SPEAKER_01: There's a moment in a founder's brain when you know your startup is gonna die. You see the future, but the future is looking like darkness. It was coming for you.
SPEAKER_00: We don't talk about Bruno.
SPEAKER_01: In the movie Encanto, there's a magical character named Bruno who can tell the future, but it's always bad news. Why don't we want to talk about Bruno? Because we don't want to hear it. If you think about it, that means people are okay with lying to themselves. And if you lie to yourself, you lie to others, you are doomed to failure. Today, we're talking about how to avoid that failure by clearly facing it head on. And you'll hear how I failed to heed that call in my own startup and how you can avoid that. Let's get started. Miyamoto Musashi was a famous and fierce swordsman in Japan. In the 17th century, he said, In 2010, I lived a lie and my startup, Postures, paid the price. We started in 2008, growing quickly. Our startup was up and to the right. It was about two straight years of back-to-back 20 to 30% monthly growth, about 10x yearly growth, and it seemed like it was going to continue forever. But suddenly, in the middle of 2010, our growth went flat. Now, there were many different reasons for it. We didn't scale our servers, I didn't turn into a people leader, and I wanted to keep coding. But most importantly, the competitive scenario changed. The truth is, we were going to die. But I couldn't accept it because I was avoiding the truth. I looked for statistics that were indicating we might still be okay. It was just a dip. We had investors and employees, and we got them to believe. What could it mean if I was wrong? My whole worldview would have fallen apart. You remember that scene in The Truman Show where Truman realizes he's on a set. Truman's blind to the reality that everything in his world is constructed for him. His reality is merely a reality TV show. He wanders into a random building and sees something totally unexpected.
SPEAKER_00: What's happening? Just as Truman realized in that moment he was on a set,
SPEAKER_01: so too must a founder who is failing realize their whole understanding has to change. What do you do when the thing you believed is no longer true? Well, when confronted with different outcomes, you have to change your model. At YC, we say, don't die. And that's a truism because it focuses you on the beliefs that you have to change. Fear of death can paralyze you into believing things that are no longer true. Overcome your fear of death as a company and you can dedicate yourself to the truth. What's confusing and counterintuitive about all of this is to what degree it's useful to believe in a dreamland before it happens. In 2013, when Bitcoin first appeared, it was normal for the Bitcoin industry to be a part of the dreamland of Bitcoin. When Bitcoin first appeared, it was normal for people to be talking about it in a virtually empty room like this one. The topic I want to talk about today is Bitcoin neutrality. This is partially why it's so hard for founders to come back to reality. You got to believe that you'll reach the promised land, but you must know that you're not at your destination yet. You must know this dreamland kind of like that empty room of Bitcoin, that dreamland is not all there is. The famous psychologist, Daniel Kahneman, told a story once about his visit to Vancouver Island. He said, We found an attractive but deserted motel on a little traveled road in the middle of the forest. The owners were a charming young couple who had used their life savings to buy this motel, which had been built a dozen years earlier. They told us without irony or self-consciousness that they had been able to buy it cheap because six or seven previous owners had failed to make a go of it. They felt no need to explain why they expected to succeed where six or seven others had failed. Madness is doing the same thing over and over and expecting a different result. This is where confronting reality matters. Founders and creators should be highly aware of the idea maze. What is the set of things that have been tried? If you're trying to commercialize some technology, know who came before you and what they tried. Don't do exactly what one, 10, or thousands of people have already done. Surely you must have some new approach, some reason why it will work for you. It might be tech, it might be the way you approach customers, it might even be as simple as we know these people and other people don't. But you should know what that reason is. Otherwise you'll be just like Kahneman's charmed young motel owning couple, ignoring reality, giving in to the madness.
SPEAKER_01: The real key story here, I think, is that you've got to find a way to immerse yourself with both dreamland and reality and make a bridge between those two things. Here's Ray Dalio talking about one way this happens.
SPEAKER_00: Whatever success I've had in life has had to do more with my ability to know how to deal with my not knowing than even the things I know. So that changed everything. It meant that I wanted to bring in the smartest independent thinkers to disagree with me so that we could disagree well. And that developed a unique culture.
SPEAKER_01: The philosopher Karl Popper talked about scientific knowledge being based not in certainty but falsifiability. Through experimentation and criticism, you would discover the truth. As a single person with a dream, you can live in a dreamland of your own creation, but if you surround yourself with smart people who don't engage in group think, you can promote and develop more accurate and robust mental models that then allow you to have an impact on reality. And then you can really change the world. That's the alchemy. Going from the dreamland of an individual to creating the reality with a group of your smartest friends. That, my friends, is the real magic. And that's what I want for you. That's it for this week. I'll see you next week.
