Deciding Which Game To Play

Why

Last year, I left my job to start a company. I spent months running different experiments. Some experiments failed. Some experiments worked, but I found that I’d quickly lose interest in them anyway. After several months and an embarrassing number of domains purchased, I realized there was a recurring pattern in my decisions.

I decided to document this, so I could define the levers of my interest and understand how to place better, tighter bets in the future. As I did this, I uncovered a framework that has helped me make big decisions with higher confidence. To be very clear, this framework is not about vetting business ideas. It is about founder-startup fit.

It’s worth taking the time to build your company on a crystal clear philosophical foundation. If not, you’ll be faced with value decisions later that could be in logical conflict with other strategic decisions upstream. Really knowing who you are and why you are building a company (i.e. which game you’re playing) can help you define the strategic boundaries of your efforts.

Deciding which game you should play is mostly about understanding yourself. Let’s start there.

Risk and Ambition

You should ask yourself how risk-tolerant and ambitious you’d like to be in this next game you play. Each combination of the two factors comes with a set of responsibilities, externalities, and lifestyles. Many people oscillate between low and high-risk profiles over their career arch, depending on circumstances. That’s totally okay. It’s good to know where you’re at and the risk level you can currently afford.

As you think about the size of the outcomes you can pursue, know that risk is not ‘priced-in’ to the market of opportunities. The marketplace that matches startup ideas and startup founders is very inefficient.

You can take the same amount of risk in two opportunities with very different return expectations. Multiple ideas to build, the same risk of failure, and the same opportunity costs.

It’s also worth reiterating that risk, in this sense, is a luxury. Risk is something you can afford to take on. There’s no right or wrong here.

Identify the source ⚡

Okay, great. You’re a high ambition type. You have the energy to face some uncertainty and shoot for big outcomes.

One question to ask yourself before moving forward: Why are you oriented this way? What is the source of this energy? It’s important to identify the source so you can manage it, and even use it to your advantage.

When chatting with other founders, I’ve noticed that this energy can come from weird places. It’s sometimes generalized as the “chip on your shoulder”. Ask yourself, “why the hell am I thinking about start a company?” and be brutally honest.

Some reasons to start a business

You’ve come to idolize entrepreneurs on Twitter. You’ve watched ‘The Social Network’ too many times. You are redirecting childhood trauma. You’ve decided this is the fastest way to get rich. You believe starting a company puts you on some moral high ground. You were not cool in high school. You want to climb the great social ladder.

Better reasons

You want to create value for other humans. You want to solve a major societal problem. You want to push the human experience forward. You want to capture value for yourself and be financially secure.

I’m not judging. I have my own healthy dose of chip-on-the-ol’-shoulder. I’m just saying, some reasons are probably healthier than others in the long run. It’s on you to understand where this energy comes from and learn to manage it. Without understanding this, your decision logic will risk being inconsistent. You’ll get taken for a ride by your true desires when they're given the opportunity to reveal themselves.

Skill assessment

Okay, so you know why you are interested in playing a game. But, what games are you most suited to play? Where do your advantages lie? Sometimes it’s obvious. Take, for example, Ferdinand Lewis Alcindor, born in New York City in 1947. Ferdinand was unusually tall from a young age. By the age of 13, he had grown to 6 ft 8 in tall and could already slam dunk a basketball on a full-size hoop.

He’d go on to win 6 NBA Championships, secure 6 NBA MVPS, and score a career total 38,000 points as Kareem Abdul-Jabbar.

Okay, you get it. Sometimes advantages are obvious. What about you? Which game are you suited to dominate? Well, that’s the wrong question. Most people are not set up perfectly to dominate any particular game.

You might be building an e-sports company without experience in consumer application design. You might be starting a health tech company without an MD as a cofounder. You could be building a new web browser, without a Ph.D. in Computer Science.

The point of this skills assessment is to ask yourself where you have enough skill to get others to trust you with their time and money. It’s about being able to do enough on your own that you can convince investors and operators to join you on the journey.

This means you probably don’t need to be suited for the longest version of this game. You don’t need to be obviously dominant. You just need to be suited to take the first few steps and be able to show strong progress. This can allow you to bring in cash (Preseed or Seed) and price the value of your company. Then, cash and equity can be a leveraged way to find the long term players (read: the dominant players) to play this game alongside you.

Last year, I spent several months building a telehealth company in Alzheimer’s care management. We built our entire care management program using Notion and Zoom. Instead of searching for a cofounding MD, I identified two neurologists at local hospitals that believed in the idea and were willing to be advisors to the company. When I needed them, they’d hop on calls with customers and team members as the ‘clinical voice of reason’. Eventually, we had enough traction to raise a healthy angel round.

In my case, my experiments were meant to illustrate the core value of my idea. I found ways to represent this value proposition through low-cost experiments and the support of experts.

Durable excitement

Now let’s say you also have a startup idea in mind: a D2C Flip Flop brand. How long will you be excited about playing this game?

Imagine you have to talk about this idea every single day for 10 years. You have to sell it constantly. Anytime a person at a party (or virtual hangout) asks you what you do, you’ll have to spend 10 minutes explaining why your Flops are the absolute best.

As a founder, you will become your company. If things go well for your startup, every Thanksgiving for the next decade you’ll be faced with the same set of questions from family and friends, and you’ll have to respond with the updated spiel. Will you be proud of the work you’re doing?

Let’s take Eric Yuan for example. To most people (including most of his employees) Eric Yuan is not a person with a family who likes to play golf and listen to The Chronic on vinyl. He is Zoom. The world sees him in one, singular dimension — the CEO of a great productivity software company — and he accepts it wholeheartedly.

Asking yourself if you want to be THAT person forces you to eliminate ideas that are too small or misaligned with who you are. Ideas that are aligned to your personality can signal durable excitement, which can translate to persistence. True, lasting excitement is its own sustainable advantage in the first few years of a startup.

For deeper thoughts on this, read PG’s essay on The Bus Ticket Theory.

Am I okay failing at this?

Let’s say you’ve checked all the previous boxes. You found a game you are good enough to play and will care about for a long time. If you spent the next 5 years playing in this market and then failed, would you be okay with that?

By the end, you will

  • Know a lot about your market
  • Know some investors and operators in this category
  • Have a network of customers in this category
  • Experience greater comfort with uncertainty

When you come out on the other side as a failed entrepreneur (the most likely scenario) what does this look like? This is nuanced from the durable excitement question because it suggests you can use these assets, knowledge, and skills again in the future.

Avoid the Zeitgeist

Another thing to consider is timing and excitement. In particular, if you’re building a business that will rely on venture funding.

Reading about low-code tools on Twitter? How about services for remote workers? It means venture investors are already seeing dozens of these types of deals every week and those startups were all founded 2 years ago.

Instead of trends that are already popular, ask yourself — what else will be an inevitability in the future? Based on underlying trends (the deployment of information technology and certain business model innovations) what is highly likely to happen? What are my nerdiest friends excited about today?

In this way, you operate as a value investor — it’s unclear when your time to shine will arrive, but if you focus on the fundamentals and see reality most clearly, eventually the opportunity will present itself.

Product Zeitgeist Fit — D’Arcy Coolican

Another good read, recommended by Keith Rabois: The Score Take Care of Itself

Competition

I’ll follow the point on Zeitgeist with a slightly antithetical, but adjacent note on competition. Timing and Zeitgeist are about the market’s excitement. Competition is about the potential to sustainably capture value. Seeing another company with backing doesn't mean you should avoid the market.

Sometimes you can worry less about competition. Especially if your market is big, and not winner-take-all. If you‘re exploring a $10b+ market and there are already 2 growth stage startups in the space, it does not mean there isn’t room to play. As examples, healthcare and finance generally work this way.

Of the top 10 pharmaceutical companies in the U.S., each has a market capitalization of over $100B. There are 44 retail banks in the U.S. each valued over $10B. That’s a lot of value to capture.

Don’t build virtue products

Many founders have an immediate desire to build things they personally believe should exist. They are quick to project their morals onto the world. This results in a lot of virtue signaling in product development, which is great until it becomes removed from reality.

We naturally want to shape the world into the way we imagine it should be. However, it’s important to be real and to ask what customers really want. Recognize that it’s hard to get people to do what’s best for them. Don’t build a health tracking app because people should want to be healthy. Instead, find a way to reward them for making healthy decisions. Don’t build a personal finance app because people should want to better manage their money. Instead, help them manage their money with no effort.

Ceteris paribus, customers will opt for the path of least resistance. They’ll opt for the candy bar on the table instead of the apple. The immediate dopamine surge will be more satisfying, so it will require some cognitive load to make any other decision.

I’m not saying you should throw your virtues out the window and build a Juul competitor. Rather, building a business requires making something people really want. You should search hard to find the overlap of customer desires and your own values.

Aspirational goods will remain so unless they are actually better substitutes — lower cost, more optionality, higher quality, more convenient, faster delivery. Otherwise, you might offer instant gratification (Twitter, Juul) or identity realignment (Apple, Peleton). Tobacco, Social, and Gaming are high margin industries for a reason.

You can read more on this here

Final thoughts on founder-startup fit

It’s hard to have options because it comes with the responsibility of selection. If you’re thinking about building something, I hope you find these questions useful in uncovering your true motivations and the games that suit you. To reiterate, this framework is not about vetting business ideas. It is about founder-startup fit.

With enough reflection, you should leave feeling like you can cross two of those less-than-ideal startup ideas off your list. And, more importantly, you might add a few ideas with bigger, bolder ideas to the list. Maybe you recognize you may not be dominant in a certain category, but at least that you have the minimum skills to prove a business model, secure capital, and hire dominant players later on.

Lastly, I hope you recognize the false flags and heuristic biases in idea-assessment that can inadvertently steer you away from sustained value capture. This means avoiding the mental mish-mash of skill bias, virtue projection, and fear of competition.

Thanks for taking the time to read through this framework. If you’d like to stay up to date with my thoughts, follow me on Twitter.

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