Hello again, edwardlorilla1986.paxforex@blogger.com. Today, I’m here to talk about something not many leaders talk about publicly—imagining failure. Now, most of us have learnt over the years that dreaming about success increases the chances of us becoming successful. Yes, the mind is a very powerful thing. If we can visualise and imagine ourselves as someone better in the future, we find it easier to often become that person. | In addition, research shows that both motivation and hope stem from the combination of a clear, desired outcome, the belief that you can succeed, and a path to get there. The burgeoning field of positive psychology has flipped many old assumptions, finding that humans are not driven solely by their pasts, but rather are actually drawn forward by their own views of the future — a concept psychologists refer to as “prospection.” Put simply, your behavior in the present is largely shaped by your view of your own future. If your future is clear, exciting, and something you believe you can create, then your behavior in the present will reflect that. | | | This is why one of my favourite questions during interviews and reviews is: “Imagine you are somehow able to fast-forward and glimpse two years into the future. You overhear someone introduce future you at a party in a very wonderful way. What would that dream introduction be?” I love this question because it allows us to imagine our careers and growth in very real terms. The party introduction is the most aspirational and relatable form of career growth, in my opinion. It forces us to strip away corporate-speak from our career ambitions. But imagining success is the opposite of what Nithin Kamath, the co-founder and CEO of India’s largest online stockbroker, Zerodha, told me when I spoke to him earlier this week for this newsletter. He told me his favourite mental model was dreaming about failure and then making peace with it. “Making peace with the worst-case outcomes is important to keep taking bets and to ensure you don’t shy away from them. Or else you’ll keep getting disappointed (when you fail), and then you’ll reduce the number of bets you make. Everything I say and do internalises that. ‘This is the worst that can happen. Can you make peace with it?’,” said Nithin. For instance, he said, “we’re a regulated business. So, we don’t push regulatory boundaries. We just won’t do it.” For someone who runs an incredibly lean and disciplined cash-spewing machine, Nithin comes across as disarmingly casual in conversations. There are a few small laughs interspersed with every few sentences, which make it hard to get a read on his state of mind. Like many other Bengaluru founders I know, he too has the “chill” vibe of not taking people or things too formally. I asked him if he could share an example of a decision he made at Zerodha, based on making peace with worst-case outcomes. Sure, he said, but clarified that sometimes the decisions you don’t take are as important as the ones you do. “Unlike many other brokers, we decided we would not offer international (stock) investing. Offering our customers the ability to buy stocks of Apple, Google, etc., was tempting, but we didn’t go ahead. There were many unknowns. For instance, as an Indian broker, you have to partner with an international one. And if they screw up, who takes the blame or outcome? We couldn’t make peace with that. Then, there’s the thing that no government likes money going out of their country. Every country wants its money to stay within. So we imagined, what if there’s going to be some action that makes it harder to send money outside India? That, too, was a risk not worth taking,” he said. “Now with the 20% TCS (Tax Collected at Source), that market is dead,” he added. Nithin is referring to India’s Reserve Bank clamping down on outward remittances by imposing a 20% upfront levy. Thinking about the future in terms of failures is a powerful mental model not just to make decisions, but also to improve your odds of success.
“Pre-mortems” are a technique we use at The Ken when planning major projects.
| Research conducted in 1989 by Deborah J. Mitchell, of the Wharton School; Jay Russo, of Cornell; and Nancy Pennington, of the University of Colorado, found that prospective hindsight—imagining that an event has already occurred—increases the ability to correctly identify reasons for future outcomes by 30%. We have used prospective hindsight to devise a method called a premortem, which helps project teams identify risks at the outset. A premortem is the hypothetical opposite of a postmortem. A postmortem in a medical setting allows health professionals and the family to learn what caused a patient’s death. Everyone benefits except, of course, the patient. A premortem in a business setting comes at the beginning of a project rather than the end, so that the project can be improved rather than autopsied. Unlike a typical critiquing session, in which project team members are asked what might go wrong, the premortem operates on the assumption that the “patient” has died, and so asks what did go wrong. The team members’ task is to generate plausible reasons for the project’s failure. | | | If you want to hear Nithin talk more about his mental models and operating principles at Zerodha, listen to episode 3 of First Principles. Nithin Kamath of Zerodha candidly talks about building his bootstrapped business, weighing risks, and finding opportunities | 8 September, 2022 |  | I’m a trader. So for me, unless I make peace with the risks, I would never think about rewards. I mean, if it’s not capped, I wouldn’t even do it. Like for example, the 2015 decision of going zero brokerage was because 3% of our revenue is coming from equity investors. So, I had made peace with it saying that if I lose, I’m losing 3% of equity brokerage. I mean 3% of our revenues. But the potential of virality, right? Uh, and also the potential that if it didn’t work, I can go back charging. You know, there is no rule that says I can go to zero and can’t come back up. It’s hard to come back up, but you can potentially come back up. So it kind of made sense to attempt it. And that was instinctive because I mean, the first thing I did was actually call a chartered accountant and said dude, how much will we lose? So, typically what I’ve been doing whenever I have an idea is, I document it. I write it down. Usually it’s in the middle of the night. So, it’s on Google Keep. But then I take it, I put it on a Google Doc and write it down and share it with a bunch of folks, sleep on it for a while. 90% of them never make it through you know…it kind of drops off there. I think trading and running a business all use very similar skill sets. Every time you buy a stock, you’re thinking of risk to reward. I think business is also about that. In trading, there’s this whole concept called Bet Sizing, which is, not every trade you take the same bet size. In the sense you have 10 lakh rupees. You can’t be putting 10 lakh rupees on every trade. On 90% of your trades, you probably should be putting only 20,000 rupees and 10% of the trades you need to put 10 lakh rupees because if you don’t do that, large trades, you’ll never make money in your life. Business is also like that. Keep nibbling, keep doing small bets all the time. And every time something feels right (when) the small bet starts showing you results, you just kind of put more meat behind it. So trading, business, even playing poker, to be very honest, it’s almost exactly the same thing. | | | You might also be interested in the latest episode, in which I spoke at length with the self-effacing co-founder and CEO of Chargebee, the subscription and revenue management software provider last valued at over US$3.5 billion. Krish Subramanian of Chargebee on continuously firing yourself | 8 June, 2023 |  | We have had a founder coach for the last two or three years. This has been super helpful for my own learning through the journey of the organisation, and to also learning to let go and then building a particular type of organisation. One of my breakthrough conversations personally was this attachment to what is our definition of success? I was obsessing about certain decision making of a particular person saying, like, why is this person doing this? And I'm actually annoyed. And I should probably give him this feedback, but I'm worried what kind of impact it will have. And I'm not sure if I'm right, but I don't like it. It was a personal conversation with a coach and then he said, okay, let's back up a little bit. Let's talk about why you think you could be right and that person could be wrong. Because I think this could be the right answer, I told him. And his question was why? Why do you think he should probably try your thing? And I said, I just want this outcome to be successful. That’s why I wanted that. My coach then say, okay, now, can you define why you want that to be successful? Why wouldn't I want that result, I said? So he said, okay, then let's talk about Chargebee. Can you just for the sake of the exercise, write down that Chargebee was a spectacular failure. Something wrong happened and you got wiped out. And yet, everybody that you talk about and think of had a phenomenally great outcome within the next three or five years. Can you imagine a scenario like that and start writing for me? Entertain me? I had to force myself to say, okay, Chargebee failed spectacularly. Everything became zero. Something went completely wrong. And then it's okay. | | | And if you want to go deeper into risk-taking and bet-sizing, here are a few more snippets from my conversations with other founders. Here’s Amrish Rau of Pine Labs. Amrish Rau of Pine Labs talks about the differences between being a founder and CEO | 24 November, 2022 |  | One of the things that I learned in the corporate world, which just completely killed me if you ask me, was that the whole corporate world is structured to be judged. And because you are going to be judged, you also end up becoming risk-averse, right? So, one of the things that I have done in each one of my startups is you should not have an environment where somebody is going to judge you. HR is not allowed to judge you. The legal folks are not allowed to judge you. […] That you make a decision and your decision tanks. You’re not going to be under the pump for that piece. However, in a large organisation of 4,200 people, the problem is somewhere else. People come in with that mindset which says, I don’t want to make a decision. If you don’t make a decision, I have to tell you, I’m going to go after you. You have to make a decision in your position and you might be successful or you might be unsuccessful. That doesn’t matter. But if you don’t make a decision, that is unacceptable. | | | And Shan Kadavil, who made the incredible pivot from mobile gaming to… fish and meat delivery. Shan Kadavil of FreshToHome on selling fish, building moats, encouraging bottom-up “shots on goal”, and being honest with boards | 2 March, 2023 |  | So, if you’re not entrepreneurial, if you’re not ready to take a risk. And most of the folks that we hire have been previous entrepreneurs themselves. And people who, you know, are ready to try and fail, but fail fast. Like you can’t try like, you know, six months to a year to get an idea to be a failure. We look at it in three or six months. You either make it or you break it. […] Because I come from the gaming world, this is something that we do all the time. And this is what we call us, you know, ‘Shots on goal’. And so, for example, before we launched Farmville, there were at least 10, 15 different games in different categories that we would try. And then the way that the organisation would do it is, you know, if you try to do everything, you will not be able to have enough resources and people to do that. So, we have what is called Green Lighting. This is actually a gaming terminology. | | | And finally, Ronnie Screwvala of UpGrad.
Ronnie Screwvala on why upGrad is neither a startup nor an edtech | 27 April, 2023
|  | When you’re working with velocity and scale, your problems will be deeper. But your upside will be there. So if you ask me today, my ratio for failure on successes is at least eight failures to two successes. And I think that’s worked brilliantly for me and very well. And I would not stop in that context. And I know that sounds like, “Sorry, but how does that add up?” I’m saying, when you’re failing, whatever your optionality is, it’s a binary output and you fail. It’s minus one X. You made a bad decision of hiring somebody, you’ve invested one crore or 100 crores, and it didn’t work. And it’s a write off, it’s a binary thing. But because you’re playing with that ability in your mind to be able to have that elasticity of failure, when the upside happens, it’ll be 20X and 30X. It won’t be anything less than 20X and 30X. […] Otherwise, you’re not going to get it because now you’re at a velocity which you’re working and you’re sitting there with four turbine engines and you can’t start wearing a propeller jet and start figuring that out. The problem here today is the mix up between people thinking I’m in investment mode versus bad burn. An investment and a burn are two different things. And I think we’ve lost the ability to identify that spending 50 million dollars on a cricket IPL advertising is an investment. If it is, it better show up in a particular manner. You can’t say it’s planned and is going to have a 10-year cycle because nobody has that context in life. | | | That’s all for this Sunday. I’m off on vacation for the next two weeks. I’m not sure yet if I’ll be able to write First Principles during the time, but in case I am unable to, know that I’ll be truly missing it. I’ve come to enjoy these weekly emails I get to write for you as a way of refactoring my own thoughts on various topics. I feel like I’m learning as much as I’m reporting, researching, and writing. Have a great week ahead! Regards, Rohin Dharmakumar fp@the-ken.com | | | | |
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