How to make sure your startup fails

One of Charlie Munger’s key business principles is “Think forwards and backwards - invert, always invert.” Many hard problems are best solved when they are addressed backward. If you figure out what you don’t want and avoid it, you should then get what you do want. In keeping with this approach, if you would like to make sure your startup fails, follow this guide:

Disclaimer: Having written this, it’s actually quite funny (and sad) how much of this guide I followed in the past - although not as tragically as some of the examples below…

1. Avoid the truth

Since the truth can hurt and cause problems, never look for it or hear it. It may cause you to change your strategy or even pivot which can increase your chances of success - don’t let the truth distract you from failing. If one of your team members comes to you with the unfiltered truth, ignore them. In fact, if they keep doing it let them go.

With our previous product (Mule) we thought we were a tech business. The truth was we were a logistics business using tech. The right decisions for a tech business are very different to the right decisions for a logistics business. Avoiding the truth meant we made the wrong decisions and lost time.

2. Growth, not profitability

Every successful business has to generate profit at some point. You are not trying to build a successful business, so minimise profitability by spending recklessly in the name of growth. Hire a massive engineering team and exponentially increase your Meta ads marketing budget each month.

Furthermore, try and spend money on things that aren’t even going to help you grow. Rent an expensive office in the center of town, pay yourself a big salary from day one, and pay someone a small fortune to design a beautiful email signature for your company.

We tried to scale a business with negative gross profit margins. Guess what happens when you do that - you lose money at an ever increasing rate!

3. Optimise for funds raised

VCs often don’t know much about your market and most haven’t been successful operators. Ask them to dictate your business/product strategy. This will maximise your chances of failure. Make all decisions using the framework “What would a VC think about this?”. Above all - never push back.

4. Don’t take time off. Treat your startup like a sprint not a marathon

An effective team works hard but knows when to take a break. Since you are trying to fail, encourage a culture of burnout. Compete with your colleagues on how little time you take off. If someone asks for permission to take a holiday you only have two options. 1) Say no. 2) Say yes, but make it clear you now respect them less. You are trying to fail, so the business won’t be around for much longer anyway.

Luke and I didn’t take a single day off for the first 3 years of our business - this is not a recipe for success.

5. Don’t talk to customers

Customers will tell you what problems they have. Talking to them will help you figure out what to build and how to improve your product. You are trying to fail so don’t listen to a word they say. Instead keep trying to sell them the same product that you and your co-founder came up with at 4am in an Uber on the way back from a night out. Allowing your “gut” to dictate product strategy is very effective at making sure you fail.

The losing formula: Don’t talk to customers + build features based on “gut feel” + don’t grind away at distribution = failure.

6. Overpromise, underdeliver

Make sure you always disappoint. Promise your customers features that you have no plan on building any time soon. Provide your investors with projections that show you will be a unicorn in the next 6 months. Getting your customers and investors to lose faith in you is crucial to failing.

7. Don’t face your problems

Avoid dealing with problems as long as possible so that they linger and get worse. Never do today what you can do tomorrow.

8. Resist change and adaptation

Fall in love with your product and treat it like your baby. Don’t let anyone tell you that your baby is ugly! (that you need to iterate or change your product). Resist changes to your way of working that could cause you to be more productive.

Our original Mule product was broken a long time before we pivoted. It’s much more comfortable to keep going and hope for the best, rather taking the hard decision and making big changes when something isn’t working.

9. Don’t spend any time on distribution

Ignore the following:

• Thousands of other businesses are competing for the attention of your customers.
• A good distribution strategy is 50% of a startup.

Instead, build your product and expect customers to start using it “organically”. If customers don’t use the product after you launch, disregard that you may actually have a good product but need to work on your distribution. Assume you have failed.

10. Micromanage your team

You are not trying to build a team of self starters. Make sure every single decision goes through you. Don’t encourage your team members to think for themselves. Create unnecessary bureaucracy to slow everyone down.

At Mule, all customer service compensation had to be approved by me. This ended up wasting a lot of my time and created a massive single point of failure. I got Covid and was sitting in bed with a very high fever, still having to approve compensation - very silly indeed!

The power of inverting is remarkably versatile. For example instead of asking “How can I be wealthy?” ask yourself “How to make sure I stay poor?” Or instead of asking "How can I win friends and influence people?" think, "What can I do to ensure I'm universally disliked?”. It should be both a funny and a somewhat eye opening exercise.

PS. If you think of any other funny inversions, comment below.

ProtectMyOrder enables you to upsell delivery protection at checkout, increasing your net profit margin by 5-15%

Website: ProtectMyOrder