We have seen a huge rise in startup incubators recently. In fact, some people suspect that there are now more incubators than startups. The incubator hype followed the huge success of Y Combinator, pioneer and godfather of all incubators. I think that most incubators are destined to fail, and I believe that there are only two extremes of the incubator model that make sense.

Here are the two models that are able to win:

The accelerator

That's the Y Combinator model, the one that has been replicated successfully by other accelerator programs such as TechStars. Accelerators are beautiful things. I believe that they create huge value in early-stage inexperienced startups teams. That is because joining a startup accelerator is a magnificent replacement for business school.

In fact, Y Combinator calls a part of its program Startup School. It's better than business school. It's the hands-on curriculum that a startup founder should have. It's the condensed wisdom that helps avoid the most common mistakes that kill startups. What accelerators accelerate is the learning curve of the participating first-time entrepreneurs.

The accelerator's deal is the following:

You join a program for a well-defined limited period of time (usually between three and six months) and within that limited period of time, you get pushed to the limit. You get access to everything that helps you get your startup off the ground in a way an experienced entrepreneur would do it. They provide you with resources, knowledge, and their network. After the program, you can see the horizon, and the accelerator says goodbye. In turn, the accelerator keeps a small stake in your company. It's a fair deal.

The company builder

That is almost the opposite model. In my opinion, there is a reason why company builders aren't called "startup builders". It's because they don't build startups. They build model companies with proven business models. Company builders make a lot of sense when they focus on execution and execution alone. Successful company builders concentrate on a clearly defined market segment or industry, such as e-commerce.

One of Berlin's most (infamously) known company builders is Rocket Internet. Some people call it a "clone factory", a nickname referring simultaneously to their company building strategy (taking business models that have been successful elsewhere and replicating them in untapped markets) and their own company culture (a factory-like adrenaline-driven culture of execution).

The company builder's deal is the following:

You become part of a machine designed to rush pre-defined business models from zero to a hundred as fast as possible. The marriage is carved in stone and the company builder will stay until the company is profitable and ready for sale. The aim is an exit at a high valuation which will help the company builder refinance its operations. The company builder steers and controls the ship, the founder is just another captain. In almost all cases, the company builder owns a clear majority stake in the company and manages the company's fundraising. It's a fair deal for those who like it.

Mixing paradigms

Both accelerators and company builders can be successful. As soon as you enter the middle ground, however, I believe that things get shaky. Accelerators accelerate startups, company builders build companies. There is no way to "build lots of startups" out of a central incubator trying to take too much ownership and staying for too long. Conversely, you can't "accelerate lots of companies" out of a central incubator trying to establish highly effective processes and operations in just six months for a bit of equity.

Mixing the two paradigms doesn't work. It's either an autonomous founding team with an awesome idea and a clear vision, trying to change the world, dedicated for the long term, ready to starve and turn their dreams into a reality, no matter how long it takes. Or it's an execution-driven management team, chasing the money, leveraging shared resources and synergies to execute even faster and on an even larger scale to rake in even more money.

Two games. Two kinds of players. Don't mix them.

Extraordinary.

What an interesting word. We rarely say "unordinary" or "not ordinary". We say "extraordinary". The choice is not between doing ordinary things and doing unordinary things. The things we're doing are ordinary by default, and we cannot stop doing ordinary things. We do them all the time.

The choice is not to be found in the things that surround us. Following our perception is an ordinary choice. The choice is in the conscious step out of the ordinary, into the unknown, in what is beyond, in the extra-ordinary. That choice can only be found in yourself, and yourself alone.

Doing great things

Great things cannot be done by copying what other people do. They cannot be attained by merely competing with others. Competition is another obvious choice. Living life with the goal of doing something a little bit better than everyone else is the Athlete's Choice. Athletes impress, but they don't create. The Maker's Choice is to do the things nobody else is doing.

The greatest companies are the companies nobody else is building. The greatest inventions are the inventions nobody else is thinking about. The greatest technological improvements are the ones that shift paradigms and reinvent a piece of the world. They are the unthinkable innovations.

Great things aren't obvious.

A while ago, I talked about extractors and enablers.

Today, I would like to explain the same dichotomy in different terms. In order to do that, I'm going to borrow some vocabulary from Umair Haque. According to Umair, economies historically develop through three stages: 

1. Functional economy
   Survival & subsistence
   Making ends meet.
    
2. Aspirational economy
   Consumption & opulence
   More. Bigger. Faster. Cheaper. Now.
    
3. Meaningful economy
   Investment & eudaimonia
   Making people's lives better in real human terms.

During the industrial revolution, western civilization quantum-leaped from a functional economy to an aspirational economy. The problem is that it got stuck at that stage. Growing the aspirational economy out of proportion, we are now left with a fragile bubble economy. Global consumption skyrocketed since the 1970s, but global savings declined. Companies produce "razors with five blades instead of four" and "designer diapers". Meaningful growth has stagnated. Our economy needs a reboot. Things need to change.

The next step up the ladder is moving towards a meaningful economy. That economy isn't driven by consumption, but instead by investment. It measures value and wealth in different terms, using different measures. It acknowledges that today's economic institutions are broken, and puts new institutions in their place. Let me put the two worlds side by side of one another and appreciate the dramatic difference:

Consumption — the Extractor's Game 

• Values:
  – Quantity ("more")
  – Size ("bigger")
  – Speed ("faster")
  – Price ("cheaper")
  
  
• Paradigm:
  Opulence ("life full of stuff")
  
  
• Driver:
  Consumption
  
  
• Culture:
  Pay-backward ("paying back the debt")
  
  
• Measure:
  Income as gross domestic product
  (flow of financial capital)
  
  
• Nature of game:
  Zero-sum or negative-sum game
  
  
• Stage of economy:
  Aspirational economy 
  
  
• Characteristics:
  – Economic bubbles
  – Super-sized meals
  – Fast food and fast fashion 
  – Meaningless interactions 

Investment — the Enabler's Game

• Values:
  – Quality ("better")
  – Relevance ("closer")
  – Sustainability ("longer")
  – Value ("richer")
  
  
• Paradigm:
  Eudaimonia ("meaningful life")
  
  
• Driver:
  Investment
  
  
• Culture:
  Pay-forward ("investing in the future") 
  
  
• Measure:
  Outcomes in social indicators
  (stock of human and social capital)
  
  
• Nature of game:
  Positive-sum game 
  
  
• Stage of economy: 
  Meaningful economy 
  
  
• Characteristics:
  – Technological innovation 
  – Enduring accomplishments
  – Healthy people and communities 
  – Relationships that matter 

Think about your life. Are you extracting value, or are you enabling value creation? Are you consuming or are you investing? Are you craving opulence, or are you making meaning? The day you look back on your life, will you have lived in your life, or will you have shaped life?

"I know that I know nothing."

— Socrates 

Lean is now officially overhyped.

Time to rediscover the essence of Lean. It's not about little capital expenditure and it's not about small teams. Most importantly, it's not about building crappy products. In reality, it's all about rapid feedback.

Incomplete information

Lean operates under the assumption that we have very limited knowledge about the rules of the games we are playing. It's a strategy deliberately designed to help us make the best possible decisions in a world of incomplete information. It emphasizes rapid feedback and an iterative process in order to counterbalance the penalty of missing information.

It's not a new idea either. Lean is the most humble answer to any big question. It is guided by the Socratic principle of the limits of our own knowledge, and the rejection of the Sophist notion of wisdom as an available resource. As a consequence of acknowledging our inability to come up with a perfect plan in advance, it replaces exhaustive planning with rapid learning and iterative improvement. "Too big to fail" becomes "Fail fast".

Lean is not bound to a specific discipline. Let me give you two very different examples illustrating the idea of Lean from supposedly opposing domains:

Lean in software engineering

In software engineering, we use design patterns to help us write better structured code faster. We use agile development in order to get to working software faster. However, I feel that the idea of Lean is most vividly expressed in the practice known as refactoring.

Refactorings are changes in the code made in order to improve its quality and maintainability without changing its functionality and without adding features. Refactorings should occur frequently and continuously. They can be thought of as the end of a feedback loop designed to test whether a certain piece of code can be implemented and whether its implementation delivers satisfactory results. Interestingly, the very practice of refactoring presupposes that the ideal code cannot be planned and designed in advance.

If the implementation doesn't deliver what was expected from it, throw it away—it's waste after all. If it does, however, refactor it in order to improve its quality and long-term maintainability. How to do things the right way can only be known in retrospect. It cannot be known in advance.

Lean in social engineering 

Social engineering is a term popularized by Karl Popper in his work "The Open Society and Its Enemies". (I'm not talking about the other kind of social engineering in the context of security here.) It essentially denotes the practice of designing and building a better society.

Popper distinguishes two fundamentelly different kinds of social engineering: Utopian social engineering and piecemeal social engineering. The former emphasizes long-term planning on a clean canvas whereas the latter emphasizes continuous learning and iterative improvement.

While both Utopian and piecemeal social engineers may initially have the same brave motivations, the former tend to bring about oppressive ideologies and horrible atrocities. By insisting in knowing the truth in advance, Utopian engineers gradually turn into enemies of the societies they set out to improve. Piecemeal engineers, on the other hand, are always concerned with removing the greatest and most urgent evil at any given moment, improving society as it is—iteratively, one step at a time.

As much as I love the theory of the Lean Startup, let's recognize the fact that its basic premises aren't that new. Iterative improvement and rapid-feedback learning are at the core of methodologies in various disciplines across the board. That doesn't make the findings less valuable.

It makes them proven, and durable.

What many people don't understand about startups is that one startup is dramatically different from another. When you think about joining a startup, the decision of joining one versus another is destined to have overwhelming consequences for your life. What do I mean by that?

Power-law functions and startups

Don't think of startups as evenly distributed groups of people. There is no "average" startup. There is no "typical" startup. The most "average" startup to be found is a failed startup. If startups work, they can work incredibly well. In fact, a successful startup will usually be many orders of magnitudes more successful than any other startup.

Startups follow a power-law curve and should not be measured like normally distributed quantities such as body height or life expectancy. Startups need to be measured on what I like to call the startup scale. The startup scale, like the Richter scale for measuring earthquakes, is a logarithmic scale. Very few startups make it to the top of the scale, and almost all startups we know — across the board — will end up at the bottom of the scale.

The reason is the following: It is as hard to grow a startup from $10 million to $100 million as it is to grow it from $1 million to $10 million. And that is as hard as it is to grow it from $100 million to $1 billion. Or from $1 billion to $10 billion. Or from $10 billion to $100 billion. For every order of magnitude of growth, the challenge is as difficult, and the ratio of startups who fail the challenge at that order of magnitude is the same.

Note: I'm using monetary valuation here as the measure of startup success. Obviously, that is neither the only nor the best measure. Any other measure will do just as fine. Should we choose "improving a certain number of people's lives" as a measure, for instance, the same logic would apply.

Founding versus joining a startup

The startup scale implies that choosing the right startup becomes critical. Only very few are truly world-changing, and most will remain mediocre. You cannot A/B test your way to success by randomly joining startups. You need to actively look for the most promising opportunity, the one where all stars magically align. Is the startup truly awesome, outstandingly ambitious? Is it going to convince every talented person in its vicinity to join?

Being able to move up on the startup scale a number of times is what matters most. Your initial stake, in turn, is not the most important thing. If you can join the Next Big Thing™, that is undoutedly better than starting your own insignificant business. A one-percent share in a $500-million company is worth twice as much as a fifty-percent share in a $5-million company.

The range of outcomes across startups is much, much larger than the range of outcomes internally within a startup. The janitor of the next Facebook will likely be better off than the CEO of your average inexperienced startup team. Understanding the nature of the startup scale is critical in order to avoid wasting time on startups that will never go anywhere.

Look for the most inspiring idea. The highest potential. The most compelling vision. The smartest team. The most beautiful product. The greatest culture. The most meaningful brand. Actively seek the organization you believe has the greatest chance to move up the startup scale many times in a row, and all you will need by then is to be a part.

A number of times in my life, I have used the wrong tool in order to perform a job. I have also sometimes abandoned a job because I thought I didn't have the right tool for it, when in fact I did. Likewise, I switched tools a lot only to discover that they were all equally suited in different situations.

I have distilled that experience into three truths about tools that now help me choose the right tools for the right jobs in the right contexts:

1. There is a tool for every job.

Start with the job and think about the characteristics of the tool you need to perform it. There are general-purpose tools and there are specialized tools. Sometimes you need the former, sometimes you need the latter. But in most cases, there is a tool for your job. You only have to find it.

When I talk about tools, I use the broadest possible definition of a tool. There are the usual "hardware" tools, but there are also "software" tools. There are technical tools, scientific tools, social tools, artistic tools, psychological tools, philosophical tools, there are all kinds of tools. And for every possible job, there is some tool that fits.

2. There is no one-size-fits-all tool.

No matter how many tools you know and how well they sometimes work, none of the tools works for every job. No tool, no matter how general-purpose it is, can be used to perform all imaginable jobs. And you should never try to abuse any tool for that. A tool is nothing without context. In some contexts, a tool may be powerful and beneficial, in other contexts the very same tool may be weak or even harmful.

Remember that every scientific discovery can be used for either good or bad? That is true for every tool. If you discover that privatization works well in some context, it might still be detrimental in others. The same holds true for communism, capitalism, free markets, monopolies, competition, anarchy, cars, airplanes, Microsoft Word, a hammer, anything. Never fall in love with one tool and try to apply it to everything.

3. Tools can be mixed and combined.

This is the final and most important truth I have learned about tools: No law prevents us from using different tools together. I found that out the hard way by replacing tools with other tools only to discover that they would work much better when they were combined. That insight is a natural synthesis of the previous two truths. Still, it deserves its privilege as a standalone truth because it is so easily forgotten.

Human beings tend to see all choices as alternatives between two options. Black or white. Capitalism or communism. Cars or bicycles. Environmental protection or environmental breakdown. Drug abuse or war on drugs. Feminism or male domination. But the real world offers more choices. There is usually a third way. And a fourth way. And a fifth way.

By combining different tools, we can achieve better outcomes. We can use tools appropriately in the right context whenever obvious, and use them together in intricate ways in more challenging contexts. Of course, that requires creativity, and the ability to analyze and understand the complex natures of problems. Binary choices are what we are used to as humans.

It is easier to pick one tool. But it is better to use many.

Tim O'Reilly has a credo. It is "create more value than you capture". I like that credo, and I have my own version of it. I believe that there are two fundamental modes of value generation: extracting vs. enabling. That applies to individuals within teams, and it applies to organizations as a whole. It applies to business models, and it applies to social contracts.

Good leaders are enablers

Great culture is built on the empowerment of others. Helping others grow far and beyond themselves is the most beautiful thing a leader can do. We realize the importance of that whenever we witness the opposite: an environment full of "cultural vampires", with everybody seeking to pursue their own hidden agenda. Extractors cause friction and undermine trust. They throw a spanner in the works of an otherwise beautifully functioning machine.

Positive-sum vs. zero-sum games

Enablers actively seek to expand The Pie by engaging in positive-sum games. They simply cannot thrive in environments where they are the only beneficiaries of their actions. Extractors, however, do not care about the nature of the games they play, and they are just as likely to be found in zero-sum games. They care more about perception than about the reality of value creation. They often give with one hand, and take with the other.

While enabling organizations are surrounded by ecosystems of innovation, with lots of interfaces amongst themselves, extracting organizations are characterized by a lack of change and innovation in their immediate and extended environments. Enabling organizations invent new markets, whereas extracting organization sequeeze every last bit out of existing markets.

Business models and platforms

Enabling business models are platforms. They empower others to build on top of a provided foundation and leave room for more, whereas extracting business models are driven by efficiency and dominance. Enabling business models are usually horizontal and invite others to expand on the vertical axis, whereas extracting business models often need to own a specific vertical.

Sometimes, the resources that are being exploited in extracting models are natural resources. But sometimes, they are human resources, or affect human resources in a big way. Business models based on advertising are the elephant in the room here. When the value you capture is being maximized by maximizing ad impressions, your users become your product.

In the old days, television hours were the ad unit. Today, promoted tweets and sponsored stories are the ad unit. No matter what the ad unit is, business models based on capturing their value will always strive to distribute more and more ad units until the point of diminishing returns is reached. Usually, that point coincides with a disastrous experience for the targeted users.

Pay-forward culture

Enablers believe in paying forward. They believe in investment and in long-term rewards. They believe that many hands will always achieve more than one hand. They plant seeds where others fell trees. I strongly believe in the power of paying forward, and everything I do is designed to enable, not to merely extract. And I know I am not the only one. Come join us.

Everybody has strengths and weaknesses. But what is the right strategy for improvement? Should we try and amplify our existing strengths, or should we try and mitigate our weaknesses? How can we increase our impact?

Uniqueness and mediocrity

I believe that focus should be on the things we are uniquely good at — the strengths that make us stand out from the crowd. These can be either generalist or specialist skills, they can be analytical or emotional capabilities. I believe, however, that the one thing we should not strive to become is almost as good as others in almost all areas of our lives. Because that is the path to mediocrity, and it will make us boring.

Most figures that stand out in human history had one gigantic strength, or two, or maybe three. They were incredibly special in some unique and big way. The same figures usually also had gigantic weaknesses, but we either don't know about them, or we don't care. What is important is what made them stand out. It is what they brought to this world that only they could bring at the time of their lives, and no one else.

Comparative advantage

I believe that there is a lesson for teams to be learned here. It is inspired by an economic theory known as comparative advantage. It asserts that countries benefit from trade even if one country is more efficient than the other in all areas. Even in that case will it be beneficial for the "stronger" country to focus on its strongest products and services, and counterbalance its weaknesses by trading with the "weaker" country.

That theory applied to teams suggests that if every team member focused on his or her particular strengths, the total outcome would be more productive than if everybody tried to mitigate their weaknesses. It also means that hiring people in order to "fill holes" in a team's skill profile is beneficial because it allows the team to focus more on what it is already strong at.

Strong and weak education

I believe that there is another lesson to be learned for our education system. It is not a big secret that our current education system is broken, and I suspect that one of the biggest reasons for that is the way we treat all disciplines as roughly equal independently of individual talents. Students are animated — and forced — to eliminate their weaknesses while they are rarely encouraged to disproportionately develop their strengths.

Do we really care if someone is slightly better in mathematics, if that would mean that he or she had to sacrifice the opportunity be become one of the world's most famous dancers or artists? The purpose of school is to turn children into capable generalist adults, and that is fine. But people will always be orders of magnitude better in some things than in other things, and schools should not hinder them — but rather help them — grow these capabilities beyond what is considered "enough".

"Everything should be made as simple as possible, but not simpler."

— Albert Einstein 

When you think about it, solving a problem is a pretty complex and nuanced process. Most of the time, we under-solve or over-solve a problem. Under-solving means not solving the problem in a satisfactory way (like treating a symptom instead of the disease), whereas over-solving means trying to develop a whole set of related metaproblems around the problem which we are then trying to solve.

Both under-solving and over-solving a problem are often equivalent to not solving the problem. When we under-solve, the problem will appear again. Think: sovereign debt crisis. When we over-solve, we entangle ourselves in complex extrapolations and theoretical frameworks around the actual problem, and might never end up tackling it at all. Or we tackle the oversized version of it and fail.

Finding a solution

The right strategy, as so often in life, is to solve the problem in an iterative manner. If we limit our investment to what is absolute necessary, we can come up with an effective way to solve the problem. We can then iteratively improve upon the solution and avoid the trap of over-solving the problem and entangling ourselves in its complexity. The feedback we receive with every iterative step of solving the problem will help us move from a minimum viable solution to a satisfactory solution.

The hacker's mindset consists of seeking and finding an effective way to solve a problem, avoiding both under-solving and over-solving. Hackers are able to spot the in-between, they do more with less. The hacker knows that a solution in the now is better than one in a distant future. Similarly, the hacker has the drive and the skill to find a solution.

Here's to the Deviant People.

The hackers. The founders. The makers. The social transformers. The challengers of the status quo. The ones who sit when all others stand. The ones who stand when all others sit. They know that in order to make new rules, existing rules need to be broken. They make impact by starting movements. They rethink, redefine, redesign. To the Deviant People.

Here's to the Deviant Ideas.

The game-changers. The enablers. The better-makers. The crazy ideas and the obvious ones. The big transformations and the small improvements. The ones that touch our hearts and inspire our minds. They are needed in a world that is short on innovation. They are the foundation we leave to our children. They are our legacy. To the Deviant Ideas.

Here's to the Deviant Startups.

The idealists. The Mission: Impossibles. The non-fundables. The startups that don't go with the herd. The ones with spirit, and with soul. The cultures that will thrive in the world of tomorrow just as well as in the world of today. They are amongst us, yet we do not see them. They come out of nowhere to unleash an ever-growing storm. To the Deviant Startups.

Here's to the Deviant Bits.

The interwebs. The network of networks. The cables that connect us. The software that amplifies our capabilities. The devices that broaden our access. The information that educates us. They cause the shift that is flattening the world. What is building the largest meritocracy in the history of mankind. The greatest liberating force. To the Deviant Bits.