Values & Outcomes

September 16, 2018

Playing in bands is probably the number one way I’ve spent my non-work time over the course of my adult life. This has been very much a recreational exercise for the most part — but in 2002, when I was twenty years old, I was in the weird position of being in a band that was more popular than it was supposed to be. In the process, I learned a couple of things that are still useful today in non-band contexts.

The background isn’t that important, but it’ll give proper context to the stakes at the time. My friends and I started a band in high school for a lot of the typical “let’s start a band in high school” reasons, with a few outside the norm-characteristics that made things interesting. For me, it was that I legitimately loved making things (even if I didn’t realize it when we started) and that songs and albums and related projects like that were a particularly good format for me. For us as a whole, it was that we were weirdly professional about concepts we’d later learn were actually business concepts; things like brand identity, quality assurance, and customer service. We weren’t necessarily good at these concepts when we were kids, but we did care about them even when there really wasn’t any money involved.

One result of this was that as kids, the people who seemed to really “get us” the most were older people — college students, adults in other (much better) bands, promoters, etc., who naturally had more respect for these business concepts than the other goofy kids we went to high school with. We were also better students than musicians, so most of the people who appreciated our more obtuse lyrics or gimmicks tended to be older and more, for lack of a less condescending term, literary. It was a weird brand, but it was ours, and it wasn’t hard to maintain because it fit the bag of dorks we naturally were.

Then we graduated from high school, recorded our first real studio album, and went our separate ways to college in different states. End of story.

… except it wasn’t. We didn’t want to stop playing music, and by that point we had achieved enough technical competence to make music that a growing number of people might actually listen to voluntarily. So we wrote more songs, practiced in our dorm rooms, and got right back at it when we got home. We booked more shows, made more merchandise, and recorded new albums.

So here’s where it gets atypical. When we started, our market was essentially our high school of 800 kids, plus a few groups from nearby towns, and the occasional scene person who caught us at a club and found us amusing. By 2002, the summer of my sophomore year of college, things were very different. Our core market had collapsed — we had been out of high school for two years had put essentially almost no effort into growing any kind of audience at our respective colleges. However, thanks to the internet, mail-order, some magazine reviews, and a small but not insignificant performance history out of state (and even out of region), that secondary market started to achieve a kind of proto-critical mass. By then, the average Glenn’s Army fan wasn’t someone who had gone to high school with us. It was someone who didn’t even know us personally, and that was something very different.

the fans you want and the fans you have

I always think to a conversation I had before a show with our guitarist (and more importantly, one of my best friends). This was more than fifteen years ago, so I’m paraphrasing most of this and probably getting the rest wrong, but bear with me because I think it’s an interesting thought exercise regardless of how bad I’m mangling the specifics.

When we were in high school, hometown shows (be they somewhere like the VFW, or a massive fire hazard in somebody’s basement) were always the most fun, because you could get tons of people to go, and a lot of them would be your friends. We did fewer and fewer of those as we got better, which was probably a good decision and had a lot to do with building an actual fan base. But we did book one that summer, and I remember being excited for our high school friends to hopefully turn out and help us relive simpler days.

A lot of people came — a lot more than I expected, given how much harder it is to promote that sort of thing without the built-in, captive market of our high school. But it wasn’t our old friends pulling up in station wagons and lining the walls of the old, wood-paneled portuguese-american club. It was… a bunch of kids. Kids too young to have gone to high school with us — some of them weren’t even in high school yet, and had their parents waiting in the parking lot. Some of the parents came in and sat in the back. And yes, some college aged kids from around the area who had seen us a few years back. But in general, we were above the median age of the room, and it definitely felt different.

Anyways, we talked about this weird culture shift both before and after the show, and we had two very takes on the situation. I was actually kind of thrilled; I wanted to expand our audience to the point where we might actually be able to play music professionally, and since we were nowhere near talented enough for some label to “make us famous”, that depended entirely on our ability to build our own following. Our fans getting younger seemed like an incredible sign of sustainable traction; we were like the opposite of U2, and incredibly, we were doing it simply by being ourselves and not pandering to anyone. We hadn’t changed at all, but our audience had somehow become more viable right when we needed them to.

That was not how our guitarist felt. He told me there was a certain kind of fan he wanted our band to have — basically older, smarter, wiser, with some historical understanding of what they were listening to and an appreciation of our influences. In other words, the kind of person who we had the most success with when we first got started. Success to him would be making this entire demographic aware of us, not impressing a bunch of kids (and somewhat uncomfortably for three 20 year old dudes, a lot of teenage girls) because we had loud amplifiers and driver’s licenses. If that’s who we were attracting, it was either time to fold up our tent, or figure out what we were doing wrong.

We didn’t play too many more shows after that, but the thing I’ve realized as time has passed is that there’s no right way to think about this sort of thing when you’re working on a passion project that’s an extension of yourself. If you want your music to be heard by a certain type of person, and that’s your primary goal, you shouldn’t be satisfied playing to people who are nothing like that, even if those people love you and there are a lot of them. Our band wasn’t a job, even if I hoped it could be some day. But either way, I realized I had an operating difference with, in startup parlance, my “co-founders”. I was content working from our values out and going with what happened, while they were more concerned about the outcome.

startups are like bands, pt. 17

High school/college bands and venture-backed startups have a lot of challenges in common, and the more I think about it, the more I think it’s because both tend to start in environments where their existential costs are subsidized (and thus hidden) for a while. Kids in bands don’t need to make money to keep having a band (or to eat); money they do make simply validates their effort and often gets reinvested into growth efforts. I know this because in the kinds of bands I’ve been in as an adult, getting paid sometimes seems so ridiculous that we refuse to accept it, especially if we’re playing with someone on tour who’s actually trying to run some kind of sustainable business.

But when you’re a kid, the fact that you don’t have to think about the grind of operating allows you to think about the things you want to think about; creative freedom, artistic integrity, and a brand that has nothing to do with money. And as I mentioned a moment ago, there’s nothing wrong with that, so long as that’s the end goal you’re working to — not financial independence.

Startups are funny because they’re a little bit of both; often passion projects for founders and early hires, but definitely investments and outcome-oriented ventures for institutional investors and later-stage employees. I’ve now been in enough of these to see the inevitable clash of these two perspectives — where some people believe adherence to their values is the key to driving outcomes, and other people believe it only makes sense to derive those values from the desired outcomes. Unfortunately, in a business, there are operational realities that make that clash a lot more consequential, and a lot less avoidable.

good and bad outcomes

If you work at a stable, profitable business, some of this thinking is probably going to seem ridiculous, so let me clarify a few things. There are a couple different outcomes for startups that can be desired at different times.

  • additional investment (at an increased valuation)
  • acquisition by another company (at a desired valuation; good for people with equity, or anyone who likes the buyer, not so good if you don’t have sufficient equity and don’t like the buyer, or stand to lose your job)
  • profitability (almost always good, but bad if it’s lower than expected or reveals the limitations of your business model)
  • development or traction that makes one of the other three things more likely (always good unless you are running out of money quickly)

Different people in different startups will have different opinions on all of these outcomes, depending on their prior experience, personal connection to the business, and interest in the kind of work the company does. Right there, you’re introducing a lot of potential conflict — and that’s just between a bunch of different, positive outcomes. There are also negative outcomes with different meaning to different people. For instance, a down round (where you get additional investment with a lower valuation) is bad for equity owners, and probably bodes poorly for future investment, but it’s still additional investment. If you’re looking for resources or to avoid cutting jobs, that can be a good thing.

Anyways, the most complicated thing about all of this is that just how desirable these and other outcomes are is a constantly moving target. It changes over time, and even changes individually in the heads of individual people as their personal and professional goals change. For instance, two people can start a company with dreams of dominating an industry. But after five years of passionate work, one of those people may decide they’d prefer to build a niche competitor with a great work environment, while the other is still convinced the opportunity for a better financial outcome is there. What happens then?

what values are for

One way to preemptively settle these potential disagreements — which happen not just among founders, but hundreds or even thousands of people in a company — is to base your decisions on values instead of outcomes. If you truly believe in a set of values, they can inform your transactional and operational decisions in a way that prevents the desire for a certain outcome from clouding anyone’s judgment.

For a giant-sized, non-startup example that’s easy to wrap your head around, think about Apple. They have an almost unlimited set of ways to make money. How do they decide what to do, and what not to do? How do they sort out which things could create short term success at the expense of long term success? Which of those outcomes is more important?

While Apple, to my knowledge, doesn’t have some stone tablets with values written on them, the way they’ve operated for years and years now makes it clear that there are some fundamental values they stick to, various outcomes be damned. One (and again, this is just my interpretation) is that they don’t believe modern technology products are ever truly successful when produced as cheaply as possible. Sure, there’s a certain level of quality they will then aim to produce efficiently, but there’s always someone making a crappier, cheaper version of whatever Apple makes, and there always will be. Another is that they don’t outsource their design work to competitors or market trends. They’ll adapt, but only when they believe they’ve been proven wrong about something — big screen phones, for instance, versus touchscreen laptops. People have been screaming in huge numbers for Apple to do a bunch of different things forever, and Apple never listens, regardless of potential outcomes.

One of the ironies about values being so prevalent at venture backed startups is that new organizations are often the least equipped to decide what values they really want to follow, mostly because they’ve either never had to prioritize a value over an outcome, or at least an outcome they really, really wanted and realistically had a chance to achieve. That’s my test for the authenticity of a value — when have you had to turn down a realistic, desirable outcome in order to adhere to that value, and what did you choose instead? And to be clear, choosing not to screw over a customer because you don’t want other customers to find out isn’t about relying on values. That’s just trying to prevent an outcome you don’t want. Losing money (or time, or progress, or whatever) to not screwing over a customer when nobody will ever find out is a real test of your values.

It’s not just ethical questions, either. Have you ever held a product back that wasn’t good enough in the face of existential market pressure? If not, it’s crazy not to question your dedication to quality, because you’ve never actually stood up for it. Did you ever make a decision that your available data indicated was wrong? There’s nothing wrong with that — but again, I question your “value” of making data-driven decisions.

You don’t need a set of values to tell you to be a reasonable operator; to listen to data when it makes sense, meet customer needs when it’s good for business, or build products that are competitively differentiated from other products. That’s just running a business (or anything, really), and people have been doing that forever.

values are expensive

So look at my old band (those handsome devils) again. We had very, very strong values, and we had some desired outcomes. My main desired outcome was to do something that followed those values, and my secondary, disposable outcome was to be in a commercially sustainable band. I was really happy back in 2002 because it looked like both of the outcomes I wanted were possible, but if not, I was more than ready to throw away the secondary one. In a way, I did; one of my (unofficial, of course) values was to keep my best friends. When they didn’t want to support my desired outcome of being in a band for a living anymore, I gave up that goal, but didn’t give up (and still haven’t given up) those friends.

But I had that option, because I wasn’t a business. I didn’t have investors, or obligations to anyone at all. Venture backed startups often feel that same way, especially in the beginning, but at some point the bill always comes due, either because you run out of money, or become successful enough those investors and creditors want to see the dividends you promised so long ago. That inflection point is always hard, always confusing, and always surprisingly conflict ridden. Because the potential outcomes are suddenly very real, and very consequential, it’s the very hardest time to truly lean on values. It requires more faith than many people can reasonably have in something like that. Unfortunately, there’s a very simple, very tempting way to kick the can down the road and prevent this kind of intellectual and emotional reckoning — reverse engineering!

In business, that means you set up the values you feel good about, and the outcomes you want, and you set as a given that those outcomes will occur if those values are adhered to. In politics and policy, we call this ideology, and see it in the “no true Scotsman” fallacy, but it’s equally present in any organization with opinions and outcomes.

For instance, I could decide that my north star is quality control — that I won’t release any product into the market until it’s as rock solid as possible, and that I won’t make any operating decisions that runs the risk of putting products into that hands of customers that don’t work the way they expect. That seems like a good value I could get behind. But it’s entirely possible that some particular outcomes of adhering to that value is that I’m slower to market than my competitors, that I lack functionality customers want, that my product costs too much, and that I’m ultimately unable to grow into what I want my company to be. If I’m truly committed to that value, there’s no tough decision here; I’ll mitigate the costs of adhering to it the best I can, but I’m going to continue to prioritize my quality control above all else. If I fail, I fail. But I won’t fail because I didn’t stick to my value.

Staring down the barrel like that is really, really hard, but it does happen. Basecamp is a great example. So is Tesla, even though it seems more and more that the only core value Elon Musk is willing to go to the mat for is “I am smarter than everyone else”. In general, you’ll see it more often from privately or family-owned companies removed from the demands of stock price and valuation, like Rolex. Of course, there are also thousands of ventures you’ll never hear about, each with strong values they stuck to as they ran out of money and closed their doors.

values vs. delusion

As with many things I write about, I think the biggest takeaway from all of this is that lying to yourself about your motivations — especially in regards to values vs. outcomes — is a really good way to waste time and lose credibility. If your values are really a tiebreaker (“… we’ll use our values to decide what to do when everything else is going great!”), they simply aren’t very important, and you shouldn’t pretend they are.

Remember, people are adults, and we’ve all made — or will have to eventually make — some decisions in life driven by money and resources. If they didn’t, I wouldn’t even have a job! I’d be in a band.