Persuasion is like physics; we don’t have to know why gravity works in order to experience its effects. Much the same way as founders putting all sorts of businessy garbage in their pitch decks is a-ok — everything is well as long as it works.
It’s still better to know why something works though, on the off chance of the thing changing, only to produce the exact opposite effect. As one example, fear of missing out, or FOMO for short, is one that founders notoriously try to exploit, but get wrong almost all the time.
When founders write pitch decks, they essentially use well known behavioral biases, say:
- A founder might send an email to an angel saying that the investment round is closing (FOMO!), and so if the investor doesn’t decide within a week, they are missing out on the deal. Which is all well and good, but most rounds never reeaally close, so the same investor might see the same opportunity a half a year later.
- Anchoring is much easier to deploy. Founders have to know their competition in and out: which similar companies secured investment, by whom, and on what valuation? Including some of the more flattering metrics in a pitch is a must. Startups can use a comparable company with a high valuation to make their cheaper offering sound like a “discount,” or use a higher valuation to signal a more “premium” product.
- Familiarity bias might work if the investor shares similarities with the founder or with the company in some way. Are the parties from the same hometown? Are the companies based in the same state? Might be worth pointing those similarities out.
- Venture tends to work like an assembly line in which Series A and later-stage investors are looking at companies that angels have invested in, and angels are looking at whether a startup is coming from a well-known incubator or not. As a new startup, getting incubators is pretty easy compared to getting seed investment, so first-time founders should consider this option.
- Press releases and social following can be important factors. A somewhat related 2006 study found that individual investors are more likely to buy stocks that catch their attention. Any advertiser could tell you: People buy what they remember.
I know, I know, I haven’t said anything entirely new here, which is kind of the point. This is exactly how most founders operate today: they use anchors from competitor data, their footer says “built with <3 from wherever the hell our favorite investor is from”, and put their achievements on LinkedIn. But isn’t it nice to know where all that comes from?
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I spent most of high school trying to convince teachers that daydreaming and gazing around the room is a large part of the creative process. In a surprising turn of events now there’s a new study, published in Nature, that says more or less the same.
They get there in a rather roundabout way. Melanie Brucks, who’s the lead author of the paper and an assistant professor of marketing at Columbia Business School, didn’t realize the true value of the study and named the thing “Virtual communication curbs creative idea generation”.
They recruited hundreds of people, matched everyone up in pairs, and asked each group to come up with creative uses for a product. Pairs were randomly assigned to work either in person or over video conference — and it turned out that people on Zoom came up with less creative ideas than people who had the chance to talk face-to-face.
The reason? People who look in the camera ignore most of what’s going on in their peripheral view. The narrowed visual focus narrows their cognitive focus, and this narrowing of the underlying associative process is what hinders idea generation.
Here you go, friends: don’t ignore your peripheral view.
And use daydreaming as part of your creative process.
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At a startup, self-doubt is real. Nobody knows whether the original idea is any good until the product is on the market, generating real feedback. So, a founder’s job is to perfect the following balancing act:
- On the one hand, they need to believe in the product. Without that conviction, it’s impossible to convince anyone else to join their team, or to buy the product.
- On the other hand, believing in an idea without a market is a very dangerous thing to do. If a startup spends too long building a product that, in the end, nobody will want to buy, they will run out of money before even making their first sale. At the end of the runway, a “plane” has to take off.
The successful poker player Isaac Haxton once said that perhaps the most important skill of a professional poker player is to know exactly how good you are. Overconfidence will bankrupt a person if they keep sitting at poker tables, going against better players.
There’s constant chatter in the founder’s mind: the replays of user interviews, the marketing messages of competitors, the opinions of product and sales teams.
Sounds counterintuitive, but what often helps distill the noise into something more productive is: more chat. Talking to mentors and peers can help us find our bearings and separate the signal from the noise.
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I’m back to being a full-time startup founder, and the job never disappoints.
Starting a company is an emotional roller coaster. The highs are high, and the lows are low. Hard not to take it personally when an investor cancels a phone call, or a potential client decides to “go forward with another option” just after a product demo that I nailed.
(I nailed that demo.)
So my every day now is a race to achieve product-market fit before the company runs out of cash. Startups need to build a product that people want to buy, and then find enough people to actually buy it, so the company can pay its bills and stay in business.
Reid Hoffman (the more famous one of the LinkedIn co-founders) repeated his quote to death, but hearing it too often doesn’t make it less true & awesome: “An entrepreneur is someone who will jump off a cliff and assemble an airplane on the way down.”
Myself included, CEOs tend to take on too much work, inevitably isolating themselves from others. Loneliness is as real as self-doubt is, and neither of those make for a healthy mind. So what’s a founder to do if they want to succeed?
Now my personal routine involves weekly check-ins with three mentors who help with different aspects of the business. Others have found mastermind groups helpful. Talking to mentors and peers is helpful to find loneliness, and can help separate the signal from the noise.
Your mileage may vary, but even if work is your passion, working seven days a week for sustained periods rarely does your health any good.
Take time for self-care and for your support system, and you know what to do if there isn’t any time to take. Make time, my friend.
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It’s only the first week of January but we have the funniest NFT story of the year.
So here’s this celebrity, Stephanie Matto, who started to sell her farts in a jar. Both a wonderful troll move and a brilliant business opportunity, bringing in $50K a week (good for her!)
And then she claims that producing farts is such a stressful work that she had a heart attack scare. She even got hospitalized to drive the point home.
Finally, in the ultimate troll move, Steph stops selling physical farts and moves to selling NFTs, which is just genius — a digital fart is somehow both less than a fart and more than a fart at the very same time.
One of the best NFT use cases I’ve seen so far.
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This year’s reading list is some 50% thinner than it usually gets, but hey ho. I blame missing commute in 2021.
- From “Small Giants by Bo Burlingham” I learned that if you want a company that cares, you need people who care, and they need to be motivated by more than money
- From “Skin in the Game by Nassim Nicholas Taleb” I learned that a doctor is pushed by the system to transfer risk from himself to you, from the present into the future.
- From “Zilch by Nancy Lublin” I learned that if you need to ask for something, be as specific as possible, see “This thing X will cost you Y and will help Z number of women.”
Reading through my notes, I’m sure I’ll re-read some of the books from this year. The complete list:
- 21 Lessons for the 21st Century by Yuval Noah Harari
- Skin in the Game by Nassim Nicholas Taleb
- Rich Dad Poor Dad by Robert Kiyosaki
- Innovation and Entrepreneurship by Peter F. Drucker
- Zilch by Nancy Lublin
- Galapagos by Kurt Vonnegut
- Howard Stern Comes Again by Howard Stern
- The Selfish Gene by Richard Dawkins
- The E-myth Revisited by Michael E Gerber
- Off to Be the Wizard by Scott Meyer
- Ä by Max Goldt
- Traction by Gino Wickman
- After the Quake By: Haruki Murakami
- The Most Beautiful Woman in Town by Charles Bukowski
- A Brief History of Time by Stephen Hawking
- Start Finishing by Charlie Gilkey
- A Briefer History of Time by Stephen Hawking
- 12 Months to $1 Million by Ryan Daniel Moran
- Big Money Energy by Ryan Serhant
- All Marketers Are Liars by Seth Godin
- I Never Knew That About New York by Christopher Winn
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To my deep disappointment, cosmic latte is not a super-massive coffee.
Cosmic latte is the average color of the universe, found by a team of astronomers from Johns Hopkins University. In 2002, Karl Glazebrook and Ivan Baldry determined that the average color of the universe was a greenish white, but they soon corrected their analysis in a 2003 paper in which they reported that their survey of the light from over 200,000 galaxies averaged to a slightly beigeish white. The hex triplet value for cosmic latte is #FFF8E7.
— From Wikipedia
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