Over the past 12 years, I have been a part of starting several companies. I’ve been fortunate to be a part of some incredible successes, but I’ve also seen my share of flameouts. I am constantly seeking to understand how to be a better leader and entrepreneur. In this blog, I hope to share some of the things that I have learned along the way.
What personality traits are the biggest predictors of success? Historically experts have identified things like intelligence, raw talent, and charisma. Newer research shows that our mindset might be the most important predictor of future achievement. Specifically, a mindset of persistence may be a more powerful leading indicator than raw talent. In Angela Duckworth’s acclaimed book Grit, she says this about the necessity of persistence in pursuing excellence:
“…there are no shortcuts to excellence. Developing real expertise, figuring out really hard problems, it all takes time―longer than most people imagine….Grit is about working on something you care about so much that you’re willing to stay loyal to it…it’s doing what you love, but not just falling in love―staying in love.”
That aligns with my experience. It’s impossible to build a business, a relationship, or any expertise without staying the course. But I’ve learned another paradoxical truth. Successful entrepreneurs are simultaneously skilled at persistence and at the art of quitting.
2nd Time is Not the Charm
In October 2009, I was a part of a team that launched an online auction business. Against all odds, it was an incredible success that surpassed our wildest expectations. We were young and naive; at 30, I was the oldest person in the company. Emboldened by our success, we began planning a 2nd e-commerce startup in 2011. Abundant time, money, and passion were poured into the 2-year buildup to launch. Confidence was high that this new venture would be another huge success. The concept was an online store where customers could shop for any product in mainstream categories. During the checkout process, they would play a short flash game to win a discount on their order. We believed our creation would add excitement and entertainment to the shopping process. We finally launched the website in 2013 with high hopes. We were exhausted but excited.
By the time the first customers saw the website, I had personally invested thousands of hours and a large amount of personal savings into funding the project. I eagerly watched to see how customers would respond. The early results were…terrible. The average customer was not responding at all. Potential customers were bouncing off the landing page like it was a trampoline. It would be hard to overstate our discouragement at the initial results. Internally, company morale sank as the reality began to set in.
In retrospect, we made several missteps in the process of launching:
-We didn’t spend enough time talking to potential customers
-We did not create a minimum viable product (MVP) and tried to launch a polished product
-We were overconfident because of the success of our first company
-We underestimated how quickly Amazon was consolidating market share in e-commerce
-We picked a technology that would soon be extinct (Flash)
-We designed around desktop instead of mobile
It’s quite a list of missteps now that I type it all out. And yet, I don’t have many regrets about the mistakes we made in launching. Hindsight is always 20/20, and anytime you try to do something new, there is a decent chance that people won’t get it. The question before us was “What do we do now?”
“Don’t Give Up”
Back to the research on the mindset of successful entrepreneurs. Conventional startup wisdom affirms the value of the statement “Don’t give up.” There are epic stories of people who refused to give up and were rewarded for their persistence. One great example Business Insider recounts here is Pandora:
Pandora was not able to pay its employees for an astounding two years between 2002 to 2004 while it worked on producing a viable commercial product. Not paying full-time employees is very, very illegal in California, where Pandora is based.
“We had no idea we were breaking the law,” Westergren said.
Over that period, Pandora accumulated $2 million in back wages owed. Westergren himself ran up a $500,000 debt on “maxed-out cards” while he paid bills and as many salaries as he could afford.
He paid a little at a time in the order they were due, an experience he describes as like “playing Tetris” with his finances, which he “[doesn’t] recommend.”
Two employees sued for back wages. And Pandora’s original model of licensing out its Internet music recommendation engine to retailers and labels was not working out.
But Westergren, a musician by training who had little to fall back on if he defaulted on the debts, managed to keep most of the team together. To keep employees motivated, he gave speeches upon speeches, encouraging them that the potential market was huge, and so was Pandora’s potential impact on music and culture.
Somehow — Westergren says he is not sure how — the company was able to close a $9 million round of funding in 2004, when money was much harder to come by than it is today.
Westergren called an all-hands meeting for everybody in Pandora that same day. Everybody was expecting another stirring speech, he says. Instead, he pulled a stack of envelopes from his back pocket and paid out the $2 million among the 50 employees right then and there.
“Everybody thought it was a bad joke, like it would bounce or something,” Westergren says.
What an epic story! The scene of Westergren handing out envelopes full of back pay is incredible.
This story can serve as a reinforcement to my natural disposition to be persistent. I don’t like giving up on things. I am the kind of person that will keep working on a brainteaser longer than other people just because it drives me nuts if I can’t figure it out. Hearing the Pandora story only strengthens my resolve. “No matter what – don’t ever give up. Sometimes success comes from sheer force of will.”
The problem with lionizing stories like the one above is that it lacks two important pieces of context.
1. Why was Westergren so convinced that he should bet everything he had to keep going? Was there clear evidence that they were on the cusp of a breakthrough? Was it obvious they had product/market fit? Was their main challenge a temporary disruption to fundraising due to the tech bubble bursting?
2. How many stories exist where things didn’t turn out so cheerfully? Survivorship bias tells us that using anecdotes and stories of successful entrepreneurs is dangerous. How many times has the founder of a company “played Tetris” with their finances only to see it end in bankruptcy? We never hear that multitude of stories because they don’t get articles in Business Insider.
The point I am driving at is this: What if persistence isn’t always the answer? What if sometimes persistence prevents success?
The last 20 years have seen an explosion of reality TV talent shows. One of the most notable is American Idol, which has led to stars like Kelly Clarkson and Carrie Underwood. Several years ago, American Idol was must-see TV for my wife and me each week. Without a doubt, the most cringe-worthy part of each season was the compilation of failed auditions. The clip below is a fan’s “top” 10 worst auditions of all time.
The hardest part of watching these auditions was not the off-key singing. It is how contestants responded to negative feedback from the judges. Instead of introspection, contestants would often reply with something like, “I’m not giving up on my dream!” or “I’ll prove you wrong!” These contestants are exercising persistence, but it is the darker side of persistence. I call this type of persistence “toxic persistence” because it harms us.
At its core, persistence is continuing on the same course despite difficulty or adversity. Belief is what fuels persistence. A belief that if we keep going, better days are ahead. But when we are heading in the wrong direction, the last thing we want to do is persist! Unfortunately, our psychological software has a bug called “belief perseverance.” When we sincerely hold a belief, we don’t process new evidence properly. Several studies have shown that being presented evidence contrary to a deeply held belief can strengthen the incorrect view. When evidence contradicts our beliefs, we tend to choose our beliefs. Ironically, aspiring entrepreneurs can be the most susceptible to toxic persistence precisely because they are so committed. Author C.S. Lewis once observed:
“Progress means getting nearer to the place you want to be. And if you have taken a wrong turn, then to go forward does not get you any nearer.
If you are on the wrong road, progress means doing an about-turn and walking back to the right road; and in that case, the man who turns back soonest is the most progressive man.”
Quit isn’t a Four Letter Word.
As I told you earlier, the second launch I led as an entrepreneur could not have gone worse. We made countless strategic errors leading up to the launch. However, when I reflect on this period, I don’t think it was the mistakes I made before launch that I regret. I regret the decisions I made after launching far more.
I regret not giving up sooner. It was clear that our business hypothesis was wrong. Not just that we were in the wrong zip code, more like we were on the wrong planet. In the face of plentiful evidence that we were not on the right path, we continued to push ahead. Over the next year and a half, we would waste even more time, resources, and morale trying to redeem a project more supported by belief than market evidence.
Why? I think the primary reason is identity. When you pour a lot of yourself into something, the lines can begin to blur. The project can transition from something you are working on to something that defines you. Once your heart makes that jump, it is excruciatingly difficult to allow it to fail. The project becomes a referendum on your worth as an individual. You become willing to prioritize belief over evidence because a failed project means laying off friends and painful conversations.
Another reason that we resist quitting is the sunk-cost fallacy. When we have invested significant time or money into something, we develop an irrational attachment to it. Imagine you buy a used car. A month later, you discover that it will require repairs that exceed the value of the car. Studies have shown that we are likely to pay for the repairs even though it isn’t rational.
I kept going because I was too afraid to quit. That’s not helpful. In fact, it will actively prevent you from accomplishing your goals. It is a bottomless pit that can devour all of your devotion, time, passion, and money. The more you indulge it, the more dangerous it becomes.
My point is that persistence must be paired with another skill to be valuable. Knowing when to quit. Our culture celebrates starting things and mourns ending things. Our emotional and societal incentives all discourage quitting. I call it the art of quitting because it requires judgment, maturity, and humility. In Seth Godin’s book “The Dip”, he examines the importance of strategic quitting and makes the observation:
“Winners quit fast, quit often, and quit without guilt.”
W.C. Fields surely agreed with this sentiment when he famously said:
“If at first, you don’t succeed, try, try – and then quit! No use being a fool about it.”
Toxic persistence is pressing on when quitting would be wiser. Quitting saves us from devoting our resources to efforts that are destined to fail. It stimulates growth and learning while bolstering our humility. It is the foundation that future success is built upon. As Mulla Nasrudin observes:
“Wisdom comes from experience, and experience comes from failure.”
Redemptive persistence is flexible and adaptive. To use an example from above, imagine someone who deeply loves music and wants a career as a singer. For a variety of reasons, including talent and circumstances, this might not be possible. Toxic persistence leads to a mindset that the only path to success is by becoming a professional singer. It would lead someone to continue to pursue a career in singing even when all the evidence from the market is that they don’t have a future as a performance artist. Redemptive persistence would lead someone to incorporate feedback and explore other areas to find a career in music. How many successful producers, songwriters, and agents only unlocked their full potential when they quit trying to be a singer? Redemptive persistence is about pursuing a career that engages your love of music while being open-handed with the specific context.
I recently read the biography of a man who dreamed of becoming an officer in the British military. He gained his first significant military assignment at the age of 20 and commanded troops by 21. He distinguished himself for courage and bravery in several battles, but after a few years, it became apparent that he would never be able to advance to a higher rank because of where he was born. After several years of service in the British military, he quit and pursued a new career in farming and politics in Virginia. Years later, he would unexpectedly realize his dreams of leading in a military context when he was appointed General of the Continental Army. As you have probably guessed, that man was George Washington. Washington’s willingness to resign from the British military instead of pressing forward created the context and opportunities that culminated in serving as the first U.S. president. How would the world be different if he had pressed on instead?
Conversely, it was Washington’s redemptive persistence that made him such an exceptional leader during historic times. He had not attended college and was woefully underprepared to serve as General of the Continental Army. He made repeated mistakes during the Revolutionary War and won very few significant battles until receiving substantial French aid. He was always low on resources and troops. But America won the war, in large part, because of Washington’s persistence. He correctly observed the enormous financial cost of the war for the British. Even though the battles weren’t going particularly well, America could win the war with endurance. He successfully held the ragtag army together until the British bills mounted and the French joined the war as allies of America.
How can we identify when our persistence is toxic or redemptive? I’m going to tackle this more in future posts, but I would offer two thoughts.
- Redemptive persistence is almost always predicated on evidence that objectively points towards possible future success. It is flexible and adjusts to feedback. Toxic persistence is often a defiant “doubling down” in the face of the evidence. It is characterized by a rigid definition of success that we become unwilling to change.
- This highlights the important role of judgment. We don’t know what would have happened if Washington had continued in the British military. Maybe it would have led to his promotion to leadership despite being born in the colonies. Conversely, many contemporaries of Washington believed the Revolutionary War was a lost cause at points. This mental model does not remove the need for judgment; rather, it highlights the necessity to carefully and strategically choose when to quit and when to press on.
In 2012 I started working on what would be the most significant professional failure of my life. It took me almost a year and a half to break free from a mindset of toxic persistence. That failure was one of the best things to ever happen to me. It helped me learn the art of quitting, and I am a better leader and entrepreneur. It would turn out that my most significant professional failure would set the stage for the highlight of my business career so far: Co-founding Simple Modern.