**THE SAN FRANCISCO FALLACY IS NOT ABOUT SAN FRANCISCO. **Rather, it’s about the herd instincts that drive tech companies to set up shop there, and the mistakes these herd instincts lead to. Most importantly, it’s about how to avoid making these same mistakes yourself.
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The Tech Fallacy
The Tech Fallacy says it’s all about the tech. Tech is the be-all and end-all of what we do. Get the tech right and the rest will follow. This belief is deeply, badly wrong—as I first discovered in my teens. Read more
THE TECH FALLACY REVISITED Selling porn taught me about the Tech Fallacy. I had believed that building great technology must mean that you’re building a great business. That it was all about the tech. But selling porn taught me that the raison d’être for any business is to give the customer what he wants. He doesn’t want the tech; he wants what the tech can deliver. The tech is just the means to an end. Read more
It’s not the better product that wins; it’s the product that best knows how to reach its market. Read more
But the winners will be those who build the best businesses, not the best tech.
There is a happy medium. Tech is helping to redefine how the world works—how we work and play, find our soul mates and flings, tell our stories, and hail a ride. Tech is required to catalyze these shifts and disruptions. We all love good tech. But the winners will be those who build the best businesses, not the best tech. Read more
Takeaway: how to avoid the tech fallacy
TAKEAWAY: HOW TO AVOID THE TECH FALLACY Beware your infatuation with tech. Make sure you don’t lose sight of your market. Read more
The Democracy Fallacy
The Democracy Fallacy is the belief that everything is awesome when you’re part of a team; or, more prosaically, that team members should have an equal say—and stake—in your venture. Read more
More often, a flawed ethos of shared ownership and responsibility gets in the way of decision making and accountability. Businesses need leadership. Leaders need to be rewarded. All the more so in youthful startups. Read more
Sharing power and trying to make everyone happy diminishes the ability to take bold risks and make bold decisions. Read more
People think visionary leadership is about convincing the markets. But you need strong leaders to take the kinds of stances and make the kinds of choices that are often unpopular within their companies. Read more
If you find yourself down the path to forming a company with equal shareholders, here’s a good question to ask of each of the team: can they leave, and the business survive? Whose departure would cause the company to collapse? Read more
There is always one person who holds the key to investment, who rallies the team – the person who acquired the first hundred customers. If that person leaves, the company dies, and you can’t just replace him or her. That person needs to be your majority shareholder. Read more
THE LESSON FOR YOUNG, WOULD-BE FOUNDERS IS THIS: by all means, start a business with your friends. Fellowship may be the crucial ingredient that gets you through the ardors and ordeals of making a startup work. But you and your friends need to know where the buck stops. There needs to be a primus inter pares—a first among equals. Read more
TAKEAWAY: HOW TO AVOID THE DEMOCRACY FALLACY
TAKEAWAY: HOW TO AVOID THE DEMOCRACY FALLACY Don’t be seduced by the fraternity of teamwork. This is a business, not a sport. Businesses need leaders. And leaders need to be rewarded. Read more
The Investment Fallacy
The idea that raising investment is a mark of success—and a badge of honor—is the Investment Fallacy. Investment is a burden as much as—or more than—an opportunity. It increases the pressure, corrupts your incentives, and creates a communications minefield. Court it at your peril. Read more
the belief that raising investment is a mark of success and that it increases the likelihood of you, the founder, ultimately getting a return on your business. This belief is false. Read more
They expect that most of the eggs in their basket will break: six or seven out of ten of their investments will be write-offs; another two or three will be base hits; one in ten will make a tenfold return. That’s the one they’re waiting for. That’s what they need in order to compensate for the other failures. Read more
With investors, when you don’t talk to them, they assume everything’s going great. The longer you don’t talk to them, the greater they think things are going. Read more
If your startup clearly needs an investment in order to reach its market, then you are entitled to take some satisfaction from successfully raising that investment. But this satisfaction should be tempered by the understanding that you must now achieve much more than you previously needed to, and, even as you concentrate on that management challenge, you must manage your investors’ expectations. Read more
TAKEAWAY: HOW TO AVOID THE INVESTMENT FALLACY
TAKEAWAY: HOW TO AVOID THE INVESTMENT FALLACY Ignore your team, the tech press, the cheerleaders: when you get a decent investment offer, they will all tell you to accept it. The longer you can hold out without investment, the greater your control, the greater the ultimate rewards, and the greater your chance of success. If you must take investment, remember: the job now gets harder, not easier. Don’t party: get back to work. Read more
The “Failure is not an option” Fallacy
“Failure is not an option” is one of the most beloved mantras of gurus everywhere. It is a fallacy. Failure is not a choice: it is an outcome. That outcome may come about as a result of your mistakes; or it may come about as a result of events outside your control. Either way, making the right choices about how to handle that failure is a crucial step to ultimate business success. The trick is not to act like failure is not an option—the trick is to know when failure is the right option. Read more
The money you’ll make over the lifetime of your customer less the cost to acquire that customer has to be positive or you aren’t viable. Read more
The harsh lesson I was to learn, yet again, with Post-ASAP was that the tech isn’t enough. If the market isn’t there, the tech is pointless. Read more
All startup founders need a failure plan: a plan for how to identify when your company has failed, what to do to shut it down, and how to do it. Who do you go to? How much does it cost? (Yes, closing a company costs money.) What sort of severance and notice for staff do you need to budget for? Read more
The key lesson I took from it was this: It’s not the failing that really hurts. It’s the stuff you do in your bid to avoid recognizing the failure that has already happened that really hurts. Read more
TAKEAWAY: HOW TO AVOID THE “FAILURE IS NOT AN OPTION” FALLACY
TAKEAWAY: HOW TO AVOID THE “FAILURE IS NOT AN OPTION” FALLACY Plan for failure. Don’t expect to fail—but do expect that you might fail. Learn about the process of closing down a business: how to do it fairly and efficiently. Set negative targets: if you hit these, despite your best efforts, then you automatically trigger your failure plan and start winding down the company. Failing this way means you’re more likely to retain the loyalty of your colleagues and the respect of your clients and customers. And that makes you more likely to bounce back and succeed the next time. Read more
The Expert Fallacy
The Expert Fallacy is the belief that the experts know best. In startup culture, the Expert Fallacy leads many a founder to rely on the analysis of established experts when, by definition, nobody can be an expert in a new product, service or market. You do need to learn from the experience of others. You do need to take good advice. You do need to study your field. But there’s a time and a place for experts. Choosing that time and place—and being ready to disregard the experts outside of that—is a hard-won skill Read more
And so we built the product, convinced that there was a market for it simply by our own enthusiasm for it. Read more
Breaking it down, it suggests there are three types of knowledge:
- Things you know
- Things you know you don’t know
- Things you don’t know you don’t know.
There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know. – Donald Rumsfeld, 2002 This is a key concept in epistemology, the philosophy of knowledge. Breaking it down, it suggests there are three types of knowledge: Things you know Things you know you don’t know Things you don’t know you don’t know. Read more
The Expert Fallacy is deeply ingrained in our culture, not merely in the tech sector. It’s the belief that the expert knows best. Experts are good when you want to know how something works. But when you want to challenge the very premise of something, experts are the last people you should talk to. Read more
If you’re trying to do something new, you can’t sell it to the people who want the old. For new products, you need new markets. Read more
TAKEAWAY: HOW TO AVOID THE EXPERT FALLACY
TAKEAWAY: HOW TO AVOID THE EXPERT FALLACY Beware of the experts. Don’t ignore them altogether, but look to them for targeted expertise, not systemic analysis. Experts, by definition, have bought into the system. If you want to create systemic change, they won’t help you. Read more
The Idea Fallacy
The Idea Fallacy afflicts not just the tech sector, but the wider culture. The Idea Fallacy is the deep-rooted belief that what really counts is the idea, not the implementation. There’s nothing wrong with a good idea—but an idea without implementation is largely worthless. Good ideas are far less rare than we think—what’s really scarce is the ability to execute. Read more
But Kevin understood that the tech ecosystem relies on cooperation and collaboration. Good ideas well executed make everybody’s lives better. Good ideas kept secret add nothing to the world. Read more
Every time someone looks at a work of art and says, “I could have done that if I’d thought of it,” that’s the Idea Fallacy at work. Read more
The Idea Fallacy is the belief that inspiration, not perspiration, is the fount of creative success
The Idea Fallacy is the belief that inspiration, not perspiration, is the fount of creative success, whether in the arts, the creative industries, or in startups. It is the belief that the root of success lies in the idea rather than the execution—the belief that ideas have substantial intrinsic value—that they are the key item in the startup value chain. Read more
Rarely is an idea original. Society’s focus on the “Big Idea” is misplaced. As Jim Collins shows in Great by Choice, many of our business icons build their success on the back of other people’s ideas: it wasn’t the McDonald brothers who built McDonald’s into an empire, it was Ray Kroc who saw the seed of greater success in their operation and bought it from them. Read more
The Idea Fallacy warns us not to be seduced by the brilliance of our ideas—an idea without execution is worthless. But it also tells us not to be intimidated by the fact that others may already be executing the same idea. Read more
The existence of thriving competitors proves that there is a market. After that, it’s all about execution: if you execute better than the competitors, you will win market share. Read more
If there are no businesses with that idea, then perhaps there is simply no market for it—no matter how brilliant you think it is. Read more
TAKEAWAY: HOW TO AVOID THE IDEA FALLACY
TAKEAWAY: HOW TO AVOID THE IDEA FALLACY Don’t be seduced by the brilliance of your idea—or anybody else’s. Test it on the market: if it works, develop it. If it doesn’t, move on. If there are already competitors with the same idea and they’re thriving, that proves there’s a market. Take it on. Share your ideas—don’t hoard them. An idea that you’re never going to execute could be the seed of somebody else’s success—and help make the ecosystem better for everyone. Read more
The Scale Fallacy
The Scale Fallacy convinces would-be founders to focus on digital products that scale. But focusing on the services they could sell would make many of them more successful more quickly, and that might give them a platform on which to later build a scalable startup. Read more
We could build that without difficulty. But they were usually lucky to get a hundred users a day. Those clients were focusing on the product, as if that were the hard part of the development process. I learned from watching them fail that going to market was the hard part. Read more
Watching client after client repeat these mistakes, I started to change the way we built products for clients. I would make them do a “mini” project—a rough prototype, a kind of minimum viable product—in order to get feedback early. This insight would become crucial to my own subsequent startup success. Read more
So VCs won’t be interested if your startup doesn’t scale, and neither will the media and neither will the public. This is because the American dream isn’t a fantasy of steady, incremental growth—it’s a dream of celebrity, stardom, and riches. Read more
TAKEAWAY: HOW TO AVOID THE SCALE FALLACY
TAKEAWAY: HOW TO AVOID THE SCALE FALLACY Don’t be seduced by the popular emphasis on scalability and success. Look at what you can do and what the people around you need. If you have skills they can use, sell them. Use those skills to get inside other corporate and creative environments so you can learn from other people’s mistakes before you have to learn from your own. When you want to build your own scalable startup, build it on the foundation of your services business. It will be stronger and more nimble, and you’ll have a cushion if it collapses. Read more
The L’Oréal Fallacy
The L’Oréal Fallacy is the belief that you should hold out for the exit you deserve—because you’re worth it. This fallacy corrupts decision making at a crucial point—the point when monetary success is actually a tangible prospect. First-time founders, in particular, should take their exit when they can. Get out, go on a holiday, and then get back in the game. Instead of holding out for a better exit, move on and create one with a new product. Read more
Suddenly, after years of failure, I was hot. The success of RightCart made me the archetypal “overnight success” that has actually been ten years in the making. Read more
don’t hold out for your ideal exit. Read more
I’ve stopped relying on what I think I’m worth. My equity is worth what the market will pay and only worth that when the market will pay it. Read more
TAKEAWAY: HOW TO AVOID THE L’ORÉAL FALLACY
TAKEAWAY: HOW TO AVOID THE L’ORÉAL FALLACY It doesn’t matter how much work you’ve put in or how great your idea is. There is no magic sum that you are “worth.” There is only what the market will pay. That will change for reasons outside your control, and it may go down as well as up. Take the money. And don’t look back. So take your exit. Read more
The Quality Fallacy
The Quality Fallacy is the belief that quality is a goal in itself—that your product should be as good as it can be before bringing it to market. On the contrary, quality is a distraction. Your product should be only as good as it needs to be to be brought to market. Anything more is a waste. Waste will undermine your company in the long run and lower the chance of your product finding market success. Focus your energies and resources where they’re most needed: build a minimum viable product (MVP); then concentrate on getting that to market and getting customers to it. Think of an MVP as a “Franken-product” – something cobbled together out of whatever’s lying around. Read more
As a creative, self-starter type, I had seen building things as the challenge and the attraction. Crandell taught me that it wasn’t the building that was the challenging part: it was the selling. To sell something, you have to know the market wants it. To find out if the market wants the product, you have to ask it. Read more
The Quality Fallacy is the belief that that the time to ask the market is when you can present it with a perfected product: only then will you be able to truly tell how it responds. Read more
So the trick is to bring your product to market as early as possible. You should launch products when they are barely working—when they are “minimally viable”: a minimum viable product (MVP). Read more
the minimum amount of time and money should be invested in product development and the maximum in channeling customers to the product. That gives you the vital information you need: is your product viable? If it is, then you can shift to a focus on quality and customer retention. Read more
You should be proud of your product and business in the long term. Making it a success may mean being willing to work with a Franken-product in the short term. Read more
TAKEAWAY: HOW TO AVOID THE QUALITY FALLACY
TAKEAWAY: HOW TO AVOID THE QUALITY FALLACY Your product doesn’t need to be finished to bring it to market—it just needs to work. Build a Franken-product—a minimum viable product—as quickly and cheaply as you can and release that to the market. Use the market’s feedback to refine your product so that you know you’re working on something the market wants, not something you think the market needs. Read more
The Passion Fallacy
The Passion Fallacy is the belief that passion should drive your startup—that the magic ingredient is your belief in your product. On the contrary, passion clouds judgment. I want to see evidence of cold, hard business acumen before I invest in a startup; that can exist alongside passion, sure, but more often founders seem to think that passion is an acceptable substitute. Read more
The model I am trying to explain to him is a performance model rather than a partner model. The essence of the performance model is that you can “force-feed” your market in order to test the performance of your product in the market from the earliest stages of its development. Instead of waiting for your market to miraculously discover you, or for your partners or even the media to push you out to the market, you can proactively push your product into the market. Read more
But I’m not interested in ideas. And I’m not interested in passion. In fact, passion worries me. Too often, it hides other weaknesses. I’m interested in execution. And “execution” doesn’t mean “tech.” As we’ve seen, the pursuit of good tech leads to the Tech Fallacy—the focus on tech for tech’s sake. All I want from the tech is a clunky prototype—a Franken-product, or MVP—that allows for some market testing. “Execution” means the ability to bring a product to market. Read more
It’s easy to get blinded by the idea you’re passionate about—to be fixated on your fix. It’s only natural to assume that there are others out there like you seeing the same problem and wishing there was a ready-made solution to it. And there may well be many others. But are they willing to pay for it? And can you even find them to ask them? Read more
The Passion Fallacy is the belief that your passion should determine what you bring to market, and drive it there. It shouldn’t. You are your worst test market because you are a market of one. Read more
TAKEAWAY: HOW TO AVOID THE PASSION FALLACY
TAKEAWAY: HOW TO AVOID THE PASSION FALLACY Don’t get blinded by your passion. Test a minimum viable product—no matter how ugly—on the market. And be prepared to dump it (or at least file it away) if the market isn’t interested. Read more
The San Francisco Fallacy
On the face of it, the San Francisco Fallacy may seem trivial by comparison with the ten fallacies we’ve just examined. A piece of geographical advice—“Don’t move to San Francisco”—hardly ranks up there with core lessons of business. But the San Francisco Fallacy is symptomatic of a broader and deeper danger in the culture—the danger of groupthink. The urge to base tech startups in San Francisco is a very literal example of herding behavior, whereby members of a community have an instinctive tendency to follow each other. Read more
This kind of analysis will always be more difficult if you surround yourself with people whose interests, culture, and working environments are the same. Seeing through groupthink requires you to stand apart from the herd. In the first place, that’s a mental and emotional discipline. But it doesn’t help if you live and work surrounded by the herd. Read more
Find somewhere cheaper, with better talent, that is more in touch with the mainstream. Build your business based on the values in this book, not on desire, dreams, or passion. But of course, you’ll need something else—something no book can give you and no experience can guarantee: Good luck. Read more
Notes extracted and edited with Kintrospect