Signals

I just got off the phone with someone who told me they turned down a startup offer “mostly because the founders didn’t have diplomas.” Now there’s a real chance that person may read this essay, so if you do, know that I’m not writing to criticize you! I just think it’s interesting.

This comment of theirs brought to mind something else I heard from someone in venture capital not long ago: “A ton of people at their company are from Stripe.” And another comment I heard from the founder of a hot startup: “When I hire, I look for former founders.”

I’m going to call the three things above (diplomas, ex-Stripe, former founders) “signals.” 

I sort of understand, though do not really agree with, why you would want to communicate these things to the general public. They don’t know you, they don’t have all the information you have, and you just want to use a broad heuristic that makes you look good. For example, it could be true that the rate of ‘super smart effective people’ is somewhat higher within the diploma-having category than the diploma-not-having category, at least in the United States. And so, if you were in charge of the lives of 10,000 people and had to set one mass rule for all of them, yes, maybe “we only join startups whose founders graduated from college” is fine.

But you? On a personal level?

Imagine you are sitting on your couch on a Sunday and want to know whether you should take your umbrella on a walk. So you look at the weather app. It shows a 20% chance of rain. You look out the window. It is pouring rain outside. And you decide not to take your umbrella. Or another scenario: your friend just cooked you the tastiest steak of your life. During the dinner, you ask him if he went to culinary school. He says no. You change your mind about the steak.

Of course it’s true that if the only information you had were the weather app and culinary school data points, your behavior would be semi-reasonable. But you have more information than that! You don’t have to rely on the barely-useful signal! So… Why are you still using it?

The “former founders” example is maybe my (least) favorite. Becoming a founder is a very easy thing to do. Becoming a VC-backed founder can be a bit harder, at least in some ways, but it is not one of the most difficult things on the planet. It is roughly as impressive to me that someone plays the piano in their free time, or is learning to speak Mandarin Chinese, as it is that someone has been a “founder” at some point in their life. It’s such a lossy signal. And, when you interview someone, you have so much more information. So much better information! Even the answer to “what is your favorite book?” is probably more useful as to whether this person will succeed at your company than their “former founder” status. Why are people relying on these signals when there is much better information right in front of them?

Solving this probably requires relying a bit less on status. Maybe it means asking better questions of people. Likely a bit of both. Whatever it is… Just be wary of “signals.”