“Know when to hold ‘em, know when to fold ‘em, know when to walk away, know when to run…” So goes the famous song ‘The Gambler’ by country music legend Kenny Rogers.
Most people would agree that to be a startup founder, you have to possess certain qualities: resilience, inventiveness, and a relentless drive. It’d be nice if you’re also a tech whiz or a well-connected marketer, but at the very least, you should exemplify the aforementioned traits.
Hope springs eternal, right? So you can continue to be tenacious, and stubborn, and believe in the viability of your business until your bank account drops below zero.
Sign up for the coworking lease, attend those important industry conferences, participate in the right social media chats.
Deplete all of your savings because you simply ‘know’ that next week, next month, next year—what you’ve created is going to be the thing that people want. The thing that people will pay for.
This is your one (albeit wild) bet, and you’re along for the ride.
What really happens when you soldier on, though? One of two things: first, you might catch a lucky break with the last minute funder or a windfall of unexpected customer growth. (This is the stuff of dreams that keeps dreams alive.)
It’s more likely, however, that you’ll slowly, almost imperceptibly, burn out both personally and professionally over an extended period. (Few startups actually implode quickly—what usually happens amounts to more of a fizzling out.)
As you may have already guessed, this post is a cautionary tale.
There are two principles from my undergraduate economics course that I’m excited to dust off and share here finally:
Point of Diminishing Returns
This is the moment in time when the benefits you derive from doing something begin to decrease, and continue to do so moving forward. Like when you’re eating a delicious dessert, but one more bite just isn’t as appealing as the last one was. You’re full. You’re getting tired of it. It’s not yummy anymore. This is the Point of Diminishing Returns—and you know you’ve reached it in your startup when working conditions or your mindset (or both) have deteriorated, and the downward trend continues without an end in sight.
This is the alternative gain that you’re preceding to be doing the thing you’re doing right now. If that’s laboring on your startup for 40+ hours per week, for example, your Opportunity Cost is the salary you could be earning at another cool startup or the freelance income you could be raking in within that time.
Or anything else you could be doing in your waking hours—exercising, learning a new language, studying for a postgraduate degree, etc. (Note: Opportunity Costs are tricky because they never go away. You’ll always be ‘paying’ when you make a choice with your time.)
What does all this mean? To put it plainly, staying in the wrong startup for the sake of seeing it through to an uncertain future doesn’t make you a hero. It makes you a gambler. And while gamblers live to win and believe they can outsmart the system, more often than not, they lose.
Even Tim Ferriss, whose New York Times bestseller The 4-Hour Workweek coined a new term (lifestyle design), has spoken about the merits of quitting on his blog. Surely someone whose success is undisputed can teach us all a thing or two about how to manage our most precious investment: time.
This might not be a popular perspective. We all want to achieve our goals, of course, and startup culture feeds into the idea that any one of us could be sitting on a unicorn. But it’s a healthy dose of realism and the focus on what the market will bear that can help you get there—either with this entrepreneurial endeavor or with the next one.
Here’s the bottom line: if you find yourself stuck in a cyclone of optimism with no real path forward, it’s time you took a hard look at your business, and, as our friend Kenny said, “know when to hold ‘em, know when to fold ‘em.”