The Stockdale Paradox — or what startups don’t understand about optimism

Commander James Stockdale was one of the US Navy’s most experienced pilots, when his A-4 Skyhawk was shot down by Vietnamese anti-aircraft fire in September 1965. The violent acceleration of the ejector seat broke his back.

Stockdale was incarcerated in Hoa Lo Prison; he would be joined in Hoa Lo by Lt. Commander John McCain two years later. Until his release in 1973, Stockdale was repeatedly beaten, whipped and choked with ropes during attempts to force false confessions and break his spirit.

Later in life, Stockdale would recall how he survived his seven year ordeal in Hoa Lo — and how others did not.

Unsurprisingly, those who lived without hope, who were all-consumed by the brutality of daily life — they often died in the prison. However, those who displayed blind, unwavering optimism that they would be released, who refused to accept the reality of their situation — they too would often die in incarceration.

As Stockdale recalled:

They were the ones who said, ‘We’re going to be out by Christmas.’ And Christmas would come, and Christmas would go.
Then they’d say, ‘We’re going to be out by Easter.’ And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again.
And they died of a broken heart.

Author Jim Collins coined this The Stockdale Paradox:

You must retain faith that you will prevail in the end, regardless of the difficulties.
AND at the same time…
You must confront the most brutal facts of your current reality, whatever they might be.

While the gravitas of their situation is wholly incomparable, I’m frequently reminded of the Stockdale Paradox when meeting startup founders.

Not only is it easier to be blindly optimistic and evangelise, than accepting of harsh truths, it usually takes an individual over the line from confidence to arrogance.

Founders who:

  • Confuse their ability to correctly identify a problem, as validation of their chosen solution;
  • Stop listening to, or inviting criticism of their performance (failure to send regular investor updates, for example);
  • Spend more time attending pitching events and networking events, than building their company;

— they’re all red flags that the balance has tipped too far the wrong way.

Investor John Henderson encounters a startup struggling with the Stockdale Paradox.

I’ve long referred to the best founders I worked with as pragmatic optimists; entrepreneurs who demonstrate the unshakable self-belief they can acheive their goals — but are always accepting of their day-to-day situation; of what is (and isn’t) working; of changes in their market and environment; of feedback, both subjective (customers, staff, investors) and objective (sales, traction, analytics).

Importantly, pragmatic optimists are incredibly investable, especially at seed stage, when investors place their bets based as much on the character of the individuals as the market they’re tackling, or the barely-tested technology they’re building. They’re coachable, they’re confident about what they know, and what they need to learn.

Pragmatic optimists are adaptable, not afraid to iterate, they’ll do what’s required to survive — and early-stage startups are all about surviving long enough to grind out results. They’re more likely to be transparent, less likely to string along staff and investors as the money runs out.

Unchecked, optimism is as likely to kill your startup as cynicism or apathy. Founders who ‘never say die’ usually do. God knows the world needs dreamers and doers right now, arguably more than ever before, so never stop believing in your potential, or the change you can effect — but keep your eyes open, your feet on the ground, and listen. Always listen.