Startups and risk

Startups and Risk Part 2: Hacking the System

This is the second in a series on the similarities between high-growth startups and high-risk sports. It began with Startups, Skydiving, and Risk – if you haven’t read it, you might want to start there.

In the discussion that followed my last post on risk and startups, I realized that there were plenty of similarities between startup founders and extreme sports athletes. A lot more than just the act of taking calculated risks.

In addition to calculated risks, for instance, there’s another thing that brings the same types of people into extreme sports and startups: the act of hacking the system.

All Entrepreneurs, Skydivers, and BASE Jumpers Are Hackers

There. I’ve said it.

Let’s be clear, here – I’m not talking about the overblown Hollywood version of hacking, where people set out to use their mad computer skillz to break into the Federal Reserve’s computers and wreak havoc on the world’s financial system. I’m talking about real hacking – the way it was printed in the pages of 2600 Magazine. Real hacking’s goal is not to do harm – it’s about breaking rules or taking shortcuts in order to reach a desired goal.
[getImage id="" class="alignnone size-large wp-image-6525" src="" width="620"] Just like these guys. (Or not.)
The key here is that the rules broken don’t have to be solid rules, or laws – they can be unspoken rules, or societal rules. Take a look at this great post by William Hudson on How to Hack Chipotle. The idea behind it isn’t to steal anything – it’s to maximize gains with minimal expense.

Put differently, it’s about taking the less-traveled path for more gain.

So how does this apply to both startups and extreme sports?

Skydiving Hacks

I’m going to stick with skydiving, since it’s my sport of choice.

The goal of skydiving is, plain and simple, to fly.

The problem? To do that, you have to step out of an airplane from two miles up and plummet towards the earth at 120 mph. For a lot of people, this is kind-of a scary thing. When you’re on the plane on the way up to make your first few jumps, you experience the fight-or-flight response firsthand.

The hack: You think your way through it. Why don’t more people jump out of airplanes? Because they’re afraid. But is their fear justified?
[getImage id="" class="size-full wp-image-6538" src="" width="500"] I don’t know. You tell me.
As it turns out, not so much. Skydiving is dangerous…but statistically, a lot less dangerous than it looks at first glance. There’s a big misconception out there. And where the general public has the wrong impression, there’s an opportunity.

As I mentioned in the last post, skydiving gear and procedures all have redundancy built in to them to make sure that bad things don’t happen. In order for you to die on a skydive, generally more than one thing has to go wrong. You have to draw a one-in-a-million straw…and there are multiple opportunities to put the straw back and choose another one.

It also helps to think about the risk in terms of comparisons. When you get into your car to drive to the grocery store, for instance, you could easily be killed in a car accident on the way home. Or when you step off the curb to cross the street, you could easily be mowed down by a car you think is stopping for the stop light.
[getImage id="" class="size-full wp-image-6528" src="" width="500"] …or a rogue soccer ball could take out your ride.
Although it’s tough to compare apples to apples, conventional wisdom holds that you stand less a chance of dying on a skydive than you do going on a 3-hour car ride.

When you think about it in those terms, it becomes a lot easier to take the leap.

Startups = Hacking

Startups, on the other hand, are all about hacking. What is a high-growth startup, after all, if not an attempt to do something better/faster/cheaper than the everyday people say it can be done?

Here’s an example of a hack on a massive scale:

The Goal? The year is 1997. You want to build a video rental store to challenge Blockbuster.

The problem? Come on, dude. They’re Blockbuster.

The Solution: Mail order. If you go to a mail order model, you eliminate the overhead of brick-and-mortar stores. And by centralizing your warehouse, you can also give your users access to a bigger movie library than Blockbuster stores can compete with.

Netflix Startup Hack

And you don’t stop there. You research the number one pain point of video rental customers, and discover that people hate exorbitant late fees. So why not switch to a subscription model? Bill a monthly fee for your service, with no late fees. You gain the benefit of a monthly recurring revenue model…and solve your customers’ biggest problem at the same time.

Obviously, Netflix has had its bumps along the way. But it’s tough to say that the founding of its business model wasn’t a masterful hack of an outdated, inefficient system.

What It All Means

Ultimately, hacking anything – be it a computer, a pay phone (remember those?), or life in general – is all about the “ah-hah” moment when you find a way to do something that the general public said couldn’t be done. For skydiving, it’s stepping out into the wind at 12,500 feet up. For BASE jumpers, it’s hucking yourself off the edge. For founders, it’s quitting your day job. And pivoting. And building a product that solves a problem in an elegant, scalable way.

Extreme sports athletes and startup founders all share that drive to hack the system…and extreme sports and startups all share the same awesome feeling when they finally get it right.

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