The Experience Fallacy

We all crave excellent advice.

I hope to give good advice, especially with startups and founders that cross my path. But my startup experience is very limited. Many folks (especially with experience) advise you ignore advice from people with no experience. Read a few Medium articles and you’ll see that. But is that too good advice?

If I know theory but don’t have direct experience, does that make my advice wrong? If I have direct experience, does that make my advice right? Is advice from those with experience committing the anecdotal fallacy? Do advisors themselves infer the general from the particular?

Millions of businesses start every year. Many fail. Some survive. Some thrive. Is experience of one success be sufficient? What about a string of successes?

Imagine there is a 20% chance of doubling revenue every quarter. If 500,000 business start in a given month, one will double its revenue every quarter for two years (500x growth). In a large population of businesses, might some firms get lucky? Do well and grow every year? Until they don’t. Kinda like fund manager performance.

Maybe even entrepreneurs with multiple exits got lucky. Maybe they weren't lucky and do know something. Can you be sure?

Unfortunately, business involves multiple paths with lots of choices. The variability of business is why good advice is so sought after — because there is no empirical evidence from genuinely objective experimentation to know what works at a macro level. However, there is (reasonably) objective information at the micro level.

So perhaps my advice (if you trust my theory) is to build a business where everyone makes evidence-based decisions at the micro level. Then do your damnedest to avoid second-guessing based on gut instinct!