If you want your startup to succeed, you need to understand why startups fail.
Why do startups fail? That question caught Harvard Business School professor Tom Eisenmann by surprise when he realized he couldn’t answer it.
So he launched a multiyear research project to find out. In Why Startups Fail, Eisenmann reveals his findings: six distinct patterns that account for the vast majority of startup failures.
Bad Bedfellows. Startup success is thought to rest largely on the founder’s talents and instincts. But the wrong team, investors, or partners can sink a venture just as quickly.
False Starts. In following the oft-cited advice to “fail fast” and to “launch before you’re ready,” founders risk wasting time and capital on the wrong solutions.
False Promises. Success with early adopters can be misleading and give founders unwarranted confidence to expand.
Speed Traps. Despite the pressure to “get big fast,” hypergrowth can spell disaster for even the most promising ventures.
Help Wanted. Rapidly scaling startups need lots of capital and talent, but they can make mistakes that leave them suddenly in short supply of both.
Cascading Miracles. Silicon Valley exhorts entrepreneurs to dream big. But the bigger the vision, the more things that can go wrong.
Drawing on fascinating stories of ventures that failed to fulfill their early promise—from a home-furnishings retailer to a concierge dog-walking service, from a dating app to the inventor of a sophisticated social robot, from a fashion brand to a startup deploying a vast network of charging stations for electric vehicles-—Eisenmann offers frameworks for detecting when a venture is vulnerable to these patterns, along with a wealth of strategies and tactics for avoiding them.
Eisenmann is a must for founders at any stage of their entrepreneurial journey.
Bio:Tom Eisenmann is the Howard H. Stevenson Professor of Business Administration at Harvard Business School (HBS) and the faculty co-chair of the Arthur Rock Center for Entrepreneurship.
Thanks for the note and I am testing you so hope to hear back. Given that I’m recording these thoughts more for me than for you (no offense) I’ll be as open and candid as possible. Apologies if it is a bit of stream of consciousness. To answer your question, the biggest challenge I’ve faced with my trading is the lack of a clearly defined system and structure. I’ve been investing my own money for the past 25 years (and worked with my mom in learning how to invest family money after my dad died 37 years ago) and have read, watched, met and followed hundreds of books, classes, videos, conferences and investing legends. During that time I’ve been in and out of markets, learned at the feet of a few titans, have built one highly successful business, have tried to build a couple of businesses which never really gained traction, have had some great public market investment successes, have suffered a number of small public market investment losses, have had a few private market investment successes, have had a few private market investment losses, and have lost money in two deals which were straight-up scams. If I were to attribute one constant theme to my history it would be a number of outsized gains combined with a number of smaller losses. This has culminated in a history which provides me with a good life and additional capital but which I couldn’t define as a tremendous success. I’ve reached a point in my life of surrender, not quitting by any means but instead the willingness to surrender the stubborn biases which have been holding me back and follow a path which leads to success. Maybe this is a moment in time where the student is ready and the teacher appears. Maybe it is just me reading a book (Trend Following) which has sat on my shelves for a long time and picking up some interesting knowledge. The former would be great but the later is also cool. What really really really appeals to me is the concept that I can make a lot of money while eschewing a need to predict future outcomes when making an investment decision. If it is possible to implement a system and structure whereby I can follow existing data and make profitable trades then sign me up 1,000%. Hopefully Trend Following lives up to the hype and holds the key to building such a system.
Here are a few things I like:
I like your candor (just listened to Episode 955 of your podcast),
I love the Ned Davis quote you use, “the idea is to make money, not to be right”
I like the idea of a stable and well defined system and structure,
I love the idea that emotional stability and discipline are the top criteria for success with such a system,
I like the idea of a system which generates success but may be a bit boring–boredom is totally under-rated and there are plenty of sources of excitement in life without the need to find it from my profession,
I like that Barry Ritholtz wrote the intro to your book
Well Michael, that’s about it. God willing I’m on a path to finally finding the Rosetta Stone which has eluded me for decades or maybe I’ll just read what is turning out to be a very good book and find a few nuggets of wisdom. Either way, thank you.
Keep plugging. Don’t quit. Why do I do what I do? It’s my calling + I’m a capitalist.
Hi Michael, I hope all is good. I’ve listened to your Podcast for years, on an off, but I always end up coming back to it because it makes the most sense. This is in terms of investing, philosophy and pretty much everything else, as your guests are top quality. I finally bought your Trend Following book and I’m around halfway through the beast of information that’s in there (5th edition). I love it, and the comparisons with Baseball are really making the light bulbs go on. I guess I’m at the stage now where I’m just figuring out and back-testing some mechanical trading systems in order to establish confidence, but I just though I’d email to say thanks for your work. (I’ll be picking up your Turtle Trader book next)
My biggest challenge? Explaining to people that my portfolio trend following market neutral system that is 100% rules based. I do not predict, I only follow my rules. People can’t wrap their heads around ‘Market Neutral’ and pretend to understand only Trend following.
I don’t understand your point, but trend beats neutral.
My plan is to sit on my hands until I see the best trade setups. It’s the time between the best trade signals that I struggle with. I’m a member of this group which really helps with identifying the trends.
You don’t identify trends. You need:
Exact rules for selecting your tracking portfolio.
Exact rules for entering your trades at the right time.
Exact rules for exiting your trades with a loss.
Exact rules for exiting your trades with a profit.
Exact rules for how much money to bet on each trade.
We live in a time of cancel culture. A time devoid of reason. A time with so many unwilling to speak truth. My guest today James R. Otteson brings clarity back.
You have heard of the Seven Deadly Sins: pride, greed, lust, envy, gluttony, wrath, and sloth. Each is a natural human weakness that impedes happiness. In addition to these vices, however, there are economic sins as well. And they, too, wreak havoc on our lives and in society. They can seem intuitively compelling, yet they lead to waste, loss, and forgone prosperity. James Otteson tells the story of seven central economic fallacies, explaining why they are fallacies, why believing in them leads to mistakes and loss, and how exorcizing them from our thinking can help us avoid costly errors and enable us to live in peace and prosperity.
Bio: James R. Otteson is the John T. Ryan Jr. Professor of Business Ethics in the Mendoza College of Business at the University of Notre Dame. He received his BA from Notre Dame and a PhD from the University of Chicago, and has taught at Wake Forest University, Yeshiva University, NYU, Georgetown, and the University of Alabama. His published work focuses on Adam Smith, eighteenth-century moral and political thought, liberalism, political economy, and business ethics.