A matter of luck

Building a company involves an unusual amount of uncertainty, and as founders, we pride ourselves on being rational. We analyze data, identify patterns, assess risks, and make decisions based on evidence. It’s yet unclear how much of our success is truly predicated on the right call we made versus being at the right place at the right time. As a result, it’s hard not to fall into the trap of interpreting every piece of news that we consume, be it an exit, a successful fundraise, or quite the opposite, a shutdown, as the direct consequence of the skill and the ability of the operator running it. But is it a trap?

The more conversations I have with people who’ve had incredible success, which often is paired with many failures along the way, the more I notice that everyone is simply doing the best they can. The end result of their work is sometimes correlated with the actions they took, but sometimes they just caught a lucky or unlucky break. Entrepreneurial success is often described as the result of exceptional judgment, preparation, and execution. These things matter, but timing, chance, and circumstances beyond our control matter too. So if that’s the case, can we fabricate luck?

I was recently having a cocktail with a friend of mine, the founder of a successful startup who, after 8 years of building, sold it to a large publicly traded company and, as a result, made a lot of people (and investors) happy. Reading the headline, anyone would’ve expected that the journey there was straightforward and predictable from day one, when in reality it couldn’t be further from the truth. As with any startup, it was a rollercoaster full of wins and losses, and a bunch of chewing glass in between. To be clear, my friend is an incredible founder, a brilliant engineer, and truly a tier 1 operator, but as with any founder, the end result was never clear until the ink dried on the paper - the second everyone said “it’s done”. And even then, it was hard for him and the team to believe that this is it.

I asked him a simple question that lends itself quite well to this essay: “How much of it was luck?” The answer was far from simple: “It’s almost impossible to say,” he shared. The inherent fragility of a startup means that at any point in time, there are a million reasons why the business could fail. In my humble opinion, the most important task of a founder is to ensure there is at least another day to fight. The rationale behind it is that by doing the right things for a long enough period of time, there are more chances for luck to appear. At the end of the day, we are simply increasing the probability that when we arrive at the right place at the right time, we will have the resources and abilities to capitalize on the opportunity. So what is luck in the first place but our interpretation of chance and randomness?

We are in a constant search for patterns: in customer behavior, market signals, investor feedback, and business performance. We are told investors invest in lines, not dots. But the same instinct can lead us to assign meaning to coincidences. If a particular ritual precedes a successful meeting, we might remember the connection and overlook all the times the same ritual made no difference. We might integrate a specific behavior because it worked once, or worse, twice (giving us the confidence that maybe we’re onto something). We all learned in college, or earlier, that correlation doesn’t equal causation. And yet here we are, grown adults, falling prey to that very simple fallacy and treating belief as evidence.

So how do we discern between our own abilities and the influence of powers beyond our control? That’s one of the hardest reflections a founder goes through, and for most, it starts with a better system of measurement. What cannot be tracked cannot be analyzed, so documenting our thoughts becomes fundamental for us to be able to answer this question. It also happens that documenting our thoughts has many other benefits, such as allowing us to clarify our thinking and make better decisions, but for the purposes of this question, we just need to be able to point to the input that led to the output. Over a sample size larger than one, we may gather a bit of data to establish a link between the two. By doing so, we might be able to judge why a successful gamble can look like brilliant intuition in retrospect, while an unsuccessful one can look like poor judgment.

We must be methodical in our analysis of self so as not to fall prey to one of two equally damaging ideas: thinking that we’re smarter than we are, or alternatively, thinking that we’re dumber than we are. Neither will allow us to make better decisions and realize that a big part of this thing called life is simply a matter of luck. Or is it?