Founders Archives - Allen Cheng

NPR’s How I Built This: What I Learned from 51+ Episodes

How I Built This is a popular NPR podcast featuring founders of world-class companies like Spanx, Southwest Airlines, and Starbucks. Each episode covers one founder’s story at a high level – how they arrived at the company idea, how they started the company, and how they struggled through calamity to break into success.

How I Built This features a wonderful diversity of companies, along multiple dimensions. The founders span a wide range of industries, including consumer goods/retail (Dyson, Spanx, Home Depot), food (Five Guys, Samuel Adams, Clif Bar), and tech/software (LinkedIn, Wikipedia, Stripe). Also wonderful is the diversity of company age – from old stalwarts like AOL and Starbucks to fresh young things Slack and Stitch Fix.

Having a wide range of companies to study lets us tackle the perennially interesting question: how do you build a successful company? What do successful companies and founders have in common, regardless of what product they make?

Inversely, can you succeed by breaking commonly accepted “startup rules”? (like how many founders to have, how much money to raise, how quickly to grow)

I listened to 51+ episodes of How I Built This with these questions in mind. I found patterns of traits and behavior that were nearly universal to all the companies profiled. I also found surprising variation in some factors around how the companies started and eventually reached success.

In this How I Built This summary, learn:

The 3 traits that successful founders almost universally have
How founders get their breakthrough idea and push it through to success
4 key differences that split companies surprisingly evenly
Why you should be careful about your takeaways from success stories like How I Built This (and this analysis)

Why Startups Fail: 59+ Postmortems of Failed Companies

Remember how this company Birchbox was everywhere 3 years ago? And how today it’s…not?

Turns out after raising $90 million at a peak valuation of $500 million, and after a few years of struggle, in 2018 Birchbox sold a majority stake to a hedge fund for only $15 million. This means after a journey of 8 years, its investors were totally wiped out. Employees who had exercised stock options came out with nothing.

Admittedly, I wasn’t a target customer, and this might have been obvious to their user base for years. But that this wasn’t bigger news (at least in the sources I read) reflects an ever-present survivorship bias in entrepreneurship. The companies that survive soak up the attention; the failed companies fade away with a whimper. We forget how much hype they built up years ago, and we turn our attention to the next hot thing.

But failed companies are where some of the best lessons can be learned. Warren Buffett says, “it’s good to learn from your mistakes. It’s better to learn from other people’s mistakes.”

Studying failed companies helps you better differentiate strategies that work from ones that don’t. Studying failed businesses helps you look past platitudes like “culture is everything” to understand the fundamentals of why many businesses fail and some succeed. Studying failed startups helps you discount today’s breathless press hype, and better try to predict the future.

I’ve done a deep dive into 59+ failed startups. Each has a meaningful story to learn from.

Most of these were venture funded by big names: Andreessen Horowitz, Sequoia, Kleiner Perkins.
They raised on average 8 figures of funding, some with $100 million+ – these were serious contenders, once strongly believed in by professional investors.
Many of them have postmortems written by a founder, complemented by third-party analysis of why they failed.

I hope they’re as useful to you as they were to me.

The PayPal Wars (PayPal’s History): Summary + PDF

PayPal is now one of the world’s largest payment systems. Its early history was chaotic. Within just 4 years of its beginning in 1998, PayPal signed up millions of users, merged with Elon Musk’s X.com, raised hundreds of millions in funding, had 3 different CEOs, IPO’d, and sold to eBay in 2002. (It spun out as an independent company in 2015 and now has a market cap of $90 billion.)

The PayPal Wars is an account of PayPal’s early history, written by former Director of Marketing Eric Jackson. PayPal Wars describes the staggering hyper-growth and the relentless competition with direct competitors and financial incumbents.

This book is a nice complement to Reid Hoffman’s Blitzscaling. You can see how the crucible of PayPal’s chaos forged Reid’s philosophy of how winner-take-all companies arise and need to “move fast at all costs.”

Best Summary + PDF: Blitzscaling, by Reid Hoffman

Want to know the growth tactics that Uber, Facebook, and Airbnb used to reach massive valuations in record time?

On the other hand, are you confused by companies that bleed billions of dollars and never seem to care about being profitable? “What in the world are they thinking?”

Blitzscaling gives you answers to both. Written by LinkedIn founder and Reid Hoffman, Blitzscaling describes the counterintuitive business strategy of putting efficiency and confidence aside for pure speed.

While nominally a business strategy book, Blitzscaling is generally relevant for:

Entrepreneurs who want to build massive companies
VCs and investors who want to discover the next big company
Employees who want to know how to work in a hyper-growth company
Anyone who looks at companies burning money to grow and wants to understand what the heck they’re doing

In this Blitzscaling summary, learn:

Common attributes of today’s most successful tech business models
When it’s appropriate to blitzscale, and when it will fail
The counterintuitive practices of blitzscaling that violate business common sense

Best Summary + PDF: Bad Blood, by John Carreyrou (Theranos’s Failure)

Founded in 2003 by 19-year old Stanford dropout Elizabeth Holmes, Theranos raised over $700 million in investment at a $9 billion valuation. It promised to run hundreds of common blood tests with just drops of blood. Holmes was celebrated as the youngest self-made female billionaire in the world and put on magazine covers.

Then it crashed. The technology was fake. As the truth came out, regulators prohibited Theranos from operating; the SEC sued Theranos with fraud. Today the company is limping alone, virtually worthless.

What led Henry Kissinger to join its board, 4-star general Mattis to say Elizabeth Holmes had “one of the most mature and well-honed sense of ethics” he’d ever seen, and pharmacy giant Walgreens to partner in rolling out Theranos in its stores? What led professional investors to invest nearly a billion dollars in a fraudulent company?

Bad Blood: Secrets and Lies in a Silicon Valley Startup by John Carreyrou, the very journalist who first exposed Theranos, covers the known history of how Theranos started, maintained its lies, and fell. The story is an incredible demonstration of the weaknesses of human psychology. Even very sophisticated investors, whose job is to sniff out these exact situations, fell completely for the fraud until it was exposed.

This Bad Blood summary covers three major questions:

How did the deception begin?
How was the deception allowed to continue?
What finally led to Theranos’s downfall?

Best Summary + PDF: Originals, by Adam Grant

In our modern economy, innovation is prized socially and rewarded financially. But how do you generate good new ideas? How do you tell which ideas are good? And how do you execute to make them real?

Wharton professor Adam Grant addresses these questions in Originals: How Non-Conformists Move the World. A bestseller like his first book Give and Take, Originals studies the habits of highly original professionals and dispels myths related to originality.

If you’re trying to be innovative, noted originals like Elon Musk and Steve Jobs may be intimidating. They seem like unique forces of nature, born with incredible intellect, creativity, and willpower, while we mere mortals are doomed to follow.

If there’s one message Adam Grant wants to convey in Originals, it’s to dispel this apparent misconception – you too can be original.

In this Originals book summary, learn:

The primary factor in generating more good ideas
Why “first mover advantage” is a myth
How procrastination can actually help you come up with better ideas
Why first-born children are generally less creative than last-born children, and how to encourage originality in your children
Which levels of an organization’s totem pole to target with your new idea

PDF + Summary: Sam Walton, Made in America (Wal-Mart Founder)

Wal-Mart is the largest retailer on the planet. It had $500 billion in sales in 2017 – almost 3x the size of Amazon – and runs 12,000 stores worldwide.

This retail titan began in 1945 with founder Sam Walton managing a single store in Newport, AR, a town of 7,000 people. In this small town, Walton learned the retail and management strategies that became the foundation of Wal-Mart’s staggering worldwide growth. (Amazing that Wal-Mart now has more than one store for every person in the town in which it was founded).

Sam Walton wrote his autobiography Sam Walton: Made in America in the last year before he died, as he struggled with cancer. Made in America is a candid, energetic retelling of the Wal-Mart story and the principles that led Walton and his partners to incredible success.

If you’ve ever read The Everything Store, a deep dive into Amazon, you’ll see Amazon’s core principles reflected in Wal-Mart, half a century before Amazon and the popular internet even existed. No surprise – Made in America is one of Jeff Bezos’s essential must-read books for his management team. If you want to understand the clash of retail titans Amazon and Wal-Mart in the coming years, you have to read these books.p>

In this Made in America summary, learn:

What Wal-Mart did in its early life that every major competitor ignored
How Wal-Mart borrowed its competitors’ best ideas – and did them better
Sam Walton’s favorite management tactics to motivate his team
Why Sam Walton always flew coach

Best Book Summary + PDF: Shoe Dog, by Phil Knight

Shoe Dog is the story of how Nike was founded, written by Nike’s founder, Phil Knight. Nike is now a global brand – go pretty much anywhere in the world, and you’ll see someone wearing Nikes.

But Shoe Dog starts you over 50 years ago in 1962, when Phil Knight is 24 years old, has just earned an MBA from Stanford, and doesn’t know what to do with his life. You travel the next 18 years with Phil Knight, through continuous adversity, self-doubt, and never-ending financial uncertainty.

Shoe Dog is a refreshingly candid entrepreneurial account. Phil is clear about his shortcomings and about how tough it was to keep Nike running year after year. Shoe Dog is also well-written, with poetic phrasings and philosophical musings, unlike the straightforward clip of most business biographies.

Read the Shoe Dog summary here for the main history of Nike and Phil Knight, but read the real book for a visceral account of how one of the world’s biggest companies got started.

Summary + PDF: The Road Ahead, by Bill Gates

Want to predict what the next technological revolution will be (eg cryptocurrency, artificial intelligence, CRISPR, VR/AR), and how it will unfold? Want to envision the most valuable applications, startups, and business opportunities to arise in this new paradigm?

One way to get better at predicting the future is to study history and people who accurately predicted the future. In 1996, Bill Gates published The Road Ahead, his manifesto on how the Internet and PC will pervasively transform our lives and major industries.

To control for hindsight bias, remember that in the mid-90s:

the web was used only by a small minority niche – 0.4% of the world population, compared to 54% today
computers were glacial by modern standards, connected to the Internet by 28k/56k modems capable of transmitting 3-6kB/s (0.1% of a typical connection in 2018)
many critics felt the Internet was just a gimmick or a simple tool, incapable of upending people’s well-established habits

Within this context in The Road Ahead, Bill Gates is optimistic and remarkably prescient about how important the Internet will be. He predicts that the Internet is a revolutionary paradigm change in zero-cost information handling, that this will spur development of groundbreaking applications, and that virtuous cycles will kick off revolutions in many industries. Bill Gates predicts elements of today’s largest tech companies – Facebook, Netflix, Amazon – and top applications – mobile phones, social networking, ecommerce – years and even decades before they fully materialized.

In this summary of The Road Ahead, I’ll summarize major elements of Bill Gates’s vision for the future. I try to build a framework for evaluating a new technological paradigm and how it will transform our lives and industry. I also discuss where Gates’s predictions fell short and possible patterns to misprediction.

Best Summary + PDF: The Everything Store, by Brad Stone (Jeff Bezos and Amazon)

Amazon is now the largest Internet retailer in the world, and Jeff Bezos recently became the wealthiest person in the world. Amazon increasingly penetrates our everyday life, from being the first stop for our online shopping to interfacing with our physical world through Echo and Alexa.

But over 20 years ago, Amazon was just an online bookstore in the rising tide of the web. In its darkest times, detractors repeatedly predicted it would go bankrupt, that titans like Walmart would easily crush it, and that it would be out-executed by tech darlings like eBay and Google.

As we know now, the dogged determination of Jeff Bezos and Amazon overcame all these objections. In The Everything Store: Jeff Bezos and the Age of Amazon, Brad Stone profiles the history of Amazon from its early days to 2014 and describes the values that led to their immense success. In this Everything Store summary, you’ll learn:

the incredible speed at which the web and Amazon developed, launching multiple iconic product lines within the same year
Jeff Bezos’s relentless ambition to beat competitors and take every advantage it can get
the qualities that guided Amazon from its founding to its ubiquitous presence today
Jeff Bezos’s most vicious criticisms of employees from his trademark temper

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