Why do startups keep making the same mistakes?

This week we enjoyed the 11th edition of Fuckup Nights in Barcelona. The global movement sees over 10,000 people a month meet up to discuss how their entrepreneurial projects went horribly wrong. Despite the name, the events are upbeat and entertaining, offering a refreshing alternative to the Cinderella stories we’ve grown used to from the startup scene. And while you’re guaranteed to learn something new at each event, I’m struck by how often the same themes come up:

  • Scaling too quickly
  • Not having a business model
  • Not validating the need for your proposed product / service

… and the list goes on.

What, you say? Don’t people know that you should have a plan to make money when you start a business? That you should check if anyone wants what you’re offering? Haven’t they read any basic startup book or even some LinkedIn clickbait?

It is precisely your lack of knowledge that blinds you to your lack of knowledge

The thing is, the speakers at these events are clearly intelligent, capable people. They go to great lengths to learn and focus on realising their ideas as best they can. So what gives?

Dunning and Kruger’s masterful insight explains one of the paradoxes of the beginning entrepreneur. When you don’t have years of experience, you can embark on a project with fundamental understanding of only some of the areas you need to know. The kicker is that this limited knowledge leads you to believe you’re doing well. Really well. Probably much better than you are.

How? It is precisely your lack of knowledge that blinds you to your lack of knowledge. Let’s take a look at Mary, an aspiring creator. She has read plenty of startup books and attended some meetups. She does everything she believes she should be doing — market research, business plans, finances, etc. However, Mary hasn’t had much time to learn about user research techniques, legal requirements, and building a team. As a result, these things are not even on her radar.

At the end of the day Mary is proud of her work, but only because she knows what she’s done, and not what she hasn’t.

But all of that information is out there, you say. Can’t Mary read a couple more books? Surely there’s at least a passing mention of these matters.

Alas, as we know from the state of today’s public discourse, having information out there doesn’t mean that people will seek it. In fact, what usually occurs is quite the opposite. The Dunning-Kruger effect is reinforced by other biases and subconscious tricks the mind plays on us to keep us in our bubble. These include:

  • Confirmation bias: We pay more attention to things that align with our ideas. Mary is unlikely to read an article about setting up a Delaware LLC because it’s not on her list of Things Mary the Entrepreneur Does.
  • Motivated Scepticism: If we do engage with facts that run counter to our beliefs, we’re very likely to do so defensively, attempting to find holes in them and rationalise ourselves. On the other hand, we don’t question information we want to agree with. It takes three doctors to tell me I’m sick, but only one to tell me I’m healthy.
  • Active Information Avoidance: There’s a whole slew of (mostly) unconscious patterns that keep important information out of our view, and some good reasons behind them. Explore further in the latest episode of You Are Not So Smart.

So can Mary ever break out of her bubble before it bursts? Fortunately, Dunning and Kruger themselves discuss a couple of ideas in This American Life: In Defense of Ignorance (second part). One thing Mary could do is share her work with trusted peers, friends or colleagues that have a close enough relationship to tell her when she’s wrong, and offer useful guidance. This isn’t easy — startups generally meet nonconstructive sceptics or fans that love them too much to see problems. Another option is to check out Fuckup Nights, or similar settings that encourage participants to truly open up and learn what they could do better.

One paradox remains: Would Mary think of seeking out this kind of (negative) feedback in the first place, if she’s convinced she’s doing great? Until we figure this one out, you can be sure there will be plenty of Fuckup Nights to come.