The Pessimism of Founders

We tend to think of people as being one of the two: optimists or pessimists. At best, we are willing to concede the same person can be optimistic about some things while being pessimistic about other things.

 

But founders of mega-successful startups need to be both: audaciously optimistic about their company’s prospects while simultaneously pessimistic that they could get wiped out by some new upstart who rises the way they did. Let’s see a few examples of the pessimism of such founders.

 

Andy Grove, as CEO (and one of the co-founders) of Intel, wrote a famous book titled Only the Paranoid Survive. He calls events that can kill businesses as ‘strategic inflection points’. These happen at high speed; and don’t creep up on you incrementally. It could be technological advances (like what the iPhone did to Nokia), or a deep pockets player moving in (think of Reliance or Amazon entering any new market), or a regulatory change, to name just a few reasons. There is a very tiny window to react in such scenarios, he wrote.

 

Google, for example, had been building its mobile OS for some time before the iPhone was launched. Why? Because its founders were paranoid that should Windows Phone OS dominate the yet-to-be-created smartphone market, they might get locked out of by Microsoft, who’d insert their own search engine by default. While a valid paranoia indeed, the entire effort turned out to be a waste since it wasn’t Microsoft but Apple which created the smartphone market! Specifically, while Google had been building a mobile OS like the BlackBerry’s keyboard-based interface, Apple’s iOS pulled the rug under them via its touchscreen-based interface… (Google, of course, managed to respond in quick time by acquiring the touch based mobile OS of another company, Android, and thus ensured it never got locked out of the mobile market).

 

Bill Gates’ pessimism translated into a decision to always keep adequate cash buffers – this would hopefully buy Microsoft time to react, even as the upheaval caused by the competitor ate into its profits. How much buffer? He “insisted on always having enough cash in the bank to keep the company alive for 12 months with no revenue coming in”, writes Morgan Housel. That must have certainly helped when Microsoft missed the potential of the Internet entirely.

 

Lastly, there is Facebook’s founder, Mark Zuckerburg, who gives a little book with core ideas to all new employees. His paranoid entry in that book?

“If we don’t create the thing that kills Facebook, someone else will. The Internet is not a friendly place. Things don’t stay relevant, don’t even get the luxury of leaving ruins. They disappear.”