The 90%

I was recently invited to Fairfield University to give a talk about entrepreneurship. Specifically, what lessons have I learned being a founder?

My top advice I shared with those hoping to embark on an entrepreneurial journey: You’re going to be wrong about 90% of your assumptions. The problem? You just don’t know which 90% you’ll be wrong about.

In 2014, when Mike Mignano and I started Anchor, we placed several bold bets. Some panned out, some did not.

In particular, most of our early decisions were based on a core assumption. Podcasting of that era was one-directional, stale, non-interactive. We believed the future of the medium was dynamic, engaging, flexible, multi-modal. So we spent time and resources building live group recording, social video creation, the ability to add music tracks to your show, smart background music, live text comment feeds, and so on.

As exciting as these features were, and as much as we believed in them personally, most of them were dead ends.

It took us about four years to fully appreciate the beast we were up against, the Chicken and Egg Problem.

Quite simply: Consumers would only come to Anchor if it had differentiated content. But, creators only create differentiated content on Anchor if consumers were already there.

And so on and so on, in an endless unbreakable cycle.

Most of our initial beliefs were wrong—likely nine out of ten. They were predicated on misinterpreting the market and what consumers actually wanted (a Product Market Fit problem I’ve written about before here).

Finding the 90%

When I tell founders this story, many shrug and say, “Well, if I’m wrong about certain assumptions, I’ll figure it out as I go.”

The truth is, it’s quite hard to recognize the 90% about which you’re wrong. The belief that you can separate right from wrong might very well be in that 90% too, meaning you have a false assumption about your ability to recognize your false assumptions.

There are numerous reasons for why we hold onto our false beliefs. One is simply protecting our fragile egos. Another may be our inability, while tackling problems, to view what we’ve built from an objective standpoint. Small companies, by definition, are small, and don’t offer much in the way of a diversity of opinion. A final explanation may be our inability to appreciate the entropy that governs the universe (more on that here).

So how do you step out—in a meta cognition sort of way—and assess your beliefs such that you can recognize what’s working and what’s not?

It must have been some time around 2018, when Anchor doubled down on the idea of embracing the format of podcasting (a term that, prior to that point, we did much to eschew) and prioritized building easy-to-use creation tools. We set an objective growth goal: Our weekly active users needed to increase by 5% week-over-week. At all costs. Having a concrete quantifiable metric is beneficial for two main reasons: First, it’s easy to track. But, more importantly, it holds you accountable.

At first, we held onto the many beliefs we had when we started the company. But to achieve that 5% growth goal, we quickly realized we were holding onto some heavy dead weight. On one particular week, we might reallocate resources away from a distracting project. On another, we might test a branding or positioning change that challenged our original assumptions about what consumers would want.

This inflection point defined when we began truly gaining traction with our product. Eventually, our product turbo-charged the growth of the podcast industry multiple times over. And this was due to the 10% of our original beliefs that turned out to be true, as well as the shedding of the 90% that turned out to be wrong.

Success cares little about your assumptions. The founders we knew who had achieved great success typically did so by following what worked rather than sticking to their early convictions. There’s a reason Instagram didn’t remain a mobile check-in app, why Netflix stopped mailing DVDs, why Flickr pivoted from its origins as a multiplayer online game, why PayPal decided not to focus exclusively on the Palm Pilot, why Android put aside its ambitions to develop an operating system for cameras. Those founders all let their early convictions carry them through the messy start and the necessity of iteration, all of which led them to understand that there were parts of their original ideas that worked, and parts that didn’t.

So, back to the original advice to those students hoping to found companies: You’re going to be wrong about 90% of your assumptions.

The follow-up advice: Place bets, develop convictions, and iterate fast to either prove or disprove those hypotheses. Don’t let your ego or sunk cost distract you from what’s next.

Final word goes to philosopher Søren Kierkegaard, who wrote, “Life can only be understood backwards; but it must be lived forwards.”

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