The Founder’s Dilemma: Being arrogant enough to launch, but humble enough to last

3 years ago, Posted in Entrepreneurship

In 2008, the bottom dropped out from my business – and it was probably the best thing that could have happened. After years of steady growth, I had gotten used to ignoring the critics. At first they said we’d never get people to buy home improvement products over the Internet. Then they said we’d never find a way to ship thousand-pound orders to people’s doors. As we grew to one of the biggest sellers in the world, I learned to turn a blind eye – until the global recession made me wake up.

Founders starting the next big thing need to have an excess of confidence. When you’re aiming to change the world, pretty much everyone will tell you that you’re nuts — and confidence, even arrogance, is needed to push through. We tend to downplay the value of stubbornness in this era of the easy pivot and lean-startup flexibility. But when you’re just getting out of the gate, it can be the difference maker.

But while arrogance gets you through that early startup-hell phase, it can also close you off from learning and adapting. Once you’ve found traction, dialing down the bravado and putting your ear to the rail becomes critical. Of course, when the revenue is finally flowing and it feels like you’ve proved everyone wrong, this is easier said than done – and few founders get this right. In the end, the same confidence that helped launch my company nearly killed it. It took a near disaster for me to re-learn how to be humble again. Here’s what I found out along the way.

Pivot on process, not on vision

When Eric Ries coined the phrase “lean startup” in 2008, he popularized a philosophy that many entrepreneurs were already practicing: the art of the pivot. The central idea here is that it’s OK for startups to change course – early and often. Growing lean means trying lots of new things, seeing what sticks right away, then throwing resources at that. It’s a trial-and-error approach to building a business that depends on constant feedback.

But it can easily become a crutch and even a handicap. While it’s great to pivot in terms of process, pivoting on vision is another thing entirely. Bold ideas, especially industry-changing ones, often require a long runway. (Where would Tesla be now if Elon Musk listened to the detractors back in 2005?) It’s during this phase that listening to too much feedback and paying too much attention to critics and naysayers can actually be detrimental.

I started BuildDirect in 1999 with an investment of $20,000 and a plan to change the $500-billion home-building industry. We saw a massive opportunity to solve a brutal customer painpoint: distrust in the building industry as a result of expensive supplies, unreliable delivery and limited selection. It seemed obvious to us that there was a need for a service that let people order everything from flooring to patio furniture online and have that shipped right to their door.

Then we talked to insiders in the industry. You’ll never get people to pay up front for big shipments, they said. Not to mention, there’s no practical way to get this stuff to people’s homes. At the time, it was hard to order books and CDs off the Internet, let alone bathtubs and skylights.

In many ways, they were right. As we quickly realized, there was no Fedex of door-to-door heavyweight shipping that we could just latch onto! We had to build a global logistics network from the ground up. Our first effort failed; then our second one did, too. We sunk millions into the platform with nothing to show for it and even my own investors began to lose faith. The word pivot came up more than once. But by this point, I had a chip on my shoulder and was determined to prove them wrong.

After all, the truly game-changing platforms of the past few decades have all faced similar resistance. At the time, I was sure we were going to be the next RIM, which had struggled early on before hitting it big with Blackberry. We’d be like Netflix, which critics once contended would never be able to dethrone Blockbuster, much less go up against the cable content providers.

That pigheadedness paid off. In 2002, with a small team of exhausted and overworked developers and just a few weeks from the lights shutting off, we turned the platform on. It worked exactly as we said it would. The revenue flowed: $20,000 in that first month, then $1 million, $14 million, $28 million – and it kept flowing.

Act II: Dialing down the bravado and finding humility

As we profited in good times and then in bad times, even through the housing crisis, we thought we were invincible. With time, our biggest critics became our biggest boosters. For the next six years, it was smooth sailing.

But somewhere along the line, the same confidence that had served us well in the beginning became a liability. I had stocked my advisory board with people who thought like me, instead of critics who would challenge me. We ignored innovative ways that companies like Amazon were harnessing data to better connect customers and suppliers. Then the credit crunch of 2008 happened. My overconfidence evaporated even faster than our revenue stream, which fell by half in one month … and continued to freefall.

In retrospect, we had suffered the same fate of so many disruptors, who had beaten the odds only to grow complacent in their confidence. We had become too much like RIM, which – after finally cornering the smartphone market – ignored Apple’s innovations, or today’s Yahoo, struggling in the age of Google and Facebook despite its search-engine pioneer status.

BuildDirect ultimately fell to the verge of collapse – and it was only through acknowledging that I’d messed up that we got through it. This forced humility was a lucky break, in hindsight. A sour economy had forced my hand and made me adapt, quickly and decisively. With the Blockbusters and Blackberries of the business world, by contrast, it was a case of the frog slowly brought to boil, never realizing it’s in trouble until it’s too late.

In the end, I upgraded every part of the team including our board. I brought on new advisors who would look me in the eye and implemented systems where hard questions from partners, customers and employees were celebrated. We hired developers for a crash relaunch of our platform to better match shippers, manufacturers and buyers using cutting-edge predictive analytics. It was almost too little, too late – and, in near-desperation, I had to sell my house to meet payroll. But even with the economy sputtering, something started to click. With better data, we were able to consistently sell out of all our supply – a revelation that changed how we do business. This year, we’re poised for even bigger market heights than ever.

It takes overconfidence to stay the course through adversity, but a humble mind to evolve and iterate. How, exactly, do you know it’s time to dial back the bravado as a company? The moment where success is knocking down your door and everyone starts telling you that you’re right – that’s the time to get humble, fast. In the end, this chronology of arrogance and humility is something too many entrepreneurs get backward … and even the best struggle to time perfectly. Get this right, however (think Apple, IBM or even Google), and you might end up being the rarest of unicorns: a disruptor that keeps on disrupting.


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