Creating EV

The Autopiloting Pitfall

Tenacity is one of the most cherished attributes in the startup community. Having the will to grind it out through good and bad times is the hallmark of great entrepreneurs. Success seems only attainable to those that make it out of the valley of sorrow and dispair.

I am definitely a big believer in this line of thinking. But I came across a snippet of wisdom in a poker forum that made me aware of a potentially dangerous bias:

“…when players are losing, they often go on autopilot and hope to run good. This might have the effect of the losing player not fighting for the small pots… …At times, because of the crazy swings that I have no control over, I think that my decisions don’t matter. I just autopilot and wait to run good. Don’t forget how EV works…” - Phil Galfond

The message was meant as a warning to poker players that their edge does not come for free. You can’t just magically put a “plus X dollars per hour” label on yourself and rake in the money. Expected Value is created by striving to make the perfect decision in every situation.

The notion translates very well to the startup world, where participants are constantly going through losing streaks(maybe not of money, but time and opportunity cost, which is just as brutal in my experience).

Surviving a year or two in the valley is great. But it doesn’t magically make you more likely to succeed in the upcoming year. Your third pivot is not automically better than your previous ones. The Startup God won’t favor you in the next billion dollar exit sweepstake just because you have five failed ventures under your belt.

You actually have to extract value from previous experiences for them to matter.

On a day to day basis, even those with amazing design and product sense have to work really hard to actually generate great design and products. The same goes for “50x programmers”. The ten thousand hour rule only works if deliberate practice is involved.

“Just showing up” is necessary but not sufficient. Don’t get into autopilot mode in hard times.

2011

I spent most of 2011 trying to do a startup for the first time. Some stuff I learned:

1) The hardest challenge is self control. It’s about showing up every day and being consistently focused. People like talk about startups, success, and failure on the scale of grand decisions, but in reality it seems what works is accumulating small advantages over time.

2) Shipping the first version is important, but it’s just the beginning. Stories of how they just slap together a prototype, hit the viral coefficient jackpot, and in comes millions of users and dollars are great to hear and fantasize about, but it’s good to be mentally prepared for the long run. On the same lines, milestones like hitting 10^x users and getting funding are great, but after they happen, there is still a long ways to go.

3) Working hard is easier than I thought. The most difficult part is building the habit, then it just comes naturally. Motivation is easy enough to find. Something or someone owns you in the face often enough to provide a consistent stream of motivation.

4) Being a good entrepreneur means mastering a complex set of skills. The most important aspects include programming, product sense, and ability to acquire users, but the list is quiet long, and it takes thousands of hours to become proficient at each skill. So for the most of us, there’s a lot of room for improvement.

5) Any market you enter, your competitors have been doing it longer, has more existing users, more money, more domain experience, and more everything. It’s just a reality that you have to get used to.

6) We make mistakes all the time. People talk about having to execute flawlessly but in reality we make a lot of decisions without sufficient information and do a lot of stuff we’ve never done before, so we should expect and embrace mistakes from ourselves and teammates.

7) Occasionally taking time off is crucial. Sometimes it’s the only way to get a good glance at the big picture.

8) PR is a double edged sword. It can be a great asset, but also a huge distraction and time sink. This includes blogging an tweeting.

9) In the early stage, the game of startup can be approximated by two variables. The only “resource” that matters is time(money just converts to time via on burn rate), and the only “score” that matters is traction. Convert time into traction at an efficient rate for the win. 

10) If entrepreneurship is a game, then we are incredibly lucky to be even playing. Sometimes we forget to count our blessings and it seems like anyone can just choose to do a startup. But so many things have to be in the right place to even start. We need the right education/experience background, the right environment, the right support group, the right cofounder, and great teammates that believe in and support us. So during those times when it seems there’s only an astronomical chance of winning and the lucky breaks just won’t come, just remember that we are already at the right place and the right time.

I just got meta-copied

I sometimes get requests from start-up friends in the US asking whether there are Chinese clones of their companies. So I thought it would be neat to make a really simple website that kept track of who’s copying who. Each company would have a page showing other companies copying or being copied by it.

I found myself with some free time this weekend, so 2 SQL tables and 2.5 hours later, I got this uploaded to a production server:

(http://chao.heroku.com)

At this point I had to get back to my real project, so I shelved it and figured I would come back next weekend to add stuff like graphs, english translations, and a real domain name….

Then today I came across a site that had just launched called “copy factory”, denoting themselves as a cruchbase that emphasized relationships between companies. I took a look and it seems like whoever made it seem to have spent a decent amount of time on it, since they had a user registration system, pictures, and everything:

Just as I was about to concede on them having done it first, I noticed this:

Dude they totally ripped off my favicon!

My site on copying just got copied. Oh well, just another day in China.

Until next time

Just had a pleasant and rewarding tour through the bay area. It was great seeing old buddies and meeting new friends.

I’m excited to go back to Beijing and tell my team about the incredible entrepreneurs I got to meeting, and all the things I learned from them. If I had to sum it up, it would be to dream big, act small, and work relentlessly.

Until next time!

Tight Aggressive

Selective aggressiveness is the dominant poker strategy. It means to play only few hands, but playing each one aggressively by betting and raising. But this is not a post about poker, it’s about building stuff.

Two years ago, I wanted to work on a weekend project with a couple of friends. The idea, inspired by our apartment-hunting woes, was to create a tool for apartment hunting. It would be map based, and offer some additional killer features over craigslist.

After going to through an intense brainstorming session, we settled on a minimally viable product, broke it down into features, and came up with a development schedule. As we were about to start coding, we thought it would be a good idea to make sure that “no one has done it yet”. Unfortunately, google did turn up a site that plotted craigslist apartment data over google maps. “aw… it has been done”. We quickly became discouraged, abandoned the idea, and ended up playing rockband that weekend.

Just to be clear, we had no idea how many users the site had, or whether it was even any good. For all we know it could have been some long abandoned hobby.  Yet, we just gave up.

The dominant sign of a novice poker player is passivity. Beginners talk themselves into folding and calling over betting and raising due to lack of confidence and experience. Looking back, being scared and passive is exactly what caused us to run away at the mere sight of something that looked like competition. This episode of sheer sadness has haunted me to this day.

Since then I’ve come to realize that, just like in poker, selective aggressiveness works when building stuff. Aggression in this case means committing to an idea and not giving up when things or people get in the way. It means to face the inevitable competition, and working as hard as you can to succeed and win.

Just like poker,  executing the right strategy makes the game more fun.