FF Insights #674: Why some startups fail

June 16, 2022: Crypto matters; The toll of psychiatric drugs; Defining age

Founding Fuel

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Good morning,

In Zero to One: Notes on Startups, or How to Build the Future, Peter Thiel offers an interesting piece of advice on how to manage people in a startup. And then he goes deeper, and talks about why some startups fail. The answer in short: “Internal conflict”

Thiel writes, 

“When assigning responsibilities to employees in a startup, you could start by treating it as a simple optimization problem to efficiently match talents with tasks. But even if you could somehow get this perfectly right, any given solution would quickly break down. Partly that’s because startups have to move fast, so individual roles can’t remain static for long. But it’s also because job assignments aren’t just about the relationships between workers and tasks; they’re also about relationships between employees.

“The best thing I did as a manager at PayPal was to make every person in the company responsible for doing just one thing. Every employee’s one thing was unique, and everyone knew I would evaluate him only on that one thing. I had started doing this just to simplify the task of managing people. But then I noticed a deeper result: defining roles reduced conflict. Most fights inside a company happen when colleagues compete for the same responsibilities. Startups face an especially high risk of this since job roles are fluid at the early stages. Eliminating competition makes it easier for everyone to build the kinds of long-term relationships that transcend mere professionalism. More than that, internal peace is what enables a startup to survive at all. When a startup fails, we often imagine it succumbing to predatory rivals in a competitive ecosystem. But every company is also its own ecosystem, and factional strife makes it vulnerable to outside threats. Internal conflict is like an autoimmune disease: the technical cause of death may be pneumonia, but the real cause remains hidden from plain view.”

Do you agree with Thiel? Let us know.

Have a great day.

Crypto matters 

The crypto currency markets continue to crash and there is a school of thought that has started writing obituaries to its imminent demise. Then there is yet another school of thought that believes busts and boom cycles are par for course. And that crypto is where the future lies. Bruno Macaes, author and member of the European Council on Foreign Relations, is one of them.

He makes a few points on his personal blog on why he thinks the way he does. “Money today is programmable. Money is not some physical stuff. It consists of accounting entries and these accounting entries can be adjusted or modified to pursue certain social or political goals. A kind of blockchain but without the immutability of the blockchain. When Russia invaded Ukraine, Russian central bank reserves were frozen. Suddenly the Russian central bank could not touch its own reserves held at Western central banks or financial institutions.

“All instruments except gold are both assets and liabilities. Under a gold standard, only gold is money. Everything else is credit. But gold is not programmable. That in the end doomed the gold standard. In a modern economy money has to be programmable.”

There is much else he has to say and all of it is interesting.

Dig deeper

The toll of psychiatric drugs

A narrative doing the rounds in hushed tones is about how young adults in urban India are being prescribed psychiatric drugs. Does this merit a closer examination? We believe it does. That is why when The New Yorker published a meticulously researched story that documents what a very young American woman called Laura Delano had to go through, we read it closely. It broke our hearts.   

Finally, “It took Laura five months to withdraw from five drugs, a process that coincided with a burgeoning doubt about a diagnosis that had become a kind of career. When she’d experienced symptoms of depression or hypomania, she had known what to do with them: she’d remember the details and tell her psychiatrist. Now she didn’t have language to mark her experiences. She spent hours alone, watching South Park or doing jigsaw puzzles. When her aunt Sara updated the rest of the family about Laura, the news was the same: they joked that she had become part of the couch. Her family, Laura said, learned to vacuum around her. Had she come from a less well-off and generous family, she’s not sure she would have been able to go off her medications. Others in her situation might have lost their job and, without income, ended up homeless. It took six months before she felt capable of working part time.

“Laura had always assumed that depression was caused by a precisely defined chemical imbalance, which her medications were designed to recalibrate. She began reading about the history of psychiatry and realized that this theory, promoted heavily by pharmaceutical companies, is not clearly supported by evidence. Genetics plays a role in mental disorder, as do environmental influences, but the drugs do not have the specificity to target the causes of an illness. Wayne Goodman, a former chair of the F.D.A.’s Psychopharmacologic Drugs Advisory Committee, has called the idea that pills fix chemical imbalances a ‘useful metaphor’ that he would never use with his patients.

“Dorian Deshauer, a psychiatrist and historian at the University of Toronto, has written that the chemical-imbalance theory, popularized in the eighties and nineties, ‘created the perception that the long term, even life-long use of psychiatric drugs made sense as a logical step.’ But psychiatric drugs are brought to market in clinical trials that typically last less than twelve weeks. Few studies follow patients who take the medications for more than a year.”

Dig deeper

Defining age

(Via WhatsApp)

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Warm regards,

Team Founding Fuel

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