(Example)
How to Start a Successful Business
January 2023
I've been writing for a while about how to start a startup, and I've noticed a pattern in the mistakes founders make. I thought I'd write a little about what I think is the most common mistake, because it's so easy to avoid.

The most common mistake founders make is to underestimate the founders. They think they're smarter than they are.

This is the mistake I made when I started Viaweb. I thought I was smarter than I was. I thought I could build a web application, but what I actually built was a Lisp application that ran on a web server. That was not what I wanted to build. Only when I realized I couldn't build what I wanted did I switch to building something I could build: the web.

(I was lucky to realize this when I did. I was only a few months from running out of money.)

The reason this mistake is so common is that it's usually harmless. It's usually harmless to overestimate your own abilities. If you think you can do a 10 day project in 7 days, and you're right, you save 3 days. If you think you can do a 10 day project in 4 days, and you're right, you save 6 days. The difference between 7 days and 4 days is the same as the difference between 4 days and 1 day. [1]

Only when you're building something new can underestimating your own abilities be harmless. Only then can you be sure you're going to hit a point where you realize you can't do what you thought you could. And then you're in trouble. [2]

The reason founders make this mistake is that they're optimists. It's the nature of founders to overestimate their own abilities. They have to be. If they thought about how hard it would be to start a successful startup, they'd never do it.

But it's not just founders who overestimate their own abilities. It's everyone. This is a mistake that can only be made by people who are both optimists and trying to do something new.

Fortunately, it's also a mistake that's easy to avoid. The reason founders underestimate their own abilities is that they're pessimists. They have to be. Otherwise they wouldn't be founders; they'd be investors. So if you want to avoid this mistake, you have to consciously take on some of the pessimism of a founder. [3]

If you want to start a successful startup, you have to be as pessimistic as a founder, but only about yourself. You have to be as pessimistic as a founder about the chances of success, and as optimistic as a founder about your own ability to make it.

Notes

[1] There is one case where overestimating your abilities can be a good thing: when you're doing something you know you can do. Then you can save time by underestimating.

[2] The reason this mistake is so dangerous when you're building something new is that you're forced to make it at exactly the worst time. You're forced to realize you can't do what you thought you could at exactly the moment when you need to be able to.

[3] There are two ways to be pessimistic. You can be pessimistic about the chances of success, or you can be pessimistic about your own ability to achieve it. I've found the latter to be more effective.

For example, if you believe you can achieve a 10x improvement over existing solutions, but believe there's only a 1% chance you can succeed, you're overestimating your own abilities. You should instead believe you can achieve a 10x improvement, but there's only a 10% chance you can succeed.

In the first case you're overestimating your ability to achieve a 10x improvement. In the second you're underestimating it. But the second way of being pessimistic leads to the right answer.

For example, if you believe there's only a 10% chance you can succeed, you should either not start a startup, or only start one as a hobby. But if you believe there's only a 10% chance you can achieve a 10x improvement, you should definitely start a startup to try.

If you believe there's only a 10% chance you can achieve a 10x improvement, you have a 90% chance of failing. But the payoff if you succeed is not merely a 10x improvement. It's a 10x improvement multiplied by the percentage of the market you capture. So the expected value of the bet is a 100x improvement in the world. Which is a good bet.

(There is a case where overestimating your ability to achieve a 10x improvement is also a good bet: when you're so good at what you do that

Thanks to John Collison, Patrick Collison, Elon Musk, and Geoff Ralston for reading drafts of this.

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