If You Don’t Have a Discrete Hypothesis You Are Incapable of Failing

Posted on Nov 27, 2011 | 40 comments


There are very few people in Silicon Valley who have such a precise grasp on what defines success of early-stage startup companies than Eric Ries. And there are very few people who so consistently exceed my expectations when I hear them speak. I find myself nodding – even when the topic is one I don’t expect to agree with such as “fail fast.”

This week was no exception. I interviewed Eric for an hour for – This Week in Venture Capital. What’s awesome is that the ThisWeekIn team now does time coding so you can go directly to the section in the video you want to hear (you need to click on link for video and then below the video in YouTube the links to the exact times will take you to that section in the video).

We had a wide-ranging discussion which included discussions of Eric’s early career (including his failures), how he came to focus on the Lean Startup movement (at the encouragement of Steve Blank who was an investor in the company he co-founded) and what he wants to do next.

Importantly we also discussed:

  • should startups raise small amounts of money or large?
  • should companies do spreadsheets / plan / have a hypothesis for success?
  • what is the difference between a “pivot” or a “double dribble” (changing your business completely)?
  • when is the right time to go big with PR?
  • how do you handle internal company morale?
  • how should you organize teams in a startup? (functional workgroups vs. product workgroups)
  • what is the importance of social media? what is wrong with today’s social media?
  • what lessons can we draw from Steve Jobs successes?

Eric is so damn good. I could have gone 2 hours. If you have some time I promise he doesn’t disappoint. Or if you’re pinched on time the summary is below and the time coding can help you watch a brief snippet on topics that interest you. And make sure to pick up a copy of his book.

Oh, and if you didn’t guess, the title, “if you don’t have a discrete hypothesis you are incapable of failing” is, of course, an Eric Ries quote. There are many in this episode. Check it out.
Timecodes:

00:00 Welcome, our guest is Eric Ries, founder of the Lean Startup Movement.
00:45 Intro to Eric
01:17 Background, before the Lean Startup
01:53 Yale during the Dot Com Bubble
3:35 The real entrepreneurs come out during a down economy
4:15 Eric’s startup history
6:30 Why did it take so long to ship?
8:17 How did you decide to go with either shrinkwrap or web only product?
9:14 What was the root cause of the failure of your first company?
11:00 Mark on over-hyping PR
11:50 Startup problems!
13:43 Why would you talk to journalist? Why waste energy?
14:20 People go too fast to internationalize
14:45 Eric: The vital function of a startup is to learn how to build a sustainable business
15:40 Discussion of Awe.sm
17:30 Can you make startups science?
19:30 A teachable moment for entrepreneurs: HAVE A HYPOTHESIS! What do you do better, different, or what do you want to achieve?
20:42 Looking for the “Up and to the Right” charts
21:20 Starting points for business should be a problem
22:10 Eric: Innovation Accounting
22:53 Eric’s book: The Lean Startup
24:00 Big money vs. Little money
25:40 The fundamental goal should be to eliminate waste
26:44 Too much capital is not good
26:54 Mark on the negatives of the “Fail Fast” movement
27:45 Eric: The thing that is supposed to fail fast is your bad ideas, not your company
31:10 Mozy Pro Ad
34:00 Imvu
35:29 Why people use social media. Will these norms change?
36:30 Eric: Social media is great for people with social capital
38:00 Should you use avatars?
40:05 What happened after Imvu
41:00 Transitioning from software to writing
42:20 Did agile development influence you?
43:20 The inception of Lean Startup
44:45 Telling an entrepreneur to focus is like telling a fat person to lose weight
46:18 iOS Vs. Android
46:50 Engines of Growth
48:30 Vanity metrics
49:00 Startups are all naked in the mirror
51:10 Astrology and causality in startups
52:00 Actionable metrics
53:35 Opposition to departmental silos
54:20 Semi-autonomous teams
57: 00 How do you rectify company mission and customer demand
58:00 Apple is iterative
1:01:01 Why Steve Jobs got fired
1:01:45 Fenwick and West AD
1:03:03 So what comes next?
1:03:35 Eric: what is society going to do? Most people are working on failing ideas.
1:05:35 Middle class job of the next generation: software development!
1:06:05 The skills gap
1:07:15 The “College Deal” and why it needs to change
1:09:50 We need education!

  • http://austinclements.me/ Austin Clements

    Wow, that whole discussion was really interesting. I thought there would have been a bigger battle around ‘fail fast’ and a few other concepts you usually voice opposition toward, but I see you’re more alike than dissimilar. I suppose your gripe is more with self proclaimed lean startup practitioners that know the terms, but don’t really have an understanding of what they mean.

  • http://www.alearningaday.com Rohan

    Thanks Mark. I haven’t had the chance to watch it yet but hope to do so.

    Hope you have a good start to the week!

  • techlibido

    We’ve reached a tipping point. The effort it takes to do a product
    prototype (SaaS) is the same that people spent writing a biz plan
    before.

  • https://taskera.com/ Deboprio Ghosh

    I agree with most part of the discussion. but then we cannot generalize pivot. yammer started as twitter for corporations, today they say that they are Facebook for corporations. that is a pivot. now tomorrow there is something else that yammer wants to become, it cannot pivot with 4 million users. while they have the cash cushion ($57 million)  to do the pivot … that wont be easy with 4 million users who were sold a certain vision. Pivoting is possible only when u have fewer users.

  • tyronerubin

    Absolutely love This Week In Venture Capital.

    Seeing Eric Reiss on was a wonderful surprise. I always look forward to your amazing guests.

    I am loving The Lean Startup using it as a type of reference book.

    whereas on a side note, just finished the Steve Job’s bio and absolutely loved it.

  • Saba

    Thanks for this great interview…  and this is by far my favorite blog of all time.

    Regarding software dev as a middle-class profession: It’s crucial to find out early on (during elementary school) whether a kid is ready, primed or interested to learn math and science. Computer science especially,  requires a specific type of thinker and those traits show up very early. A teacher or a parent can figure out how to spot them. I started programming in BASIC  when I was 13 only because I was intensely curious, not because it was part of any curriculum. I was lucky I went to a school that offered it. Kids nowadays are starting to learn how to program at 5 or 6.  

    This may be a generalization, but overall, we set the bar too low in the US.  We also don’t cater to the different ways/modes kids learn, nor do we single out their strengths. We just expect the same curriculum to be effective for all students across the board. 

    As someone who went through 4 years of elementary school in another country, I can tell you that the public education system we have here in the US is so focused on rewarding mediocrity that it’s no wonder that at this critical point in time, there is a shortage of qualified engineers and scientists in the workforce.    In the other country’s system, there was an expectation of a certain level of achievement and therefore students aimed higher.  Math and science were especially emphasized. When I started 5th grade in the US, I had already had the same math curriculum 2 years prior. And it’s not to say that faster is necessarily better; it just goes to show that setting the bar high is the right way to get results.  The more we expect of students, the more we will see them achieve.  

    Thanks again for another thought-provoking discussion as usual.

    ~ Saba

  • http://twitter.com/dougmillison doug millison
  • JamesHRH

    Eric seems like a sharp guy. I am not trying to be a grind, but there is absolutely nothing new about anything he is saying.

    Trout & Ries ( Positioning / The 22 Immutable Laws of Marketing / 1970’s): the strongest position is one that is easily disproved. If your position is vague, it is weak. It must be specific and investigable (discrete).

    Robert Cooper (Winning @ New Products / StageGate methodology – 1980’s): engage customers in pre-development discovery phase (lean – get out of the building). Admittedly, Cooper felt you could phone people, which I realize makes him very 20th century.

    The  entire tech sector needs to pull its head out of its own derriere and look around at other industries, where really smart people have been writing down insights for decades.

  • http://austinclements.me/ Austin Clements

    Definitely relevant examples that you gave. But I believe the value of the book and methodology comes with the application of these concepts to startups. 

    Ries spoke at NYU last month and pretty clearly differentiated his Lean Methodology from other related methodologies. He also does this pretty well in the book. Ries points out, for example, that Lean is not as sink or swim as StageGate, but rather founded a ‘commitment to iteration.’ In other words, you dont kill the project that fail and start anew, he explains the process in which you build and lean from an idea that failed.

    People have been writing about these concepts much longer than the 70’s, but there is nothing wrong with someone putting it in a practical context for a particular market that may have otherwise ignored the previous work.

  • JamesHRH

    Thanks Austin. Its a little hyped, but maybe that is because the audience is starved for it. More confounded by the audience reaction than the content….?……

    As for StageGate, I never really read it as addressing what to do if you failed – that was up to your pigheadedness.

  • http://bothsidesofthetable.com msuster

    I was surprised, too. I expected more resistance on his part. Turns out we’re pretty damn aligned! I really enjoyed listening to his perspectives / stories. They were eerily familiar.

  • http://bothsidesofthetable.com msuster

    yammer started out as an internal tool at Geni.com. Yammer itself was a mega pivot.

  • http://bothsidesofthetable.com msuster

    thanks, tyrone. I plan to read the Jobs bio over the break.

  • http://bothsidesofthetable.com msuster

    Thanks, Saba. 

    I think that we can prime those that are mathematical by nature to focus on programming / problems solving.

    For those that are more right-brained and visual we should teach computer design at a young age.

    Both skills are vital. They take different skills.

    Thanks for your comments.

  • http://bothsidesofthetable.com msuster

    To be fair to Eric, I think that’s exactly what he was saying. Science has solved many problems and has created methodologies that startups could learn from. Manufacturing has created processes that startups could learn from.

    So I don’t think he claims his ideas are “rocket science” so much as borrowing from other industries and trying to make startup business more methodical.

  • https://taskera.com/ Deboprio Ghosh

    geni was separate project altogether.  but after launching yammer they did pivot twice. questions is how do customers [users (paid/unpaid)] react to pivots

  • http://austinclements.me/ Austin Clements

    I did not argue for how StageGate should be interpreted (or how I interpreted it). I simply explained how Ries expresses the difference between the two methodologies (specific reference is on pg 112 for the curious). Yes, the book is VERY hyped, but I think it still makes for a useful read for most tech entrepreneurs.

    My unsolicited suggestion would be for you to not interpret every comment response that does not agree with your opinion as an attack on your intelligence. Based on the blogs you read and comments you made it’s obvious you are well versed on the subject. No need to call names. Best of luck to you in your endeavors, maybe we’ll have a discussion about it in person one day.

  • http://twitter.com/AydinG Aydin Ghajar

    Austin, I don’t think James was calling names… I read his last sentence as “that was up to *one’s* pigheadedness.”

  • http://austinclements.me/ Austin Clements

    If that’s the case, my apologies for the miscommunication. These things tend to happen when talking over these internets :)

  • JamesHRH

    Not sure what you are using as clues that would suggest your interpretation. I do not in any way feel my intelligence is under attack – my motivation to respond to your post is to engage with people who respond, to learn more (which I have through your post – thx). I kinda think that’s the idea here ;-)

    Missed where I am calling names – with the explanation that ‘your pigheadedness’ is not directed at you, but at you the person taking a product through StageGate.

    I do think that many tech entrepreneurs are a little (some a lot) to keen on themselves and suffer from an odd Not Invented Here syndrome.

    Eric is a great example, in that ‘Eric Ries is a genius’ seems to be the reaction of the tech sector, while it is really more accurate that Eric is a sharp guy who has just taken the time to read on the topic outside of tech (which is what founders should do).

    I have a general frustration that many tech startup founders are not very well rounded as business people (but they think they are better at business than their local Ford dealer, which is highly debatable).

    I probably shouldn’t care or comment – but noone bats 1.000 on Disqus!

    Plus, I still remember the day when I realized that a lot of smart people had come before me, and they were nice enough to write down what they learned (T&R, Cooper, Drucker, etc.). Hopefully I can provide that moment for a few people in the space.

    Not in NYC a lot, but will look you up when I am there next.

  • JamesHRH

    Mark – we are likely agreeing violently. The reaction to Eric’s ‘movement’ is certainly beyond Eric’s control. Thanks for responding.

  • Paul Hazel

    If the new middle class job is software development, this is a business opportunity that could potentially scale, but to be successful as an industry the costs/barriers to entry must be kept low. Microsoft’s certification fees were outrageous, and as software moves beyond the Valley, there will be a temptation by some to replicate this pricing model because they see themselves as “worth it.”
    I do NOT mean to suggest that all projects need to be open source or that investors should try to force their portfolios in that direction, but clearly if low barriers to entry drive the innovation ecology, then it would seem that it is in an investor’s best interests in the long run to also consider a company’s potential with regards to the ability of 3rd party innovators to add on to it’s products or build new products with its DNA.

  • http://blog.kwiqly.com/ James Ferguson @kWIQly

    Well Mark – thank you for this. I just finished a day defining an MVP demo with my tech partner in Germany and we stopped ourselves over and over again asking “But what’s the hypothessis” – “is it actionable” etc  Personal respects to both of you for a ) being quite interesting b) saving me a shed-load of wasted time

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  • Matt Amoia

    awesome piece!

  • http://twitter.com/tim_ph Tim Pham

    Mark,
    These are awesome interviews, but most of us don’t have 1 hour to watch video. Can you somehow record them into mp3 also?
    That would be great help… Love the tough Q&A of these :)

  • Geoff Graber

    Excellent, Mark! Watched in it’s entirety last night. Eric is brilliant and has a huge amount to offer the world. Thank God the not-to-be-named 3D world startup failed because we might have been waiting longer to have his contributions to the bigger issues. Great to see you bringing up societal challenges as an important opportunity for VC to focus. As you know, you are my kind of guy. Hope to see you for a bite again soon.

  • http://www.RenegadeToolCo.com Timothy Lemnah

    Eric couldn’t of said it better.

  • Pete

    Hi

  • http://adrianchilders.com adrianchilders.com

    Hey Mark

    Just to let you know of the brief mention of your blog and a couple other VC blogs on my site http://www.adrianchilders.com/two-cultural-changes-every-third-world-country-needs. 

    Take care!

    Adrian

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  • legendarymoves

    Mark where have all your posts been today is Wednesday?? Please let me know your thoughts on my latest article:  http://legendarymoves.com/?p=91

  • http://www.tvidesigns.com Mahdad Taheri

    THANK YOU for the time stamps! So useful.

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  • http://www.victusspiritus.com/ Mark Essel

    I remember mentioning strong alignment between one of your posts and Steve’s customer development model a year or so back. Seeing you and Eric synchronize made me believe it even more.

    Great video discussion. I’m sold on Eric’s book, will track it down now.

    I’m worried that the scientific approach to lean startup decision making will perceive patterns in utterly different markets which aren’t real. How does the scientific method minimize the observers bias for a single Monte Carlo trial? A startup may go through many iterations, but you both mentioned you achieved most of your learning about ultra specific and timely problems by making mistakes. Can lean startups deliver learning without the failure? If not, what additional value does it bring?

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  • John

    You studied political science? Insteresting, I’m thinking about doing that.

    What was your motivation?