and I have never been an entrepreneur so forgive me if I am misunderstanding, but doesn't YC give them money? In order for this statement to be true either (1) having startup seed money has no bearing on success or (2) YC gives the same money to people it rejects as to people it accepts.

But then you're acknowledging that startup success is not solely dependent on luck...
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