14 ms·

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.

by pg 13y ago

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.

ForHackernews 13y ago
Why not try it? http://www.investorhome.com/darts.htm http://www.investorhome.com/darts.htm
yarou 13y ago
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 eventually.
- paulbaumgart 13y ago
  The crucial difference might be that the finance world is zero-sum while the startup world (wealth creation) is positive-sum.
- socillion 13y ago
  > If you are genuinely skilled, you will succeed. Some skilled people succeed, therefore all skilled people succeed eventually? Alternatively, it's a tautological statement that defines "genuinely skilled" people as those who succeeded, therefore unsuccessful people must not be skilled.
- mbetter 13y ago
  > 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.
boomzilla 13y ago
I think the OP's point is after filtering out obviously non-successful startups, the chance of success is potentially non-correlated with other "traits", "characteristics", or "metrics" etc. that people often associate with successful startups/founders. It would be an interesting experiment if YC lower the acceptance threshold to say twice the original batch, and randomly pick from that bigger pool, and see if there's any difference between the ones that didn't make the original cut and those did. (A/B in its finest :)
acemtp 13y ago
It's not luck for you, it's luck for entrepreneur. Your job is to select people who were lucky enough to meet the right people, meet the market, had luck to have enough traction, lived in a country where he could spend time learning and so on... But when you are entrepreneur, you have to maximize your luck by maximizing number of opportunities.
nwhitehead 13y ago
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 label each group correctly at different stages and see how they do. These people could be: YC alums, YC staff not on the interview loop, VCs making investments, outside experienced CEOs, successful startup founders. For full double-blindness you could even do interviews with the EXPERIMENT group, then use a program to automatically either use the interview result or not. This might be aggravating for reviewers, though, seeing their work wasted by random choices.
- jbooth 13y ago
  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?
  - nwhitehead 13y ago
    You could also accept groups with good interviews in the experiment batch, but not include them in the experiment.
    - jbooth 13y ago
      But then they're effectively excluding the best-interviewing groups from the random experiment.
      - jayd16 13y ago
        Can't you pick the best interviews, then hold your experiment with random groups as long as you mix in a the data from the interview groups in such a way to build a representative sample?
pesenti 13y ago
In order for us to "believe you", you would need to test your hypothesis at least once - for example, by selecting a small number the startups you invest in at random and see how they fare compared to the other startups. Keep in mind that most stock pickers would respond exactly like you even though their choices are rarely (if ever) better than chance.
- vacri 13y ago
  If I was to walk for the first time into your kitchen and tell you that your hotplate was turned on, would you not believe me until I'd also experienced your hotplate turned off? You would discount my previous experiences with hotplates, because maybe, just maybe, your hotplate is hot enough to boil water when it's unpowered? The idea that the null hypothesis is the only source of information needs to die.
  - baddox 13y ago
    But on the other hand, there are well-known cognitive biases and counterintuitive facts that can cause people (including extremely intelligent people and even people aware of the biases and facts) to believe things that scientific experiment can show to be false.
  - pesenti 13y ago
    Figuring out that a hotplate is turned on can be done though a very simple and direct observation, so most likely I would take your word for it. Figuring out what makes people successful at starting companies is extremely complex. And without objective evidence, no level of expertise, be it PG or other VCs, will convince me to take someone's word for it.
acangiano 13y ago
That would actually be a rather interesting, if costly, experiment for you guys to try.
lifeformed 13y ago
Basically, the random choice is pulled from the pool of all the talented and productive people. So the best we can do is try our best to continuously be talented and productive, and hope we get lucky one of the times.
diminish 13y ago
It's best if founders are all up to get some fun, and investors are in to get lucky, not vice versa.
loceng 13y ago
What about if given enough time and access to enough resources?
wellboy 13y ago
You just need to let in exclusively the crazy startups, the insane ones. That's the only metric. 90% failure rates, but the remaining 10% (5 startups) is all Dropboxes and AirBNBs --> Average YC startup valuation up 10-fold.
kevando 13y ago
So you're saying my app that helps hamsters connect via foursquare has a chance?
deleted 13y ago
[deleted]
minikomi 13y ago
This makes me wonder if there's some kind of fantasy football for startups played behind the scenes by some people.
man_bear_pig 13y ago
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.
- mdda 13y ago
  NB: There is a lot of hard-earned wisdom distilled in man_bear_pig's comment.
rbanffy 13y ago
I was discussing a somewhat related subject yesterday, on an in-company product development workshop. For a DropBox-like product, feeling safe you won't lose your files is the baseline. If you cannot reliably ensure the files won't get randomly deleted, you don't have a product. Once you have a product, the value you add gets increasingly more subtle - better metadata capture, nicer ways to organize your files, an outstanding slideshow or music app - and what determines your ultimate success may feel completely random and totally unrelated to the original way you defined your product. It would be interesting if we could measure luck based on previous YC batches.
halfcat 13y ago
All you stat nerds keep on talking about statistical significance. While you are busy waving your hands, PG will keep raking in millions. "Your best? Losers always whine about their best. Winners go home and fuck the prom queen."

by pg 13y ago

ForHackernews 13y ago

Why not try it? http://www.investorhome.com/darts.htm http://www.investorhome.com/darts.htm

yarou 13y ago

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 eventually.

paulbaumgart 13y ago
The crucial difference might be that the finance world is zero-sum while the startup world (wealth creation) is positive-sum.
socillion 13y ago
> If you are genuinely skilled, you will succeed. Some skilled people succeed, therefore all skilled people succeed eventually? Alternatively, it's a tautological statement that defines "genuinely skilled" people as those who succeeded, therefore unsuccessful people must not be skilled.
mbetter 13y ago
> 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.

boomzilla 13y ago

I think the OP's point is after filtering out obviously non-successful startups, the chance of success is potentially non-correlated with other "traits", "characteristics", or "metrics" etc. that people often associate with successful startups/founders. It would be an interesting experiment if YC lower the acceptance threshold to say twice the original batch, and randomly pick from that bigger pool, and see if there's any difference between the ones that didn't make the original cut and those did. (A/B in its finest :)

acemtp 13y ago

It's not luck for you, it's luck for entrepreneur. Your job is to select people who were lucky enough to meet the right people, meet the market, had luck to have enough traction, lived in a country where he could spend time learning and so on... But when you are entrepreneur, you have to maximize your luck by maximizing number of opportunities.

nwhitehead 13y ago

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 label each group correctly at different stages and see how they do. These people could be: YC alums, YC staff not on the interview loop, VCs making investments, outside experienced CEOs, successful startup founders. For full double-blindness you could even do interviews with the EXPERIMENT group, then use a program to automatically either use the interview result or not. This might be aggravating for reviewers, though, seeing their work wasted by random choices.

jbooth 13y ago
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?
- nwhitehead 13y ago
  You could also accept groups with good interviews in the experiment batch, but not include them in the experiment.
  - jbooth 13y ago
    But then they're effectively excluding the best-interviewing groups from the random experiment.
    - jayd16 13y ago
      Can't you pick the best interviews, then hold your experiment with random groups as long as you mix in a the data from the interview groups in such a way to build a representative sample?

pesenti 13y ago

In order for us to "believe you", you would need to test your hypothesis at least once - for example, by selecting a small number the startups you invest in at random and see how they fare compared to the other startups. Keep in mind that most stock pickers would respond exactly like you even though their choices are rarely (if ever) better than chance.

vacri 13y ago
If I was to walk for the first time into your kitchen and tell you that your hotplate was turned on, would you not believe me until I'd also experienced your hotplate turned off? You would discount my previous experiences with hotplates, because maybe, just maybe, your hotplate is hot enough to boil water when it's unpowered? The idea that the null hypothesis is the only source of information needs to die.
- baddox 13y ago
  But on the other hand, there are well-known cognitive biases and counterintuitive facts that can cause people (including extremely intelligent people and even people aware of the biases and facts) to believe things that scientific experiment can show to be false.
- pesenti 13y ago
  Figuring out that a hotplate is turned on can be done though a very simple and direct observation, so most likely I would take your word for it. Figuring out what makes people successful at starting companies is extremely complex. And without objective evidence, no level of expertise, be it PG or other VCs, will convince me to take someone's word for it.

acangiano 13y ago

That would actually be a rather interesting, if costly, experiment for you guys to try.

lifeformed 13y ago

Basically, the random choice is pulled from the pool of all the talented and productive people. So the best we can do is try our best to continuously be talented and productive, and hope we get lucky one of the times.

diminish 13y ago

It's best if founders are all up to get some fun, and investors are in to get lucky, not vice versa.

loceng 13y ago

What about if given enough time and access to enough resources?

wellboy 13y ago

You just need to let in exclusively the crazy startups, the insane ones. That's the only metric. 90% failure rates, but the remaining 10% (5 startups) is all Dropboxes and AirBNBs --> Average YC startup valuation up 10-fold.

kevando 13y ago

So you're saying my app that helps hamsters connect via foursquare has a chance?

deleted 13y ago

[deleted]

minikomi 13y ago

This makes me wonder if there's some kind of fantasy football for startups played behind the scenes by some people.

man_bear_pig 13y ago

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.

mdda 13y ago
NB: There is a lot of hard-earned wisdom distilled in man_bear_pig's comment.

rbanffy 13y ago

I was discussing a somewhat related subject yesterday, on an in-company product development workshop. For a DropBox-like product, feeling safe you won't lose your files is the baseline. If you cannot reliably ensure the files won't get randomly deleted, you don't have a product. Once you have a product, the value you add gets increasingly more subtle - better metadata capture, nicer ways to organize your files, an outstanding slideshow or music app - and what determines your ultimate success may feel completely random and totally unrelated to the original way you defined your product. It would be interesting if we could measure luck based on previous YC batches.

halfcat 13y ago

All you stat nerds keep on talking about statistical significance. While you are busy waving your hands, PG will keep raking in millions. "Your best? Losers always whine about their best. Winners go home and fuck the prom queen."