The nature of entrepreneurship: randomness, trial and error, and how intelligence can get in the way

July 4, 2007   

In many ways, I am not a typical entrepreneur. Entrepreneurs are often risk taking, creative types who do not do well in the traditional education system or workplace. By contrast, I was the shy, introverted A+ student who was conservative and deferred to authority. I highly valued, and in many ways still value, the classical education I received and found beauty in the logical arguments I constructed both for my classes in college and for my clients at McKinsey.

Fortunately, somewhere along the way, I came to realize that’s not how the world really works. There is a tremendous amount of uncertainty in the world and especially in the fast moving environment of the Internet and thus management by trial and error is probably the single most effective way to become successful.

Consider this:

  • Friendster does not know why it is successful in the Philippines.
  • Orkut does not know why it is successful in Brazil.
  • Hi5 does not know why it is popular in Portugal.

In all three cases, it was not planned, it just happened – maybe because a single important user randomly decided to use that site rather than another. I am sure they have found arguments to rationalize their success since, but I bet those are only one of many possible explanations.

Also consider this: when eBay, Google, Yahoo, MySpace, Youtube and most other such companies were created, their founders did not expect them to be nearly as successful as they became.

From personal experience, I can tell you it’s far more effective to try something, discard it if it fails and continue refining it if it works than trying to theorize what is the most effective. Quick decisions – even wrong ones – if you have the humility to accept that you were wrong and are willing to rapidly change course – are much better than a long decision making process.

I don’t recommend running a startup by consensus. It takes time to get to a consensus and what the internal consensus of your company is, is frankly irrelevant. By all means involve everyone in the decision making process: get everyone’s opinions about what should be tried, but make up your mind rapidly and test the idea. In fact, I highly recommend testing multiple ideas and doing A/B testing if possible.

In other words, intelligence gets in the way because by looking for what should be the right answer, you waste valuable time you could be spending finding out what actually is the right answer.

Also note that many “breakthroughs” happen in a similar way. The Wright brothers did not just wake up one day and built a flying plane. They tested dozens of wing designs, built different types of engine. It was a grueling multi-year process of marginal refinements, the sum total of which led to a flying plane.


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