Newsletter 95: contrarian but right, how to think for yourself
Last week, I wrote on timeless advice you have to ignore, which turned out to be my second most read essay. Clearly, there is an appetite for contrarian takes. As Christopher Hitchen once remarked:
“the essence of an independent mind is not in what it thinks, but in how it thinks.”
If everyone agrees with conventional wisdom, progress will likely suffer. We must strike a balance of questioning yet listening to the wisdom of the crowds. I do not think that contrarianism means being against everything by default. We must think hard for ourselves, especially when a decision has irreversible consequences. Yet, we sometimes have to embrace common wisdom if it makes sense.
The value of being a contrarian is most visible when investing in and/or building businesses. You have to be contrarian to find great opportunities that are not obvious to other people. Then you need to act on them despite the pushback from everyone you. Of course, that would inevitably result in frequent mistakes. But, all it takes is to be right once when everyone else is wrong.
That chain of thoughts made me reflect on what are my contrarian, especially when it comes to running a startup and managing people.
I spent the past decade working in tech. Throughout that time, I have made more mistakes than I like to admit. I often listened too much to what others felt was the right way to do things. So I do find value in reflecting on all those lessons every once in a while, which led to today’s essay. Here you go, my not-so-popular lessons learned from building startups.
Years of experience < proof of work
Conventional thinking: years of experience carry the most weight when hiring new people.
Contrarian take: years of experience is a false positive signal.
Unless a candidate is exceptional, then the years of experience amplify greatness. In all other cases, do not assign a lot of weight to how long someone has been practicing her craft.
When recruiting new people, HR teams always emphasize the need to recognize the years of experience a candidate has. So they would bring someone with +10 years of experience and expect that alone to blow my mind. Then I meet the candidate and schedule several interviews to test culture fit, behavior, and competence. Only to realize that she is not at the level we expect.
I have experienced that dynamic again and again across countries and cultures. So rather than fixating on the years of experience, I look for proof of work. Proof of work means relevant activities either as part of the candidate’s past work or during her free time. All great people have a strong bias for action. Action, in turn, results in a variety of side hustles. Outperforming everyone else at work. Starting companies. Obsessively studying fields she finds exciting, the list goes on and on.
I do not believe that years in business carry the most weight when assessing someone’s capacity to do great work. I have met countless young people who find ways to compensate for their lack of experience. Grit, resourcefulness, and curiosity are some of the qualities that come to mind.
Not to mention how many experienced folks are masters at masking their weaknesses. Their many years of experience have turned them into master communicators. They know how to feign competence and exhibit charisma. Thus, making it hard to recognize true talent. So be wary of experienced executives.
Should you hire an agency?
Conventional thinking: small and medium agencies offer great value for money.
Contrarian take: most agencies offer mediocre work. If you are looking for an agency to hire, go for the best (top 5 globally) or the smallest (a kickass freelancer). If you work with anything in between, you will receive average results.
Working with the best is a safe bet. We live in a highly competitive world. If the vendor can raise through the noise, most likely, you will be in good hands.
Working with a small vendor/freelancer guarantees focus. Most probably, you will be their biggest client. Additionally, it will be easier to assess how good they are.
On the other hand, when hiring mid-size vendors, the person selling you the service is different from the person delivering on the promise. In my experience, the salesperson is great, but the person delivering is not at the same level. You will be one of many clients and won't receive priority support.
There are always exceptions, but I prefer to work with freelancers or the world's best vendors as a rule of thumb. Everything in between is a waste of time.
More people less output
Conventional thinking: the bigger your team, the higher the output.
Contrarian take: smaller teams force you to focus on the 1-2 most important bottlenecks.
Unless you run a business that requires massive teams, e.g., a factory, you better run a lean team. In my experience, less than ten people result in better output. Small and well-aligned teams focused on a specific goal is where the magic happens. Quality trumps quantity.
When the time comes to scale your organization, be careful. Take small steps. Do your best to maintain a culture of execution. It is possible to divide your workforce into small units, even when your business scales significantly.
Startups are different than regular businesses and thus require a particular type of talent.
Processes equal efficiency
Conventional thinking: processes will help your team to be more effective.
Contrarian take: premature processes kill creativity and create unnecessary bureaucracy.
I recognize the need for process, especially in highly regulated industries, e.g., airlines, healthcare, and finance. Processes are enforced to either prevent fatal errors or to increase efficiency. But people frequently make two major mistakes when implementing new processes:
Adding processes too early — premature processes can reduce your learning curve. When building a new business, you must be in the midst of all the action. At least, up until you cannot manage the chaos due to scaling too much. That’s the only way to clearly understand how the entire organization works. The needs of your users and clients. Meaning that early on, you need to do a lot of things that do not scale, therefore, avoid processes. That’s the only way to reach product-market-fit.
Self-serving processes — often, the employee puts their personal ease of work over the company’s needs. In such cases, the process is self-serving, and thus it creates bottlenecks and frustrations for other teams. Allowing people to appease their own ego leads to inefficiency at best and toxic culture at worst.
The more controlled one’s actions, the less likely it is for that person to take the initiative. Her creativity is suffocated due to too many rules dictating each step. Be wary about when is the right time to start implementing processes.
You need an idea to start a company
Conventional thinking: the idea is the most important aspect of starting a new venture.
Contrarian take: Problems > ideas.
People have it reversed. You do not need to think of startup ideas to identify business opportunities. Instead, look for problems. Preferably problems you have experienced yourself.
Why problems over ideas?
Study any success case. You will find out how the founders tested out several quite different solutions against the problem until they discovered product-market fit. Building a company is a long process. Nowadays, companies stay private longer, so it can take a whole decade to reach a level of success, whatever that means to you. Throughout the years, your understanding of the problem will grow. The solution you are building will follow your learning curve. So fixating on a solution without much depth in understanding the problem is premature. It may even drive you to failure.
On the other hand, focusing on the problem will grant you the necessary flexibility to pivot when necessary, thus adapting to an ever-changing market.
Perhaps the better way to start a business is to ask yourself which problems are worth your effort.
Your ability to validate a problem early on is essential. First, at least some users must urgently want a solution to your problem. Next, you need to be able to answer the question, "why now?". Timing matters. Every good investor will challenge you on that. After all, Google was not the first search engine. YouTube wasn't the first platform for videos. Facebook was not the first social media.
As Paul Graham argues:
“The verb you want to be using with respect to startup ideas is not "think up" but "notice." At YC, we call ideas that grow naturally out of the founders' own experiences "organic" startup ideas. The most successful startups almost all begin this way.”
Finding a startup idea is a subtle process. As counterintuitive as it sounds, thinking of startup ideas often does not work well. To see that in action, try joining a great startup. Your worldview will change. It may take time to come across situations where you notice worthy problems. But surrounding yourself with great founders will help you start noticing. The more problems you solve, the more you will be able to recognize great startup opportunities.
Perhaps some of the ideas in this essay won't hold true in more established organizations or other sectors. However, having a contrarian perspective is not a universal approach that could be applied carelessly. In fact, most kinds of work require the very opposite. You have to follow conventional wisdom, thus avoiding being wrong at all times.
In other types of work, the only way to do well is by thinking differently than most people around you. As highlighted earlier, investing and starting a company are such scenarios. Scientists, authors, and artists face a similar challenge. How to keep on producing ideas that are both correct and novel? How do you maintain an independent mind despite the natural need for conformity?
Most likely, it’s a matter of nature rather than nurture. You need to have a natural drive to push against the boundaries of what people consider the right way of doing things. Lacking that personality can cause serious unhappiness if you pick the wrong career.
Having said that, there are ways to become a more independent thinker. Surround yourself with people who think the way you want. That could be done either offline or online.
Offline — by building a friend circle of such people. Which is admittedly hard since you have the constraints of your location.
Online — all it takes is researching and following a few interesting people. That will give you a glimpse of what it takes to think differently.
Then nurture your curiosity. As Paul Graham argues in one of his essays, those two are the fundamental ingredients of an independent mind.
“In my experience, independent-mindedness and curiosity predict one another perfectly. Everyone I know who's independent-minded is deeply curious, and everyone I know who's conventional-minded isn't. Except, curiously, children. All small children are curious. Perhaps the reason is that even the conventional-minded have to be curious in the beginning, in order to learn what the conventions are. Whereas the independent-minded are the gluttons of curiosity, who keep eating even after they're full.”