I originally wrote this as an email to my co-founders. It has been edited. Enjoy.
Commitment is a hard thing to wrangle out of a man, particularly when you're recruiting for an undercapitalized startup. Human beings are fundamentally loss averse. Committing to a new venture requires the recruit to:
a) forego all other possible opportunities, both known and unknown;
b) give up on his current commitments and realize them as losses, and;
c) commit to creating something that neither exists now nor has existed before.
In layman's terms, this means convincing people to quit their current jobs or drop out of school to join our crazy little venture. Hmm. Speculative venture with uncertain outcome vs. certain process with clearly bounded outcomes.
There's two basic solutions to this problem:
1) Find and recruit those whose perceived opportunity cost is the lowest, i.e. hire people with nothing to lose, or;
2) Change the perceived opportunity cost, i.e. convince people that they have more to lose by not joining you than vice-versa.
At SpeakerText, we're doing both. Option #1 we exercise by moving to and recruiting in the Valley, where people discount the future much less than they do elsewhere (and selling equity is always a bet on the future, not the present). Option #2, well, that's what this blog post is all about…
At its core, commitment––like any human behavior––is an emotional act not based on purely rational calculation.
My method is loss aversion jujitsu by using salami tactics to lower the decision threshold and create a situation in which, at the point of decision, loss of new commitment outweighs the loss of the old.
What are "Salami Tactics"?
Salami tactics is a fantastic term I picked up in some of my graduate poli sci/IR coursework at Columbia. As far as I know, Thomas Schelling––the famous economist and game theorist (as in won a Nobel Prize)––coined the term. Here's how he described it in his famous essay, The Art of Commitment:
There is some threshold below which the commitment is just not operative, and even that threshold itself is usually unclear. From this arises the low-level incident or probe, and tactics of erosion. One tests the seriousness of a commitment by probing it in a noncommittal way, pretending the trespass was inadvertent or unauthorized if one meets resistance, both to forestall the reaction and to avoid backing down. One stops a convoy or overflies a border, pretending the incident was accidental or unauthorized; but if there is no challenge, one continues or enlarges the operation, setting a precedent, establishing rights of thoroughfare or squatters’ rights, pushing the commitment back or raising the threshold…
If there is no sharp qualitative division between a minor transgression and a major affront, but a continuous gradation of activity, one can begin his intrusion on a scale too small to provoke a reaction, and increase it by imperceptible degrees, never quite presenting a sudden, dramatic challenge that would invoke the committed response.
In other words, baby steps.
A good parallel is the romantic realm: First a light kiss. Then harder. A hand wrapped around the low back. Upper back. In the hair. Grabbing. Tugging. Pulling. A brush against the breast. A kiss on neck. The clavicle. Sternum. Clothed breast. Bare breast. Nipple.
And pretty soon you're upstairs rollicking on the kitchen table. Who'd a thunk it would've gone so far?
This, my friends, is how the poor man should hire.
First, you say: "Dude, could you give us some advice on this thing we're working on? It'll just take a few minutes." And truly, the commitment is minor. Yet in the process, some important things happen: trust is earned, however slight. At the individual level, emotional bonds begin to form. The recruit begins to learn who we are and, most importantly, how we think.
Hand on the low back.
The next step: "Yo, could you help out on this project? If it doesn't work out, no biggie." A slight escalation. Now the person begins to wrestle with the problems himself, investing time and emotional energy into the project.
Further: "Well, here's our strategy for world domination. We're not sure if it's a good one. What do you think?" The person wrestles deeper, beginning to think at the strategic level, beginning––however slightly––to adopt the founder's mindset.
Tug of the hair.
More: "Ok, so what would you think of working on this one thing and kind of owning it as your own? No need to quit your job or school, just do it as a side-gig." The investment grows. Emotionally, they start to own some part of the company, their re-investment becomes ongoing. It takes over more and more of their free time.
Even deeper: "Dude, just do it for the summer. Full-time for 3 months. No need to commit long-term. And if it doesn't work out, hey, you can just go back to grad school." Complete immersion. Real bonds happen with the team. Long hours are invested into the project. They attended repeated strategy sessions. They see the vision and, if you're lucky, internalize it.
Do you wanna go upstairs?
Decision: "Well, you've been here all summer and it's been fucking awesome. The team loves you. I think you're great. Honestly, this thing is really taking off, so what'd you think of taking a year off and joining us full-time? You don't get opportunities like this every day, you know." The moment of truth. Hopefully, by this point, the bond is so deep that the fear of loss re: the company outweighs the fear of loss re: grad school or the old job. Gates did it with Ballmer. Zuckerberg did it to himself with Facebook. When setup right, it works like a charm.
And then the real magic happens.
Of course, salami tactics don't always work. And sometimes they work in reverse, with you trying to tug the recruit along farther than they want to go for way too long, and not wanting to give up because of your own loss aversion and unwillingness to realize sunk costs.
C'est la vie. Life is a dangerous game when you play it this way. But it sure is fun.
UPDATE: Just to be clear, this is not a post on "how to exploit people and get them to work for you for no money/equity." Hardly. People in startups should have equity so long as they are actually committed to the company. And you should not be stingy w/ said equity either. Being honest and fair is ALWAYS the best policy. You can get away with lying and cheating in the short-term (say if you want a quick flip), but it is absolutely unsustainable in the long-term (say if you want to build a real company).