Make Better Decisions by Thinking Like a Startup

People are startups, too.

A couple of years back I decided, more or less on a whim, that I was going to get into photography. Emboldened by my decision to move abroad—and by Instagram—I went from “I want to take more photos” to “I need to buy a new camera” very quickly. I spent a lot of time researching equipment and a lot of money purchasing a new, expensive DSLR camera.

At the time of this writing, said camera is sitting in a camera bag in my closet. I haven’t touched it in months. I’m disappointed in myself for not pursuing this hobby. But I’m even more disappointed in my decision to purchase something I didn’t really want to support a hobby I was never really interested in developing.

How many others fall into the same trap? We want to learn to play an instrument, so we buy a guitar. We want to learn how to code, so we purchase an online course. We want to develop a new workout habit, so we sign up for a one-year membership at our local gym.

Meanwhile, the average completion rate for an online course is a mere 15 percent, and 63 percent of gym memberships in the U.S. are completely unused.

These kinds of decisions are categorically bad. For a gym membership, the decision is a significant waste of money, but in my case—spending countless hours watching YouTube camera reviews—it was a tremendous waste of time as well.

How can we make better decisions?

Eric Ries, esteemed entrepreneur and author, defines a startup as “a human institution designed to create a new product or service under conditions of extreme uncertainty.”

Under conditions of extreme uncertainty, the traditional management and decision-making process—robust market research and strategies, full-fledged product designs and launch—is inadequate and wastes a considerable amount of time and money.

The lean startup methodology, in contrast, advocates for a measured approach following the build-measure-learn feedback loop. Rather than launching full-scale products and services, lean startups ship minimum viable products (MVPs), saving time and money and gaining valuable feedback from their customers, which informs the perpetual iteration and optimization process.


The number-one reason startups fail is that there is no market need for the product or service to solve a problem. Founders come up with a seemingly good idea and start building—without any market feedback on whether customers will actually pay for the product or service.

In the entrepreneurship bible The Lean Startup, Ries argues that many businesses we would not traditionally categorize as startups actually fit the criteria, and they can and shoulduse the lean startup methodology as their approach to business.

To qualify as a startup, the business must meet three criteria: 1) it’s a human institution, 2) creates new products or services, and 3) operates under conditions of extreme uncertainty.

The key to lean startup methodology is quick and affordable experimentation, with the goal of measuring user behavior. An experimental process helps us benefit from what Ries calls “validated learning,” or empirical evidence that a startup has learned valuable truths about its current and future business prospects. Without testing and putting ideas into the world, we are no closer to knowing what works than when we started theorizing.

In an uncertain environment, the only way to know what works is by testing and iterating accordingly. Because we can’t predict the future, however, the lean startup methodology advocates shipping MVPs precisely so we don’t waste precious time and money developing a product no one wants.

Startups are seeking product-market fit—or the moment when a product resonates with a widespread set of customers. Only when this happens should startups invest in customer acquisition and scaling. This process works incredibly well for entrepreneurial businesses. Would it be as successful with individuals?

If we adapt Ries’ definition and three criteria, we can define mission-driven, aspirational people as startups: 1) it’s a human institution 2) creates new products or services outcomes, and 3) operates under conditions of extreme uncertainty.

A startup is a venture, just like our individual goals are new ventures. We are all entrepreneurs. So if people are startups, why are we still using the traditional, linear management style approach to our own decision-making?

The affordable loss principle

I predicted that I would enjoy photography and I immediately purchased an expensive DSLR camera. I did not act entrepreneurially in this decision. Neither do those who buy a yearlong gym membership after making their New Year’s resolution to exercise more.

Our present selves think we can trick our future selves into the behavior we seek.

In What Makes Entrepreneurs Entrepreneurial, University of Virginia professor and researcher Saras Sarasvathy introduces the concept of the affordable loss principle.

Expert entrepreneurs… think in terms of affordable loss rather than expected returns… [They] stop depending on prediction. Instead, they focus on cultivating opportunities that have a low failure cost and that generate more options for the future. The combination enables cheap failure and learning that can be applied to the next iteration of the opportunity.

If I had followed the principles of lean startup methodology and the affordable loss principle, I likely would have saved myself from myself. I could have tested my idea of getting into photography much more quickly and affordably. I could have taken photographs with my iPhone and used free software to test my interest in editing. If I passed the first test, I could have borrowed a friend’s DSLR or rented one from a local camera shop before buying my own.

I would have made incrementally greater investments in time and money based on my actions, rather than my thoughts or predictions. Instead, I put time and money into scaling before achieving product-market fit. I should have relied on experiences and experimentation before researching cameras, buying a camera, investing in photo editing software, and learning the craft.

My photography hobby failed—just like most startups—because of a lack of market interest and need.

Precommitment doesn’t work

Maybe you’re thinking that buying a camera would facilitate my desired photography hobby. After all, if we spend the money, we’re more likely to use what we purchased, right? Wrong.

The basic idea of precommitment is to increase our chances for success by taking action in advance to make it harder, if not impossible, for our future selves to back out. Our present selves think we can trick our future selves into the behavior we seek. But precommitment often doesn’t work, and it ends up costing us time and money—as evidenced by the 63 percent of gym members who pay money to not go to the gym.

Rather than precommitting, aspiring workout warriors can instead test their hypotheses with the lean startup methodology and commit only once they’ve developed the habit and are certain the membership won’t go to waste.

People make poor decisions—and fail—for the same reasons startups fail.We seek to make a change in our life, a desired outcome. We invest our time and money in achieving that outcome without first testing and experimenting whether we actually desire the outcome we’re projecting or wish to do the things we’ve set out to do.

The lean startup methodology helps prevent the kinds of failures that lead to wasted time and money. Startups can quickly and affordably experiment in an effort to benefit from validated learning and ultimately achieve product-market fit. Adhering to the affordable loss principle, we can test our strategy by thinking about affordable losses and not expected returns. Knowing that precommittment doesn’t work, we can better understand a decision through experimentation before we invest time and money.

This methodology works for entrepreneurial businesses. If we treat our lives like startups—operating under conditions of extreme uncertainty—it can work for us too.

Leave a Reply