Lucky or Smart
My career from ages 18 to 28:
In 1991, as a college freshman, I had an idea for an online service offering "real life" education to college students: practical advice about jobs, personal finance, and health. I made the simple observations that no one was teaching us these subjects in the classroom, and that computers -- rather than books or TVs -- had become the primary medium of communication and entertainment.
During my sophomore year, Dick Sabot, a very smart Oxford-trained Ph.D. in economics and the professor of a class in which I received a B-minus, agreed to collaborate with me on my concept. He did so not because I was his best student, but because he had had a near-death experience during which a higher power advised him to do "something different."
By 1994, when I graduated from college, our project had indeed become something different: an Internet start-up company we named Tripod.
Using what little cash I could raise from friends and family, I hired a team of computer programmers. I did this because I did not know how to install a web browser on my own computer, which is a significant barrier if you plan to run an Internet company.
Unbeknownst to me, and surely with some sort of anarchic motive, these lawless, long-haired, multi-pierced, tattooed, incredibly charming and smart hacker hooligans built a piece of software on Tripod that had nothing to do with offering practical advice to anyone. Instead, this software gave individuals the power to publish their own "personal homepages."
By 1995, the popularity of the Tripod Homepage Builder was growing rapidly and had far surpassed my original idea to offer college students "practical advice." It occurred to me that I might have a business on my hands. Having never written a business plan, I went to the local library and checked out a book called -- you guessed it -- How to Write a Business Plan.
In August 1995, Netscape went public and proved that Internet companies had value. Or at least proved that Wall Street investment bankers had convinced the stock-buying public that Internet companies had value.
One month later, I was able to convince New Enterprise Associates (NEA), one of the world's most respected venture capital firms, to review the Tripod business plan. They agreed to do so only because Dick's wife's brother's college roommate knew someone who knew someone at NEA.
NEA liked the plan because it mentioned the Internet several hundred times. It provided $3 million in financing.
By the beginning of 1996, one year after it was launched, the Tripod Homepage Builder had fundamentally changed the nature of consumer media. For the first time, anyone with access to a computer and a connection to the Internet could publish pretty much whatever they wanted; and anyone else with access to a computer and a connection to the Internet could view it.
By the middle of 1997, Tripod had attracted nearly one million registered members.
Tripod never posted a profit.
Tripod generated barely any revenue.
On December 30, 1997, in the middle of the stock-market bubble, I was offered $58 million for Tripod.
On December 31, 1997, I agreed to sell Tripod in exchange for $58 million in stock of a publicly traded company named Lycos, which at the time was an Internet company only slightly more stable than Tripod.
I agreed to a "lockup" that forbade me to sell all of my Lycos stock for two years.
Over those two years, I watched the value of my Lycos stock increase tenfold.
By December 31, 1999, at the height of the bubble and just a few months before the market crashed, I had sold nearly every share of my Lycos stock.
I invested the majority of those proceeds in bonds and real estate because they were the only two investment vehicles I could thoroughly understand. And because I needed a house.
By now, I hope my theme has become obvious.
Luck is a part of life, and everyone, at one point or another, gets lucky. Luck is also a big part of business life and perhaps the biggest part of entrepreneurial life. At the very least, entrepreneurs must believe in luck. Ideally, they can recognize it when they see it. And over time, the best entrepreneurs can actually learn to create luck.
Luck in business is different from regular old luck, like when you find $20 on the sidewalk. First of all, being lucky in business has an intoxicating underbelly called believing you're smart. No one actually believes that he should take credit for finding $20 on the sidewalk. But when people get lucky in business, they are often convinced that it is not luck at all that brought them good fortune. They believe instead that their business venture succeeded thanks to their own blinding brilliance.
The big challenge is that everyone -- the press, your shareholders, your colleagues, your significant other, and your parents -- will work hard to convince you otherwise. They will tell you, over and over again, that you are in fact a genius and should take complete credit for all the great things happening to your company. Why? Because to them, you are one of the following:
- A source of professional gain
- A source of financial gain
- A boss
- A lover
- Their pride and joy
None of these relationships provide incentive for any of these people to tell you the cold hard truth about your entrepreneurial success: You may have gotten just plain lucky.
The second difference between business luck and everyday luck is that luck in business can be created, whereas everyday luck cannot. You can't will yourself to find $20 on the sidewalk. But you can create a company that gets lucky more often than the average company. Indeed, there is a pseudo-scientific formula for creating business luck. The key element is this: Lucky things happen to entrepreneurs who start fundamentally innovative, morally compelling, and philosophically positive companies.
Why? Because lots of smart people will gather around companies with these qualities. As it turns out, precious few such companies exist. And the vast majority of human beings, and certainly most of the smart ones, are constitutionally caring creatures who would, if given the chance, prefer to spend their valuable time in a positive setting contributing to the betterment of society rather than in a negative setting contributing to its detriment. Shocking, I know, but true.
And when smart, inspired people gather around a fundamentally innovative, morally compelling, and philosophically positive company, they work very hard. And when smart, inspired people work very hard, serendipity ensues. Serendipity -- the faculty of making fortuitous discoveries by chance -- causes lots of unexpected things to happen to a company. Some of these unexpected things are good. Some are bad. But because no one planned for the good things to happen, they appear as luck. In other words, the best way to ensure that lucky things happen is to make sure that a lot of things happen. It's really that simple.
Much of what makes a company fundamentally innovative, morally compelling, and philosophically positive is contained not in the company's business model, but in how the entrepreneur communicates the mission of the company. A company's mission, communicated by the entrepreneur with charisma and passion, is what creates the environment that attracts smart people and gets them inspired in the first place. Which is exactly what gets the luck rolling.
Tripod made what money it did by selling advertising to clients such as Ford and Visa. That was our business model. But Tripod's mission, as I described it to my colleagues, was to revolutionize consumer media, allowing anyone to publish his or her views to the entire world using the Tripod Homepage Builder. Suddenly, almost overnight, the stories, viewpoints, and opinions of every individual, interest group, or culture could be made available for others to grapple with. "Tripod isn't here just to make money," I told my colleagues. "We are here to fight the most important battles on the frontier of the First Amendment!"
Mezze, the restaurant group I later co-founded in the Berkshire Hills of Massachusetts, serves food and drink to locals and to tourists from New York City and Boston. That's our business model. But the mission of Mezze is larger: to set an example of quality and service for all the Berkshires' retail establishments. I tell our staff that by working hard to refine Mezze, we raise the bar for everyone. And that by doing so, we will together attract more visitors to our small part of the world.
Village Ventures, the venture capital firm I co-founded in 2000, makes money by taking advantage of the supply and demand imbalance that results from the concentration of venture capital in only a few large cities. That's our business model. But the mission of Village Ventures is different: to enable entrepreneurs to start companies in the towns where they want to live. Rather than having to flee to Boston or San Francisco to find venture capital, entrepreneurs in Boise, Idaho, and Providence, R.I., can get capital from Village Ventures right in their own hometowns and build their companies in the same place they'd like to raise their families.
Missions such as those of Tripod, Mezze, and Village Ventures create an aura of authenticity, which is the elixir that attracts smart people and inspires them. There is little authenticity in the modern business world. But it's just the thing that people crave most in their work. When people find themselves aboard one of these vessels, they don't want to get off. They form a fierce protective boundary around it and will do anything to keep the vessel afloat and its inhabitants alive. These people are liberated by finding not only a way to make money but also a way to feel good about it. This is what takes inspiration and turns it into hard work. And the results of smart people working hard are serendipity and luck.
Marty Liebowitz, the vice chairman and chief investment officer of TIAA-CREF, one of the world's largest pension funds, once said to me, "Thank God they created the word 'muffin' or I'd be eating a cupcake for breakfast." Words are incredibly powerful, sometimes causing us to do things that we would never normally do.
It is for just this reason that I harbor a tremendous amount of guilt about my place in entrepreneurial culture. I fear that perhaps thousands of well-intentioned people wasted hundreds of thousands of hours pursuing entrepreneurial projects in part because of what they read in the press about me. I created a sort of playboy persona for myself as the CEO of Tripod. Pictures of me skiing, mountain biking, drinking beer, skateboarding in the office, and attending meetings in shorts, Birkenstocks, and a baseball cap graced several major media outlets. From Forbes to ABC's Nightline, from BusinessWeek to People, from MTV to Spin, the media broadcast images of me doing just about everything but working.
I absolutely, completely, 100% sold myself to the media to promote Tripod. Together, we created this image of the Slacker CEO: an athletic, shaggy-haired, perpetually mellow 24-year-old making millions while barely lifting a finger.
This image was broadcast not just in the United States but also to most of Europe. In five days during the summer of 1999, I jetted from Madrid to Milan, to Hamburg, to Paris, and finally to London, attending launch parties for Tripod Europe, staying in first-class hotels, and internationalizing the Slacker CEO myth of which I had become the archetypal example.
Hell, who wouldn't want to be an entrepreneur? I was a rock star. And I was the only person who knew it wasn't true. Friends would ask me, "What's it like to be a famous international Internet CEO?" "I'm not a famous international Internet CEO," I would answer. "But I play one on TV."
Working with the media was the most important job I had at Tripod. Period. Twenty-four-year-old Bo Peabody, with his hip Internet company in the mountains, was a perfectly packaged pied piper for the story of the decade. I was not only Tripod's poster child, I was shilling the whole goddamn Internet. And when it came to promoting these two things, the only self-respecting thing I ever did was turn down an interview on Montel. How noble.
I've often kidded that 90 percent of Tripod's value was in the amount of press we received in such a concentrated period of time. Sitting at a board meeting, lamenting our anemic revenue, I once joked to the board of directors that rather than actually running ads on the Tripod site, I'd sell potential advertising customers the opportunity that I might mention them in an article or wear their logo on my baseball cap. The board didn't laugh. They asked me to look into whether or not this plan was possible.
A lot was left out of all those articles. The hundred-hour workweeks. The anxiety attacks. The crashed cars and missed planes. The times I had to tell colleagues that we couldn't make payroll. The years of a $12,000 salary. Night after night after night of pasta dinners and stress-relieving Advil "cocktails." The countless meetings with absolute assholes who had no interest in learning about the Internet, the single most significant business innovation of their lifetimes. Pleading to venture capitalists for financing. Firing perfectly pleasant people when they didn't perform. In the late nineties, this reality did not sell newspapers and magazines. Baseball caps and Birkenstocks did.
Had I actually begun to believe what was being said about me in the press, I would never have sold Tripod when I did. I would have reasoned, instead, that I was in fact a genius, and that I should take complete credit for the great things happening to my company. Never mind that Tripod had little revenue, no profits, and an unproven business model; we should take this horse public! "Yeah," I could have said, "I am smart, not lucky, and I can defy economic gravity. I am in control!" Wrong. Tripod was all hat and no cattle. Had we taken it public, we would most likely have failed, and everyone, including many unsuspecting individual in-vestors, would have lost a lot of money.
I was not, however, completely immune to the media frenzy. Following the sale of Tripod to Lycos, what personal money I did not invest in bonds or real estate I invested in more than 20 Internet start-ups. Only five of these companies are still in business. The others are gone, along with a few million of my dollars.
The quickest way to tank your company is to believe what you read in the press, especially if it happens to be about you. The vast majority of journalists are not interested in covering what is actually happening. They are interested in covering what they think people want to think is actually happening. Everything is sensationalized. In 1999 it was sensationalized on the positive side, and in 2002 it was sensationalized on the negative side. It's never exactly accurate. As it turns out, accuracy can be quite boring. And quite boring does not sell newspapers and magazines.
Learn to keep your ego in check. That's how you'll be able to distinguish the crucial difference between being lucky and being smart. Your ego is both the most dangerous and the most useful weapon in your entrepreneurial arsenal. When used wisely, ego helps entrepreneurs craft their mission, work hard, and keep faith in their companies, even in the face of heavy scrutiny.
Ego also gives entrepreneurs the confidence to sell their start-ups to partners, customers, and investors, and the courage to act like famous international CEOs even when they know they really are just playing a role. And ego is the force that allows entrepreneurs to get comfortable with their powerlessness and learn to love the word "no" instead of panicking in the face of it.
On the other hand, when allowed to run amok, ego keeps entrepreneurs from knowing what they don't know and tempts them to believe their own press. Ego is also the culprit when entrepreneurs cling to their role as founder rather than turning their companies over to more capable managers. And ego is to blame when entrepreneurs can't work with odd people who are clearly smarter than they are, or when they fail to remain calm and gracious in all business situations.
Use your ego when it is called for, and check it at the door when you sense that it will get in the way. Unchecked egos are the most destructive force in business.
I have often dreamed of a study that somehow measures the impact of ego on workplace productivity. The results, I imagine, would be staggering, with as much as a 50 percent increase in productivity resulting from the eradication of egos. In an ego-free company, all good ideas from all sources would be implemented. Managers would hire only people smarter than themselves, and would never spend valuable time worrying about who gets credit for what. Meetings would be shorter, as no one would feel the need to drone on in an effort to impress his colleagues and managers. In a business world devoid of egos, profits would rise, salaries would increase, and unemployment would plummet. In all seriousness: A number of the planet's problems would be solved.
But it will never happen. As it turns out, businesses consist of human beings, and most human beings have either tragically fragile egos or uncontrollably big ones. All we can do is make an effort to control our own egos. As hard as it may be, there are real incentives to do so.
If I had let my ego go unchecked, I would never have let those crazy programmers put the Homepage Builder on Tripod. The Homepage Builder, after all, was not my idea. Moreover, it was the idea of people who were clearly smarter than I was. Someone who was insecure would have declared the Homepage Builder a distraction, a waste of time, inappropriate for the Tripod audience, too expensive, too risky, or any of the other excuses that those with fragile egos use to fortify their own power bases.
But the fact is, the Homepage Builder was the foundation of Tripod's success. The day we launched that little piece of software, we enrolled more members than in the entire previous month. It was like watching the Gold Rush all over again: The automated-membership counter ticked away as hundreds of strangers from all over the world signed up on Tripod and staked a claim to their little piece of Internet real estate.
In the end, my original idea for Tripod -- practical advice for college students -- was completely consumed by the popularity of the Tripod Homepage Builder. At one point, Tripod was the eighth most trafficked site on the Internet. Our membership base spanned every age and more than 40 countries. Now, as part of the Terra Lycos network, Tripod has 40 million members, from virtually every country on the planet. Had I stuck religiously to my original idea, the best thing that could have happened to Tripod would have been my being fired as its CEO. More likely, it would have ended up on the pile of failed dot-com start-ups that now symbolize an age of ego and excess.
Without the Homepage Builder, Tripod most likely would have failed, and my life would have taken a different direction. Without the success of Tripod under my belt, Village Ventures would probably not have received the funding and support it has. And without Village Ventures, the four other start-ups I helped found -- Mezze, VoodooVox, Waterfront Media, and FilmFree Entertainment -- would most likely not be flourishing to the degree they are. Was I lucky? You bet your ass I was lucky. But I was also smart: smart enough to realize that I was getting lucky.
This article was adapted from Bo Peabody's book, Lucky or Smart? Secrets to an Entrepreneurial Life (Random House, December). Peabody (firstname.lastname@example.org) is the managing general partner of Village Ventures.