I’m about to commit heresy in certain startup circles. So let me state first that I’m a devoted numbers guy, I believe wholeheartedly in the measurement of progress. I get chills when the numbers I’ve decided will determine the success of failure of my pursuits happen to point towards fortune. And I get all cranky when they dip, or even worse, when they don’t move at all.
August 9, 2016
How Numbers Can Wreck Your Startup
Sometimes the data is lying
This is true not just of startup or business or money, but anything. Let’s talk health. I track my runs, their length, my speed, the miles I run in a month. Maybe you do this too. But I also track everything else, my weight, my calorie intake, my caffeine intake, my shoe tread—at one point I had a stat for how I felt at the end of a run, and I was seconds away from deciding that the data point for that metric should be an emoji, like, “After my run, I feel = (poop).”
I inched back from that precipice.
But if there’s one thing I’ve learned from a lifetime of setting goals, establishing metrics, tracking progress and recording the results of myriad experiments, it’s that sometimes the numbers don’t mean anything, and in rare cases the numbers will straight up lie to you.
Now, I’m not talking about tracking the wrong data—what’s more commonly known as vanity metrics. Anyone with six months in marketing or who is old enough to remember eyeballs as a metric will tell you to watch out for stats that make you feel good but really just mask imminent doom.
I’m talking about those moments when all the numbers are off. I’m talking about gut over brain, heart over head, and the fact that most people don’t tell you often enough that an entrepreneur has to be right when everyone else is telling them that they’re wrong, and those naysayers have the data to back up their argument.
Yeah, I know. Me, the data guy, telling you not to trust the data.
Your results may vary, and this is a stunt that should only be performed by professionals on a closed course under heavy adult supervision. Don’t try it at home.
But sometimes you have to ignore the numbers.
There are way too many permutations of this phenomenon to give you a play-by-play for each, and it would be malpractice for me to try to tell you when to trust your gut. Those are philosophical and maybe theological decisions that every entrepreneur must stare down the barrel of.
However, there are two common and critical times when it matters, and I’ll tackle those two scenarios with anecdotal evidence, just to make a point.
I’m kind of a hypochondriac. Not in the classical sense, but I’m one of those people that if you tell me that there’s Zika, I’m pretty sure I’m going to get Zika.
This is something I fought for a long time, and there was a period in there when I was at the doctor literally once a month, if not more often, looking for ways to gain the knowledge and the numbers I needed to convince myself that I was OK and thereby had cured what I didn’t yet know was just a runaway case of my own personal hypochondria.
But you know what eventually cured it? When I stopped going to the doctor.
Actually that’s not entirely true.
What cured it is when I had to go to the hospital weekly for a shattered wrist. I spent so much time worried about my ability to play guitar, lift things, and, you know, type words for you to read, that all the other tics and insecurities had to get in line behind that one big one. After 12 weeks of screws, fixators, incapacitators, painkillers, and another 12 weeks of physical therapy, I developed an unhealthy fear of hospitals and more than a little flirtation with Vicodin.
I didn’t go to the doctor for about five years, and as a result, I got healthier, in body and mind, than I had ever been.
Now, again, here’s the disclaimer. It shouldn’t have taken a five-year hiatus from my medical upkeep to get me to the point where I am today. My doctor and I are now buds, he’s a great guy, and I see him without fail once a year (probably should be every two years, but you can’t change your stripes overnight).
What I got over was every time I got a sniffle or an ache, thinking I had the bird flu (that’s Zika in the 1990s) or a torn rotator cuff (I irritate my shoulder because I sit funny when I’m on the computer for long periods of time, which is 20 hours out of every single day, so, you know).
This is an extreme case and probably a boring story, but it proves a point. Not every chart is going to point upper left all the time, and the further you break down your metrics, the more of them are going to show what looks like drastically negative momentum. An entrepreneur has to digest the data without going off the cliff, which is one of the hardest things a person has to do.
Risk looks fun until your toes are hanging over the edge of the roof.
The other extreme is more dangerous. On one hand, when you know you’re right in the face of disaster, you’re on notice, you’re aware (constantly aware) of failure nipping at your heels. But when everyone and everything is telling you how awesome life is, that’s when you need to pay attention. It usually means no one is looking at the road ahead.
That road, Startup Road, is littered with the flamed-out chassis of companies driven into the ground because they seemingly hit an invisible wall at top speed.
But ask any founder who had a little more than a clue and they’ll tell you, readily, that they knew it was coming. And it isn’t just hindsight or bravado behind those claims, I’d be willing to say that 100 times out of 100, the entrepreneur knew that failure was inevitable, but the numbers told them they were crazy.
This is the scenario people refer to when they refer to vanity metrics. Startups who have so many Users but not enough Monthly Active Users, or those who have tons of Monthly Active Users but precious little Monthly Recurring Revenue.
That’s an easy warning sign to see. Shoot, Google Analytics can tell you that. Kid stuff.
What I’m talking about is when everything looks rosy, including the top and bottom lines, and a shift in the wind is about to knock everything over. These are the times when the creators of the machine need to step up and announce, “Holy crap, we’ve got 3D TV here.”
Some of the hardest but most rewarding entrepreneurial experiences I’ve ever had were with a few people sitting in a windowless room and thinking about changing everything, even when it looked like we were going to be printing money for years to come.
I remember one such move from my past, and I have to keep it vague in order not to betray some secrets and some friendships, but I made the move and it got out and someone I trusted and respected came to me absolutely angry at what I had done. At the end of the lecture all he wanted to know was why? Why did I do such an insane thing?
I ended up giving him a BS answer because I knew that he just wouldn’t understand until my premonition played itself out, which took a while, probably a year or so. Then he got it, and everything got patched up.
It didn’t have to. I could have lost co-workers, money, friends, face, all of it. Like I said, toes over the edge of the roof, but those are the times when an entrepreneur is truly tested, when you have to live with the consequences because you don’t have the data to back your insanity in midst of the salad days.
And sometimes it doesn’t pay off. Again, huge disclaimer, sometimes the numbers are 100% spot-on right and you’re just an idiot. But at least you’re an idiot entrepreneur, and not just an idiot executive.