Unmasking the Gervais Principle in Silicon Valley’s Million-Dollar Failures

Breaking the Startup System

I was on LinkedIn and I saw the following comment from Rick Brimacomb a seasoned investor.

The startup system is broken! 87 startups that raised at least $10 million have shut down so far in 2023. If $1MM can’t take you to profitability, then no amount will.

Then there was a comment from a guy named Bob Korzeniowski that said…

The reason startups are broken is because of the Gervais Principle.

I thought about this after reading the article he linked and thought how does this relate to the comment from Rick?

In summary the article on “The Office” and the Gervais Principle can be related to the comment about startups in a few ways. The Gervais Principle discusses different character types within an organization – “Losers,” “Clueless,” and “Sociopaths” – and how they navigate and perceive the organizational structure. This principle could be applied to understand some of the dynamics within startups and why some might fail.

Character Types & Leadership:

• The “Sociopaths” in the context of startups might be the visionary leaders or founders who are willing to make tough decisions and take risks to achieve the company’s goals.

• The “Clueless” could be those who are not fully aware of the startup’s challenges, risks, and realities. These could be either founders or employees who are overly optimistic and may not make the best decisions for the company’s sustainability.

• The “Losers,” as described in the Gervais Principle, may represent employees who realize the limitations and risks but are willing to work within the system for various reasons. In a startup, these could be employees who are drawn by the culture or the mission but may not be fully compensated for their efforts.

Organizational Structure & Failure:

• The comment about startups highlights the failure of several startups despite significant funding. This could be linked to the concept of an organization as a “psychic prison,” where individuals are trapped in particular ways of thinking or operating. Startups might be stuck in a cycle of seeking funding without developing a sustainable business model, leading to eventual failure.

• The interaction and movement of the different character types within the organizational hierarchy, as discussed in the article, could impact the decision-making and viability of startups.

Capital and Sustainability:

• The statement “If $1MM can’t take you to profitability, then no amount will” could be analyzed using the Gervais Principle by looking at how the different character types utilize, manage, and perceive the value of capital within the organization. It might be the mismanagement or misunderstanding of the role of capital by either “Sociopaths,” “Clueless,” or “Losers” that leads to the downfall of these startups.

By applying the Gervais Principle, one might gain insights into the dynamics, behaviors, and decision-making processes within startups and how these contribute to their success or failure. So, overall this was a fascinating dive into some very relatable spaces which I have been a part of for a long time.

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