#138 - What causes success?
And is rarely spoken about
‘And so you start to wonder—what correlates the most to success—team, product, or market? Or, more bluntly, what causes success? And, for those of us who are students of startup failure—what’s most dangerous: a bad team, a weak product, or a poor market?’ asks Marc Andressen from a16z in his iconic 2007 essay The only thing that matters.
Andressen’s talking about startups here. He goes on to note that there’s an ‘incredible wide divergence’ of both startup success and of the caliber of each of the three components of team, product, and market. Much like Paul Graham or Ben Horowitz, the other half of a16z, Andressen has seen a very large sample of startups.
He goes on to suggest that the answer to what causes success will vary depending on whom you ask.
‘If you ask entrepreneurs or VCs which of team, product, or market is most important, many will say team. This is the obvious answer, in part because in the beginning of a startup, you know a lot more about the team than you do the product, which hasn’t been built yet, or the market, which hasn’t been explored yet.
Plus, we’ve all been raised on slogans like “people are our most important asset”—at least in the US, pro-people sentiments permeate our culture, ranging from high school self-esteem programs to the Declaration of Independence’s inalienable rights to life, liberty, and the pursuit of happiness—so the answer that team is the most important feels right.
[....]
On the other hand, if you ask engineers, many will say product. This is a product business, startups invent products, customers buy and use the products. Apple and Google are the best companies in the industry today because they build the best products. Without the product there is no company. Just try having a great team and no product, or a great market and no product. What’s wrong with you? Now let me get back to work on the product.’
And who else should we ask this question? Someone who bets a level higher than people, higher than the products they build. Someone who bets on markets. So what does Andressen as a general partner of a16z think? I love the way he puts it here, not as an axiom but as his two cents on literally a multibillion-dollar question.
‘Personally, I’ll take the third position—I’ll assert that market is the most important factor in a startup’s success or failure.
Why?
In a great market—a market with lots of real potential customers—the market pulls product out of the startup.
The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along.
The product doesn’t need to be great; it just has to basically work. And, the market doesn’t care how good the team is, as long as the team can produce that viable product.’
The question Andressen is pointing to is fundamental: Why do most people think so little of that which matters the most?
I can think of two plausible reasons, one of which Andressen hints at himself when he says ‘if you ask…’
1️⃣Founders, much like Danny Ocean, take pride in assembling a crack team. They see it as their job to find talent. Engineers see it as their job to build great products. Whose job is it to pick a great market? No one’s. It may be at a VC fund but most of you reading this don’t work at one.
2️⃣We tend to over-index the thing we have most control over so that we can take credit for being good at it. We tend to under-index the thing we have little control over because we cannot take credit for it, even though that’s what makes the most difference. We can largely control the teams we assemble and the products we build, but markets? Those we have little control over.
And that’s what this week’s piece is about. What happens when you ignore the most important ingredient to your recipe of success? Short answer: It’s not a bad thing per se. But it is important for us to understand the nuance, given that so many of us feel meh about the jobs we do. And if you’re going to be paid for work you feel meh about, shouldn’t you pick something that pays you well?
With that, let me show you why, no matter who you are, it is important to appreciate what adds up to career success.
👋Hi, I’m Satyajit. Welcome to my newsletter that picks apart the messiness of decision-making about business, careers, and career design. I’ve recently put out to a playbook for middle managers to guide them through common yet tricky managerial situations.
Badminton and tennis—a racquet family where the cousins don’t meet
‘As per the figures available for 2013, when the Malaysian superstar in badminton, Lee Chong Wee, earned a record-setting $292,540 for his consistent performances, Novak Djokovic’s winnings from tennis stood at $11,197,947. In other words, that year, Djokovic earned 38 times more than Lee.’
This caption runs in a 2016 edition of Sportstar. 2016 wasn’t a particularly somber year for professional shuttlers. This kind of disparity is the norm.
The total prize money at World Tour Finals 2023, the season-ending spectacle in badminton, stood at 2.5 million USD. The corresponding kitty for tennis’ season-opening slam, Australian Open 2024, was 86.5 million USD. Just Jannik Sinner, the singles champion at the Australian Open, pocketed (seems like an awfully inadequate word here) a cool 2.9 million USD.
Here’s the picture from 2023 for tennis and badminton.
Only Djokovic and Alcaraz won Grand Slams in the tennis year, which shows in their outlier on-court earnings. Outside of the Slams, there continues to exist disparity in the prize money for men and women tennis professionals, which shows too in the steepness of the curves for male and female players.
Badminton refreshingly has equal prize money for men’s and women’s singles. If you’re a female shuttler, that parity should feel good as also the fact that the highest earner in the sport is a woman. But a quick look over to the tennis cousins and the pecking order is clear:
Someone can be the 30th-best tennis player in the world, male or female, and still make 4X of what the best shuttler in the world makes.
That’s a telling statement. The choice of sport is a driving force behind your material success. Transported to the lives of white-collar workers like you and me, it reads as:
Focus on the market, then on everything else.
Market > Firm > Skill
🚀Story goes that Jeff Bezos in the early 1990s saw a chart that showed the Internet was growing at 2000+% and made up his mind to leave his already high-paying PE job. Bezons bet on the market first, then on everything else.
A couple of years back, Steph Smith, podcaster and writer, asked this on X:
what are some markets growing at an exponential rate today?
Some of the most interesting data that tumbled out, referenced visually.
👉‘The percentage of men under 30 not having sex has tripled in the last decade.’ So: metaverse?
👉‘The electronics system was 5% of car costs in 1970. It's expected to be 50% by 2030.’ So: market for car malware and app stores?
👉‘The OG lab-grown burger costed [sic] $330k in 2013. Now, 1lb of lab-grown chicken costs $7.70, down from $18 mid-2021.’ So: lab-grown meat maker?
Each of these markets is comfortably beating Moore’s law today. Yet, most of these markets will fly under the radar of job seekers for years, if not decades. By the time there are college courses (or on YouTube?) that teach you how to culture meat or fab semiconductors, the markets will have become competitive and saturated.
A few weeks ago, while talking about regression to the mean, I wrote…
…by and large, luck has a big hand to play in unprecedented success. But the reason he [= Daniel kahneman] seems to suggest it as an non-obvious insight (and not an obvious truth) is because people love attributing success to something within their control.
It’s a hard thing to digest. Growing up, I was told it mattered to be good at what I did, to pick a good firm. No one said anything about markets. Certainly not that all markets are not equal and that it pays handsomely to pick a winning one.
As parents we may wince having to dole out this life advice to kids. It is an unpopular truth, for sure, so we forget to ask, is it monetizable? But ask Marc Andressen. His a16z today has a Growth Fund, a Gaming Fund, a Crypto Fund. These funds tell you the high-growth market bets. He’s putting his money where the market will be. As Andressen says:
‘Markets that don’t exist don’t care about how smart you are.’
📢Do try the Middle Manager Playbook and, if you find it useful, share it with friends. Your support will encourage me to do more 🙏
Until next week…
"Markets that don’t exist don’t care about how smart you are."
-Marc Andreessen
Loved this issue.