Most people say that 90% of start-ups fail, but they don't mention how many start-ups entrepreneurs attempt on average. If: 0.most founders only attempt one startup (and first-time startups have a 90% chance of failing),
You could make your model a bit more precise by noting:
Chance of all your startups failing (during life-time) = P(1st startup is a failure) P(2nd-startup is a failure) ETC.
If:
Then, if somebody just did 6 startups consecutively, their probability of success would be 1-.9^6 = .47. There's certainly room for a healthy amount of optimism in this model. If you model it more like 1-(.9.7.6*.6) = .73, then those seem like pretty good odds to do lots of startups.
I'd like to see people play around with numbers like these. It's an outside view model. You can use your inside view to predict more specific things (how long a start-up takes, how much you learn from your failures, etc).
This is better than having a model: P(Devise an idea for a product that creates demand.) = .90 P(Build it) = .90 p(Market and sell it) = .90 P(Things run smoothly (some might call this luck) ) = ?
P(success) = .9.9.9*? = higher than what's actually true. (Though, you could contend that plenty of people can't devise an idea for products that creates demand, and that if you can do this, then you have a much better chance than the average start-up).
Paul Graham said something like "Startup founders are / (have to be) optimists". I'm wondering how accurate people think P(2nd-failure | 1st failure) = .7 is. It seems like it's still pretty skeptical (closer to .9 chance of failure rather than .1 chance of failure of the purely inside view model), but is still probably optimistic compared to YC's ~80% failure rate.
Your post is exactly why "how many startups can I conceivably do" is an important question. If failed startups take on average 5 years to fail, which is a reasonable assumption for a semi-successful but ultimately failed startup, then doing 4 startups takes 20 years of your life. For most people, working 20 years at a startup and making relatively low wages is not feasible or desirable.
My motivation behind this post stems from Aumann's agreement theorem. It seems that my opinions on startups differ from most of the rationality community, so I want to share my thoughts, and hear your thoughts, so we could reach a better conclusion.
I think that if you're smart and hard working, there's a pretty good chance that you achieve financial independence within a decade of the beginning of your journey to start a startup. And that's my conservative estimate.
"Achieve financial independence" only scratches the surface of the benefits of succeeding with a startup. If you're an altruist, you'll get to help a lot of other people too. And making millions of dollars will also allow you the leverage you need to make riskier investments with much higher expected values, allowing you to grow your money quickly so you could do more good.
A lot of this is predicated on my belief that you have a good chance at succeeding if you're smart and hardworking, so let me explain why I think this.
Along the lines of reductionism, "success with a startup" is an outcome (I guess we could define success as a $5-10M exit in under 10 years). And outcomes consist of their components. My argument consists of breaking the main outcome into it's components, and then arguing that the components are all likely enough for the main outcome to be likely.
I think that the 4 components are:
The Idea
Your idea has to be for a product or service (I'll just say product to keep things simple) that creates demand, and can be met profitably. In other words, make something people want (this article spells it out pretty well).
What could go wrong?