- The author discusses the importance of facing the truth and avoiding self-deception in startups.
- They share their own experience of ignoring the truth in their startup, Posterous, and the consequences it had.
- The author emphasizes the need to change one's beliefs and models when confronted with different outcomes.
- They highlight the importance of overcoming the fear of failure and dedicating oneself to the truth.
- The author mentions the balance between believing in a dreamland and acknowledging reality.
- They stress the importance of learning from previous failures and not repeating the same mistakes.
- The author encourages founders to surround themselves with smart individuals who can provide different perspectives and challenge groupthink.
- They discuss the concept of scientific knowledge being based on falsifiability and the importance of experimentation and criticism.
- The author concludes by emphasizing the transformation from individual dreamland to creating a new reality with a group of intelligent individuals.

It can be very easy for founders to fall into a trap of denial in the early stages of a startup’s life. But in order for your company to really take off, it’s critical to be honest with yourself and to build a community of friends and collaborators who are willing to challenge groupthink. In the first episode of our new series “The Main Function,” YC President and CEO Garry Tan explains how founders must face hard truths in order to take their company from dream to reality.

Apply to Y Combinator: https://yc.link/MainFunction-apply
Work at a Startup: https://yc.link/MainFunction-jobs

Chapters (Powered by https://bit.ly/chapterme-yc) - 
00:00 - Intro
00:14 - Encanto Movie
00:53 - Don't Live a Lie
02:06 - The Truman Show Scene
03:10 - Dreamland
03:53 - Reality
05:26 - Surround Yourself With People Who Tell The Truth
06:43 - Outro

There's a moment in a founder's brain when you know your startup is gonna die.

You see the future, but the future is looking like darkness.

In the movie Encanto, there's a magical character named Bruno who can tell the future, but it's always bad news.

If you think about it, that means people are okay with lying to themselves.

And if you lie to yourself, you lie to others, you are doomed to failure.

Today we're talking about how to avoid that failure by clearly facing it head on.

And you'll hear how I failed to heed that call in my own startup and how you can avoid that.

Miyamoto Musashi was a famous and fierce swordsman in Japan in the 17th century.

He said, truth is not what you want it to be.

It is what it is, and you must bend it to its power or live a lie.

In 2010, I lived a lie, and my startup, Posterous, paid the price.

It was about 2 straight years of back-to-back 20 to 30 percent monthly growth, about 10x yearly growth, and it seemed like it was going to continue forever.

But suddenly in the middle of 2010, our growth went flat.

Now there were many different reasons for it.

We didn't scale our servers, I didn't turn into a people leader, and I wanted to keep coding.

But most importantly, the competitive scenario changed.

But I couldn't accept it because I was avoiding the truth.

I looked for statistics that were indicating we might still be okay.

We had investors and employees and we got them to believe.

My whole worldview would have fallen apart.

Do you remember that scene in the Truman Show where Truman realizes he's on a set?

Truman's blind to the reality that everything in his world is constructed for him.

He wanders into a random building and sees something totally unexpected.

Just as Truman realized in that moment he was on a set, So too must a founder who is failing realize their whole understanding has to change.

What do you do when the thing you believed is no longer true?

Well, when confronted with different outcomes, you have to change your model.

At YC we say don't die and that's a truism because it focuses you on the beliefs that you have that might kill you.

Fear of death can paralyze you into believing things that are no longer true.

Overcome your fear of death as a company and you can dedicate yourself to the truth.

What's confusing and counterintuitive about all of this is to what degree it's useful to believe in a dreamland before it happens.

In 2013, when Bitcoin first appeared, it was normal for people to be talking about it in a virtually empty room like this 1.

The topic I want to talk about today is Bitcoin neutrality.

This is partially why it's so hard for founders to come back to reality.

You got to believe that you'll reach the promised land, but you must know that you're not at your destination yet.

You must know this dreamland, kind of like that empty room of Bitcoin.

But you also have to realize that dreamland is not all there is.

The famous psychologist Daniel Kahneman told a story once about his visit to Vancouver Island.

He said, They told us without irony or self-consciousness that they had been able to buy it cheap because 6 or 7 previous owners had failed to make a go of it.

They felt no need to explain why they expected to succeed where 6 or 7 others had failed.

Madness is doing the same thing over and over and expecting a different result.

This is where confronting reality matters.

Founders and creators should be highly aware of the idea maze.

What is the set of things that have been tried?

If you're trying to commercialize some technology, know who came before you and what they tried.

Don't do exactly what 01:10, or thousands of people have already done.

Surely you must have some new approach, some reason why it will work for you.

It might be tech, it might be the way you approach customers, it might even be as simple as, we know these people and other people don't.

Otherwise, you'll be just like Kahneman's charmed young motel-owning couple, ignoring reality, giving in to the madness.

The real key story here, I think, is that you've got to find a way to immerse yourself with both dreamland and reality and make a bridge between those 2 things.

Here's Ray Dalio talking about 1 way this happens.

Whatever success I've had in life has had to do more with my ability to know how to deal with my not knowing than even the things I know.

It meant that I wanted to bring in the smartest independent thinkers to disagree with me so that we could disagree well.

The philosopher Karl Popper talked about scientific knowledge being based not in certainty but falsifiability.

Through experimentation and criticism you would discover the truth.

As a single person with a dream you can live in a dreamland of your own creation, but if you surround yourself with smart people who don't engage in groupthink, you can promote and develop more accurate and robust mental models that then allow you to have an impact on reality.

And then you can really change the world.

Going from the dreamland of an individual to creating the reality with a group of your smartest friends.


Speaker 0: There's a moment in a founder's brain when you know your startup is gonna die. You see the future, but the future is looking like darkness. It was coming for you. We don't talk about Bruno. In the movie Encanto, there's a magical character named Bruno who can tell the future, but it's always bad news.

Why don't we want to talk about Bruno? Because we don't want to hear it. If you think about it, that means people are okay with lying to themselves. And if you lie to yourself, you lie to others, you are doomed to failure. Today we're talking about how to avoid that failure by clearly facing it head on.

And you'll hear how I failed to heed that call in my own startup and how you can avoid that. Let's get started. Miyamoto Musashi was a famous and fierce swordsman in Japan in the 17th century. He said, truth is not what you want it to be. It is what it is, and you must bend it to its power or live a lie.

In 2010, I lived a lie, and my startup, Posterous, paid the price. We started in 2008, growing quickly. Our startup was up and to the right. It was about 2 straight years of back-to-back 20 to 30 percent monthly growth, about 10x yearly growth, and it seemed like it was going to continue forever. But suddenly in the middle of 2010, our growth went flat.

Now there were many different reasons for it. We didn't scale our servers, I didn't turn into a people leader, and I wanted to keep coding. But most importantly, the competitive scenario changed. The truth is we were going to die. But I couldn't accept it because I was avoiding the truth.

I looked for statistics that were indicating we might still be okay. It was just a dip. We had investors and employees and we got them to believe. What could it mean if I was wrong? My whole worldview would have fallen apart.

Do you remember that scene in the Truman Show where Truman realizes he's on a set? Truman's blind to the reality that everything in his world is constructed for him. His reality is merely a reality TV show. He wanders into a random building and sees something totally unexpected. Just as Truman realized in that moment he was on a set, So too must a founder who is failing realize their whole understanding has to change.

What do you do when the thing you believed is no longer true? Well, when confronted with different outcomes, you have to change your model. At YC we say don't die and that's a truism because it focuses you on the beliefs that you have that might kill you. Fear of death can paralyze you into believing things that are no longer true. Overcome your fear of death as a company and you can dedicate yourself to the truth.

What's confusing and counterintuitive about all of this is to what degree it's useful to believe in a dreamland before it happens. In 2013, when Bitcoin first appeared, it was normal for people to be talking about it in a virtually empty room like this 1. The topic I want to talk about today is Bitcoin neutrality. This is partially why it's so hard for founders to come back to reality. You got to believe that you'll reach the promised land, but you must know that you're not at your destination yet.

You must know this dreamland, kind of like that empty room of Bitcoin. But you also have to realize that dreamland is not all there is. The famous psychologist Daniel Kahneman told a story once about his visit to Vancouver Island. He said, They told us without irony or self-consciousness that they had been able to buy it cheap because 6 or 7 previous owners had failed to make a go of it. They felt no need to explain why they expected to succeed where 6 or 7 others had failed.

Madness is doing the same thing over and over and expecting a different result. This is where confronting reality matters. Founders and creators should be highly aware of the idea maze. What is the set of things that have been tried? If you're trying to commercialize some technology, know who came before you and what they tried.

Don't do exactly what 01:10, or thousands of people have already done. Surely you must have some new approach, some reason why it will work for you. It might be tech, it might be the way you approach customers, it might even be as simple as, we know these people and other people don't. But you should know what that reason is. Otherwise, you'll be just like Kahneman's charmed young motel-owning couple, ignoring reality, giving in to the madness.

The real key story here, I think, is that you've got to find a way to immerse yourself with both dreamland and reality and make a bridge between those 2 things. Here's Ray Dalio talking about 1 way this happens.

Speaker 1: Whatever success I've had in life has had to do more with my ability to know how to deal with my not knowing than even the things I know. So that changed everything. It meant that I wanted to bring in the smartest independent thinkers to disagree with me so that we could disagree well. And that developed a unique culture.

Speaker 0: The philosopher Karl Popper talked about scientific knowledge being based not in certainty but falsifiability. Through experimentation and criticism you would discover the truth. As a single person with a dream you can live in a dreamland of your own creation, but if you surround yourself with smart people who don't engage in groupthink, you can promote and develop more accurate and robust mental models that then allow you to have an impact on reality. And then you can really change the world. That's the alchemy.

Going from the dreamland of an individual to creating the reality with a group of your smartest friends. That, my friends, is the real magic. And that's what I want for you. That's it for this week. I'll see you next week.

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How To Go From Startup Dream To Reality