z on life

In the world of startups, everyone seems to have a different definition of ‘winning the game’ or ‘being successful’. With that said, I wanted to write about what I think winning is and is not.

To start, let’s talk about some popular ways to viewpoints on what it means to win that you hear in and around the startup crowd all the time:

1. Making something that millions of people use every day
2. Working with your friends, being comfortable, and having fun
3. Becoming Internet famous
4. Getting to a liquidity event
5. Being massively rich

To different extents, I disagree with every item above. Some of those are merely stepping-stones to real success, and some just have no place in the same sentence with the word ‘winning’.

Making something awesome that a lot of people use everyday is sometimes necessary but never sufficient in building a real business. Unless you can truly extract money from those users in a significant and sustainable way, I don’t see the point. Maybe the purpose of your work life is to just provide cool goods and services to the world. In that scenario, you’re really just running a charity event, in which case you need to acknowledge to yourself and others really what your true intentions are. But if the purpose of your work life is to build big companies, then focus on economic value by thinking about distribution, retention, monetization, strategy, relationships, and market before anything involving the word ‘cool’.

Getting to work with your friends with flexible hours and a low key work environment is great if you want to be a lifestyle business. If you are a disciple of the work-to-live philosophy, then that’s all fine and dandy. By all means, emulate the four-hour workweek. But if you want to build empires like Gates, Jobs, Ellison, Brin and Page, Dell, Bezos, etc, you will never get there if you maintain this type of philosophy. If you want to be funded by Sequoia, KP, Accel and that elite crowd, you’ll never get there in this mindset. When you’re in the office, the more blurry the line between friends and coworkers, between fun and business, between goals and leisure, the worse off you will be.

Becoming Internet famous is a really funny goal that many people have but few will admit. At the end of the day, famousness stands for very little expect maybe a fulfilling feeling inside to someone who needs that. Can you imagine coming to your board and saying “Well we missed earnings and we’re going to have to liquidate at a loss on all of your investments, but at least now people know who I am when I walk down the street.” That sounds absurd and is absurd. If fame comes with the process of being a successful businessperson, then that is what it is. But if you seek out fame for the purpose of fame itself, you actually stand to have less of a chance of succeeding because you will make irrational decisions and spend too much time and effort worrying about the wrong things.

Getting to a liquidity event can be a huge win, but the concept of ‘exiting’ in and of itself is not. Many times startups push forth and push forth and push forth because they just don’t want to die. Amen to not dying, but what is the goal of what you’re doing? Is the point to not fail? Is the point to prove that you were right after all and that “this can work”? Do you need to see the company ‘exit’, even if it is a tiny sum of money with years of handcuffs, just so you can think you “didn’t waste that time” in your life? Does exiting make it somehow worthwhile, even if you could have made more money over those few years working at Google or building new and better startups? Hey, if you’re going to hit it huge and explode with a 10-figure market cap, by all means exit and buy a Ferrari. But if you’re on the other end of the spectrum, are you really being rational, or are you hanging on to the concept of ‘not failing’ instead of focusing effort on a new massive success that could be up for the taking?

Being massively rich, in a self-made way, has correlation with “having won” but does not for sure indicate causality. After all people do get lucky, are benefited by serendipitous events, or find themselves in the right place at the right time. But in the end, most of these people still earned it. In my mind, though, these people have won a battle, not the war. I feel like the key to winning the war is in a process and not in any one result. It’s those people who have built up a methodology, a framework, and a desire to do it again and again and to do it huge. These are the Marc Andreessens of the world. The other side of this coin involves all the people I mentioned earlier Gates, Jobs, etc who have really focused on one company and taken it all the way for many, many years. Instead of doing it again and again, these people are all about extending it further and further. It’s the not the money, it’s the push to always be looking up even after you have the ability to be comfortable for the rest of your life.

So then what is ‘winning’ to me? Here’s a couple definitions or elements that seem much closer to what I would be comfortable with:

• Going from 0 to multi-billion dollar IPOs and beyond
• Putting yourself in a position to work with the best people
• Doing in aggregate what the fewest other people have been able to do

IPOs and huge exits are a good, tangible way to look at things. Money as a scorecard is fine, because virtually everyone who’s at the very top of that scorecard has earned it, either via sustained hard work or a huge string of success after success. Analogously in the non-startup world, you could argue that running a key division of a company or managing a huge fund and growing the earnings or worth by a large multiplier is just as good. I completely agree. There are lots of tangible ways to win.

Being able to work with the best people is an indicator of success. It means that every day, you get to experience the joy of pushing out the most creative, strategic, business-savvy ideas at the fastest possible rate. You get to solve problems that other teams can’t possibly imagine solving. If you think of life in terms of how many interesting experiences you get to have, working with great people can make that number explode. Every minute of every day can be incredible. While others can pay to go anywhere in the world, drive fast cars, and even go to the moon, you can’t pay to work with the best. Sure you can sometimes just set up the economics so that they make sense, but if really good people don’t respect you and see you as a winner, they won’t want to bet some portion of their career on you. If you can get to this point where the best want to be around you, you are on your way to a win.

The last is my personal favorite: measuring the size of your win by how many people have been able to carry out what it is that you did. We as people naturally seek to be different and new things excite us. We love to do what others can’t, not to evoke jealously, but because it is has core appeal. Professional athletes are one a million, same with movie stars, senators, and the like. Being a top of the top businessperson is more on the order of one in a hundred million. Striving for that is exciting, not because you get famous, but because getting there means you solved the most difficult and dynamic problems the world has to offer. Think about your aggregate level of accomplishment and what percentage of the world is at or above it? Chances are, that number is large. How can you get it down an order of magnitude, or how about five orders of magnitude?

Notice I have left out anything besides work. Nothing was stated in here about life, family, friends, fun, none of it, except how it was bad to mix lifestyle and work. The enjoyment of life outside of work as completely and wholly necessary, but it is an even more macro question of balance between the career-facing facts stated here and the elements of fun, happiness, and personal enjoyment elsewhere. What do I mean? You will be on some trajectory to win at some magnitude in the professional sense, and depending on what that is, you will have some portion of time to spend on the rest. The end goal of life on the whole might still be happiness, but the key is deciding how big you will win professionally, how much happiness that generates for you, and how much you will need to seek from other sources such as personal enjoyment of friends, family, leisure, and so forth.

So what should all of this mean to you? Really, it should mean nothing. This is how I look at things, but everyone is different. Winning as defined here isn’t for everyone, and I think it is awesome that not everyone goes down that path. I will say, though, that when I meet people, I am always curious how much they really want to win and win big. The ones who want it bad are the kind of people I enjoy working with.

In consumer web, how can you avoid the constant urges to build for yourself? One great way is to run through the thought experiment of building a product for someone as little like you as possible. Invade the unknown territory that is urban America, the economically challenged family, a youth age group, the opposite gender, or better yet, all of these at once.

So how would this go if I were doing it? I would describe myself as the following:

• 20 year old white male
• Socio-economically upper-middle class suburban upbringing
• Well-educated at the masters level from a top university
• Technology enthusiast, sports fan, avid reader
• Facebook versus MySpace? — Facebook

Knowing that, then, who would it be fun to build for?

• An urban demographic with low socio-economic standing
• Teenage girls who hate school
• Someone who thinks MySpace and YouTube are the entire Internet
• Anyone who didn’t go to college

Let’s say your building for any or all of these characteristics. How do you do it?

To approach this very hard problem, you need to be systematic. If you can’t immerse yourself in the culture, then you should at least talk to some people who are in it day-to-day. Listen to them talk about daily life. If you abstract away the unimportant details, it is likely that you are very much alike in the raw elements of life that provide happiness. The key is to find the analogies between your experience and their reality so you can come to terms with why they like the things they do. Pull out these analogies, understand the core elements of life that provide happiness, and surround them with a context that is agreeable to whoever you’re building for.

So let’s say I am building for an urban teen girl who has no plans to go to college, works at a fast food restaurant, and is a huge MySpace party girl. First of all, if you think most of America is far, far different than this, you’re way off base. To be mass market, this is precisely who you need to build for. So the question is, what should be built for this huge and actually very average audience? To start, consider what they might like: YouTube, party pictures, stating their BFFs, rap music, glitter text, flashy MySpace layouts, hot celebrity photos, scandalous personal photos, flirting online, phone wallpapers, pimped-out text with misspellings, music videos, Apple Bottom jeans, and so much more.

So right now you might be tempted to make a mash-up to ‘best’ hit this demographic, something like an embeddable photo slideshow player with background rap music sequences for MySpace that features a glittered border and pimped out subtitles that let’s users post shout-outs to each other. This is exactly how to get a horrible and contrived product that will fail miserably. Instead, try to understand what these ‘things they like’ are really telling you about the psychology that drives them.

YouTube and the music videos (and a lack of things like news articles) tell you that they like visual media way more than text-based media and will want a product that provides instant gratification in a rich way with little effort. The Apple Bottom jeans, and rap music are things that indicate a need to self-identify with a unique culture and specific icons, symbols, brands, and activities. The phone wallpaper, pimped text, flashy layouts, and glitter text represent self-expression and the ability to show uniqueness, creativity, and present themselves in an eye-catching way so they’re differentiated to those around them. The party photos are displays of social proof of popularity. The flirting and scandalous personal photos are all mechanisms of reaching out to sexuality and demonstrating personal value and power in a social way. Hot celebrity pictures are icons of future aspiration. Finally, prominently displaying BFFs shows a need for attention and the reciprocation of affection and relationship.

When you boil these things down you get the raw elements: entertainment, identity, expression, uniqueness, popularity, sexuality, power, aspiration, attention, affection, and relations. If there’s anyone out there who doesn’t want or need these things, I would be surprised. So, what we’ve shown is this demographic that at first seemed very mysterious is actually quite predictable in its desires when you break things down. So, getting back to product, the key is to think subtly about the ways each of these raw human levers are pulled in their lives. They certainly are not pulled in the same way for me as they are for the demographic we’ve been discussing. In fact, something I like might not resound at all with them, and vice versa. The devil is in the details. It’s not that the emotions themselves are different for different people, but the contexts around them certainly are.

Translating context can be as easy as changing ‘flirt’ to ‘holla at’, Zegna suits to Air Jordans, or the PGA to the NBA. It can be as hard, however, as having to completely rethink a communication medium because a certain demographic uses text messaging instead of email. Compare the demographic you’re building for to the one you’re most used to. What if the new demographic is less likely to care about friends’ recommendations of products? What if the social circles of the demographic are based on 100 looser relationships instead of 5 very close friendships? What if the demographic works on average 3 more hours in the day and has less time to spend on the computer? What if their interactions with others online are more direct and they won’t hesitate to send a bulletin to 300 people? What if they are more likely to give someone a virtual gift? Questions like these are the questions that need to be asked. They are extremely subtle. The raw emotions stay constant across demographics, but these minute details of context and process do not. They can shatter the success of a site that relies on an axiom of life that does not hold for the target audience.

So, if you understand the subtleties of the context, you can likely build a great product bottom up. Start with some strong emotional drivers, wrap them in appropriate context that fits the demographic, and tie them together with some core functionality that makes a user happy. I know this is easier said than done, but if you really understand you’re users and are good at evoking core emotion with products, you should have no problem. You just need to frame your attack to hit the right targets and use the right weapons.

So what is the actual product? I will leave that up to your creativity! The point of this wasn’t product. It was process. I get off easy this time :).

Here’s a quick math lesson that highlights the importance of super-strong network effects and near perfect retention for any long-term web business.

In high school, you probably learned the 68-95-99.7 rule for percent of the normal curve within 1, 2, and 3 standard deviations of the mean respectively.

A similar rule for web retention is what I will call the 92-96-97.3 rule. Having month-to-month user retention of 92%, 96%, and 97.3% will get you on average 1, 2, and 3 user-years respectively per user that ever signs up on the site.

Okay, in English? If each month you lose 8% of your existing users (92% retention) from the previous month, the average use will stay for 12 months. If you can hold just 4% more of your users (96% retention), then they will stick around for 2 years. If you can hold only 1.3% more than that (97.3% retention), they will be in for 3 years.

It’s easy to think of retention percentages in the 90’s as good. It just feels good. But over the course of time, products in the low-to-mid 90’s will fade super-fast, and ones only slightly more sticky will do much, much better. Single percentage points here are mission critical, that’s why attention to detail and rigorous analytics become so important on the web.

*Note on math:Just in case anyone is wondering about the math, consider the function y = (R)^x, where R is the monthly retention coefficient. The area under the curve from 0 -> infinity represents the user-months the site will get out of each registered unique. So if you do the integral out, you will see -1/ln(R) user-months on average per registered unique for any retention cofficient R where 0