The Competitive Value of Time

In 2007, I was giving an interview to TechCrunch about the company I had just founded [1]. Outside of product, my main talking point was about how we were making a bet on compounding interest and that, although we had no venture funding, we would outlast and eventually outgrow everyone else in the space.

The TechCrunch reporter that I was pitching, Mark Hendrickson, went on to found Plancast, and later to help me launch my current company. As coworkers, he would often (playfully) hassle me about that interview, the fate of that company and how wrong I was. Although I’m obsessed with how “almost right” I was.

The Snowball Theory.

The line about “betting on compounding interest” comes from a lifelong obsession with Warren Buffett.

Buffett describes his business and career philosophy as a snowball rolling downhill, gathering momentum the longer you let it roll. His recent biography is titled Snowball, and, at 81 years old, his current net worth is 44 billion dollars (Although Buffett is the son of a congressman and probably started with more advantages than the rest of us, I still think his philosophy works for a general class of entrepreneurs.)

Time

Eighty percent of new businesses fail, or some number like that. People tell you it’s all luck, but I think this is nonsense, or at minimum unhelpful. Yes, you do have the option, many times, of betting your entire business. And when you lose that bet, you go out of business.

You also almost always have the option of not betting your entire business. Because so few people do this, longevity turns into a competitive advantage. The trick is managing your business so that you have enough time to matter.

For example, when I built my first company, I very carefully managed the finances so that we were always a little bit profitable. At first this meant contracting on the side. Eventually that morphed into running a very, very lean operation. Then in year four it turned into a really profitable operation. That’s one experience of the value of time--each year the company was stronger and capable of tackling bigger goals.

During that four year period, I also saw dozens of competitors, many of whom had millions of dollars (in one case 100 million dollars) of funding, show up and then quickly put themselves out of business. It’s not the case that we beat them--they very clearly beat themselves. Through bankruptcy, disinterest, pivoting, and acquisition, you can almost always count on outlasting your competitors--given that you yourself avoid those things.

Those are two ways that time plays in your favor, but they come with a big caveat: you have to be working on something that you’ll care about for many years.

The Mountain

In the Snowball analogy, the mountain is the niche, market or problem that you’re trying to serve. For example, Buffett chose Finance, probably the biggest and most lucrative of all mountains. In hindsight, choosing this mountain is the key to this whole analogy.

Lift, my second company, is a human potential company because that’s something I’ve been interested in since first grade (when I was introduced to both Dungeons&Dragons and art, and immediately wondered how to level up my drawing skills). Although there are other factors in picking an area of focus, I think personal interest should be your primary one.

The Snowball

The Snowball in the analogy is about your ability to execute, which gets stronger the more time you focus on it.

For the first half of my career, I thought my ability was 100% tied to depth and breadth of technical knowledge. In that regard, I probably peaked in 2005 after the publication of The Regular Expression Pocket Reference and a simple open source Perl module.

However, after going through four startups, I think there’s a separate snowball building, which for lack of a better word is based on assets. This is not the most polite word because your career assets are often people and those people would prefer to be called friends.

My co-founder, Jon Crosby, is a quick example of a wonderful asset that took years to develop. We met in 2000, working our first jobs out of college, doing trivial meaningless tasks at a major corporation. But we liked each other and kept in touch as we hopped into increasingly interesting roles (he was head of engineering at Path and Engine Yard). This isn’t to say that you can’t co-found a company with a relative stranger. Sometimes that’s your only option. But over time, if you treat your coworkers well, you’ll have more and better options.

In Practice At Lift

I often say that Lift is in a space that I could work in for fifty years. That’s what I mean when I say that it’s important to pick your mountain based on your interest. While there are many interesting ideas to work on, I can think of very few that I would want to spend decades mastering.

We spent the first six months of Lift running interesting and informative, but largely unsuccessful experiments. This is where it’s important that everyone was committed to the space. If we’d been running spray-and-pray entrepreneurship (a completely valid alternative approach), then I’m sure we would have abandoned. Instead we powered through and found something that worked.

Lift is venture backed, which complicates this philosophy, but not fatally. Primarily, we’ve focused on finding investors and partners who take a long view (they just have to think longer than your average startup). The upside is that we get to work with amazing people. Having bootstrapped my last company, I really appreciate how much quicker it is to pull interesting people into Lift.

Of course, there’s no failsafe method for building a company. I’m sure we’ll have some failures along the way, but I’m equally sure that the long term focus will bring enormous wins.

Feedback? Talk to me on Twitter.

[1] The first company was CrowdVine, which got scared off by Ning, ran into a vertical, scraped by for three very lean years, and then emerged very profitable and with more resources (especially design). By that time Ning had taken itself out of contention and we could have taken another swing at our original goal (essentially Groups 2.0) with 7x stronger developer resources. I still own CrowdVine, although it is now completely run by one of the original employees.