There are many biographies of Tupac, all of which have aspects that someone probably will take issue with, so I won’t create my own version in this blog post. I will instead quote one sentence from Wikipedia: “Tupac Amaru Shakur, also known as 2Pac and Makaveli, was an American rapper and actor.” As you probably know, in September of 1996 Tupac was shot and killed in Las Vegas, in what remains and unsolved crime.
As an aside, I hope you know that I weave the discussion of business topics around people like Tupac, Biggie, Rza, K-Dot, and Lil Wayne is to make business topics less boring. I am trying to get people to read material who would not otherwise do so.
- “It’s time for us as a people to start making some changes.”
All great founders know they must break at least one rule everyone else thought was unbreakable. The ability to pick the right rule or rules to break is part of what makes a founder skillful or lucky. Their success depends on convincing other people to believe in the value of “making some changes” as Tupac points out. People who have charisma and are brave like Tupac will have more success in creating significant changes. Airbnb is a classic example of a founding team that decided to break some rules. Marc Andreessen said once about Airbnb: “Breakthrough ideas look crazy, nuts. It’s hard to think this way — I see it in other people’s body language, and I can feel it in my own, where I sometimes feel like I don’t even care if it’s going to work, I can’t take more change…. Airbnb? People staying in each other’s houses without there being a lot of axe murders?”
As another example of “making some changes,” many people today do not know or have forgotten that in 1994 the “consensus” view was that the future was all about “The Information Highway.” This consensus view included the assumption that cable and telephone companies would have top down control of specifically allocated on-ramps and off-ramps. The interactive pilot Information Highway systems included: NYNEX in New York, Time Warner in Orlando, Bell Atlantic in the Virginia suburbs of Washington, D.C., GTE in Cerritos, Viacom/AT&T in Castro Valley and US West in Omaha. Vendors salivated heavily at the prospect of supplying the equipment and software for these Information Highway systems. PR firms did their usual part of stir up the Information Highway hype to extreme levels. As an example of the view at the time among many people was the 1994 Wired Magazine cover depicting John Malone as “The Infobahn Warrior.”
Andreessen describes the situation in 1994 and how the actual trend differed from the consensus view:
“The decision to put money into the Internet in 1994 was considered by many of my colleagues to be borderline insane. Most people said things like, The Internet is free; you can’t make money on that! I literally had people telling me I was going to screw up the Internet by bringing more traffic to it.”
Another person who identified the emerging trend in 1994 was Steven Sinofsky, as was described in this passage from a Business Week article:
The Web-izing of Microsoft begins in February 1994, when Steven Sinofsky, Gates’s technical assistant, returned to his alma mater, Cornell University, on a recruiting trip. Snowed in at the Ithaca (N.Y.) airport, he headed back to the Cornell campus. That’s when he saw it: students dashing between classes, tapping into terminals, and getting their E-mail and course lists off the Net.
The Internet had spread like wildfire. It was no longer the network for the technically savvy — as it had been seven years earlier when Sinofsky was studying there — but a tool used by students and faculty to communicate with colleagues on campus and around the world. He dashed off a breathless E-mail message called “Cornell is WIRED!” to Gates and his technical staff.
Many people had a hard time for a relatively long time understanding what the Internet would become. They thought to themselves: “A distributed communications network of networks that no single business actually controlled?” and it boggled their mind to think that this could ever happen. It was easy to not understand what was coming since it broke rules that people though were important. As another example, while I have a less than perfect recollection of the exact dates some events during this period, I do know that Steve Jobs met with Craig McCaw sometime in 1993 or early 1994 and first explained to him the nature of the business opportunity that the Internet would create. Craig said to Steve: “Let’s buy it.” Steve quickly explained why that was not possible, but people’s first reaction, even if they were very smart natural contrarians/pirates like Craig, was to not understand the phenomenon.
Getting a sense of when and how radically the consensus view changed oner a short period is assistend by looking at a high truncated Internet time line of those years like this one below. People like Andreessen and Sinofsky used variant perception to understand that the consensus view on Information Highway was very wrong and that the Internet was instead the important trend.
1989: AOL launches the “Instant Messenger” service
1990: The World (world.std.com) is the first commercial provider of Internet dial-up
1991: Commercial Internet eXchange (CIX) Association, lifts restrictions on the commercial use of the Internet; Wide Area Information Servers (WAIS) appear; Gopher released
1992: AOL IPO
1993: CERN places its World Wide Web technology in the public domain; Mosaic appears
1994: Launch of Netscape Navigator; Amazon and Yahoo are founded. A business “spams” the Internet with email; first banner ads appear on hotwired.com and Time Warner’s Orlando Information Highway project was scheduled to start
1995: Craigslist and eBay are founded. Netscape IPO; Microsoft ships Windows 95
1996: Google is founded.
1997: Time Warner Orlando Information Highway project cancelled
As late as December 1994, a policy paper still proclaimed: “Just as the automobile changed American society, so could the Information Superhighway.” But other people had already figured out that something bigger was happening. This quote from May 25, 1994 is a humorous example of someone recognizing that something was coming that would be very different:
“I believe that, for a long time to come, this information superhighway, far from resembling a modern interstate, will more likely approach a roadway in India: chaotic, crowded and swarming with cows.” Arthur Ochs Sulzberger
It was not until 1995 that the Internet consensus crushed the consensus view about the importance of Information Highway. The service trials mentioned above by cable and telco providers were shut down one by one. For example, the Time Warner trial in Orlando, originally scheduled for spring of 1994, was shut down in 1997. Tupac never expressed a specific view about the Information Highway. He did say: “It’s the game of life. Do I win or do I lose? One day they’re gonna shut the game down. I gotta have as much fun and go around the board as many times as I can before it’s my turn to leave.” if the Information Highway has happened would he have been ridin in his Hummer?
- “I try to be somebody instead of just make money off of everybody.”
A startup will never become a successful business if it is not making something that customers are willing to pay for with real money. Making that happen is far more likely is the founder are passionate about solving real problems for customers. This is the right thing to do to create a successful business, but also the right thing to do since it makes life more meaningful and people happier. You will recall that in his song “Changes” Tupac makes clear that that even if you “made a G today’ it doesn’t really mean that the seller of the product is somebody if they “made it in an sleazy way.” Success is more sustainable and meaningful if you are creating real value while you are doing well financially.
It is vastly easier to motivate a team, investors and customers if the business is trying to make the world a better place. As an example, traditional providers of rocket launch did not believe demand would increase if there was a drop in the price of selling rides for payloads like satellites into orbit. This assumption about the price elasticity of launching payloads like satellites on rockets for customers caused traditional providers to milk their sunk non-recurring engineering and to not invest significant amounts in price reducing innovation. The good news is that the industry has been turned on its head by Blue Origin and SpaceX which are trying to do more than “just make money off of everybody.” Jeff Bezos and Elton Musk have a passion to lower the cost of space travel and that has resulted in dramatic changes, including re-usability of some rocket components.
Without a profit an endeavor can’t scale and grow. Without a purpose and delivering real value, it is hard to motivate people to create the business in the first place. It is possible to create a business without delivering real value? It is rare but it can happen. But why the hell would anyone want to do that? Tupac described the rewards of creating real value: “Happy are those who dream dreams and are ready to pay the price to make them come true.” Being happy is highly under-rated as a outcome in life.
- “I try to find my way in the world. So I go down paths that haven’t been traveled before and I usually mess up, but I learn, I come back stronger.”
The process of discovering product market fit is iterative. Almost no startup finds product market fit with exactly what was envisioned from the start. For example, Twitter was originally a company called Odeo and wanted to find product market fit in podcasting. Flickr started as an online role-playing game called Game Neverending. Instagram began a check-in app named Burbn. This sequence is essential: (1) do a lot of experiments using the scientific method as you try to create and then operate a business and (2) measure everything you do and the results of what you do and (3) evolve and iterate based on feedback from that process (which never ends).
- “The only thing that comes to a sleeping man is dreams.”
If a founder is not willing to do the work necessary to create the business, they will fail. An extreme example of someone not doing the work was Color Labs co-founder and CEO Bill Nguyen. A news report once wrote this account: “According to several sources close to the company, Nguyen has not been seen at Color Lab’s Palo Alto headquarters for more than two months. The speculation was that Nguyen was ‘probably either in Tahoe or Hawaii.’” The financial result of this lack of work at Color Labs was what you would expect.
I spent 6 years at a startup after joining a company known as Teledesic as the fourth employee. I never worked harder of felt more alive in a work setting. I spent very little time being what Tupac called “a sleeping man” in those years. People involved in Teledesic worked incredibly hard. As just one example, I flew 500,00 air miles a year for five years in a row. People worked every day and often late into the night. One of the investors in the startup was Bill Gates who set the standard for hard work. CNBC tells this story about the early years at Microsoft:
“In a 2016 interview with BBC Radio, Gates shared just how work-obsessed he used to be. “I was quite fanatical about work,” he said. “I worked weekends. I didn’t really believe in vacations.” Unsurprisingly, this work ethic transferred to employees. “I had to be a little careful not to apply my standards on to how hard they worked,” he said. However, that didn’t stop him from tracking which employees were working the longest hours. “I knew everybody’s license plates so I could look out in the parking lot and see when did people come in [and] when were they leaving,” Gates told the BBC. Paul Allen said as much in a 2011 first-person article for Vanity Fair. “Microsoft was a high-stress environment because Bill drove others as hard as he drove himself,” wrote Allen. “He was growing into the taskmaster who would prowl the parking lot on weekends to see who’d made it in.”
Startups are “all in.” If someone can succeed with a startup while not working hard or making any sacrifices, well good for them. I will say that exactly zero examples jump to mind to support this alternative view.
- “No one knows my struggle, they only see the trouble. Not knowing how hard it is to carry on when no one loves you.” “Long live the rose that grew from concrete when no one else even cared.”
If a founder’s ability to sustain the effort necessary to build a successful business is dependent on outside validation happening throughout the process of creating the business, the probability the founder will succeed is tiny. The author of High Growth Handbook Elad Gil points out: “As the founder of a high growth successful startup, you may feel like you are constantly failing. You are not alone in this.”
I’m looking forward to releasing my review of Scott Belsky’s soon to be released book The Messy Middle, but for now I am embargoed. But Belsky has already written about what Tupac is talking about previously on his on his blog:
“In reality, the middle is extraordinarily volatile—a continuous sequence of ups and downs, expansions and contractions. Once the honeymoon period of starting a new journey dissipates, reality hits you. Hard. You’ll feel lost and then you’ll find a new direction; you’ll make progress and then you’ll stumble.”
- “Never surrender, it’s all about the faith you got; don’t ever stop, just push it ‘till you hit the top and if you drop, at least you know you gave your all to be true to you, that way you can never fail.”
The best founders are missionaries. They are motivated by more than money. It is that non-monetary motivation that can sustain them through the rough spots. Mercenaries sometimes succeed, but it happens far less often. John Doerr was the first person to use this metaphor:
- “You never know how strong you can be until being strong is the only choice you have left.” “Tomorrow I wake with second wind and strong because of pride. I know I fought with all my heart to keep the dream alive.”
Founders and startup employees often find they are stronger than they ever thought possible. There are companies like Open Table that almost died after the Internet bubble ended and yet rose again to success. They went through some very tough years before finding success. Ben Horowitz chronicles the power of staying strong as Tupac suggests during tough times in his book The Hard Thing about Hard Things.
- “You can spend minutes, hours, days, weeks, or even months over-analyzing a situation; trying to put the pieces together, justifying what could’ve, would’ve happened… or you can just leave the pieces on the floor and move the f*** on.”
Charlie Munger makes the same point as Tupac in this way: “It’s important to review your past stupidities so you are less likely to repeat them, but I’m not gnashing my teeth over it or suffering or enduring it. I regard it as perfectly normal to fail and make bad decisions. I think the tragedy in life is to be so timid that you don’t play hard enough so you have some reverses.”
- “I’m not saying I’m gonna change the world, but I guarantee that I will spark the brain that will change the world.”
Josh Wolfe makes the same point in this way: “The detritus in this wave becomes the combinatorial fodder for the next wave. And today, the cost of capital is so low that it acts like a tractor beam, pulling far future ideas to the present.” Nassim Taleb similarly believes: Most of you will fail, disrespected, impoverished, but we are grateful for the risks you are taking and the sacrifices you are making for the sake of the economic growth of the planet and pulling others out of poverty. You are the source of our antifragility. Our nation thanks you.”
- “I believe that everything that you do bad comes back to you.”
Reputation takes many years to create, but only minutes to destroy. Warren Buffet says: “If you think about that, you’ll do things differently.” One example of this happened at Salomon Brothers and resulted in a dramatic period in Buffett’s life. The LA Times wrote at the time: “Today people scratch their heads in wonder that Gutfreund jettisoned his career to protect Mozer. In testimony, [the CEO Buffett put in place] Maughan called Gutfreund’s actions ‘inexplicable and inexcusable.” Some suggest it was hubris, but others say Gutfreund may simply have been trying to hang onto his job. The result was a dramatic resignation by [the Salomon Chairman and CEO] Gutfreund. In a statement the CEO stated: “we cannot let our unfortunate mistake of not taking prompt action, when in April we learned of one unauthorized bid at a February Treasury auction to harm the firm.”
- “There’s nobody in the business strong enough to scare me.”
Every startup or business must face competition. Being fearless to a fault is positively correlated with success. The best book I have read about being an entrepreneur is Shoe Dog by Nike founder Phil Knight. If you are interested in business and have not read this book, what exactly are you reading? Speaking of Phil Knight this is a great story about being brave told by Knight’s cousin Doug Houser:
In 1973, Blue Ribbon Sports and Knight filed a lawsuit in federal court in Portland against Onitsuka. The lawsuit “alleged that (Onitsuka) had breached their contract by soliciting new distributors and demanding that Knight sign over control of BRS for the right to go on distributing Tigers,” says Kenny Moore’s book, Bowerman and the Men of Oregon. Federal Judge James Burns ultimately issued a ruling that entitled Blue Ribbon Sports to damages but allowed both the U.S. company and Onitsuka to continue selling identical shoes. Critically, though, only Blue Ribbon was allowed to sell them under their U.S. trademarked names, including the Cortez. Onitsuka appealed but eventually sought an out-of-court monetary settlement rather than re-fight in court. Houser said: “they came up with a figure we felt was great. At the time it was an awful lot of money and it was to be confidential. And still is. Knight and Houser were asked to come to the San Francisco office of the law firm that represented Onitsuka. The pair was under the impression that they’d sign papers and there would be a transfer of funds into a Blue Ribbon account. “So Knight and I go down and we appear in the San Francisco lawyers’ conference room,” Houser said. “And they have an old steamer trunk. Looks like a casket. A big steamer trunk, filled with cash.” The Onitsuka lawyer explained the unorthodox payment method as the result of the difficulty of transferring money out of Japan. He encouraged Knight and Houser to sign some documents. “And I said, ‘Is that X dollars?’” Houser said. “And they gulped and said, ‘Well no. It’s illegal to bring that much money out of Japan. And we couldn’t’ bring it all. That’s all you get. But it’s a lot of money and you ought to sign.’ They knew we were desperate and needed money badly. “But it was grossly unprofessional. Grossly wrong. Morally wrong. Everything about it stunk. “And Knight said, ‘Eff you. We’re out of here.’ “And we left the conference room and went out into the lobby, punched the elevator button and just like in the movies, just when the elevator opened, the conference room door opened and they hollered, ‘Don’t’ leave. We’ve got the rest of the money.’ “So we went back into the conference room, they opened a door to an adjoining conference room where there was a second steamer trunk and they said, ‘Now sign the papers.’ “And at that point we said, ‘We’re not signing anything until a bank has counted the money and we have a certificate of deposit in the company’s name. This could be counterfeit for all we know and you guys have no credibility whatsoever.’ “I called the Bank of America, explained our problem at, maybe, 4 o’clock in the afternoon and they said, ‘It’s going to take a while to count that. But we’d be delighted to stay open late and we’ll have an armored car there in about five minutes.’ (The money was in $100 U.S. bills, Houser said.) “And they came and got the steamer trunks and we went to the bank and waited and they gave us our certificate. We signed the release papers. The case was over. We had the certificate of deposit. We went out to celebrate. Had a wonderful dinner and drank too much.”
- “Whatever you see you gotta keep a sense of humor; you gotta be able to smile through all the bullshit.”
Laughter and humor are amazing weapons that can be harnessed in creating anything important. Ben Horowitz said once: “As a startup CEO, I slept like a baby. I woke up every 2 hours and cried.” Humor is everywhere if you know who to find it. It does not need to be found in jokes or stores but that are one important source:
A family had twin boys, who had very different personalities even though they were identical twins. One boy was an eternal optimist, the other a complete pessimist. Just to see what would happen, on the twins’ birthday their father loaded the pessimist’s room with a huge pile of toys and games. In the optimist’s room, he brought in a huge pile of horse manure. That night the father visited the pessimist’s room and found him sitting next to his new gifts crying bitterly. “Why are you crying?” the father asked. “Because my friends will be jealous, I’ll have to read all these instructions before I can do anything with this stuff, I’ll constantly need batteries, and my toys will eventually get broken,” answered the pessimist twin. The father then went to the optimist twin’s room and father found him happily digging deep in the pile of manure. “What are you so happy about?” the father asked. The optimist twin replied: “There’s got to be a pony in here somewhere!”
Two friends, one an optimist and the other a pessimist, could never quite agree on anything it seemed. The optimist hatched a plan to pull his friend out of his pessimistic thinking. The optimist owned a hunting dog that could walk on water. His plan was to take the pessimist and the dog out duck hunting in a boat. They got out into the middle of the lake, and the optimist brought down a duck. The dog immediately walked out across the water, retrieved the duck, and walked back to the boat. The optimist looked at the pessimistic friend and said: “What do you think about that?” The pessimist replied: “That dog can’t swim, can he?”
Phil Knight story https://www.oregonlive.com/playbooks-profits/index.ssf/2015/10/post_74.html
Elad Gil: http://blog.eladgil.com/2017/08/feelings-of-failure.html
Color Labs: https://techcrunch.com/2012/09/28/color-ceo-nguyen-is-out/
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