Using Intellectual honesty to maximize the value you get from your asks
Using Intellectual honesty to maximize the value you get from your asks
How being truth-seeking about the value you will provide to others will help you calibrate your asks
Hi - I’m Mike Wilner, the writer of this post which is part of my weekly newsletter, Getting Shots Up. The newsletter includes essays, interviews, and more about building entrepreneurial careers. This isn’t startup advice – it’s a zoomed out view of how entrepreneurial people can think about constructing a career that results in a lot of high quality shots on goal. I’m a former startup founder, the co-author of a book on seed fundraising, and am on the Early Stage Startup team at AWS.
If you’re in the middle of en entrepreneurial career or want to start something down the road, consider subscribing:
Introducing Intellectual Honesty
Conviction is a trait that most entrepreneurs come by easily. It helps entrepreneurs overcome the inertia of starting to build things. But getting started is a small part of the journey. If building an entrepreneurial career (or building a startup) were a rocket ship, then conviction would be boosters, and intellectual honesty would be the controls. You need both to make it to space.
Intellectual honesty is the practice of seeking the truth – regardless of if it aligns with your personal beliefs or that you want to be true.
It’s typical for first-time founders (including myself circa 2014-2018) to have high conviction but low intellectual honesty. Some ways that this may manifest include:
Thinking you have product-market fit because you have positive customer feedback when you really don’t.
Thinking that your startup is venture-backable because you want to raise money even though it isn’t.
Thinking that someone should be willing to hop on a call with you and give you advice because you’re an up and coming entrepreneur.
When I started my first startup, I held a firm belief that we would achieve our mission. I addressed obstacles in the road by doubling down on my convictions, believing that I could will my way to success. When investors passed on me, rather than curiously assessing their objections, I wrote them off as non-believers and moved on. I mostly wanted to hear things that confirmed my firmly-held beliefs that we’d be successful, and avoided spending too much mental energy on anything that would prove those beliefs wrong.
Trying to will my way to success didn’t work. I got my ass kicked and we failed. My aversion to intellectual honesty was a big part of the reason why.
Given that insecurity, intellectual honesty has been priority #1 for me over the past two years. Every time I have an idea or a hypothesis, I proactively seek the truth first before I get emotionally invested in what I want to be true. I try to be my own biggest critic and proactively surface the biggest risks that could lead to my ideas not working, addressing them head on. Focusing on truth-seeking has made me a significantly better operator than I was when I was running my first startup.
It’s also made me think of Neo from The Matrix – I felt like embracing intellectual honesty was choosing to choose the red pill over the blue pill. The more I’ve practiced intellectual honesty, the more I’ve been able to see some of the unpleasant truths of the startup ecosystem for what they are, rather than the altruistic, abundant place I assumed it was while running my first startup.
On the surface, the startup ecosystem is a place of abundance – people are generally more helpful in the startup ecosystem then other professional environments. But this isn’t because they’re better people with kinder hearts, it’s because they have incentives to do so. As Charlie Munger says, “Show Me the Incentive and I’ll Show You the Outcome.” The startup ecosystem is not an exception
People’s time, attention, and money are scarce resources that they need to invest purposefully in order to find success. And people will act based on their incentives. Even when people in the startup ecosystem are being genuinely helpful, it's because they have incentive to do so. Altruism alone isn’t enough to get someone to invest their precious resources.
Over the past two years, I’ve been able to mentor hundreds of founders through my day job, and I’ve put an emphasis on intellectual honesty – both when it comes to fundraising advice and other operational advice. I’ve seen how founders who embrace intellectual honesty and objectively think about the incentive structures and unpleasant truths that exist in the startup ecosystem are able to use them to their advantage, rather than being subject to them. If embracing intellectual honesty is Neo taking the red pill, understanding the underlying incentive structures is like when Neo sees the underlying code behind the matrix and gains the ability to dodge bullets and fly.
Some examples of these unpleasant truths in the startup ecosystem include:
Helpfulness paradox: The people who can help you most (personal mentors, potential co-founders, investors, early customers) have strongest incentive to help you if they think you’ll be successful even without them. On the other hand, people most willing to help are usually the least helpful.
The investor string-along: Investors have stronger incentive to string you along indefinitely (even if they don’t want to invest) than to tell you “no”
Power Law: A vast majority of financial returns in early stage startup investing comes from <5% of outliers, so once it’s clear that you’re not going to produce outlier returns, your own investors become less motivated to support you.
Today, we’ll dive into that first unpleasant truth – the helpfulness paradox. We’ll dive into the underlying code that makes it true and how entrepreneurs can use that understanding to their advantage.
Getting the most out of your asks
Helpfulness paradox: The people who can help you most (personal mentors, potential co-founders, investors, early customers) have strongest incentive to help you if they think you’ll be successful even without them. On the other hand, people most willing to help are usually the least helpful.
Entrepreneurs who are trying to make forward progress are always asking for help – regardless of if they’re currently working on a startup. Examples include:
These people that we ask for help should all be thought of as investors. While actual investors invest their time and money, all of these asks for help require that the helper invest their precious assets – whether it be their time, money, social capital, credibility, or anything else.
Just like investors, these “helpers” are not all created equal. Investors are sometimes uncharitably classified as “dumb money” and “smart money.” Dumb money investors don’t provide much help outside of money, while smart money investors provide a lot of help outside of the money they invest. This spectrum exists no matter what kind of help entrepreneurs look for – from personal mentors, to potential co-founders, to investors and advisors.
You should always want to be getting help from the most helpful people you can. But the more helpful someone is, the higher the demands are for their time and the more discerning they’re going to be about how they invest their time. They will want to invest their time in ways that have high returns. Conversely, people who are not helpful do not have many demands for their time and may be eager to help, even with low returns.
If you ask someone for help and the Expected ROI of helping you is above their expectations (AKA the “willingness-to-help threshold”), then they will help. If it’s below their willingness-to-help threshold, then they will be reluctant to help.
This helps us understand the helpfulness paradox. The most helpful people are usually reluctant to help unless the Expected ROI is high, and the least helpful people are eager to help when the Expected ROI far exceeds their expectations. Intellectually honest entrepreneurs can use this to their advantage by calibrating their asks (both the people you ask for help and the ask that you’re making) to (1) get the most value out of people willing to help (2) find ways to get the most helpful people to help you. In a perfect world, the ask and the person helping fall in the goldilocks zone so that you can maximize the value you’re getting out of your asks:
Whenever entrepreneurs ask for something, the recipient of the ask is making a conscious or subconscious calculation of the Expected ROI. That Expected ROI anchors the range of people who will realistically be willing to help with asks.
In this example, the goldilocks zone is made up mostly of people that are helpful, with some very helpful people. But the most helpful people out there will be reluctant to help. To start to tinker with Expected ROI, we need to break down the variables.
Potential value: The potential value that someone can get from helping you
Chances of success: The chances that you’ll be successful and that potential value will be realized
Personal Impact: The person’s unique ability to provide help that has a large impact on you or your startup
Investment: The amount of resources (including time, attention, social capital) they need to invest to deliver on the ask
Playing with these variables can help you (1) get more value from less helpful people who are eager to help and (2) find ways to get the most helpful people to help you.
For example, for less helpful people who are eager to help, you would have the opportunity to increase the investment in your ask and still get their help (if you want it), making them fall in the goldilocks zone. If someone really helpful would be reluctant to help with your current ask, then you have two options:
Grow the Expected Return: Improve the perception of your potential value to them, your chances of success, or their unique impact they can have on you or your startup
Reduce the investment: Reduce the required investment implied in your ask
Reducing the denominator is easy, so let’s start with an example of that:
Increasing the expected return is basically everything that goes into building an entrepreneurial career and building a startup, which is largely what this newsletter is about. For the sake of today’s post, let’s assume that when making an ask, the cards you have are the cards you have. Here are 3 tips to increasing the Expected Return:
Tip #1: Embrace vagueness about potential and don’t overplay your hand
When making asks, one of the quickest ways to lose credibility (and reduce your perceived chances of success) is by overplaying your hand – being arrogant or presumptuous with the potential value you bring to the think you’ll bring to the table. After all, if you’re asking someone for help, they should probably know more than you about the thing you’re asking for help with. So if you’re overplaying your hand, their expertise will likely help them sniff that out. If you lose credibility, then the person on the receiving end of the ask will assume that your future value is really low.
On the other hand, I often find that entrepreneurs (including myself) feel the need to be specific about their future plans for their careers or startups when making asks. With some asks, that’s necessary. But sometimes, specificity can backfire. If you’re too specific about what the future may hold (especially when you don’t actually know), then you may end up putting a ceiling on your potential future value.
This sometimes happens to startups during fundraising. When a startup is pre-revenue, there are so many unknowns that investors can’t get hung up on some of the numbers, and their imaginations can run wild with the potential upside of the startup. On the other hand, once a startup startups making revenue, investors can start doing the math to figure out the startup’s ceiling.
If you don’t know where something is going, keep it vague and don’t put a ceiling on the possibilities. This is the happy medium between stating the facts and overplaying your hand. Here are some examples:
Tip #2: Convey that you will continue making progress, with or without them
If you’re dependent on the person you’re asking for help, then you’re hinging your success on whether or not they will help. This not only conveys that the person you’re asking for help will have to do a lot of work to make you successful (they’ll need to invest a lot), but also serves as a signal that your chances of success might not be that high if you’re gambling your success on whether or not they help.
This manifests all the time in fundraising. Investors want to invest in startups who will be able to raise their round and continue making progress with or without them. If an investor feels like the founder is depending heavily on them to make their round work, they’ll be less likely to invest.
It also manifests when non-technical founders are looking for technical co-founders. Quality technical co-founders are most likely to join if they believe you’re going to continue making progress with or without them.
No matter who you’re asking for help, if they feel like you’re going to be successful with or without them, you will increase your perceived chance of success and increase the Expected Return.
Tip #3: Be more thoughtful and specific about the personal impact someone can have
Generic asks often leave people wondering, “am actually uniquely positioned to help, or will I be one of many voices giving generic advice?”
For example, I frequently get asked for generic fundraising or startup strategy advice. Without clarity of how I’m able to provide unique value, I’m pretty reluctant to hop on a 30 minute call. I had a founder ask me for that last week, and I replied asking them to shoot me an email with some of the specific questions they had so I could answer via email asynchronously.
On the other hand, last week I also received an email from a founder who thoughtfully explained that she was building a startup similar to my last startup, cited a post I wrote about that last startup, and outlined big questions she had from my experience.
Both founders thought I could help. But I knew from the asks that 30 minutes of my time would be 10x as impactful for the second founder than the first, as I was uniquely positioned to help with some of her questions. Even if both of those startups had equal chances of success and equal potential future value, the Expected ROI for me of having a 30-minute call with the second founder was 10x as high as the first.
Whether or not the people you’re asking for help are actually being this calculated with their willingness to help entrepreneurs, this calculus is happening. Being intellectually honest about (1) the potential value you can being someone, (2) your chances of success, (3) the personal impact someone can have on your success, and (4) the investment you’re asking for – will help you maximize the value you get out of your asks.
The 30+ mins you shared with me were, indeed, impactful - thank you! :)