View profile

The DL - Why Join a Startup, the YOLO Economy, and Happiness at Work

April 26 · Issue #83 · View online
The DL
This week’s DL discusses my mental models for thinking through a big job change from VC partner to startup founder, as well as links to a great writeup on the “YOLO economy” and a McKinsey article on the number one predictor of happiness at work.
If you’re one of the 103 new DL readers who joined over the last month, welcome to the best newsletter about tech, startups, and investing in the Pacific Northwest.
👋 Referred by a friend? Sign up here.

Dan's Mental Models for Joining a Startup
A few months ago I left an amazing job as a partner at a venture capital firm to start Plus, a startup that helps people capture, see, and share data from different tools. I thought most people would think that was crazy, but everyone I’ve spoken to - including my very risk-averse in-laws 😅 - has been surprisingly excited that I’m building something I’m passionate about.
According to the NY Times, ~50% of tech workers want to leave their job this year, so it’s not surprising that many people ask me why I did it. Here are some of the mental models I used to make this decision. If you are thinking about joining a startup or trying something new, hopefully they help you think through your decision, too.  
1. Potential vs. Probability
“It’s the possibility of having a dream come true that makes life interesting.”
— Paulo Coelho, The Alchemist
The most exciting thing about buying a lottery ticket isn’t the expected value of the ticket (pro-tip: it’s negative 😉), it’s the non-zero chance that you could actually win a million dollars.
Similarly, the most exciting thing about joining a startup is the non-zero chance that you could build the next Airbnb, Coinbase, DoorDash, Snowflake, Stripe, or SpaceX (and it’s not bad that you could make millions of dollars doing it).
If you work in tech — whether in big tech or at a startup — the probability that you will earn a great salary that gives you the financial freedom to live an amazing life is pretty high. Given there’s a relatively high floor on compensation, even at a startup*, take the path you think will make life more exciting and more rewarding. 
For me, when I ask myself “What would I actually want to do if I made enough money to retire today?” I would probably want to work with great people building impactful products. If someone wants to pay me to go do that today, why not chase my dreams? 
2. Explore or Exploit
“Explore when you will have time to use the resulting knowledge, exploit when you’re ready to cash in”
— Brian Christian, Algorithms to Live By
In your second week in a new city, would you rather go to the best restaurant you’ve had so far or try something new? The decision to explore (i.e., try new restaurants) vs. exploit (i.e., go to the best place you know) is personal, but for me, I’d rather “explore” if it’s week two of a year-long stay but “exploit” if it’s the last day of a two week vacation.
Why do people bias to exploring if they have more time? Because the activities that make people happiest and most satisfied are trying new things and learning/mastering new skills. At a startup, you are forced to explore and learn a lot because you encounter so many different types of problems on a day to day basis.
Big companies are better suited for exploitation than exploration. To grow and become more profitable, they want to build efficient processes to make sure people don’t have to encounter too many new problems, and they set up career ladders that make people better and better at solving the same problems over and over again.
From a career perspective, solving the same problems can be very lucrative, but if you want to spend more time exploring, the learning curve at a startup is probably steeper and more varied. Time is your most limited resource, so make sure you are making a deliberate decision on when to explore and when to exploit.
3. Efficient Career Risk
One of the most important ideas in finance is the idea of the “Efficient Frontier” - portfolios of investments that give you the highest expected return for a certain level of risk. Essentially, by combining different types of higher risk / higher return assets with lower risk / lower return assets, you can increase the expected return on a portfolio without taking on more risk. 
Applying this framework to thinking about your career is helpful. If you have worked at a big tech company for a while, joining the right startup is a “smart risk” because you’ll likely gain many valuable experiences that will be applicable to any other job, and this will shift up the “efficient frontier” of your career outcomes.
To make this more tangible, here’s an example. Let’s say you’re a high performing senior engineer at Microsoft. You’re wondering if you should stick around for a couple years for the next promotion or join a promising early stage startup. What’s your career risk?
  • If you join and the startup becomes the next big thing… awesome! You’re set for life (both in terms of money and future career opportunities).
  • If you join and the startup doesn’t work out… bummer, that happens. But now you have experience that gives you a totally different perspective on work, domain experience in a new field, and a network of advisors, investors, friends, and cofounders if you ever want to pursue a startup again.
Best of all, if you decide to return to Microsoft, the worst case scenario is you go back to your old job. The more likely scenario is you return at a higher level on a steeper trajectory because you have new skills and experiences that make you a better engineer. Without taking on more risk, you’ve improved your expected outcomes.
4. Freedom to Focus
Starting from a blank slate is scary and incredible at the same time. It’s often unclear if you are taking the right path, but it’s also easy to move rapidly, focus on what matters, and iterate on quick feedback cycles. This applies for building both products and organizations.
One of the best parts of joining an early stage startup is picking and choosing the best practices from companies where you have worked in the past, while trying to avoid the things that made working at those other places unpleasant.
As companies grow, they accumulate “organizational debt” (e.g., office politics, unnecessary meetings, needlessly complex processes) the same way that software accumulates technical debt. Joining an early stage startup means you get to build great products that don’t come with years of technical debt, and you also get to build teams and relationships without the years of organizational debt that have accumulated at a big company.
That means you can spend your time focused on what you’re good at, instead of all of the “other” stuff that eats up people’s calendars. This is why people spend so much time talking about the pace, the culture, and the excitement of working at a startup. It’s an environment that is all about enabling people to get their best work done.
If I had to name the one most positively surprising thing about working on a startup, it’s this freedom to focus and the resulting pace and productivity. At Plus, we get so much done with a small team that I am completely blown away with our progress every month, and it’s what makes going to work so fun. 
“The framework I found was called a ‘regret minimization framework.’ I wanted to project myself forward to age 80 and say, ‘Okay, now I’m looking back on my life. I want to have minimized the number of regrets I have.’
I knew that when I was 80 I was not going to regret having tried this. I was not going to regret trying to participate in this thing called the Internet that I thought was going to be a really big deal. 
I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not ever having tried. I knew that that would haunt me every day, and so, when I thought about it that way it was an incredibly easy decision.”
— Jeff Bezos
If you find the right opportunity with the right team, joining a startup to build something from the ground up can be a unique, once in a lifetime experience. You won’t regret taking a once in a lifetime opportunity and, in today’s job market, it’s not very risky either. 
Maybe you take a pay cut for a year or two, but your job at a big tech company will always be there if you decide to go back, and the opportunity to focus on your work, build a brand new product, and explore something with unknown potential… well, that’s really exciting. 🤩
* If you’re interested in learning more about startup compensation benchmarks, shoot me a note!
If you want to explore job opportunities at startups, we are hiring for JavaScript engineers at Plus (my startup)! I’d also love to connect you with other startups in the Madrona portfolio or other companies that I am connected to in the Pacific Northwest. Just send me an email.
Other stuff Dan's talking about
💼 The Boss Factor - According to McKinsey, one of the biggest predictors of life satisfaction is a good relationship with your boss. Surprisingly, relationships with management are 6x more important than with coworkers
🔥 The YOLO economy - Great article on why exhausted, type-A millennial workers are looking for new jobs. Here’s my Twitter summary of the article if you just want the highlights
💻 North Korea’s Hacking Army - Fascinating look into how North Korea trains hackers in the same way as Soviet-era Olympians and uses them to wage cyber warfare and cybercrime (they’ve stolen nearly $2B of crypto)
🍎 New Toys - My big decision this week is going to be whether I order an 11" iPad Pro or the 12.9" iPad Pro. I really want that fancy new mini LED screen, but the 12.9" iPad just seems way too big. Any advice or recs?
Please hit reply! (Or subscribe or forward!)
About me: I’m the CEO of a startup in the low code / productivity tools space. Before that, I was a partner at Madrona, a Seattle-based VC firm.
If you have thoughts, questions, or comments on the newsletter, hit reply! If you’re new, check out some of the DL’s past articles:
🔥 Want to subscribe? Sign up here!
Did you enjoy this issue?
If you don't want these updates anymore, please unsubscribe here.
If you were forwarded this newsletter and you like it, you can subscribe here.
Powered by Revue
Seattle, WA