• An exploration of the impossible tradeoff that all startups must make: betting on now vs. betting on the future.

    There is a surprising amount of similarity between the process of starting a company and the wild science of quantum physics. Both are chaotic, unpredictable, and in many ways counterintuitive. And one particular principle that I think translates quite nicely is what I’ll call the Startup Uncertainty Principle.

    In the late 1600s, Isaac Newton single-handedly changed humanity’s understanding of the universe. In a span of several years, he invented calculus, derived the laws of motion, explained the ubiquity of gravity, and accomplished many other incredible feats. Underlying much of his work in physics is a fairly simple, seemingly obvious observation: things can only be found in one place at a time, and can only be seen moving in one direction at a time. But as it turns out, Newton was wrong.

    Enter the Uncertainty Principle. Three centuries later, in 1927, Werner Heisenberg proved that there was a fundamental limit to the accuracy with which the universe could be measured. Specifically, the more precisely one measures the velocity of a particular particle, the less precisely that particle’s position can be measured, and vice versa.

    For example, if one were trying to look at an electron and determine its direction of movement, they would find that as the measurements of its direction became more accurate, the less certain would be their measurements about its position. And so underlying the entire universe and all its laws of physics is a tradeoff. There is always a compromise to be made between knowledge of the now (position) and knowledge of the future (direction).

    The same is true in the world of startups. I’ve spent my career building consumer products and features, all of which started out not quite right. Some of them found their audience and succeeded. Many of them never really worked and subsequently failed. Yet all of them went through a very common, very tricky journey, the journey of navigating the Startup Uncertainty Principle.

    Early in a product’s lifecycle, the team developing it makes certain assumptions about their customer needs, their competition, user perception, the forces of the broader market, etc. And just by virtue of statistical improbability, most of these assumptions turn out to be wrong. Yet it’s not always obvious how they’re wrong, and whether those false assumptions require a minor tweak or a grand pivot.

    One of the greatest challenges facing startups at every stage of early development is deciding which of their many assumptions they want to double down on and which they want to continue revising. This is the Startup Uncertainty Principle at work. Given that a startup doesn’t know which bet will pan out, there will always be a tradeoff between its desire to strengthen its commitment to any particular idea and its desire to preserve optionality and keep exploring new avenues. It’s a sad irony: the company wants to find the winning approach quickly so it can devote all of its resources to that idea. But because it doesn’t know which approach is the winning approach, it simultaneously is fearful of over-investing and diverting resources away from exploration.

    I’ve seen this happen time and time again. In the early days of my company Anchor, for instance, we tended to over-index on a preference for optionality and iteration. And while that was effective and ultimately led to a great product, it took a very long time (and time, for a startup, is a function of one thing only: limited money in the bank). Had it taken any longer, it may not have worked. I’ve also seen the inverse happen at other startups, where lack of iteration and an unwarranted commitment to an assumption early on proves fatal.

    The Startup Uncertainty Principle shows that the more you focus on the now, the less you’re able to prep for the future. And the more you prep for the future, the less effective you’ll be now.

    The magic of success depends on a startup finding a way out of the purgatory of the Startup Uncertainty Principle.

    When does this catch-22 stop plaguing the development of new products? When the products reach that elusive milestone of Product Market Fit. This term is typically defined as something like “when a product finds its target audience and is able to satisfy their demand.” It’s that wonderful stage at which development transitions from pivots and iteration and onto scaling.

    But I think another definition of Product Market Fit rings just as true. It’s the point when the Startup Uncertainty Principle becomes more forgiving. When a team gains the confidence that it knows where it is (its position), it can begin diverting its attention and resources toward growth and scalability (its velocity).

    The Startup Uncertainty Principle is real, and it affects the winners and losers alike. Every great company that did ultimately win began with a series of misconceptions and missteps, just like the companies that failed. So what differentiates the winners from the losers, if everyone starts off in that abyss? What made the great ones great is that they found that magical spot between altering course and doubling down, and they stayed there just long enough to outlast the unforgiving Uncertainty Principle.

    P.S.

    I referenced Isaac Newton’s creation of calculus. In fact, it’s unclear whether he did invent it. Around the same years (the 1670s), German mathematician Gottfried Leibniz independently invented calculus. The debate over which of them deserves credit for the invention continues to this day. And many parts of Leibniz’s formulation are preferred over Newton’s. Nonetheless, the truth is, Leibniz is not a household name the way Newton is. Maybe there’s another lesson to be learned from that, and another article to be written: There’s a big difference between who does something first or does something best and who actually gets remembered in the history books…

    Prev:
    Emotional Intelligence: Skills You Weren't Taught in School
    Next:
    You'll Never Be Wealthy Until You Delay What You Can Buy Today