Don’t be a badge collector


Lots of people — especially young and ambitious people — say they want to start startups. Very few do. If you’re young-ish and ambitious and you want to become one of those who actually does start something, the biggest danger you face is “credentialism”.

What is credentialism?

Crudely, credentialism (or, more rudely, “badge collecting”) is the belief that it’s always worthwhile to gain one more credential — a place at a prestigious university, a masters degree, a top-tier first job, one more promotion, and so on, before you leap into becoming a founder. Partly you think you’ll be more “ready” to be a founder later; partly you believe that the credential is a worthwhile hedge against potential failure. I think both motivations are misplaced.

A lot of the time you’ll have a choice — implicitly or explicitly — between starting a company and gaining another credential. The danger comes not because credentials are bad in themselves, but because they’re addictive. The marginal credential doesn’t feel like it will take you far from the path of becoming a founder, but the cumulative impact is huge.

It’s an insidious effect: if you think that staying one more year in your investment banking job or your Google role won’t harm your chances of becoming a founder, you’re probably right — but that’s only the first order effect. The second order effect is that in a year you’ll have the same choice with the same apparent payoffs. But now you’ll be making a bit (or a lot) more money, you’ll have a bit more responsibility, you’ll be one year closer to the next major milestone… and now the cost of leaving is marginally higher.

Rinse and repeat. It’s amazing how quickly it becomes inescapable: some of my most talented and ambitious friends are barely 30, say they want to start a company, but tell me they can’t afford to quit their high-end jobs[1].

Of course, I didn’t write this to raise awareness of plight of rich and successful professionals who are too well paid to start a startup(!); I wrote this because many of the people I meet who are just starting their careers seem to feel the dilemma and I wanted to try to provide a framework for thinking about it.

Why credentialism is harmful for future founders

Credentialism presents four problems for aspiring founders: (a) as I’ve already suggested, it trains you to think about “readiness” to start a company in the wrong way; (b) it trains you to seek the wrong kind of dopamine hits [2]; (c) it teaches you to adopt a set of values that are rooted in the status quo (rather than changing it); and (d) it trains you to avoid risk.

Readiness

Sometimes when we offer someone a place at EF, they ultimately decide to go and get an additional degree (i.e. another credential) instead. There’s nothing wrong with that per se; for a lot of people, getting a masters degree is a lot better idea than starting a startup. It makes me sad only when they tell me that they think getting a degree will make them more “ready” to start a startup in future than they are right now. Except in very rare cases, that’s not how readiness works for founders.

Lots of careers do work like that — in which case credentialism makes perfect sense. When you’ve collected all the requisite qualifications, you are ready to be a doctor (and I wouldn’t want to be treated by one who hadn’t). But there are no pre-requisites for becoming a founder, other than wanting something to exist and believing that you can make it exist. Of course, sometimes you might think that you need to get another degree to learn specifically how to make that thing exist, but that rarely works in practice. If you don’t already have the skills to make a thing you can imagine, you’re probably not the right founder for that thing. In our experience at EF, people with an idea but without the skills the idea requires overestimate their ability to learn the specific thing they need, rather than getting sucked into generalities. At this point the degree doesn’t actually provide the knowledge that unlocks a startup; it’s another credential.

More broadly, you become a good founder not by being “ready”, but by getting started: determining whether you’re a good founder is a discovery process, not an analytical one. Moreover, there are rapidly diminishing marginal returns to gaining more pre-startup knowledge. You rarely if ever know what will end up being most valuable to know before you get started.

Few if any of the best founders I’ve worked with felt ready when they started. Credentialism tempts you to think that if you get one more badge, you’ll feel ready — but the danger is that it will just stop you ever making the leap.

Dopamine hits

Founders have to learn to find motivation in improving the most objective metrics available to them — ideally revenue from customers. That sounds obvious, but it’s harder than it sounds. It’s not the way much of the world works. Most degrees and many jobs, including the most prestigious ones, are set up such that success is about third-party praise and approval — winning a badge — not objectively creating something valuable.

When I was at McKinsey, the standard advice on how to succeed as a junior consultant was to “make your boss look good”; the way you found out whether you were succeeding was that every six months you’d be given a rating by a panel of partners. Maybe that sounds silly or an easy trap to avoid, but it’s addictive: you learned to shape your behaviour to optimise your performance rating (another credential). Most of all, you learned that third-party (i.e. boss) praise was the measure of success. My co-founder Alice and I were at McKinsey only a couple of years, but the transition to a “praise-free environment” was one of the hardest adjustments when we started EF.

Of course, there’s lots of celebration of fundraising and awards in the tech industry (I’m guilty of this too), but good founders know that this kind of third-party validation is meaningless unless their startup is genuinely making progress.[3]

As a founder, you need to get your dopamine hits only from making a product that customers pay for. The longer you ride the credentialism train, the harder it is to switch into a startup mindset.[4]

Status quo bias

The purpose of credentials is that they are shorthand for certain standards. The reason people talk about companies like Goldman Sachs or universities like Oxford being “great names on your CV” is that they represent a set of values and achievements that are well understood and generally acknowledged. That’s really helpful if you’re applying for a job. I can read your CV and infer various important characteristics from your credentials with a reasonable degree of predictability. Why? Partly it’s because badges like these are competitive. Many more people want them than can have them. Partly it’s because you learn skills and knowledge in gaining them — and in particular you gain the types of skills and knowledge that other well established institutions value.

Credentials are therefore less useful for founders. Will you be better off as a founder if you go work at McKinsey or get an MBA first? They’re both great credentials, but they’ll teach you to value, and how to do, stuff that people already know how to do well.[5] So much of founding a great company is in the stuff that people don’t already know how to do well. They’ll also teach you to value, and how to conform to, well established standards. So much of founding a great company is in ignoring (or at least questioning) well-established standards. It’s striking how many of the truly great founders had very little experience outside their own company.

Risk

Worse, credentials are about risk reduction: they’re designed to reduce variance — both in the holder’s career outcomes and employers’ hiring outcomes. Startups are the opposite: founders (and investors) need to embrace variance. In fact, one of the reasons startups are attractive for very ambitious people is that the outcomes have a power law distribution (or something like it), which is what allows for extraordinary outcomes. Most credentials aren’t like that. Credentials are really about predictable, linear success; in a way that’s the point of them. You get a better test score, you get a promotion, you get a pay rise — they’re real achievements, but they’re the opposite of extraordinary.

You’ve got to decide what is most important to you. If you want the possibility (albeit a small one, conditional on who you are) of doing something exceptional, you have to become a variance seeker. You need to pursue opportunities that have lower median and higher variance outcomes; you have to reject consistent small wins in favour of consistent attempts to achieve big wins.

What to do about it

The danger doesn’t lie in having credentials; many of the most successful founders at EF have attended some of the world’s top universities and worked for the most competitive organisations. The danger for an aspiring founder is investing incremental time to gain incremental credentials. As I’ve said, though, credentialism is insidious, so how do you throw off the shackles?

The most important thing is to recast your credentials as a reason to seek risk, rather than as an end in themselves.

About seven years ago, when Barack Obama was running for president, I saw an interview with him in which he explained why he had chosen to become a community organiser in Chicago when he graduated from Harvard Law School. His credentials — he was president of the Harvard Law Review — could have given him access to more or less any top corporate law firm or Supreme Court clerkship he wanted. I remember his answer very clearly: he said it was precisely because he had such great credentials that he was able to take the risk of becoming a community organiser. His credentials set a lower bound on his future outcomes; he might be forsaking the opportunity to maximise his income by not joining a corporate law firm straightaway, but he was never going to be unemployed.

I think that’s a great mindset for an aspiring founder. The fact that you’ve got a degree in computer science from Imperial is exactly why you can afford to try to start something now, not a reason why you have to take the most prestigious job you can get.

***

One of the attractive things about credentials is that they represent a structured way to achieve success. Whether it’s a degree or a job, a credential usually involves a well-defined way to win. Starting a startup isn’t like that. By default, there’s no one but you — and there’s no playbook, curriculum, hierarchy or instructions. What makes it harder is that our educational institutions and prestigious jobs largely reward mastery of these things: we’re trained to figure out the rules, play by them and win. Credentialism is deeply embedded in our whole culture of ambition, but the more ambitious you are — and the more you think you want to be a founder — the less you can afford to be sucked into it. The longer you wait to jump in, the harder it gets and the harder the transition.

Don’t wait — another badge just isn’t worth it.

EF supports and funds Europe’s most ambitious technical founders to build deep technology startups in London. Since 2012, we’ve helped build 37 companies now worth over $130m. To find out more or to apply, visit www.joinef.com

[1] I doubt it’s true, in an absolute sense, but it’s how they feel.

[2] I’m using this term loosely; I just mean to seek and gain validation from the wrong kind of rewards.

[3] The much discussed idea of “vanity metrics” gets at exactly this problem)

[4] Alex, one of EF’s programme directors, read a draft of this and added: “One of the things I’ve learned from working with super early stage companies is that if you’re used to praise you start to believe that third-party validation can actually compensate for real user feedback. It’s not just that you learn to enjoy praise, it’s that you think it’s important.”

[5] It’s interesting the extent to which somewhere like Google — now a 50,000 person company — today represents something similar.