Founders Define Reality (& Give Hope)

By Jason Calacanis

I recently had author Warren Bennis on "This Week in Startups" and he said something that struck me deeply:

"Leaders define reality."

The interview was so long we broke it into two parts. It's a commitment, but if you watch it I think you'll get a lot our of it. Part one & two.

The origin of the quote seems to be Napoleon Bonaparte: "The leader's role is to define reality, then give hope."

The challenge is that as a founder, you're going to be faced with brutal reality after brutal reality.

Looking back at my three big startups I can recall each of these "reality defining" discussions, and there is some advice I can give on them.

1. Define reality as quickly as possible

When the Google Panda update crushed my current startup Mahalo last year, we had a management meeting that Sunday. We had to figure out what to do because Google, without warning, had destroyed more than half our revenue and traffic.

Of course, having seen this movie before at Silicon Alley Reporter and the dotcom crash that took 90% of our revenue, I knew the answer: cut costs quickly and deeply and don't be delusional.

When the cheddar gets moved, it almost never comes back.

In the Silicon Alley Reporter days, I moved too slowly and didn't define reality quick enough. I was in a bit of denial because I believed, correctly, that the internet was not a fad. Of course, it took five years for the "fad" label to get shaken off.

Here's the reality-defining conversation I gave when Panda kicked Mahalo in the nuts:

1. Google is not going to let any one site get too much traffic from search, and it is increasingly becoming a full-blown content company in competition with the people it is indexing. That's reality. You don't get to buy Zagat and say you're not a content company. Sorry, Google.

2. If Google is becoming a content company, we're not going to be able to beat it -- certainly not in its sandbox.

3. Google is under massive government scrutiny when it comes to search, so the chances of a resolution are very low. Add to that the fact that no one is "in charge" of anything at Google and getting a resolution is unlikely.

4. Since we can't make a search-driven business work, we need to find a new ecosystem. Let's test the three most vibrant ones: YouTube, Facebook and Apple.  

So, we accepted how screwed we were and looked for a new sand box (more on that in a minute).

2. It's not one reality-defining conversation

You're not going to define reality once as a founder. You're going to do it multiple times a day. In a crisis it's critical that folks get to meditate on exactly how bad the reality is.

It's going to take a dozen discussions in the first week so that you're really, really clear on what reality is -- and just how fracked you are! Good times!

It's a process, and you'll see it play out in tragic events like 9/11. Rudy Giuliani did an amazing job of defining reality for New Yorkers, and over five to ten years we, as a society, moved from thinking that it was the end of days to today when folks think terrorism is a manageable issue.

As humans our greatest strength is our adaptability and our ability to find enough meaning in life to persevere.

As a founder you need to believe in your team's -- and your own -- ability to adapt your way to success. We actually have a word for this adaptivity: pivoting.

3. Hope needs to be authentic

If you don't actually believe the hope you're giving to your team, you are screwed because they smell your fear instantly.

Back to the Mahalo Panda issue, it was clear to me that our mission to "help people find information they could trust" could manifest itself in at least one of these three other ecosystems.

Turns out we figured out how to make our educational content work brilliantly in one ecosystem, well in another and not at all in the third.

Apple's app ecosystem is great because folks will pay for our educational content. It's a slam dunk.

In YouTube's ecosystem, traffic is mind-blowing and it is so close to figuring out a sustainable revenue model that I think we're a year or two away from it working. I'm 100% certain YouTube will get there, and we will be right there with them.


Well, Facebook is good at one thing: making Facebook money.

No one outside of casual games can really make Facebook work as a business (as a marketing tool? sure). If Facebook wants to be a true partner, it needs to shoot the lock off its enormous wallet and start *sharing* revenue like YouTube and Apple.

Why on earth should partners invest in developing their Facebook presence if all they get is marketing? Facebook would be bigger than Google search, Apple's Apps and YouTube's videos if it shared revenue.

Since Zuckerberg is so smart, I'm thinking the only reason he isn't sharing revenue on Pages is because he's saving another bullet for after the IPO. Can you imagine how much more content would be inside of Facebook if it gave page owners 70% of the revenue on their pages?

In conclusion...

The bottom line is that the truth will make you free. The more honestly you can define the reality of how f@#$ked you are, the quicker you can get to hope, and the quicker you can get to hope, the quicker you can get back to building stuff.

Truth is, all businesses are "totally fracked" at some point or another. If you're not fracked, you're not taking enough risks.

According to the Eeyores in your startup -- if you haven't fired them yet -- you're actually fracked right now and will be for all time. That's just what Eeyores do, but I'll save that for another editorial.

PS - If you know of a killer startup looking to launch on March 7 & 8 @ the LAUNCH Festival in San Francisco, tell me. :-) [ jason at calacanis dot com ]

PPS - Mark Cuban, Google and I invested in CRM company It's awesome. It's by the guy who did GOLDMINE if you remember that desktop app from back in the day. More on the deal here  -- Side note: Did I just say that I got to invest alongside Mark Cuban and Google?! Pinch me!

PPPS - Yes, I'm still angel investing. Looking for five killer ideas to invest in this year. Tip: Only suckers write or send business plans. Real founders send URLs, mockups and apps.