Hypothetical Number Inflation

I read a lot of Hacker News and it always strikes how big the numbers are in other people's blog posts. When people write about a big exit on HN, they talk about $100M not $500,000.

When I was in college, and especially when I was running my first startup, reading those articles made me feel like a failure. From what I could tell, the world was populated exclusively by companies "struggling" to break $10M in yearly sales, and founders learning how to manage similarly "modest" liquidity events.

Now that I've been blogging for a few years, I can say from experience that most of those numbers are bogus. Survivorship bias aside, bloggers suffer from what I like to call Hypothetical Number Inflation.

When I write about a topic, I want to make a point, and the point is very rarely to be realistic about ordinary business metrics. I might want to prove that the relationship between effort and reward is correlative not causative, or that bootstrapping your first business makes sense. These are opinions that I've thought through and believe, but it helps to rally some ballpark numbers to make the case.

And therein lies the problem: in the course of arguing a point, it behooves me as a writer to push my numbers to the logical extreme to avoid losing my readers to unrelated quantitative niggling.

If I want to provide an example of a successful business in a blog post, I want the example to be unequivocal. If I choose a number that's too low, the effect is like Dr. Evil asking for 1 MILLION dollars, readers stop and think "wait a minute, $1,000,000 isn't successful to me." When that happens, I lose that reader before they hear the entirety of my argument.

Since the HN crowd is so affluent (or at least says that it's affluent), writers that want to be taken seriously need to choose hypothetical numbers that boggle the mind and leave no doubt as to as to the writer's intent.

So, if you get frustrated when you read authors talking about "small" exists in the mid-8 figures or "low" executive compensation in the high 7 figures, remember that these numbers don't represent the median, but the extreme. Better yet, decide for yourself how many zeros constitute success or failure and ignore writers like me.

Are Titles Important at a Startup?

My two co-founders and I signed our first company into existence on a hot summer day in 2008. Prior to signing the document, we had to decide what our titles would be. Our lawyer assured us that we could give ourselves any titles we wanted and it would not have an impact on the legal process. We thought it would be fun to sport executive titles, so we each chose a grandiose executive title and then returned to our shared apartment and kept hacking.

After several years at both companies, only the CEO title stuck. Although we remember what job titles we each picked, they ended up being largely unimportant. 

Size Does Matter

Organizations give titles to members to help people outside the organization understand who they are speaking with. When you get interviewed for a job, you want to make sure you aren't talking to a sales associate, you want so-and-so from HR. When a member of the press deals with a company, speaking with the CEO lends more weight than if the representative is a summer marketing intern.

But the orienting power of a title breaks down when the organization being represented is small. If you are being interviewed for a position at a 5 person startup, it's less important who you talk to because you can be more certain you are talking to someone of importance. Similarly, if a member of the press talks to one of a three person founding team, it matters less what title they chose and more that they are one of the co-founders.

For small startups, job titles are less important, if not entirely meaningless--except for the title of CEO.

Head Honcho

So why does the CEO badge remain important even at a tiny company? At both of my companies, we made it clear to our customers and business partners who we were, and we didn't made any attempts to look larger than we are. So at least in theory, an email from any one of us should have carried equal weight. Internally this was true, but externally, it remained useful to call one person the head honcho. Even in a super-small startup, it helps clarify to outsiders who the organization recognizes as the leader or point of contact.

None of us made business decisions without unanimous consent, we all checked each other's commits, and we all read each other's support emails. But startups deal with thousands of people in their lifespan and it's easier on everybody to avoid explaining egalitarian cooperation and simply point to one guy and say "he's boss."

This doesn't mean, however, that tiny startups can get away without a clear internal division of labor. Titles need not be assigned, but somebody has to know it's their job to file this year's tax return on time. At both of my startups, I was referred to as "head businesser." Nick was a "programmer," and Scott was a "programmer and accountant." The fact that Nick and Scott were labeled CTO and CFO on paper was only superficially important. Their understanding of their roles at the company, however, was of paramount importance.

Conclusion

If you are starting a startup and are wondering whether you and your cofounders should have titles, I would give this simple advice: decide who the CEO is and stop worrying about other three letter acronyms. Incidentally, this is exactly the advice that YCombinator tells it's founders.