Thread by @theBuoyantMan

Stories like these are why most people start a business.

And they are all wrought with survivorship bias.

Be very careful while getting inspired by such stories. Always ask, "how many edu-businesses started with Aakash and failed?" before you consider starting one of your own.

I am not discouraging you from starting a business.

By all means, start a business. That's one of the ways to the promised land of wealth.

But don't start a business because you're inspired by the success stories on media.

No founder comes up to media to discuss failure.

Failure stories also don't work that well commercially and don't provide enough fodder for media ratings.

Nobody discusses failure publicly. Very few are transparent enough to do that.

So, what you see is filtered information.

The stories of business successes you see startups that

- raised their seed rounds
- got funded by VC
- raised their valuation
- became a unicorn so fast
- sold the company and exited at a massive profit

and on and on.

For every single story you see like that, there are at least 100 startups

- shutting down their operations
- suffered because of single point failure
- ran out of their runway money
- product launched and bombed
- had to fire 75% of workforce
- lost an important client

- don't know how they are going to survive next month
- don't know how they'll do payroll for next month
- can't survive next year without raising additional funds
- got rejected by all the VCs they approached
- got cheated by a bigger company
- struggling due to red tape

These stories don't get covered because they aren't sexy.

What you see in media is the earth in the first photo.

The total population/universe of stories to draw from is the second photo - that you see as the universe.

The problem with the media stories of startup successes is that, they are a very teeny tiny subset of samples drawn from the entire population,

albeit with a significant bias for only those that are on track to success, or already succeeding.

If you treat that as motivation/inspiration/proof that you too can replicate that, you're only going to be VERY VERY disappointed.

You need an altogether different approach to starting a business other than just because someone was able to start something and scale to billions.

Replace "business" here with "trading", "data science", "blogging", "becoming a successful youtuber" - anything for that matter and all of the aforementioned things will still be applicable.

Never base your inspiration on stories of sample population picked with obvious bias.

Few steps to think about starting a business:

1/ Pick an industry you're excited to be in.

Businesses involve a lot of unsexy work, which you'll have to suck up and do, at least in the initial days.

Unless you like the field of work obsessively, you will not last the trials.

2/ Study the companies that are dominating the industry right now.

Figure out the factors that made them successful.

Filter out survivorship bias from that.

Dig deep on whether the factors worked because of strategy or luck.

Sometimes, "genius" is just luck post-facto.

3/ Look for all possible companies that started along with these industry leaders and failed.

Study what didn't work for them, where they went wrong, what kind of mistakes they did, etc.

4/ Now that you have done this, whatever you learnt so far is useless.

You aren't gonna start a business that's going to challenge the industry leaders. If you do, you'll most likely get wiped out before you even begin.

Realise that, and go back to the drawing board.

5/ Identify a small sub-niche of the industry, where

- you find a problem worth solving
- you find a solution worth improving on
- you find a product you can better

Find out which startups are working on similar alternatives. Study them.

6/ Identify who is the leader (usually a small to mid sized company) in the niche you have identified.

You can't compete with them on price.

In most industries, mature companies have economies of scale.

They have achieved scale in distribution, logistics, and raw materials.

7/ Once you realise you can't compete on price, you'll have to come up with a way to

- either provide better solution/product
- or create an altogether new segment/product (blue ocean strategy)

This requires a very well thought out strategy, with a buffer for errors.

8/ Once you think up a strategy, check which startups tried such a strategy and failed.

Check if a good majority of the startups that tried such a strategy succeeded.

Once you have confidence in the strategy, move forward, but be nimble and small.

9/ Keep refining your strategy, be modular, and keep adding components, like a jig-saw puzzle.

Keep iterating and bettering your strategy.

In business, not growing means death.

You can't stagnate.

When you stagnate, someone does one up on you.

10/ Be mindful about hiring for delegating responsibilities.

Quickly hire, quickly fire - avoid this mentality.

Take a lot of time to hire, to almost never have to fire.

Scale up and out as and when you see fit.

11/ Don't use too much leverage early on in your startup journey.

A lot of debt to run the business will kill your business if you make a costly mistake.

So, for the first 2-3 years, experiment, iterate, finesse your product/service, add clients, and bootstrap yourself.

12/ Always be on the look out for low-risk high-reward opportunities that @MohnishPabrai calls "Dhandho" opportunities.

When you find them, apply leverage smartly, and execute like crazy.

Opportunities won't wait for you.

If you find a gap worth exploiting, by all means do.

13/ Always keep your customer at the forefront.

The more you prioritize customer's experience, the better your business grows.

Ex: Amazon, Zappos, Twitch, Costco, etc.

14/ Never allow yourself to stagnate.

Don't rest on your laurels. Always have experiments going on - for new products and relevant additional services.

You must always keep running, keep growing.

Your current strategy/edge can wear out at any time.

Disruptors get disrupted.

15/ Always know that even if you become successful, failure is just around the corner.

Success is subjective.

A multi-billion dollar company like Enron failed.

A multi-generational 100+yo company like Lehmann doesn't exist now.

What happened to Wework?

Be mindful of these.