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I've been spending a lot of time in Silicon Valley for my day job at CalendarTree.  I feel like an embedded journalist. You might be interested in some of the things I've discovered.

The most fascinating phenomenon in the start-up world is called the pivot. That word has been used in every meeting I've attended. There's more to it than you think.

A pivot is when a start-up quickly changes from one product to another or from one business model to another. The valley is full of stories about companies that started with a lame idea and hit it big after a pivot. Most start-ups in the valley are software-based, so pivots are both practical and economical.

The pivot used to be the exception. For example, a company starts out selling PEZ dispensers online and later pivots to become eBay. You didn't hear about all of the companies that failed so the pivot stories probably sounded more prevalent than they were. It's similar to how a story of one shark attack makes you think there's a Great White under every surfboard. The human brain assumes that whatever it hears most frequently must be the best reflection of reality.

The valley attracts some of the smartest humans on Earth, and each of those humans, being otherwise normal, probably assumed they could use their talent, brains, and hard work to achieve specific business goals, such as building product X and selling the company to Google for a billion dollars.

And then they find out that success in the start-up realm is mostly luck. They discover this by trying great ideas coupled with great execution and failing. And they further discover it by observing unexpected successes at other start-ups. Success simply can't be predicted to any level of statistical comfort.

Smart observers in the valley look for the "tell" that an early stage start-up will be a winner, but none can be found. Oh, sure, the team needs to be smart, talented, and willing to work long hours. But nearly every start-up has that going for it. Most have great ideas as well. None of it predicts success.

So imagine if you will, some of the smartest, most rational humans the world has ever created, wallowing around in the absurdity of Silicon Valley, where success is mostly based on luck. How does one feel good about that? And what is the solution?

Answer: You institutionalize the pivot.

In other words, you move from a goal-oriented approach to a systems-oriented approach. The system involves assembling a team around a starting idea and then pivoting until something lucky happens. No one pretends to know where it will all end up.

Here's the system:

1.      Form a team
2.      Slap together an idea and put it on the Internet.
3.      Collect data on user behavior.
4.      Adjust, pivot, and try again.

Thanks to Google Analytics, Optimizely, Bitly, and other tools for measuring customer behavior in real time, a smart team can try different approaches and different products until something works out. A start-up in 2014 is a guess- testing machine.

Meanwhile, technology is increasingly becoming a commodity. A smart start-up can build nearly anything. If they need extra talent, connections, or money, the valley has plenty to offer. There isn't much of a resource constraint among the talented. That's the positive side of the "boy's network" in the valley. Everyone knows everyone. (The downside is not enough women.)

Another fascinating phenomenon in the valley is that every entrepreneur and investor seems genuinely interested in helping strangers succeed. I would go so far as to call it the defining feature of the start-up culture. Some of it has to do with the nature of entrepreneurs as serial problem-solvers. If you tell me what problem your start-up is experiencing, my reflex is to offer a suggestion or to connect you to someone who can help. And creating social capital makes a lot of sense when teams are fluid and who-you-know always matters. But beyond the practical and selfish benefits of being helpful, the dominant worldview in Silicon Valley is that if you aren't trying to make the world better, you're in the wrong line of work. The net effect is that the start-up culture is shockingly generous. If you need something for your start-up, folks will happily help you find it. I would have predicted the opposite.

But here comes the interesting part.

In an environment in which start-up resources are not limited, and no one can predict the next winner, and it is easy to measure customer behavior in great detail, the Internet is no longer a technology.

The Internet is a psychology experiment.

Building a product for the Internet is now the easy part. Getting people to understand the product and use it is the hard part. And the only way to make the hard part work is by testing one psychological hypothesis after another.

Every entrepreneur is now a psychologist by trade. The ONLY thing that matters to success in our anything-is-buildable Internet world is psychology. How does the customer perceive this product? What causes someone to share? What makes virality happen? What makes something sticky?

Experience and history give start-ups their ideas on what to test first. But the thing that worked for the last business often doesn't work for the next because no two situations are identical. So psychology on the Internet is an endless series of educated guesses and quantitative testing. Every entrepreneur is a behavioral psychologist with the tools to pull it off.

In this environment, quality is less important than speed. So the most prized technical people are the ones who can work quickly and produce one buggy prototype after another. And that brings me to the next observation.

Psychology has evolved to be a function of speed plus measurement. We're nearing the point at which the best psychologist in the world is any computer with access to Big Data, and any start-up that is rapidly testing one idea after another.

That's a system that makes sense to me. In a complicated environment, systems work better than goals.

Please excuse me while I go pivot.

--------------------------------------------------

Scott Adams
Co-founder of CalendarTree.com

Read more about the advantage of systems over goals

 



 
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Jun 24, 2014
Sounds to me like there is a market for Startup business incubators.
 
 
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Jun 20, 2014
Hairless Man Grows Full Head Of Hair In Yale Arthritis Drug Trial - Cue the Pivot in 3...2...1....
 
 
Jun 19, 2014
You might want to check out Kathy Sierra's old blog. (She unfortunately stopped publishing after a scary cyber bullying incident several years ago.) It delves a lot into the psychology of how to make your app addictive, and she did it in a fun way.

http://headrush.typepad.com/
 
 
Jun 19, 2014
I've got some news for you Scott...

"Building a product for the Internet is now the easy part."

Building the product has always been the easy part of making a commercially successful internet application. There are significant exceptions that will spring to everyone's mind almost immediately, but most web applications consist of pretty normal programming stuff.

I wish you well in finding the right team to create the right product to be sold in the right way at the right time to the right people.
 
 
Jun 19, 2014
[Because the alternatives are worse. Smart money is stranded at the moment. -- Scott]

So wait, is anyone snarky enough to double-down on "everything old is new again" and just invest in old, tired concepts and companies in the belief that nobody else is doing it...so they'd be getting out ahead of the curve?
 
 
Jun 19, 2014
I'm busy at work so I can't flesh this out at the moment, but I know there's a profound connection between the ideas espoused in this New Yorker commentary ("The Disruption Machine - What the Gospel of Innovation Gets Wrong.") and the observations Scott is making. The key is that I'm fairly convinced that both sides are both true and accurate (at least in broad strokes). I have a suspicion that reconciling the two seemingly-contradictory concepts would be the holy grail of startups.

http://www.newyorker.com/reporting/2014/06/23/140623fa_fact_lepore?currentPage=all

Thinking while writing this comment, the loose idea rattling around in my brain is that Scott is arguing for an approach that takes an established approach that's not a good one, but tries to refine it to a logical extreme with the belief that it will eventually cross a threshold of viability. Jill Lepore, on the other hand, is almost arguing that constant disruption will never work, and thus a different paradigm (for lack of a better word) must be found.

In other words, Lepore is arguing for the very disruption she rails against, but Scott is arguing to stay true to the established concept of...disruption.

How meta.
 
 
+1 Rank Up Rank Down
Jun 18, 2014
>>I just disagree with most folks as to what advancements are and whether they are actually good for the world.

So, you are Amish?

 
 
Jun 18, 2014
So let me get this straight... never mind if the product is anything anyone NEEDS ( and they don't) or can AFFORD (and they can't) ... lets use psychology to "pivot" our way into the market so Amazon will buy us out for zillions. Great use of resources, while millions on the planet starve and die... lets encourage the production and invention of more useless crap. The criminals in the banking business nearly collapsed the entire world economy in 2008 lets sit back and see what group of idiots will finally succeed. Maybe one of these silicon valley companies will pivot their way to the top of the greed heap and do it!
Oh, by the way, I am not ignorant ... I know that thousands of attempts by entrepreneurs over the years eventually leads to so called "advancements" in technology or whatever ... I just disagree with most folks as to what advancements are and whether they are actually good for the world.

[No, you got every bit of that wrong. The product is almost always something the start-up team imagines the world wants or needs. The psychology problem is along the lines of "How do I explain the value clearly?" and "How can I convince users to trust us to do what we say?" -- Scott]
 
 
Jun 18, 2014
@MTBob - as in, "Honey, I swear it's not an affair, it's a matrimonial pivot"?
 
 
+1 Rank Up Rank Down
Jun 18, 2014


I wonder if anyone has written a book about how the Pivot Concept / Systems & Goals
might be able to be used in my daily life.

 
 
+1 Rank Up Rank Down
Jun 18, 2014
PLEASE keep these Silicon Valley insights coming.
I too am a founder with a world wide unique and truly innovative B2B solution and dreaming of global market domination with a return of millions.
My challenge is cash and letting go of my baby. I have not tried getting cash yet but my business sense tells me I wont get any (too early, I think, product ready and being tested by prospects now) which makes life more challenging. Once I'm over a certain curve I wont need cash anymore but bet THEN invertors will come knocking.
 
 
Jun 17, 2014
@Drowlord
That did give me a chuckle, it makes for a perfect reality check.
 
 
Jun 17, 2014
@Chenlambec,
Awesome article, but "Most people don't 'calendar in' their friends" might be cutting a little too close to the nerves.
 
 
Jun 17, 2014
Sidebar here:

Your posts like this are often very interesting, but it seems more and more like you're in a bit of an ivory tower. For your reading pleasure. http://www.quora.com/Silicon-Valley/What-are-some-things-people-in-Silicon-Valley-may-be-shocked-to-learn-about-the-outside-world/answer/Susan-Wu
 
 
Jun 17, 2014
[I would say they are moving from a business model with bad odds to a business model with better odds. Unless you think trying one thing gives you the same odds of success as trying ten things. -- Scott]

So, instead of betting on 10 different groups of people doing 10 different things, you're thinking it's smarter to bet on 1 group of serial entrepreneurs doing 10 different things... on the pretense that their consistent failure has little to do with their quality as a group, and more to do with blind luck?

I'll agree that failure gives you experience, and experience increases your odds of success, but I'm not sure I fully agree with the blind luck thing. From what I've seen, the vast majority of startups have pretty obvious reasons for failing:
1. No compelling reason to use products/services.
2. Too much competition, and no distinguishing features.
3. Poor implementation.
 
 
Jun 17, 2014
So you're saying that psychology is no longer predictive but blindingly fast reactive.
 
 
+1 Rank Up Rank Down
Jun 17, 2014
So....they're trying to organize dumb luck.

Does it work that way? Are they just a bunch of hipsters enjoying a new buzzword? How many buzzwords have guaranteed success in anything?

[I would say they are moving from a business model with bad odds to a business model with better odds. Unless you think trying one thing gives you the same odds of success as trying ten things. -- Scott]
 
 
+10 Rank Up Rank Down
Jun 17, 2014
There is a great saying, related to this theme: "Startups don't fail, they just run out of money." It seems spot-on in the multiple-pivot environment. One fantastic example of this is Adchemy. Here's the very long headline from the 24 Nov 2013 Business Insider story about the company: "After 6 Different Business Models And $120 Million In Funding, This Adtech Startup Thinks It's Figured Out The Next Wave Of Search". Yup, $120m will fund a lot of pivots...and eventually even the blind squirrel will find a nut! BTW, I am not at all grousing, just agreeing that luck plays a huge role in success, and, like Woody Allen said, 80% of success is showing up -- if you can get funded well enough, you can spin even multiple threads of bad luck (or bad decisions) into gold. And yes, there was an overabundance of quotes and metaphors in this comment!
 
 
+5 Rank Up Rank Down
Jun 16, 2014
Thanks for your insider account. I have to admit, as a life long programmer, not a lot of what emerges from Silicon Valley in the era of "social media" looks very useful to me. I kind of wish the "best and the brightest" were tackling some of the more pressing issues of our time.

There was a good article in the May New Yorker about a small corner of the online start-up world...
http://nymag.com/news/features/laundry-apps-2014-5/

<a href="http://nymag.com/news/features/laundry-apps-2014-5/">Article</a>
 
 
+5 Rank Up Rank Down
Jun 16, 2014
Another interesting point on the psychology issue, names.
I have no idea how to analyze this, but I wonder to what extent main street companies, large and small, run into the fact that a good name can be more important to success than the actual skill and work ethic of their employees. Remember when lots of businesses were AAAAAAAbout selling (it started with 3 a's at the beginning of the name, then 4, then 5...) so they would be the first listing in the phone book?
Likewise, general electric and general moters, grandma's cookies, etc. are named to get a specific response from the shopper, and no one else can have a similar emotional hook since the name is already owned. Heck, Tesla is named after an early electrical scientist, are that man's heirs strongly involved in the company? Or did the company just grab the name?
Meanwhile the Mai-Dung Chinese restaurant failed quickly, for reasons having nothing to do with the food or atmosphere.
 
 
 
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