Inside the Mindset of Silicon Valley's Tech Innovators
Position yourself for growth in 2017—join us live at the Entrepreneur 360™ Conference in Long Beach, Calif. on Nov. 16. Secure Your Seat »
Home to many of the world’s most influential technology companies as well as thousands of promising startups, Silicon Valley is the launchpad for multiple generations of entrepreneurial talent. But there are skilled, capable founders, and then there are the true visionaries—those lightning-in-a-bottle geniuses whose products and services change the world. What separates the best from the rest?
Fred Terman knew genius when he saw it. Widely regarded as the father of Silicon Valley, Terman in 1925 joined Stanford University’s engineering faculty, where his students redefined the notion of precociousness. Chief among them, William Hewlett and David Packard went on to launch their eponymous IT firm in a Palo Alto, Calif., garage two miles northeast of campus; brothers Russell and Sigurd Varian later founded Varian Associates and invented the klystron tube, a high-frequency amplifier for generating microwaves.
Terman was an early investor in both companies—two of the first Silicon Valley firms to go public—and sat on their boards, as well as those of electronics manufacturers Ampex and Watkins-Johnson, other startups at the vanguard of the Bay Area’s technology culture.
Terman, who died in 1982, was uncannily adept at identifying next-level brilliance. It was a skill he learned from the master: his father, Stanford psychologist Lewis Terman, who developed America’s first widely used IQ test, now known as the Stanford-Binet Intelligence Scales, and pioneered the longitudinal study of gifted children with his multivolume Genetic Studies of Genius. The younger Terman, whose contributions to Silicon Valley’s evolution cannot be overstated, spent his career nurturing the brilliance his father’s research sought to quantify, helping to usher in a new age of business. But recognizing entrepreneurial innovation is one thing; understanding its essence—its myriad complexities and abstractions—is another.
“Engineers are artists. These are people with visions that no one else sees or hears, and the only other domain like that is art,” says Steve Blank, a retired serial entrepreneur and Silicon Valley historian. “There’s a story—probably apocryphal—about someone walking into Michelangelo’s studio, seeing a block of marble and asking, ‘What’s that?’ Michelangelo responds, ‘It’s the most beautiful sculpture you’ve ever seen.’ The guy says, ‘But it’s just a block of marble!” and Michelangelo says, ‘Come back in three years.’ He came back, and there was the Pietà. ‘How did you do that?!’ Michelangelo replies, ‘It was there. I just had to remove the stone around it.’ That’s exactly the story of founders—Steve Jobs, Elon Musk—take your pick.”
We may never fully comprehend the deepest inner workings of genius—the big-bang cosmology of psychological forces and the differences in nature and nurture that separate the revolutionaries and disruptors from the rest of the pack. But experts say that behavioral studies and predictive analysis can offer significant insights into the hearts and minds of Silicon Valley’s most visionary entrepreneurs.
“This is a passion-driven business, much like art, and it’s a miserable job a lot of the time,” Blank says. “Your co-founders quit. You’re out of money. Your best customer just went to your competitor. Your VC screams at you during a board meeting. Why would normal people do this? You could work at a regular job where you get to go home and see your family. Well, why do people paint when they struggle for years to sell their art? It’s the same idea. They’re fueled by the passion.”
Like chewing glass
Blank is the stuff of Silicon Valley legend. He arrived in 1978, two years removed from the U.S. Air Force, and began his high-tech career at strategic reconnaissance technology firm ESL Incorporated. Blank went on to launch a string of startups, including semiconductor companies Zilog and MIPS Technologies and customer relationship management software developer E.piphany, which raised $66 million in its 1999 IPO. He retired that same year, and in 2005 authored The Four Steps to the Epiphany, a handbook to building early-stage companies based on his Customer Development methodology, a framework urging startups to improve their products by honing a deeper understanding of their consumers.
Blank now teaches entrepreneurship to undergraduate and graduate students at Stanford; the University of California, Berkeley; Columbia University; and other institutions. “People used to laugh and tell me you can’t teach entrepreneurship. But then how do you do it?” he asks. “You can teach entrepreneurship, but only to the people who desperately want to learn it. I don’t mean playing at it. I mean committing your life to it.”
Entrepreneurs learn by doing, Blank says. “I will teach you theory, but the class is all about experience. You’re getting the fuck out of the building, and you’re spending 30 hours a week talking to customers and partners, then you’re coming back and getting your head handed to you every week by the teaching team. That’s experiential entrepreneurship. You know what we call a failed entrepreneur in Silicon Valley? ‘Experienced.’ Find that in any other part of the world. Failure in other places means ‘failure.’ Here, it’s ‘What’s your next company?’”
In fact, maintaining an unshakable faith in your entrepreneurial vision despite the inevitable setbacks and challenges is what distinguishes Silicon Valley’s true innovators from the imitators, contends Justin Kan.
“It’s all about having a strong belief, despite whatever external feedback might be given to you or what the market might be saying to you, and staying with it,” says Kan, co-founder of live video platforms Justin.tv and Twitch, and partner at venture capital firm Y Combinator, which has funded more than 700 early-stage companies since 2005. “If you look at Elon Musk, there were years and years when [initiatives like SpaceX] weren’t successful. People said, ‘These are horrible investments,’ but he still allocated most of his net worth to funding those projects. Musk had this great quote about how starting companies is like chewing glass and staring into the abyss of death, and he did it. That’s what separates the 1 percent from everybody else.”
Persistence is one of the critical factors Y Combinator considers in investment targets, Kan adds. “We’re assessing [founders] on a lot of things: Do we think these people are going to be relentless and not give up on the company? Can they build the product they’re promising? People talk about mission-driven companies vs. mercenary companies. There has to be a reason why they want to be working on that company eight to 10 years into the future. If you look at Airbnb or Dropbox, the founders saw a problem they had to solve. It was a problem that was interesting to them because of their personalities and backgrounds. That’s something we try to ascertain through our selection and interview process.”
A test for success
Adeo Ressi believes there’s an accurate, scientific way for investors to identify founders engineered for success. Roughly a century after Lewis Terman completed the first version of the Stanford-Binet test, ushering in the modern era of intelligence testing, Ressi is drilling deep into the collective psyche of Silicon Valley to forge a methodology for assessing entrepreneurial acumen.
Ressi, a serial entrepreneur whose résumé includes web development firm methodfive and casual gaming platform Game Trust, is the mastermind behind the Palo Alto-based Founder Institute, a for-profit entrepreneurial training and startup launch curriculum that leverages a proprietary Predictive Admissions Test to determine the most promising business talent. According to the Founder Institute, the hour-long battery of behavioral and aptitude evaluations predicts with 85 percent accuracy whether an applicant has the chops to become a successful tech entrepreneur.
The Predictive Admissions Test homes in on what psychologists call the Big Five personality traits: openness, conscientiousness, extraversion, agreeableness and neuroticism. The two factors that weigh most heavily on Predictive Admissions Test results are openness and fluid intelligence.
“Fluid intelligence is not a Big Five personality trait: It’s a measurement of one’s ability to rapidly learn and apply a rule set. As an entrepreneur, you’re rapidly dealing with different issues, and your ability to switch from one issue to another is very important,” Ressi explains. “A high openness score means you’re open-minded—you see the world for what it is—whereas a low openness score means you’re incredibly closed-minded, and you see the world the way you want to see it, regardless of what is actually going on. Openness explains the ability to innovate and come up with big ideas because you’re open to them, and fluid intelligence explains the ability to go and execute.”
The four-month, part-time Founder Institute program has graduated more than 1,300 startups since 2009. Of the 30,000-plus applicants who’ve taken the Predictive Admissions Test, which issues grades on a scale of 0 to 5, only 61 have scored above 4.0, with no one climbing beyond 4.7.
According to Ressi, this shows that you don’t have to be a prodigy to build a booming business; you just have to commit to working your ass off.
“We’ve seen entrepreneurs of various different capacities build great companies,” he says. “Some of the best NBA players are not big, tall guys—they’re all different shapes and sizes. What they don’t have in terms of height they make up for with real passion and conviction. There’s no test to measure that, except the test of hard knocks. When you get punched in the face 10 times and get up and keep going, that’s the ultimate test.”
Nor is an eye-popping Predictive Admissions Test score any guarantee that an innately gifted entrepreneur will flourish. “Some of the traits that make you a great entrepreneur also work against you,” Ressi says. “Examining data of high-scoring people, we find that oftentimes the world frustrates them: They’re super-smart, they’re super-capable, and the work quality of their peers is vastly inferior to what they can achieve on their own. This is something they have to overcome in their personal journey to be a successful founder—to accept that some people are not going to work at the same level that they do.”
Ressi acknowledges that sometimes the entrepreneurial elite will find collaborators who breathe the same rarefied air. Hewlett and Packard did it; Google founders Larry Page and Sergei Brin did, too. And that’s when things get interesting.
“Given that only 60-odd people out of 30,000 who’ve taken the test have scored a 4 or above, you’re looking for a needle in a haystack,” Ressi says. “But it does happen. Just look at the company [Page and Brin] created together.”
The sociopath in charge
The Founder Institute’s Predictive Admissions Test also pinpoints the behaviors and characteristics that virtually guarantee an entrepreneur will fail. The test tracks around 20 red flags in all. “We’ve analyzed a few hundred of our most successful companies, and none of those founders are flagged,” Ressi states.
Three flags in particular portend disaster. “The first is deceit,” Ressi explains. “This is almost pathological deceit, where the founder cannot tell the truth in any situation. Another flag is what I call ‘predatory aggression’—that is where you are aggressive to an almost illogical extreme. It’s not enough to beat your competitor; you have to put them out of business and embarrass them at the same time. The third flag is a very high degree of instability. Whenever stress levels go up, they’ll throw things across the room or yell at people or fire people randomly.”
That kind of conduct corresponds with mounting evidence that many key facets of the entrepreneurial profile mirror tendencies associated with psychopathic criminals. Research released in 2013 by the Australian School of Business at the University of New South Wales suggests that common psychopathic behavioral patterns—e.g., committing a crime, going to prison and then breaking the same law upon release, essentially learning nothing from the experience—are cut from the same cloth as the fearlessness and doggedness celebrated among entrepreneurial trailblazers.
Columnist and broadcaster Milo Yiannopoulos’ forthcoming book The Sociopaths of Silicon Valley tackles the subject head-on, exploring whether the executives running social media sites, online gaming platforms and other digital businesses have their users’ best interests in mind or are ignoring consumers’ rights and privacy laws to exploit personal data for their own financial gain.
Yiannopoulos began probing the Silicon Valley underbelly after selling his online tabloid magazine The Kernel to Daily Dot Media in early 2014. “It is important to know what sorts of people are running these businesses—they have as much, if not more, power than our elected representatives, but they are almost entirely unaccountable to ordinary consumers,” he says. “There’s a gap between marketing spiel and reality at Facebook—the ‘connecting the world’ marketing speak and the reality of building a furiously A/B-tested, sticky, addictive advertising network, which is what Facebook actually is. The great genius of Silicon Valley is that marketing. They’re really, really good at presenting capitalist business models and products as social enterprises.”
Yiannopoulos’ findings—based in part on dozens of interviews with Silicon Valley movers and shakers—align with other studies indicating that entrepreneurs rank high for sociopathic behaviors, alongside power-broker professionals like doctors, attorneys and bankers.
“You will find sociopaths at the top of every industry and in all sorts of positions of success,” Yiannopoulos says. “What’s different about Silicon Valley is that doctors and lawyers are constantly reminded by a variety of different mechanisms that they’re dealing ultimately with people—people’s feelings, their reputations and their finances. It’s very easy for Silicon Valley entrepreneurs and their employees to forget they’re dealing with people.”
Absolute power corrupts absolutely, Yiannopoulos believes, calling out Facebook and dating site OKCupid for manipulating user data—a move both companies chalk up to ongoing efforts to improve their services.
“The great tragedy and the great failing of American technology is not keeping these egos in closer check,” he says. “What the fuck does Facebook do? What has it really accomplished? We need to keep our geniuses on their toes to remind them that they have special gifts, and with those gifts comes a responsibility to make the world a better place—to build things and share things that actually improve the state of humanity. Because not everybody’s born with the ability to do that. This generation is squandering those gifts, and that’s because of the ego problem.”
But Silicon Valley isn’t solely the domain of greedy cutthroats with egos run amok, Blank counters. He invokes the name of Robert Noyce, co-founder of Fairchild Semiconductors and Intel Corp., credited (along with Texas Instruments engineer Jack Kilby) for developing the integrated circuit. In retirement, Noyce was a mentor and father figure to a number of up-and-coming Silicon Valley entrepreneurs, including Apple’s Steve Jobs.
“Noyce was Mr. Silicon Valley, and he mentored Jobs for years. Silicon Valley is still full of those stories. That’s what we’re built on. It may look like a money machine, but there’s an altruistic version of the culture that’s uniquely American,” Blank says. “The Valley gives all of us an environment to practice our art. This economy—this version of capitalism—has created a financial asset class that’s figured out how to make money out of artists. It’s the only artistic class that’s made trillions of dollars.”
The six entrepreneurial profiles
The Silicon Valley-based Founder Institute has identified traits and personality profiles that appear to correlate to success in business. When considering applicants to its entrepreneur training and startup launch program, the institute administers an hour-long personality and aptitude test. The organization claims that, combined with evaluation of performance in the program and the real world, the test is more than 85 percent accurate in determining entrepreneurial success. The test is intended to measure key traits associated with entrepreneurship. Among them:
• Professional experience. The average candidate is 34 years old and has domain and management experience.
• Fluid intelligence. This genetic trait is also referred to as “abstract thinking.” Successful founders who demonstrate this trait are able to recognize patterns and quickly learn rule sets, then apply them quickly to solve problems.
• Openness. Creativity, curiosity and a desire to seek new experiences and knowledge are desirable traits.
• Moderate agreeableness. The best founders exude a sense of compassion and are generally warm and considerate—but are capable of being straightforward or even harsh when necessary.
Varying degrees of these and other traits were used to compile the six basic entrepreneurial profiles. Where do you fit in?
1. Exuding confidence, hustlers (aka “go-getter salespeople”) are enthusiastic, action-oriented and conscientious, never lacking in self-discipline or follow-through. They score 25 percent above average in both extraversion and conscientiousness. They are highly agreeable individuals, always interested in the needs of others.
Examples: Mary Kay Ash, Zig Ziglar
2. The quintessential disruptors, innovators (“caring thinkers”) are adventurous, forward-thinking and always on the lookout for unconventional business ideas. They score high in openness (creativity and inventiveness) and agreeability, but are slightly below average in terms of emotional stability.
Examples: Richard Branson, Tony Hsieh, Evan Williams
3. Those who always get the job done and on time are machines (“quiet, diligent doers”). These people have a strong sense of duty and an aptitude for problem-solving. Machines score 80 percent above average in conscientiousness and 10 percent above average in fluid intelligence; where they are lacking slightly is in openness, the search for new ideas.
Examples: Larry Ellison, Bill Gates
4. Gifted with an inherent business sense, prodigies (“stoic, brilliant recluses”) run on instinct, trusting in their natural intellect and social skills to succeed. Prodigies score high in fluid intelligence, agreeability and emotional stability.
Examples: Elon Musk, Larry Page
5. Creative tacticians, strategists (“somewhat difficult, creative ops”) rely on their intellect to develop effective business models and to never lose their cool. They score 55 percent above the norm in emotional stability and also demonstrate openness and high fluid intelligence.
Examples: Steve Jobs, Martha Stewart
6. Always perceptive to the needs of their demographic, visionaries (“uber-creatives”) see the big picture and constantly try to push their companies to new heights. That enthusiasm leads to a high score—40 percent above average—in extraversion, as well as above-average ratings in openness and fluid intelligence.
Examples: Ted Turner, Oprah Winfrey, Mark Zuckerberg
What are the traits of demonstrably deficient founders? You might want to reconsider your career path if you are prone to the following:
• Predatory aggressiveness
• Emotional instability
Source: Founder Institute