Startups: A Losing Strategy, But Still Your Best Chance At Winning

At their 10-year college reunion, nine investment bankers and an entrepreneur walk into a bar. Guess who’s buying the drinks?

Maybe you’ll think of companies like AirBnB, Instagram, and WhatsApp in the Unicorn Club as you picture a San Franciscan 30-something ordering a round of Don Julio for his buddies. But in reality, the tab’s probably getting picked up by one of the bankers.

Availability bias explains why startup founders are perceived as wealthy and successful:

A person sees several news stories about cats leaping out of tall trees and surviving, so he believes that cats must be robust to long falls. However, these kinds of news reports are far more uncommon than reports where a cat falls out of the tree and dies, which could be more common (Tversky & Kahneman, 1973).

Just replace the word “cats” with “entrepreneurs”. You get the picture.

Founders accept probable defeat to...