What the founders wrote down

In 1998, two Stanford Ph.D. candidates published a paper describing a search engine they had built. In an appendix, Sergey Brin and Lawrence Page took a position on the business model of their competitors. "We expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers," they wrote, and they concluded that it was "crucial to have a competitive search engine that is transparent and in the academic realm."¹ When Google filed to go public six years later, it reported that approximately 95% of its net revenues in 2003 came from advertisers.²

None of this makes the founders hypocrites. Their filing argued that clearly labelled ads could sit beside unbiased results, the way a newspaper separates ads from articles.² But the early record does not read like the opening chapter of the story everyone now knows. It reads like two researchers confidently arguing against the thing their company became. Founder stories look inevitable for reasons that have little to do with what founders knew at the time, and the clearest evidence of that is often in their own early documents.

How a winding record becomes a straight line

In a 2012 review of research on hindsight bias, Neal Roese and Kathleen Vohs separate it into three levels: misremembering what you predicted ("I said it would happen"), believing the outcome was bound to happen ("it had to happen"), and believing you could have foreseen it ("I knew it would happen").³ They trace the second to sensemaking. Once people have a narrative with a beginning, middle and end, the events in it seem connected and their flow seems obvious; in their words, "the better the story, the greater the hindsight bias."³ The research concerns judgments of outcomes in general, not founders, so applying it here is our step.

Applied, it turns the usual explanation around. Founder stories do not need anyone to tidy them on purpose. They become inevitable because they become good stories, and a good story is what produces the feeling of inevitability. A pivot becomes a turning point, an argument against advertising becomes a principle that shaped the ad product, and the years of trying things become the first act.

There is a second ingredient. Roese and Vohs describe experiments in which people who found it easy to explain an outcome judged it more foreseeable, apparently mistaking ease for certainty.³ The effect also ran the other way. People asked to come up with a couple of explanations for how a different outcome could have happened showed less hindsight bias.³ A story that can be told fluently feels true; a past in which other endings are easy to imagine feels less settled.

The founders who are not in the story

Hindsight works on each story we hear. Selection works on which stories we hear at all.

The base rates are stark. Analysing US Census data on the 510,654 businesses founded in 1996, Shane found that over half had failed within six years and 175, or 0.03%, had reached more than $100 million in sales, as reported in a 2014 review by Thomas Åstebro and colleagues.⁴ The founders who get written about come from that last sliver.

Founder stories often credit unusual conviction. But conviction is not unusual among people starting companies. The same review reports a 1988 survey by Arnold Cooper, Carolyn Woo and William Dunkelberg in which 33% of about 3,000 entrepreneurs put their own odds of success at 10 out of 10, while giving similar businesses much lower odds.⁴ If a third of all entrants are certain, finding certainty in the ones who succeeded tells us little about why they succeeded. If conviction had nothing to do with success, the winners would still look this confident.

Reading a founder story

None of this says founders lack skill. It says the usual form of the story cannot show which of their qualities mattered, because it is told after the result, about the survivors, in a shape that makes the result feel necessary.

That is a problem for the advice most often drawn from such stories. "Believe in your vision" is learned from people whose vision happened to come true, and the same belief, held just as firmly by the founders whose companies failed, is missing from the sample. The psychology points to a better habit than either admiration or suspicion: for any founder story, ask what else could have happened, and look for what the founders wrote before they knew.