If startup success is mostly random then how can someone like Elon Musk create startup-after-startup shooting for a goal against-all-odds, but always come out on top?
The thing is, once you've had a success, you now have enough money to buy your way over certain hurdles or attack industries that can't be tackled with $5 VPS and a MacBook Air. Plus VCs are 10x more likely to give you their money.
Could Elon have started Tesla if he didn't previously make $165M from PayPal? I say "unlikely". Could he have started X.com/PayPal if he didn't make $22M from Zip2? I don't know. Was Zip2's success partly due to luck? I don't know but I'm sure it played a part.
In July, 2003, Tesla Motors was founded by Martin Eberhard and Marc Tarpenning (who both initially financed the company).
A year later Elon Musk invested in the company and became Chairman. Musk made Tesla’s long-term vision to produce affordable electric vehicles available for the public.
IIRC there was quite a fight between Martin and Elon for control of the company, it wasn't pretty
Which brings me to a point regarding this article: I don't want to be a dick but most startup postmortems don't tell the truth. Besides that most founders fail to realize exactly where they failed the fact is that the startup environment itself isn't transparent at all.
On that last point: a year ago I was talking to a friend who just closed his startup and he gave the typical "not enough traction/not enough funding" explanation they should be selling as hallmark cards already. Last month I bump into him after a meetup and the story was quite different: his startup was unfortunately used as filler along many others by a group of investors who needed to put a show because they were using government funds to finance these companies. All the participant startups got some seed money but at the end of the day all the full amount of funding was given to one single company with no employees a half-baked product that failed to launch and founded by none other than the younger brother of one of the investors who then moved his entire operation to singapore, and then nothing.
There are tons of stories like that, and founders can't say anything because when something like this happens and in the heat of the moment its most likely they would look like sore losers and the last thing they need at that point is to scare away other potential investors by looking like a rogue founder.
My point is that we rarely if ever get the whole story.
Flip a coin enough times and you'll get a run of all heads that is arbitrarily long. Doesn't change the fact that nothing but randomness is at work.
Musk works hard, no doubt. But that is a necessary, not a sufficent, condition for success. Many people have worked just as hard as Musk and failed. Furthermore, successful people who start second businesses tend to fail slightly more often than first-timers, which is hard to understand if you believe business success is a learnable skill.
So I don't think Musk is a counter-example to the OP's point, but rather a predictable consequence. In a world were 95% of startups fail and tens of thousands of people start companies, you'd expect the odd one to have multiple successes.
Again: this does not mean that Musk isn't incredibly smart, hard-working and most of all courageous. It means he's all of that, and lucky as well.
Every successful entrepreneur is going to be hard working etc, but that says nothing about all the hard working entrepreneurs who aren't successful (I'm belabouring this point because in this kind of discussion one often sees "All the successful people I know are hard-working" as if that had anything at all to do with the claim "All hardworking people are successful."
This implies that all work is equal. If two entrepreneurs both work 80-hours weeks and only one is successful, I don't chalk up his success to luck, I ask what did he do during those 80-hours that the other entrepreneur did not.
if 100 people do random things, and 99 fail while 1 succeeds through sheer luck, do you repeat the same random things they did?
Survivor bias is a huge problem in learning from case studies. A particular tactic may work well through a particular combination of market, environment, team and timing. That doesn't mean it's a good tactic for your particular situation.
You absolutely have to study and learn from the failures as well as the successes.
Elon was nearly illiquid for moments when spaceX and tesla were struggling. I think the fact that both companies were at the brink suggests that the struggles are very real to him as well.
It's actually pretty well documented that if the companies failed (and both almost did, by almost I mean within weeks of failing), Elon would have been ruined. At the point where he invested in Tesla and SpaceX, he wasn't actually billionaire, and his companies certainly were not liquid. The one out Elon had was having Google buy Tesla (which almost did happen). A few sources:
"In the meantime, at SpaceX, Musk and top executives had spent most of December in a state of fear, but on Dec. 23, 2008, SpaceX received a wonderful shock. The company won a $1.6 billion contract for 12 NASA resupply flights to the space station. Then the Tesla deal ended up closing successfully, on Christmas Eve, hours before Tesla would have gone bankrupt. Musk had just a few hundred thousand dollars left and could not have made payroll the next day."
Start-up success is likely a random, but not independent, event. If you had success with your first start-up, I'd be willing to bet that the capital you now have plus the contacts you made will increase your likelihood of being successful in your second one, etc.
If you look at a sample of people who started companies and find a few repeat winners, you probably will have found repeat winners produced by chance. But if you look at a repeat winner who keeps producing wins after you've started watching them, the same argument doesn't apply -- odds are overwhelmingly against the hypothesis that they continue winning randomly.
If X happens to 1 in 100 people, then there's a very high chance (~1) that X happens to 1 of the 100 people, but a much smaller (~1/100) chance that it will happen to person #56, for example.
The parent post is saying that "starting to watch someone" constitutes naming the #56.
His first one zip2 was mostly luck. After that, he had massive amounts of capital and connections which greatly enhanced his chances for future success. The snowball effect.
A lot of what Musk is doing now is deeply dependent on government support. And if you look at all the tech giants you'll see a kernel of government subsidy from the outset. Oracle. Sun. Google. Many others got their start with a government "in". It's the open secret of capitalism: states create markets. Markets require states.
This is almost a non-sensical statement as the state injects itself into every market and is by definition unavoidable. You could argue that the state subsidized Uber by handing a monopoly to the taxi industry, who's complacency created an opportunity for improvement. Doesn't mean government support is by any means required or necessary.
States are required in markets (as we understand them) fundamentally for protection over the transaction. History shows if you remove the state you end up with inter tribal economies where arbitrary homicide is a "valid" outcome of exchange (organized crime is a good predictor here). Not sure what you're advocating exactly though, so you could be right on different terms.
>A lot of what Musk is doing now is deeply dependent on government support.
That's in the nature of car manufacturing. If one government starts subsidizing a high capex industry, others have to follow suit or throw up trade barriers or their industries will drop off a cliff.
This has been going on since at least the 50s when Japan threw monumental sums of cash at its (at the time), pathetic and failing car industry.
Aerospace is similar. Best of luck trying to create a competitor to Boeing or Airbus unless you have the backing of the Chinese state. No amount of magic pixie startup fairy dust is going to get you there.
If startup success is mostly random then how can someone like Elon Musk create startup-after-startup shooting for a goal against-all-odds, but always come out on top?
Does he define the "mostly" in the argument?