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What if successful startups are just lucky?

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Re: What if successful startups are just lucky?

#161

Post by baddox »

MichaelGG wrote: post #125
tomasien wrote: post #8

Earlier quoted context omitted.

Bizarre - the last link I was on was a random ESPN quiz with UVa star Joe Harris in which that quote was one of the questions. (I realize this is a pretty meaningless and useless comment, but seeing this quote 2 times in less than 10 seconds was too much not to mention).

Is it bizarre? Given the number of people on HN, the number of things you're likely to read -- it seems inevitable that "bizarre" coincidences will certainly happen.

Presumably it's still bizarre for him to experience the phenomenon.

Re: What if successful startups are just lucky?

#162

Post by baddox »

jfb wrote: post #40
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…

"There is no moral of the story other than: failure does not mean that you didn't do well." While this lesson is pretty well internalized, I think there's some difficulty with the converse: just because you succeeded, doesn't mean what you were doing was right. Life is contingent.

This is really just semantic. You can play around with definitions and construct all sorts of truisms:

Just because your company ran out of money and ceased to exists doesn't mean you failed.

Just because your company grew very quickly, IPO'd at a high price, and had consistently large profits for many years, doesn't mean you succeeded.

Re: What if successful startups are just lucky?

#163

Post by gwu78 »

For anyone arguing that there is some causation behind a startup's success besides "luck", I challenge you to prove it.

It is not easy to prove causation.

For example, startup says "We did X and this was the direct cause of Y", where X is some random thing, and Y is "success". That is difficult to prove. And startups never say that. They just say "We did X." Maybe they also say they believe this was crucial somehow to their success. But they never try to prove causation.

Of course, no one demands anyone to prove causation when it comes to the actions and the success of any startup. The scientifc method does not apply here. We are happy to listen to someone tell us about what a startup did, about their eventual success and then let our imaginations make the supposed causal connections.

I do not think it's unreasonable to question, as does the OP, whether "luck" is a proper explanation for the success of a startup. If it were, then that leaves startups free to make their own rules instead of believing they must do X in order to produce Y. And I say that is fine. The fact is, doing X might not bring about Y for every startup that does X. Clearly there is more to this than a "formula", whether it is the YC's or someone else's.

Re: What if successful startups are just lucky?

#164

Post by man_bear_pig »

Michael Jordan and Lebron James definitely get lucky... But I'd bet on them hitting that lucky shot more than 99% of other basketball players because they just know how to execute. One of my friends was a top 10 high frequency equity futures (snp minis) trader in the u.s. i used to think damn he gets lucky all the fking time. i mean at best it's like 70/30 ratio. just pure luck. how does he just call the tops and bottom and never read a sec filing or financials of a company?! nope he is really that good at execution, and that's why he's only right 70% of the time whereas others are just coin flipping.

a lot of times. timing is luck. but a lot of people get lucky on timing... it's like if the bubble bursted next year then people would have said there was never an easier market to raise money / take risks / make quick money in mobile,social, etc. but i'm pretty sure there's a ton of smart people with luck on their side that's trying to do that right now; and 100 other variables besides luck will make majority of businesses fail.

how do you define luck? break down the components of luck.

Re: What if successful startups are just lucky?

#165

Post by nitrogen »

brudgers wrote: post #141
jxcole wrote: post #137

Earlier quoted context omitted.

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.

The amount of capital provided by YC is trivial...a rounding error relative to the value of a successful company. But more relevant is that YC almost certainly has some meaningful data on the companies it rejects. So PG's claim could very well be supported by proprietary information.

The amount of capital provided by YC is trivial.

Never been accepted to YC, but I gather that the value of access to YC's demo day and a strong network of investors and alumni is far from trivial.

Re: What if successful startups are just lucky?

#166

Post by man_bear_pig »

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.

More interesting than double-blind test is if each of the yc partners play fantasy startup.

a) each pick his/her top 5 yc companies per batch that they think will be most successful (and main drivers why) b) each pick his/her bottom 5 that they think will be least successful (and main drivers why) c) each assign the value of each of the 5 most successful companies 5 years from now. (and build a bridge as to how that value will be achieved).

and then run some fun numbers on your predictive capabilities.

when i ran "c" for my private equity firm on all investments made over 20 years in various vintages and industries, i found my answer as to why my job of building complex financial models was pretty much worthless number painting. very low predictive ability in value drivers and financial projections being met (these are later stage businesses, too). also, i realized that i should get out when every newer vintage had a larger % of the driver of value stemming from leverage (i.e. financial engineering) than ebitda outperformance.

Re: What if successful startups are just lucky?

#167

Post by tomasien »

avenger123 wrote: post #66
tomasien wrote: post #46

Earlier quoted context omitted.

I don't think "and of course, I also have to pay the bills" is an instructive part of anyone's life mantra. "The bills" are whatever you decide they're going to be - there's a very low fixed cost to staying alive, what you decide you need beyond that is up to you. I have no trouble paying the bills now, but I've gone through times working on a startup where I lived on less than $4 a day, for example, without any regr…

It's great that you are in this situation. When its only you, well it comes down to the lowest denominator for living costs. I think there is a lot of people that didn't start young with the entrepreneurship bug and ended up married with kids. With these people, paying the bills has a direct and noticeable impact on their family. I would say there is a lot of people in this situation and the dynamics of going "all in…

I understand that, and I'm trying to be as general as possible: paying the bills isn't part of your world view, what "paying the bills mean" is shaped and reified BY your worldview and goals. That's all I'm saying: "that's great, but you still have to pay the bills" doesn't have anything to do with a mantra by which you live your life, it's something you fit around and is shaped by what is core to how you want to live.

Re: What if successful startups are just lucky?

#168

Post by mdda »

man_bear_pig wrote: post #166
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.

More interesting than double-blind test is if each of the yc partners play fantasy startup. a) each pick his/her top 5 yc companies per batch that they think will be most successful (and main drivers why) b) each pick his/her bottom 5 that they think will be least successful (and main drivers why) c) each assign the value of each of the 5 most successful companies 5 years from now. (and build a bridge as to how that…

NB: There is a lot of hard-earned wisdom distilled in man_bear_pig's comment.

Re: What if successful startups are just lucky?

#169

Post by indrax »

argonaut wrote: post #140
jxcole wrote: post #137

Earlier quoted context omitted.

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...

Giving selected startups money confounds two factors: the selection criteria and the extra funding. This means that any differences in the success rate can't simply be assigned to the selectors choosing wisely.

Re: What if successful startups are just lucky?

#170

Post by acemtp »

powera wrote: post #147
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…

So pg's years of experience getting better than random results is irrelevant and you'll only believe him if he does a long experiment (that would cost him lots of money if it's not just luck) to prove something he already believes?

Launching a successful startup is luck BUT selecting entrepreneurs/startups who have luck is no random. You can definitively find some metrics to evaluate the current luck of a startup and expect that the founder has enough skill to continue to maximize luck in the future.
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