in Growth & Marketing, Startups

The ruthless pursuit of the truth in entrepreneurship, and why startups fail.

The first lesson when you read Dale Carnegie’s “How to win friends and influence people” is don’t criticize, condemn or complain, which is very good advice when it comes to managing and dealing with people. But there’s a part of me that’s dismayed by that lesson when I think about all the other entrepreneurs and senior leaders out there who are reading this book as a guide for how to operate within their teams. The thing that stops me is that this advice correlates to a lack of ruthlessness when it comes to seeking the truth.

In my opinion, there are three types of decisions that entrepreneurs make. Data-driven decisions, data-informed decisions, and emotion (i.e. gut/feeling/ego) driven decisions.  All three are necessary to navigate the uncertain waters of starting a business, but the single biggest mistake I see entrepreneurs make (beyond lack of focus) is that they make feeling and ego-driven decisions way past the point where it’s appropriate.

Let’s be honest, when you’re standing at ground zero, there’s only going to be so much information and data available to you – one of the functions of a capital injection or an experiment is to effectively “pay” for more information ( in the form of structured growth / product experiments) however ground zero doesn’t always come lush with natural resources.  You’re typically standing on barren soil with a few seeds and no shovel, water or bucket.  You may see a patch of land that looks well off, and you have to plant those seeds before they die, so you go for it. You make a gut-decision and you then get your first chance to see what information you can analyze.

But where I’ve seen the same problem in multiple companies (including in myself in my first failed startup) was a lack of focus on the truth once information is available. You’ll plant your seeds and the first plants start to grow – then another gardener comes along who has experience planting seeds too, and starts to help you farm your land. The local shop gives you more seeds and water and tools in exchange for profit from you land. Your new farming partner comes up with a grand plan to plow the entire field, which looks and sounds good, and last time you went with a good idea, you got plants, so why not do it again? You’re a little unsure, but you’ve been successful so far and planting season is now! Without evaluating the land any further, you go full steam ahead.

Just because your seeds grew into plants the first time doesn’t mean they’re going to grow again across the entire field.  Let’s say you invest all the resources the local shop gave you in farming the land, and you discover that only 20% of the field is viable. You’ve just wasted precious resources and now you may lose the farm when you could have taken the time to survey the plot. Why did you go ahead with it? You didn’t want to hurt your farming partner’s feelings and you were happy to buy in to the excitement. Your opinion was that it would work based on loosely gathered information.

Well, here’s the fact.  You metaphorically failed because your opinion doesn’t matter. You didn’t seek the truth.  Sound familiar? That’s because Ray Dalio built that principle into corporate culture at Bridgewater.

“the greatest tragedy of mankind — or one of them — is that people needlessly hold wrong opinions in their minds.” – Dalio

Entrepreneurs need to be the most self-critical creatures (and privately critical of others) in existence because it’s easy to hide behind an idea and a feeling.  There’s a false sense of security when you get lucky or your see your initial traction. Businesses devolve when you can’t make decisions based on the truth, and progress is hindered by ego.  Almost any argument can be settled by data, but not when it’s surrounded by emotion.

One of the single most valuable principles I believe in is the ruthless pursuit of the truth.

Once up on a time I was working at a company where I realized that the truth of the matter was that the new department I had been hired to work in shouldn’t exist at all – there were greater troubles with the core business that resources needed to be allocated to preserve. When I brought this up (turns out I wasn’t the first person to do so), I was met with a lot of backlash. Emotions were high – people couldn’t separate their egos and ideas from the reality.  There was no ruthless pursuit of the truth, and eight months later, the company suffered significantly for it and emergency cash was the only thing that saved it from closing after massive layoffs.

What makes the truth difficult is that hearing information that breaks your current world view and view of yourself creates a reaction in your brain that’s similar to feeling physical pain. People find it easier to focus on what they want the truth to be.  One greater problem still is that power and entrepreneurship tend to be very tied to ego and self-image.

There is now neurological evidence demonstrating the effect that attacks on our self-esteem have on the brain. One study showed that “social pain” activated the same circuits of the brain as physical pain. Consequently any attack on our self-image is interpreted by the brain as physical pain. Source

I’ve seen entrepreneurs focus on a strategy to achieve their dream, without realizing that they do not have the resources available to attack the problem in such a way.  The key difference is that good entrepreneurs recognize this and make adjustments. You constantly have to be ruthlessly honest with yourself about who you are, what resources you have, and what the market is telling you to achieve your goals.

Our brains seem to indicate that saying sorry will be as painful as putting our hand into a fire. Source

At some point you’ll be forced to confront the truth whether you want to or not.

You have to be ruthlessly honest about how people see you, and what you need to overcome your deficiencies.

You have to be ruthlessly honest about the amount of cash you’re burning every month.

You have to be ruthlessly honest about what work needs to be done to keep the business focused and reach your next milestone.

You have to be ruthlessly honest about what your customers want.

You have to be ruthlessly honest about your product and market.

You have to be ruthlessly honest about the truth, and that’s how you’ll win.