"In a fight, who wins — the smart guy or the crazy guy?" That is the question that SoftBank CEO Masayoshi Son asked Adam Neumann before investing in WeWork. The story goes that Neumann answered, "the crazy guy", and Masa replied, "correct, but you are not crazy enough." Softbank later invested $4.4 billion in WeWork at a $20 billion valuation and then pushed that valuation up to $47 billion. In early 2020, following its IPO and the start of the Covid-19 pandemic, WeWork's valuation dropped to $2.9 billion. By 2022, Apple rolled out its dramatized version of the story in a tv series called WeCrashed.
Startup founders don't think like everyday people. They think that they can beat the odds, don't factor the odds, and often don't know the odds. Founders see the slim chance of a victory over the certainty of failure. So, you have to be at least a little crazy to start a startup, but are you "crazy enough" to win?
Humans fear making mistakes, failing, and looking stupid. This fear keeps most people from doing things outside of the box, and it prevents the crazy ones from drawing too far outside of the lines. However, your problem as a founder is probably not that you are too crazy. It is more likely that you are not crazy enough. Most founders work on too small of ideas. They pitch what they think investors want to hear. They build products that they think can get funded. They don't form a purpose or build their vision.
In the end, most ventures are compromised and build incremental products. Some tech people advocate this approach - to make money on boring ideas. That may be fine for them, but they are not the people that Steve Jobs would call the crazy ones. I believe in working on something that will leave a positive impact on the world. If you are going to spend years of your life building a startup with no guarantee of success, you might as well do something that matters. Enjoy it. Make it awesome. Think crazy! Jack Ma said, "we can be crazy, we shouldn’t be stupid.” Great founders know the difference.
Are you crazy enough? Marc Andreessen in his essay, It’s Time to Build, says that we need to demand more from entrepreneurs and investors, and that we lack imagination, action, and will. Bruce Gibney of Founders Fund writes, "We believe that the shift away from backing transformational technologies and toward more cynical, incrementalist investments broke venture capital."
Part of the problem is that VCs aren't crazy enough. Many of them have never really started a startup. They don't lead deals; they follow. They don't form strong theses; they jump on bandwagons. That is the opposite of crazy; it is groupthink. And it pushes founders to chase trends, build incremental products, and follow the status quo, because those are the ideas that get funded by VCs.
We need crazier thinking on both sides of the table, from founders and investors. And we have to be willing to take some losses to achieve greatness. Masa & Softbank also invested in Alibaba, which analysts expect to book revenue of $135.7 billion in 2022. Neumann raised $70 million, led by a16z, to sell tokenized carbon credits on the blockchain. When crazy pays off, it pays big.
As a founder, you have skin in the game, but you don't go all in. You can see the edge, but you don't go near it. You have big ideas, but you play small.
Are you crazy enough?