Social Proof Is Dangerous

Hunter Walk has a post up suggesting that "social proof" is not as helpful of an indicator of startup quality as it once was.

I have always hated the idea of social proof. It's just the herd instinct at work. It's nonsense.

If you can't figure out why you like an investment and why it will be successful, don't make it.

Yesterday my partner Andy and I met with a company that has had a hard time raising capital. I talked to a bunch of big name investors about it and they all hated it. I told Andy "that makes me like it even more."

We may or may not make this investment. We have to do our work, figure out the market, make the calls on the management team, and figure out how big of a business it can be and whether we can make a good return on it. But we don't care who else wants to invest. In fact, I'd prefer if nobody else wants to invest in it. That would be great.

Make up your own mind. Don't follow the herd. Don't chase.

#VC & Technology

Comments (Archived):

  1. VincentWright

    Fred,In addition to working as good advice for VC’s and entrepreneurs, this sentence also works quite well for the parents among us: “Make up your own mind. Don’t follow the herd. Don’t chase.” (Indeed, the longer I live the more I like the “Don’t chase” as a guiding light…)

    1. fredwilson

      parenting has made me such a better business person. my kids have taught me so much.

      1. VincentWright

        Agreed, Fred….(and as dangerous as it may be for me to compliment my son on advice he’s shared with me, the advice he’s shared has been worthy of the risk of complimenting him…(now, if he’ll only take my unending advice to CONCENTRATE while driving, we’d be a heck of a team!))

  2. Matt A. Myers

    In a way this fits well with CRAD’s comment yesterday — it’s potentially too late if everyone else is already talking about it, or if it’s the herd rejecting it then it’ll likely also be the herd that’s only following the popular, and basing decisions off of that, and not theory.Just to quickly add..If you use having 800+ million users as your social proof, without understanding the logic and theory as to why that ecosystem exists, then yes – very dangerous.Time will tell to see how Facebook fairs.

    1. fredwilson

      yes. today and yesterday’s post are two sides of the same coin

  3. Cam MacRae

    In all things I prefer to fish where the fish are than aimlessly drop a line off a crowded pier.

    1. fredwilson

      i like to fish too.



  4. William Mougayar

    Great words of wisdom, but you need to have the confidence to be able to make such seemingly contrarian decisions. Many other VCs are followers and not leaders in their decision-making.@davefleet from Edelman, a speaker yesterday at BlogWorld had these great quotes: (I tweeted some of them)”Leave the buzzing to the bees. Social media is already full of it.””I’m worried about social media. Shiny objects are dominating.””Many brands with lots of followers have actually little engagement.”Although these relate to social media, not social proof per say, there is a parallel about not following the social herds. In the social spheres, it’s like in the rear-view mirror: Things appear bigger than they are in reality.

    1. Matt A. Myers

      Confidence comes from understanding theory, and understanding theory comes from proof points of experiential observations – where you can see the same cause and effect occurring multiple times in different ecosystems.You could think you understand and be mistaken of course, however I’m guessing most people buying Facebook at the IPO price either, i) are merely gambling, ii) aren’t domain experts by any means (unless they are gambling and are domain experts on herds buying/trading of stock)Being a follower, even if you’re following successful people can be problematic as well. i) You’ll very likely join the party too late, and ii) you won’t know when to get out and move on when the time comes because those signals likely won’t be apparent.Love the “Things are appear bigger than they are in reality” – beautiful! πŸ™‚

      1. Guest

        “Confidence comes from understanding theory…”Are you sure? I would think confidence comes from seeing examples of a theory, or parts of the theory, working as expected. Just understanding the theory doesn’t sound like it would instill confidence.

        1. Dale Allyn

          Confidence can also come from ignorance and/or arrogance. Outcome may be as desired or not, but confidence is not always well founded. ;)cc: @mattamyers:disqus

          1. panterosa,

            @daleallyn:disqus Confidence is trusting your gut. Learning from your gut when you take risks, whatever the outcome, gives you more confidence.

          2. Dale Allyn

            Agreed, panterosa. Worth doing, yet sometimes the result is a new lesson, rather than the expected or desired outcome. Often, that lesson is worth tenfold the original intent. πŸ˜‰

          3. Matt A. Myers

            I have trouble with this gut feeling, mostly I don’t trust it all of the time – and then I always regret not trusting it; I’m not sure what needs to shift to help with that. I think it is an artificial pressure on me making me take risks that I know there’s no point to; Not going to give any examples, though the whole process isn’t fun any of the times.

          4. panterosa,

            Many people would say you have too many other voices so you can’t hear your gut clearly. Those voices are usually specific people who are close to you and influence you. But they needed to be turned down to hear your own gut feeling if your gut is ever to be of use a compass and gauge. Your gut may feel weak from being crowded by the other voices. When you listen to your gut you reward it and it becomes stronger when you flex it.

          5. Guest

            Good point!

        2. Guest

        3. Matt A. Myers

          You’re right! This is why I added the second part to the sentence, “and understanding theory comes from proof points of experiential observations” πŸ™‚

          1. Guest

            OK, well if I could read properly you wouldn’t have needed to waste your time re-explaining your point. My bad.

          2. Matt A. Myers

            Hehe. It’s okay, the way I write is stringy and convoluted sometimes.

        4. FAKE GRIMLOCK


      2. James Ferguson @kWIQly

        The Tsar who played Russian roulette all winter with his hand crafted revolver, thought he was immortal. He had, after all “proof points of experiential observations”.His immortality allowed him to go out into the winter of the Russian steppes to rid them of wolves and he was soon devoured. When they found his revolver, the workmanship was so fine that the weight of a loaded chamber carried it past the firing pin.The difference between cause and effect and a high degree of correlation are a major source of confirmation bias.… .I suspect social proof is very similar…If you rely on this … Successful investors back successful companies, we can assume their backers are successful and back what they back. Nothing could be further from the truth. We overlook that we hear more about the successful companies. Humans survive by avoiding trouble. trouble comes in patterns so we see false positives – the cost of avoiding a non-existent problem is small vs the problem of ignoring the now mystical “woolly mammoth” problem.

        1. FAKE GRIMLOCK


        2. Matt A. Myers

          You’re grouping “successful investors” together that only invest in successful companies, right? This of course is far from the truth.@fredwilson:disqus ‘s theories, based initially on what I believe on their involvement with Geocities, were mostly right or right enough to begin – and so they could guide money better that way.I would say USV is one of the most successful VC firms out there, yet we know not everything they’ve invested in has a high level of success; I personally don’t believe in failure as the opposite, more that there’s a spectrum of success, however you can have your odds being closer to one end of the spectrum than the other..Re: Avoiding trouble – I must not be human because I don’t avoid trouble – I never have, not in the legal or harm sense, but in the challenges sense. If I see something that needs to be changed, that would benefit people, then I find a way to change it or work it into my plans.Most people don’t care about the wooly mammoth problem because they are too busy stuck trying to just survive, too much so to focus on the community’s survival – other than maybe their direct family, work place or other – instead of what’s best for all, which takes a lot of time to understand through exposures.

          1. James Ferguson @kWIQly

            NO – The word “Only” is yours and is itself an astonishingly clear case of confirmation bias – you read what you hoped to read !I say “Successful investors back successful companies”.So, if I must, – I will add for completeness ..”Successful investors back dogs too”.ask @fredwilson :)However, being forced to spell out every implicit statement breaks the flow of rhetoric and so I leave@FakeGrimlock:disqus to complete my point more succintly.

          2. Matt A. Myers

            Isn’t that what high-level conversation and discussion is – speaking clearly, carefully and thoughtfully? If not you run into generalizations, more so bothersome to me is slam poetry – where poets, creatives, decide to be generalists and unspecific so their poetry flows well – yet their meaning is left dangerous in generalizations.@FakeGrimlock:disqus speaks usually in conclusions, allowing many to use different paths of thinking to reach the same conclusion and thus allow him to be correct in his POINT FORM CAPITALIZATIONS OF AWESOMENESS.

    2. Cam MacRae

      Of course that’s not limited to VCs but applies to people in general — in descending order of rarity there are those who always lead, those who never lead, and those who lead some of the time.

      1. Guest

        True leaders, like true entrepreneurs, are hard to find.

    3. ShanaC

      Oh god, thank you @davefleet for publicly saying there is a shiny problem. I’ve been wanting to see someone say that aloud for months already. It is killing the idea of network effects over time.



      1. falicon

        Do you think that is because people have molded social media to be that way, or do you think that the current state of social media is molding people to act that way? Do you believe it’s fixable?

        1. Guest

          Both.Fixable? What do you think it should be?

          1. falicon

            Those are the questions I wanted to hear @FakeGrimlock:disqus take on…I don’t think I have thought about social media as a whole enough yet to have my own answer…

          2. Guest

            You asked if it’s fixable. I’m trying to find out what makes you feel social media is broken?

          3. falicon

            I interpreted FG’s comment to mean social media is currently broken (because it’s full of shallow and dumb people — or at least because the people within it currently appear shallow and dumb).I was just wondering what his ideas were on making software that helped people not appear/act that way…or if he felt there was nothing more software could do to make social media seem less full of ‘shallow and dumb’…

        2. James Ferguson @kWIQly

          The qualification for having access to Social media used to be “Being born in the USA”.It is now tending towards “Being Born”.This is one of the achievements many of us have under our belt, and speaks little for our ability to discern the shallow from the seminal.Regards it being fixable – there is education – a path that seems equitable, and then there is eugenics.In eugenics might is “right” and that is exactly what is wrong with it. It also makes that *irony* LITTLE *irony* assumption that what is good for society is best judged by those in control of society.In my view – what is best for society is often that which is most foreign to it. Numerous martyrs over the years have shown this to be the case.

        3. Dave W Baldwin

          Good question. The different levels of ‘knowledge’ have always been with us. So when the news was sent from NY to LA via telegraph, the full range of intelligence saw it… and retold it making the story details change.When FDR gave the ‘Firesides’, you still had the range of IQ’s.When you had the ‘Big 3’ Networks… ditto.IOW, you could control a message via limited access, working to drive the herd where you wish. They still are. But now we are moving from a controlled string of ‘bits’ transmitted to move 90% over into random that starts to splinter the percentage moved.So, currently, the maturation involves the same range levels of intelligence throwing bits and we need to fight so those bits do not become so segregated that the more shallow stay that way while the enlightened do not feel the inevitable isolation.

        4. FAKE GRIMLOCK


      2. ShanaC

        how do we make people less shallow (dumb may be partially innate, though I do wonder)

        1. FAKE GRIMLOCK


          1. ShanaC

            doesn’t work so well yet, otherwise I would change parts of my genome.

      3. Matt A. Myers

        So let’s educate them.

  5. Fernando Gutierrez

    Lately I get asked a lot about what I think that will happen with my country, Spain, and the Euro. I always say that I can’t know, but what I know is that it won’t be what big media is publishing. What recent crisis have taught me is that it never is what everybody is saying it will be… at least that I hope! πŸ™‚

    1. William Mougayar

      Exactly. The media will report on whatever happens. They aren’t the ones predicting it.

    2. fredwilson

      Do you worry about keeping money in the spanish banks?

      1. William Mougayar

        yikes…good point. circa Argentina in 2002/2003

      2. Fernando Gutierrez

        I’ve been worring about keeping money in Spanish banks for a few years now. Aside of my business I’ve been buying and selling assets from financial institutions all this time and always felt the big problems had not arrived yet. We had a huge real estate buble that was already bursting when Lehman went bankrupt, so the banking crisis was only a matter of time. Anyway, with the country under scrutiny, if any bank fails everything goes behind, so all type of assets are risky.Edited because I accidentally sent the comment before it was finished.

    3. ShanaC

      Are you doing ok out in Spain?

      1. Fernando Gutierrez

        Thanks for asking Shana :)I’m doing great. The country is upside down and it’s sad, but there are huge opportunities all around if you keep your nerve and are not broke already.

  6. kidmercury

    mildly disagree, and i think there is a distinction to be made between social proof and contrarianism. being a contrarian is definitely where it’s at and so you need to feel comfortable being in a minority and being despised by the majority. but if you’re all alone, you might be too early and if you’re not strong enough, you might not have the resources to push the market all by yourself. when i am investing in small public stocks (25mm – 500mm market cap) i still like to see some other investors i consider big enough and smart enough to give the company some strength. but, perhaps these considerations are not as relevant for a fund like USV, which may have the connections and capital to give sufficient push on its own. so maybe it depends on who you are and where you’re coming from.

    1. Cam MacRae

      contrarians are just as susceptible to social proof. the killer quote for me is:If you can’t figure out why you like an investment and why it will be successful, don’t make it.of course your answer might be: “cos fred invested” πŸ˜‰

    2. Robert Holtz

      Fred is saying that social proof is groupthink in sheep’s clothing.* groupthink = acting primarily on the thoughts and opinions of others.* contrarianism = acting primarily on the thoughts and opinions of others.Only the action is different. The contrarian zigs while others zag. But at the essence level there is no difference. Both are guiding their next actions on whatever the group is doing at any given time and either blending in or sticking out.If you go your own way, sometimes you’ll be part of the group and sometimes you’ll stick out like a sore thumb. A contrarian is like a non-conformist, defining them self as not going the way of the group EVER. By going your own way, it takes a certain self-reliance to be part of the group on occasion and to constantly fall in and out of favor with the group.The flaw of groupthink is sometimes the group is wrong. The flaw of contrarianism is sometimes the group is right. You’re not truly free of what the group thinks unless you’re perfectly willing to go your own way and sometimes be one of the herd and other times be it’s outcast without letting it phase you.

      1. kidmercury

        i suppose it depends on how one defines contrarianism. for me, contrarianism doesn’t mean blindly doing what others are not doing; rather it means doing what others are not doing is a requirement — but not the only one. you still need to find value. i.e. saying their are purple donkeys on the moon would be against mass opinion, although i don’t think there’s value in that statement as i haven’t seen any proof or evidence. saying 9/11 was an inside job is unfortunately against mass opinion, though i think the evidence is abundant — and so it strikes me as being in the sweet spot of contrarianism.

        1. Michael Elling

          You don’t build it hoping they will come; you build it because you know they will come based on all your knowledge. Its confidence in what you know and what you perceive. Yours and Fred’s comments about timing and knowing when this will happen to lower risk and ensure outsized returns instead of losing it all is very critical.

        2. Robert Holtz

          These definitions are well-aligned with how I define contrarianism:…I’m going to avoid the slippery slope of the 9/11 conspiracy theories. No matter how that event came to transpire, my takeaway is that it was a tragic and almost unfathomable loss of life that set the world back in ways and means that are for all practical purposes immeasurable.Coming back to the AVC audience of entrepreneurs and VCs looking for advice and insights to help “sharpen their saws,” my question to you, having defined yourself as a contrarian, is this…How does one apply the philosophy of contrarianism without the prerequisite step of interrogating what the group is presently thinking on any given issue or doing at any given moment in order to then inform the contrary?

          1. kidmercury

            it depends on what sphere of life, but let us narrow our focus to investing/entrepreneurship.1. if price has risen and everyone knows about it, you’re too late. 2. there’s lots of data points on investing that can be cited. for instance you can look at trading volume, COT report, market capitalization. you can also rely on intuition.

    3. fredwilson

      Great points. You have to risk being too early to be early enough. Portfolio diversification is key. I am willing to lose everything on a third of our investments

  7. LIAD

    The social proof heuristic developed instinctively over millennia probably for very good reason. Seeing others run away from a woolly mammoth was probably a good indicator you should do the same.As we have evolved and become increasingly lazy we’ve probably allowed the thought shortcut and comfort blanket social proof provides to become overly magnetic and alluring.We shouldn’t dismiss it out of hand, even when it comes to investment decisions.We just need to be clear on the trade-off using it inevitably necessitates, i.e, looking outwards for understanding and answers where perhaps we owe it to ourselves and should be looking inwards.

    1. JimHirshfield

      +1 just for using “woolly mammoth” on avc. Great visual.

      1. fredwilson

        Yeah. I liked that line too.

    2. Mark Essel

      Great post to refer to cogsci and historical decision making. Just about done with Predictably Irrational, a must read. After reading it I feel like I have an unfair advantage on a range of consumer and market interactions.

      1. LIAD

        should watch his Ted talk. The story behind the impetus for his quest to understand behaviour is incredible.(first few mins here – Dan Ariely, author of Predictably Irrational on his accident and resultant treatment – )

        1. Mark Essel

          I have, and thanks for the suggestion. Just finished while out walking, looking for his new book via kindle now.

          1. awaldstein

            New-2-me.I need to find and watch and it seems, read the book as well.Inspiration is a great find. Can’t get enough of it.

          2. Matt A. Myers

            I can’t find the time to read longer-form copies of anything. How do you all do it…

          3. awaldstein

            Never do as much as I like.I don’t read at home much. So…bike to spots on river and bring a book. Try to get to the beach a couple of times a year.Its aspirational more than I want it to be.

          4. Matt A. Myers

            The amount of inspiration and cascade of thoughts triggered from reading something good — generally long-form/books are, when suggested by peers, are very well thoughtout — is too much, takes up too much mental space that I currently need for other things. Priorities. I do keep a book list, and I hope they will somehow magically fit into reading times in some useful / serendipitous way.Beach time for me usually is with friends. I should set aside 2-3 hours a few times a week this summer to sit in a park to read, though.

        2. falicon

          Thanks for pointing it out … just watched it (… ) …great and fun stuff to ponder.

          1. LIAD

            check out the first few minutes of this Ted speech he gave when he talks about his burns –

          2. falicon

            Yep – watched that one too (after the one above)…super interesting. A lot that can be applied throughout both those talks when thinking about software and customer experiences (especially transactional experiences)…will be watching them both at least a few more times in the future.

      2. Fernando Gutierrez

        Great book! Don’t be so sure about your advantage. Even understanding why we make some irrational decisions we keep doing them… only with more guilt maybe.

    3. Matt A. Myers

      The smarter ones raised and trained woolly mammoths to be friendly and then road them into battle!Your example is exactly why the stock market is setup perfectly for gambling. You have the supply of people running from mammoths, and you also have the supply of “money-managers” who will ride the waves, up or down, in hopes to take advantage of the herds on the run.

      1. ShanaC

        The smartest ones end up eating all the wooly mammoths…. through herding them off a cliff….

        1. Matt A. Myers

          Then you have none left to breed new offspring, and they go extinct – not so smart. I’d much prefer keeping them as livestock, sustainability and all..And luckily, there’s no real cliff with online ecosystems — people are mobile.

          1. Guest

            I think you’re right again, Matthew.ShannaC: I think fear may have been your motivator. How would you approach it now after reading Matthew’s comment?

      2. Guest

        You’re moving away from the OP’s original situation of impending danger.But, I like your way of thinking. Move yourself up from prey to predator and take advantage of the situation around you. Excellent thinking!!!Humans were designed to think just how you’ve described. The trick is to eliminate all the baloney in everyday life and let your ingenuity shine.

    4. Guest

      Not a good plan! You must first be sure a mammoth doesn’t ignore stationary objects. With many animals running away is the wrong approach.Also, look at it this way. Most people spend their lives going to work 40-50 hours a week making enough money to get from paycheck to paycheck. Few people take the path less followed and make it big thus living the life humans were intended to live: One of excitment and discovery.

      1. LIAD

        great comment dude.

        1. Guest

          I think your statement has some very important parts. Like looking at what others are doing, in this case running away. Problem is you left out half the equation and that is how was the mammoth reacting to the running.

  8. Kerry

    Was Buglabs a contrarian investment?

    1. fredwilson

      Yes and it wasnt our best investment

      1. ShanaC

        :/ – conceptually it is such a good idea though. maybe now is not the time….

  9. awaldstein

    True from an investment perspective. Certainly true from a startup idea point of view.From a marketing perspective, it’s more complex, People and customers want social proof, do follow the crowd and do emulate the rock star.The dance around social gestures as ‘light’ and engagement as ‘substantial’ and how this all intermingles into results is messy and interesting and non-scientific. Blog communities are made up of likers, commenters, leaderss and watchers. There is no formula that says what proportion makes it all work.

    1. VincentWright

      Your second paragraph is pretty intriguing but, it is also pretty hard to process if “people” and “customers” are conflated into *ONE* thing which 1.) “wants social proof”, 2.) “does follow the crowd”, and 3.) “emulates the rock star”But, if we use Facebook as an example:1.) “People” go to Facebook to hang out with friends, family, and colleagues and whether or not they’re following the crowd or emulating rock stars, do NOT want to be interrupted by ads – even if those ads are from such vaunted companies as GM (which we all know pulled its ads off Facebook just before Facebook’s IPO)2.) To me, “customers” suggests a subset of “people” who’ve already gotten sufficient social proof to have purchased from the marketing company. Customers would have sought out GM’s Facebook page, for example…If I’m misinterpreting your meaning, please help me to get clearer on your second paragraph…Thanks…

      1. awaldstein

        Sorry if this was not clear.People are social animals. The market is a crowd based entity.My point, somewhat squishy, is that we use social proof, behavioral connections to build audiences and find customers.I question both the talk that all social gestures are measurable against an ROI and that only the most engaged are useful to the company.The big change for business on the social web is that the funnel of customers as gotten both wider and deeper and more complex.I wasn’t talking Facebook specific. It’s pertinent of course but with all the noise around them and ads and value, it muddies everything somewhat.

        1. VincentWright

          Thanks kindly for the clarification. (I was aware you weren’t talking about Facebook but, I wanted to use it as a big old example…)

          1. awaldstein

            You can’t think of the world or your company without putting Facebook on the whiteboard.But you can’t think of the world and your business with only Facebook there. It’s in no way the center nor the solution for anything. Simply a breadcrumb in the customer funnel.

          2. VincentWright

            Yes…I’m fully aware of that…(Now, I’ve gotta go help some people…Enjoy your day….)

        2. Mark Mohler

          Totally agree. Fred’s post seems to equate social proof with investment interest and those things may not be synonymous. On the investment side, herd mentality has pros and cons. I tried to address that in a recent blog post (http://crowdfundinglaw.word…. On the product use side (users and not potential investors), social proof remains a very valuable validation, at least in my mind.

          1. awaldstein

            I’ll check out the post. Thanks.Sticky discussion that sinks into semantics quickly,I agree with Fred completely but between an original idea, a working model and market traction is a crowd with group dynamics and social strings.

    2. fredwilson

      Yes indeed

    3. ShanaC

      Yes there is – it is different for every type of blog or whatever, but at the end the question is – do you have positive ROI or not.Same issue hit facebook when going public – it wasn’t the class of investors that set the price of IPO, it was the market being brutal.



  10. kirklove

    Suppose you can throw this in the #iconoclast bucket though personally I’m trying to beef up your #punk cred so I’ll toss it there.

    1. fredwilson


      1. kirklove

        Need to trademark that shit.

        1. fredwilson

          hashtag is the new trademark

          1. FAKE GRIMLOCK


          2. fredwilson

            right on!

  11. Guest

    Social Proof is herd mentality and just going in an opposite direction, or contrarianism, is just the opposite side of the same coin…The true way is to, in the words of Ralph Waldo Emerson, “Do not go where the path may lead, go instead where there is no path and leave a trail…”

    1. Robert Holtz

      Agreed. Contrarianism is just herd mentality as seen through a mirror.Common sense is what used to tell us the world was flat.

    2. fredwilson

      Great comment. Great advice.

    3. Mark Essel

      Bonus points for the quote Carl πŸ™‚

    4. Matt A. Myers

      Trailblazing FTW

      1. Guest

        I sure am glad there is an urban dictionary on the net….had to look up “FTW”

        1. Matt A. Myers

          Not dyslexic WTF

    5. Kasi Viswanathan Agilandam

      +100 ( @falicon:disqus way).Leaving the trail is much more rewarding than finding the path.



      1. Guest

        Never really paid all that much attention to other people…as long as I didn’t trip over them…

    7. William Mougayar

      Thanks Carl. That is so true.

    8. vruz

      That resonates with the famous Spanish poet Antonio Machado…”To the walker: there’s no such thing as a path / you make the path as you walk”

  12. Robert Holtz

    This is actually at the core of what I’ve come to really respect about you, Fred. You go your own way. It is refreshing to see because part of why the tech industry can be so fickle at times is precisely because there is the large presence of a herd mentality that follows the latest insight-du-jour of the hour and turns a blind eye to perfectly good businesses just because they fall out of favor or out of sync with the latest bit of groupthink.I get the distinction you are making here. It is one thing to seek out and secure validation. That on it’s own IS a good thing. But in terms of those relying on it or on lack of it, over all other empirical data — they are not just doing harm to that particular business but cumulatively to the entire field.Marketers teach entrepreneurs to go out and collect social proof. In fact, it is a known tactic to build up a perception of traction before you actually have it. Indeed, it can be a powerful tool but I think you’re pointing out it should not be as heavily weighted by those who are assessing a startup’s value.And while there may be something to it if droves of others have kicked the tires and walked away, I think your clarion call here is that it is the VCs job to wear the prospector’s hat and ply their craft to extract the essential value using your own assessment. Social proof may tell you there is gold in them there hills but wherever one may be looking or not looking, it is only by the prospector’s discerning eye and skilled hand that gold will ever actually be struck.

    1. fredwilson

      Thanks Robert

  13. JimHirshfield

    I think it’s hard to get funded without social proof. It’s the traction you want to see. I agree with you wrt blindly following others. And VCs that do that suck. But it’s part of the system, given that VCs talk amongst themselves all the time.

    1. awaldstein

      Good point.An idea and a prototype that reifies it is one thing.Market traction, early adopter communities are variants of social proof in themselves.There’s always that line it seems…

    2. ShanaC

      Traction isn’t social proof. Before they blew up, pininterest technically had traction, but not social proof. Social Proof are the t-shirts that some investor who passes in the end is caught wearing…..

  14. Thomas Cornelius

    Finally…..I wrote an article last year about my experience as an entrepreneur watching VC’s and angels acting like sheeps. In summary “SOCIAL PROOF IS THE ENEMY OF INNOVATION”. Read my thoughts at business insider http://articles.businessins

    1. fredwilson

      I will check it out. Thanks.

    2. fredwilson

      great point on social proof investors not buying into the company vision and therefore will be weak in the knees if things don’t go perfectly

      1. Thomas Cornelius

        thanks Fred. Since then I joined the other side and we have started an early stage ventures unit within the organization that is acquiring my company with a very narrow focus on digital retail innovation, focusing on online to offline commerce. Getting this new perspective and be on the vetting side of information has added definitely some new insight. There is no shortcut to “insight/ experience” and I think the narrower you can be in your market/ investment approach, the more problems you have tried to solve yourself within the same sector as your potential “partners/ startups”, the more accurate your “gut-ometer”. This approach at least for me allows me well to dive faster into the real issues and adds potentially more value during the dating process for the entrepreneur by tackling some important questions quickly (regardless if the outcome is an investment or not).

        1. fredwilson

          i totally agree

  15. Tom Labus

    Social proof precludes you from hitting a home run.It’s like an index fund for VCs which I would imagine would be a disaster for you and your investors.Celtics!!!

    1. fredwilson

      The VC asset class is like a casino. In the aggregate the returns are negative

    2. kidmercury

      i was watching the game at a bar in chicago last night. when pierce hit that three near the end of the game the place erupted, you would’ve thought we were in boston or something. anti-lebron sentiment is practically universal. in fact relating to this post it might be herd mentality! i love it though. hoping for celtics vs okc in the finals. i will be rooting for the celtics, no question.

      1. Tom Labus

        Heat will start crying if they get down in Boston and whining to the refs.

      2. ShanaC

        where are you in Chicago?

        1. kidmercury

          right around the border of gold coast and old town, if you are familiar with the various neighborhoods. near the clark/division red line stop.

  16. Robert Holtz

    BTW… small spelling typo in the post.Fourth paragraph, first sentence:”Yesterday my partner Andy and I met with a company that has had a hard time rasing capital.”The correction is as follows:”rasing” should read “raising”… just FYI.

    1. fredwilson

      Thanks. I wish there were a tool that would let you make that correction

      1. Cam MacRae

        Imagine the mischief :)As an aside, difficulty rasing capital is a positive quality!

        1. falicon

          A tool to allow readers to suggest edits could probably be approached much like SVN or GIT … any use could make any edit, and the details of the edit could be saved and sent to the blog owner for ‘approval’ or ‘merge’…the changes themselves wouldn’t get pushed until they were accepted or approved (and of course the blog owner could specify certain users to have ‘production push’ permissions, could block other users, and maybe even set thresholds on how many ‘edits’ or how much content on a given post could actually be ‘edited’)……actually very doable…hrm…

          1. Cam MacRae

            Nice. To avoid overwhelming the host with duplicate or non-obvious/mischievous edits you could somehow indicate existence of the patch, and introduce a voting mechanism with a threshold.

          2. falicon

            Yes. Definitely. Another great idea. Now someone just needs to sit down and build it… πŸ˜‰

          3. fredwilson

            i have wanted that tool for ages…dec 2008

          4. falicon

            yep – I remember that request from way back…surprised no one has built it for you yet…eventually I’ll get around to taking a crack at it if no one else does…eventually… πŸ˜‰

          5. Abdallah Al-Hakim

            I remember Quora having such a tool for where users can notify others of spelling/grammatical mistakes

      2. Robert Holtz

        That would be nifty.Ideal would be if I could submit a proposed update to your post and you, as the moderator, would need to review it and either accept it or reject it. It would be especially cool if it presented the proposed change in-context to your original post.I think the tricky part is DISQUS is just the commenting system not the blog authoring tool… am I right? This would need to be a feature of the tool you use to make your actual posts. You use Tumblr if memory serves. Am I right about that? Would be an interesting feature.The possibilities of that could be quite amazing if you think about it. Could even have ramifications beyond traditional blogs — for example a writer crowdsourcing the editing of a book or multiple writers collaborating on a single work. Any entrepreneurs’ gears turning yet? πŸ™‚

  17. LissIsMore

    This is a similar view to what Warren Buffett espouses when discussing why he ignores market trends: “Mr Market is bi-polar.” πŸ™‚

  18. Guest

    Makes sense. Though social proof is certainly a strategy… If your position is that “I won’t do the work myself until someone else has vetted you first” and you can apply this without compromising the part where you do the work yourself for the people who pass that test, it will align your choices with the rest of the industry, but to what end? I think the most powerful argument against ‘social proof’ is an argument that says there is no real advantage in aligning your investments with everyone else’s investment choices.

  19. reece

    it’s sad how few VC’s actually think this waythe party rounds of 2010/2011 are just silly, for both the investor and the entrepreneurso glad we didn’t do one and that our investors were happy to, in their words, “fly like an eagle”

    1. fredwilson

      Levandov is one of my favorite VCs. He is decisive and makes up his own mind.

      1. reece

        yup πŸ™‚

      2. markslater

        mine too! – we took your advice fred and were lucky enough to get rich in to our company (along with his partner brad).

      3. markslater

        there is a VC here in Boston called scott Johnson. He is a GP at NAV (formerly DFJ). Scott is my absolute favorite. he is deadly smart, and completely real. He introduced us to Rich. When i asked you about rich and you gave your response – coupled with scotts reccomendation – that was it for us – we put all our energies in to convincing rich that he should take a chance.

        1. fredwilson

          i need to meet Scott

    2. markslater

      especially in Boston reece. you have Rich L, ryan moore, scott johnson, and that is absolutely about it in terms of independent thinkers here.

      1. reece

        interesting. i’m sure there are plenty of investors in BOS who may disagree though

        1. markslater

          sure. But a cursory look at their investment track record will tilt towards lemming in most cases.

  20. Avi Deitcher

    I have always been OK with people following irrational paths for emotional reasons, as long as they are intellectually honest that they are doing it.Here is what I want to know. Did the other investors have valid reasons for hating it? If so, did they share them? If not, were they aware of their own biases/groupthink?

    1. Avi Deitcher

      Nice. LIke it!Back in my old Morgan Stanley IT days (mid-90s), I worked with a group of brilliant people, just incredibly talented. We all thought we were smarter than we were. But when it came down to it, we *knew* we weren’t, and were willing to be proven wrong.The one who didn’t fit was the guy who wasn’t smart enough to know he wasn’t as smart as he thought he was… πŸ™‚

      1. andyswan

        Critical to know where your holes are, isn’t it?!!

        1. Avi Deitcher

          All over the place! But a lot better than not knowing them.I am beginning to think the definition of maturity is no more or less than being aware of your own weaknesses and working with them. Does that make me old?

    2. fredwilson

      where do you get the photos that anchor your posts? they are awesome. the posts are too btw.

  21. Raj

    I believe that’s also referred to as punk rock.

    1. fredwilson

      you know it

  22. John Revay

    I saw two tweets from @howardlindzon how he missed opportunities ( frm Fred) to invest in Twitter and ZyngaMaybe he was just kidding

    1. Aaron Klein

      He wasn’t. Howard is one of the great investors because he talks publicly about what he got right and wrong. That true for the public and venture markets.

    2. falicon

      He was speaking truth…he mentions it again in his recent post ->…

    3. fredwilson

      nope. i offered him parts of the initial rounds in both.

  23. Dan Cornish

    Investors/customers reject a product/company/team. The CEO finds one investor/customer willing to take a chance. Bam social proof. The inflection point is finding the one investor/customer who has the ability/guts to take a chance.I would argue that getting an investment from Fred is a large amount of social proof. USV is so successful because they can find the inefficiency in the market and have the deal flow to see enough deals.

    1. fredwilson

      we make more bad investments than good ones. a USV investment is just an investment. it is proof of nothing.

      1. Abdallah Al-Hakim

        good point but still it is a big deal when USV makes an investment!

      2. ShanaC

        Thank you for being public about that.

      3. Robert Holtz

        And THAT, ladies and gents, is what you call a defining moment!High-five my friend. That took balls to lay that out on the line.Ironically, I kind of agree with what @dcornish:disqus is aiming to say but it is not a badge of infallibility on anyone’s part either. Social Proof creates an intentional blur between affiliations and accomplishments.Personally I think anyone who gets funding from anyone else goes up a notch in everyone’s book simply for getting that done. Lots of people have ideas. There is a dividing line between those who dream these things up and then going out there and successfully getting the money from wherever it comes. That is a validation of at least a focussed commitment.Part of what makes AVC so special though is that we have been granted special “permission” to tell you, Fred, that you’re bat-shit crazy sometimes and, folks, Fred will actually listen and process what we’ve got to say. He realizes the diverse background of the AVC community allows him to plug into sort of a meta-soundingboard for his own thought processes. It is a privilege to be part of it so it sometimes feels like an exclusive club and yet the wildest part is when you realize the door is wide open and anyone can pull up a stool at Fred’s bar. It is like the elusive obvious; the loud secret.What I’m learning about you, Fred, that is even more remarkable is that you ply the same philosophy with the investments at USV as you do in how you moderate AVC. In both, you’re in a position of authority but it is a transparent and collaborative kind of authority. The best way I can sum it up is that your philosophies are intentionally never fully-formed. You leave room there.

        1. LE

          “Personally I think anyone who gets funding from anyone else goes up a notch in everyone’s book simply for getting that done.”Agree with that but where “everyone” means “majority”.

          1. Robert Holtz

            Thanks for pointing that out. It turns out I was unintentionally ambiguous with my use of the word “everyone.”In this context, it was not intended to refer to “everyone in the world” but rather “all parties involved” in a given VC transaction — specifically, the funder “validates” the funded and vice versa. THAT “everyone.”But again I appreciate your pointing that out since in retrospect I didn’t originally convey my meaning as clearly as I thought I had. Were I to edit the comment, I would rephrase it entirely.

        2. fredwilson

          Its a work in progress. My practice as the yogis in my life like to say.

      4. Guest

        What do you do to systematically improve your investing results?

        1. fredwilson

          Write, read, reply

  24. James Ferguson @kWIQly

    When I go along with a view (take Liads woolly mammoth), it is because it appears to have been assessed and the outcome is clear, think product review.When faced with a “shall I” / “shan’t I” decision, it implies uncertainty and lack of clarity, think food or music preferences.At this point the best thing to do is change position and perspective.Being close to a woolly mammoth can be great if you are collecting for the roses – so long as you keep behind it. It’s the pointy end of the thing you need to avoid.So – the question may be not who is in, but why? – Does the proposition fit their investment philosophy, their timing, their portfolio – or are they just great buddies, who want a toe in the water. Each may be a reason or tipping point in or out depending where you stand.And if you don’t know where you stand – you better watch out – their might be a woolly mammoth eyeing you from behind.You might like it – you might not – but it can be hard to say no to a persuasive one.

    1. falicon

      ‘why’ is always a key question to ask. Very important.

  25. Rohan

    It’s amazing how often affiliations are confused with accomplishments.Affiliations are often a ‘mid-step’ to doing something big.It’s easy to focus so hard on a mid-step that we lose context of why we’re takingthat step. But I see it’s vital not to fall prey to that.Because, at the end of the day, whatever the list of affiliations, it’s theaccomplishments that will count.

  26. JLM

    .A bad idea held by a majority does not become a GOOD idea.There is a big difference between being a critical and independent thinker and being a contrarian investor. While bedfellows, they are different parts of the investment process and require different kinds of courage.In the business of buying low and selling high, it is the buying low which will test your fortitude.If for the last 50 years, one had embraced the following real estate investment thesis, you would have timed every market perfectly.When the institutions are getting OUT, GET IN.When the dentists are getting IN, GET OUT.The corollary of this, in a more general sense, is that whenever the investment bankers securitize an otherwise understandable business in order to milk more profit from that otherwise understandable business by feigning the creation of “investment grade” securities, RUN, do not walk, RUN!You cannot make chicken salad out of chicken excrement even if Moody’s initially indicates otherwise..

    1. fredwilson

      what do you do when the dentists get into VC?get into real estate?

      1. LE

        I’ve been going to the same dentist since I was a kid. (He is now retired). When I was there many years ago he had some poster on the wall supplied by Crest which was essentially a big advertisement for Crest. So I asked him “what does Crest pay you to put that poster there?”. He paused and said “Funny I never even thought of that – I just thought it would be good for the patients”. But he seemed clearly intrigued by the line of thought as it had never occurred to him that Crest had any ulterior motives. He was a dentist and not a businessman and it showed in terms of the treatment and how he acted. (Tip: Always a good idea to have a medical professional that is not a business person.).The dentist who took over his practice I had asked him for a price on a mouth guard. The price to make a mold was $400 he said. I was ready to get it done (out of pocket) and I said “so what is the difference between getting you to do this and the one I can buy at the drug store (about $20?). I really wanted to get the better one, the price didn’t matter and I wanted to be sold and feel I had done the best thing. He essentially said “probably not much of a difference you might as well save the money”.While this lack of business thinking is good for patients I’ve seen it so many times I have to believe that it is one reason that medical professionals get shafted so much by the health care system. And in fact when I held a contract with a hospital when I was younger I was shocked to find out that the administrators were firmly in charge and not the Doctors.

      2. panterosa,

        teach kindergarten.

        1. fredwilson

          oh god. i don’t think i could do that. high school, yes happily. 5 year olds. not a chance!

          1. panterosa,

            I love 5’s, 4’s even more. I love teaching them before they’ve been messed up by trying to fit in. They are so fertile then. They are my target audience when I design because they are so open, so creative, no boundaries.

    2. ShanaC

      Unless the dentist is starting a venture backed company (has happenned).How do bad ideas spread?

    3. Dale Allyn

      … oops, misread. deleted.

    4. panterosa,

      @JLM:disqus “A bad idea held by a majority” spells Danger.

  27. John@PGISelfDirected

    This is definitely one of the best posts I’ve come across today.

  28. gbattle

    The easiest way to fight against the group-think/herd mentality of social proof is to enforce accountability by measuring people’s predictive capacity in the most transparent manner possible. That means considering dealflow, investments, and outcomes. The human brain tends to err on the side of selection bias when evaluating performance for self and others. Get honest about risk, and even more honest about independent research. If you know yourself well enough, good and bad, you won’t need other people’s wholesale input – you’ll get selective and strategic.Fred’s best comment in the thread:”The VC asset class is like a casino. In the aggregate the returns are negative.”Truth.

    1. fredwilson

      conversation brings the best out in me and pretty much everyone

  29. Dave W Baldwin

    Another angle is looking forward. Herd mentality plays more to RightNow/SlightlyPast vs. looking at what the conditions will be in 18 months.Your position, Fred, regarding the playing around with a User’s data makes you somewhat the contrarian and that is good.

  30. JLM

    .In an ocean of “no’s” it only take a single “yes” to change the future..

    1. Michael Elling

      Genius is perceiving what others do not. True genius is being able to communicate it. Absolute genius is making it reality.

    2. Carl Rahn Griffith

      Not waving, but drowning…

  31. falicon

    When in doubt, follow Richard Prior’s advice (as told by Eddie Murphy in Raw):Richard said, “The next time the motherfucker call, tell him I said, “Suck *my* dick.” I don’t give a fuck. Whatever the fuck make the people laugh, say that shit. Do the people laugh when you say what you say?” I said, “Yes.” He said, “Do you get paid?” I said, “Yes.” He said, “Well, tell Bill I said have a Coke and a smile and shut the fuck up. Jello pudding-eating motherfucker.”…ie. if a company has got ‘it’ (however YOU define ‘it’)…then everyone else’s opinion, action, or non-action doesn’t really matter…

    1. Kasi Viswanathan Agilandam

      omg. I thought you are just a nice rock-programmer :-).

      1. falicon

        yeah I have a wide variety, and often opposing set, of interests (classic Gemini I think)…38 and I’m still working on defining myself…if I ever figure it out, I’ll let you know πŸ˜‰

        1. fredwilson

          You are defining yourself with your work and i am a fan of it and you

        2. Kasi Viswanathan Agilandam

          Every intelligent human has minimally three people inside them …The raw -thyselfThe clown – sense of humourThe Hulk – FTW .I have seen all these three with many of the Profs and Radiologists i interacted with and that is quite normal for a person with good IQ :-).and btw, looks like I am one of the senior members of this community running 45.

    2. matthughes

      I’m reeling from that rated R content before breakfast (on the West coast). πŸ˜‰

      1. falicon

        Sorry…but sometimes you need more than Wheaties to get your day started right! πŸ˜‰

        1. matthughes


    3. Kirsten Lambertsen

      Now THAT was a great way to start the day.

    4. fredwilson

      richard pryor was as crazy as they come. and as funny as they come too

    5. andyidsinga

      raw was great ..still is to this day

      1. falicon

        I still love both Delerious and Raw…chuckle every time I think of lines from either…so great. πŸ˜‰

        1. panterosa,

          Yes, showed them to my younger BF who was in diapers then. Was great to see. “Baby, that’s nasty…..”

  32. Kasi Viswanathan Agilandam

    Just coming out of the team meeting … and what a coincidence about chase.”Don’t chase” applies to almost everything we do … not only investment and entrepreneurship.Don’t chase the money … let the money chase you. That is the advice I am giving to all my junior fellows. Learn as much as you can at this age .. then money will chase you where ever you are. You chase the knowledge and the money will chase you.P.S. I felt nostalgic when i was again and again typing chase word in the comment… Fox Chase, Philly.

  33. jonburg

    Do you know if anyone has researched the limits and best use cases of social proof versus community knowledge? This make make for a fantastically wonky book or doctor thesis.

    1. fredwilson

      not that i have seen

  34. Lee Blaylock

    Refreshing and candid comments Fred. So many investors don’t want to be left out of the NBT. They raise large funds and work for for the fee than the carry. Good on you mate!

  35. pointsnfigures

    Hah, don’t chase. I have traded my own money in commodity markets for over twenty years. Don’t chase. Maxim of trading. Of course, easier said than done. In times like these, it’s critically important to maintain discipline. You will miss some deals. But you have to have the internal gumption to be okay with that. The deal junkies that want to be in on every deal will get burned in markets like this. If I see one more uncapped convertible debt note I will puke.

    1. fredwilson

      if i see one more convertible note i will puke, forget about uncapped. that was beyond crazy. but i don’t like convertible notes either…Aug 2010

      1. pointsnfigures

        We are seeing them all the time now. And I mean, virtually every deal. Sux. We have an investor day this week and will talk about this issue. (and I am just learning how to use to full advantage and I am liking it a lot. sorry for the late comment back on this.

  36. ErikSchwartz

    Social proof is only interesting within the domain of expertise. If you’re a video startup and Hunter is an advisor or investor, it might mean something because Hunter knows a lot about online video.

    1. fredwilson

      that’s true. but i can always email hunter and ask him what he thinks. that’s the way i’ve always done it.

  37. bfeld

    Brilliantly said.

  38. markslater

    i am trying to find something new to do with my time before the office opens (6-730 or so) – i’m finding the activity of reading blogs and tweets and so on very unrewarding lately. I think its precisely because the whole social proof thingy is beginning to pong a bit.My mind wakes up at the mornings first scrum and the mountain we are attempting to conquer that day begins to appear.

    1. Dale Allyn

      I had to look up “scrum” in this context. πŸ˜‰ Wasn’t sure of the term.I’ve cut my blog reading way back too. I have a short(ened) list that I read thoroughly (this among them, of course) and then simply no longer do the TC/Pando/BI/ATD stuff. I don’t ignore what’s going on, but I’ve reached a saturation point for the noise for now.This time of year, morning run/hike/walk is better for me. Early morning light, sounds and wildlife are better / more interesting. πŸ˜‰

      1. markslater

        thats it. I’ve reached noise saturation and am now having blog fatigue.

        1. fredwilson

          I know how you feel Mark. But stop by here now and then if you can. You might get another JLM gem for your wall.

          1. markslater

            we are moving office next week – we have more space to fill – on the look out for those gems.if you travels find you up here, you must stop by for an update.

          2. fredwilson

            will do

  39. Kirsten Lambertsen

    Yay for this! It would be heaven if more investors thought this way. I can think of at least one gathering place for investors and start-ups where “social proof” is a mantra πŸ™ It creates an atmosphere of ‘insiders only’ to founders.A couple of weeks ago, I watched a very (very) high profile investor tell a founder, with tens of thousands of users already using his brand new mobile app, that his company needed more social proof because none of the founders went to Stanford or MIT. And this investor is someone who considers himself to be a champion of founders πŸ™

    1. ShanaC

      *headthunk* Marc Andreesen couldn’t be worthwhile with those criteria…….

      1. Kirsten Lambertsen

        Great example, thank you!

      2. LE

        Andressen essentially failed with loudcloud (he had to pivot) so I’m not sure the point you are trying to make is valid.After many adventures–in which the young company suffered many defeats, took on the new name Opsware, shifted to a new business and discovered its true calling was softwareβ€”it has achieved its original destiny: a huge buyout.http://bits.blogs.nytimes.c…Now of course if you want to change the yardstick to the person rather than the idea then social proof is of less importance (and of course this is the theme that is out there – investing in people and not ideas whereby YC doesn’t necessarily need an idea).

      3. Dasher

        As an aside – Marc went to UIUC which is a pretty darn good school.But I agree with main assertion that there are plenty of great entrepreneurs that do not satisfy that social proof.

  40. Matthew Ranauro

    What a refreshing post.Social proof is like a genetically mutated plant that grew too fast – everyone wants you to pull it out of the ground and hold it up so they can see how impressive it is but in the excitement you forget to replant it and let the roots grow.It’s sad to see so often. It can be a distraction. Innovation comes from unexpected places and people – always has – it takes discipline and doubling down on yourself and vision to get there.

  41. Chris Phenner

    When I read the phrase ‘social proof’ as an indicator of an early-stage firm’s success, my assumption was that Fred was talking about user traction, as measured through social metrics (e.g., Reach, Engagement & PTAT). These are the metrics agencies and brands are concerned with as they measure the efficacy of FB media.And by the fourth paragraph of the post I get that Fred intends ‘social proof’ to mean ‘what other VCs think,’ which to me is the antithesis of ‘social proof.’ Who cares what VCs think when users and usage data is now so readily available?What I wonder is whether VCs spend any time modeling *end user* (or customer) social proof data via third-party sources, and if that data is used to inform investment decisions (and I mean beyond comScore or Quantcast-y type sources).If ‘no’ to the above, that strikes me as worth solving.

  42. Abdallah Al-Hakim

    terrific post and full of wise words. Many times it is by going against the trend that success comes.

  43. ShanaC

    To me, all this sounds like is weak metric numbers. Investors should be coming in with a thesis about what to invest in and why. Even if the company is pre-revenue.Social proofs don’t necessarily equal good investments. It equals some short term interest. As nice as it sounds, you’re building for the long term anyway (or I hope you are), and you don’t want just cursory interest, you want long term.(Some advice I was thinking about: you may want to be targeted to the people who would be naturally interested without looking for social proof)

  44. Steven Kane

    Same as it ever was. Same as it ever was. Same as it ever was. Same as it ever was.

    1. fredwilson

      nice use of talking heads lyrics!

      1. Steven Kane

        that tune — and the entire remain in light album — changed my life back in the day. but the work has total sustaining power. gets better with time.

        1. fredwilson

          What an incredible band they were. I might have to go on a talking heads bender

          1. Dale Allyn

            I do that sometimes. Great benders they are.

    2. Carl Rahn Griffith

      These are days of Burning Down the House, for sure…

  45. TSC

    “Be fearful when others are greedy and greedy when others are fearful.”

  46. Iggy Fanlo

    A a trader and trading manager for 15 years on Wall St, I can confirm that momentum trading can only be profitable in one scenario: short-term. For long term investing, you should make up your own mind and if anything it pays to “lean against the wind”

  47. Elie Seidman

    Amen. Another form of the insidious social proof game is comparing a business to a “hot sector” where the businesses in that sector are perceived to be easily raising financing. During fundraising I’ve often been asked “how is your business similar to – insert other perceived successful business here?” I typically answer that every business is different. Each has it’s own nature. To compare our business to a flash sale business is simplistic, useless and counterproductive. Better to actually spend the time learning the pros and cons of this specific business and have your own opinion vs hoping to social proof match it against other business that you think are doing well. The irony is that many of the businesses we’ve been compared to over the years – businesses that were perceived to be doing very well and were “hot” – have later gone on to do poorly or even fail. As a discipline tool, we actually keep a list running list of the “hot” companies we’ve been compared to over the years to see what we thought of that business in the moment (when we were asked how we compared to that business) and we revisit it a couple of years later. Countless times those “hot businesses” end up not being that hot at all. Further, in many cases, entire “hot categories” are later understood to be far less hot than they were once perceived to be. It’s a great reminder to stay true to our own vision and beliefs independent of the external environment.

  48. Thomas Cornelius

    Social proof is the enemy of innovation.Looking at angel and venture investments, there is an advantage for knowledgable and specialized individuals or teams to make investment decisions in their field of expertise. On a scale of risk taking from stocks, commodities and venture investments – qualified and specialized angel and venture investors have knowledge about market developments, business development deals and traction in the segment and can build a better risk profile for an investment, than somebody who is simply following others.Social proof based participation in a round is a passive behavior, similar to Yuri Millner’s latest strategy to simply invest in all YC companies. Sure having Paul Graham and Co. doing pre-qualification is helpful and providing start up’s an environment of collaboration is a good foundation, but it does not replace a qualified investment strategy.Angel and Venture investment with segment focus and diligence, where you and your team (including co-investors) build a collective understanding of the opportunity, the entrepreneur and the traction dissected in a segment that you own and completely understand is your hedge against bad investments.The willingness to dig deep into the problem that is going to be solved is step one for a successful investment, not a guarantee though.The current times where technology is grabbing a piece of our lives and with that technology companies and technology enabled companies take a disproportional amount of success rates in growing their businesses compared to the total businesses is the breeding ground for the herd mentality. Simply jumping on an opportunity that many others have vetted, is an easy way to participate and potentially be successful at this time.But this success is short lived as it does not provide any future qualification for the individual or venture firm to make conscious and knowledge based investment decisions in the future.

    1. fredwilson


      1. Thomas Cornelius

        btw this was “recycled” from my older interaction on Quora, where naval, clavier & mclure shared their view around this topic

  49. JordanCooper_NYC

    truth. i remember when Sacca said he refused to listen to who else was investing in a round so that he could make up his own mind. it was a perfect statement.

  50. BillMcNeely

    Naval of AngelList has been a real champion of Social Proof in the past. Has he softened his stance recently?

    1. fredwilson

      I dont know

  51. leapy

    old music industry joke: Q: How many A&R men does it take to change a lightbulb? A: I don’t know – what do you think?

    1. fredwilson


  52. Guest

    Fred, I gotta’ disagree. Pretty soon you’re gonna’ begin to not want me here.Social proof is not dangerous. The misuse of social proof is dangerous. You have to examine it and decide whether it is applicable.Look at a cross section of who are providing the proof first. If you apply social proof to the wrong question then it’s dangerous. Keep in mind it is very difficult to apply social proof properly.Example:You are not a mechanic (for this example).You ask a crowd of mechanics how best to rebuild a transmission. They will give you a detailed description of how to take apart and put back together a transmission. And you can trust it will work.If you then ask a crowd of non-mechinics they will give you some limited information about how they guess a transmission should be taken apart and rebuilt.Which one is proper to apply to the situation? Neither! The proper answer is that you as an non-mechinic should not be working on transmissions. You should hire a mechanic to do the work.The information provided by the non-mechanic crowd wasn’t dangerous unless a person is foolish enough to apply that information to the process of transmission work.

    1. fredwilson

      Disagreeing is not only welcome here, its critical to the health of this community. Bring it on

      1. Guest

        I must apologize for missing the most important part of your post!The most important thing is that you didn’t just ignore the potential investment because others hate it.I know what it’s like to need funding and have everyone ignore me and/or dislike my ideas. It makes for a disheartening experience.Taking the time to go against the grain and review the opportunity to invest takes guts.I hope it works out to be something that creates a good return for you.

  53. Rudyc

    A while back when starting my own project, someone closely involved with Facebook mentioned to me that ‘social’ rules were being made as we speak. After a year and 1/2 or people are starting to get a better idea of what the rules are.I totally agree with the ‘herd’ mentality described by some other commentators. I’m probably one of the few on this site that still use Facebook. I’ve noticed the new trend is just ‘before’ making a major funding announcement, things like viddy and social cam start showing up on some of my friends feeds.If I were an investor today in social media I would probably want to be more specific. With the current direction of APPS on Facebook gaining the most traction right now, and given the user has almost no ‘time/effort’ involved in ‘signing up’, I would want to monitor not unique users as tradition but ‘repeat users’ and I would also want to see at what specific times are most users going to these sites.I think one of the major factors in FACEBOOK that is always overlooked is boredom. Most users esp. kids are on the weekends. Most adults during commute times and/or work. Night time usage is much lower. The question becomes, why?In my opinion, it is because the television is still much more entertaining than the internet for most people.My father once told me as a child, if you don’t use it, don’t invest. I think that thinking still applies today…

  54. davidhclark

    Such a bad ass.

      1. davidhclark

        lol! Andy Swan’s tumblog is my favorite. I reblog his posts frequently. This is one of my favorites. Must be the motorcycles. I want to see your version of these but on a Vespa! It takes a real bad ass to ride a Vespa! Uhhhhh hu! πŸ™‚ Seriously though, I love it.

        1. fredwilson

          flipping the bird on the vespa – that would be badass

          1. davidhclark

            lol!!! Hell yes it would. If I ever see on on your Vespa, I’ll hold you to it πŸ™‚

  55. jonathan hegranes

    Reminds me of @andrewchen’s ‘Law of Shitty Clickthroughs’ —…First it works… then it doesn’t…..For a long while, social proof worked, but now too many people have figured out how to get it. They focus and obsess on this, knowing investors will ask. Social proof helped propel platforms like Angel List.I don’t think social proof is dead, but it’s being disrupted… Who else is investing is becoming less important, but other levels and derivatives of social proof will emerge to take it’s place.

  56. Jay Janney

    In Academia, we have a term for this, and it relates to Institutional Theory–the term is mimetic isomorphism. In Mimetic Isomorphism, when there is uncertainty about what to do, managers copy the actions of someone else who has been successful. Then, if they are wrong, you were fooled just like the experts, and not because you were a dunce.In 1999 Fortune magazine ran a cover story asking if time had passed Warren Buffett by, as he didn’t understand this newfangled doodad called the internet. Of course, the bubble POPPED, and he looked like a genius again. The point being, you have to have really thick skin to go against the conventional wisdom; even if you have a track record like Warren Buffett.The key, is to use this when you don’t know how to proceed, not when you do. If VCs in general are fleeing a sector, but you personally think there is profit to be made there, you probably ought to stay. If you are clueless what to do, exit might be best.I ma curious: are there investors where when you see they have invested, it causes you to look at a given deal, or visa versa?ps On my weekly quiz, when I ask about Mimetic Isomorphism, the correct answer (the question asks for an example of mimetic isomorphism) “You have no clue what mimetic isomorphism is: you notice your neighbor (who aced the last exam) marked choice “D”, so you do as well.

    1. fredwilson

      Wow. I need to read up on that

    2. Dale Allyn

      Love the term. Thank you for sharing it here. It’s a common circumstance in business (and many aspects of life), but I did not know the academic term for it. Something for me to study more deeply.

    3. markslater

      love this – thanks for sharing. i knew nothing about it.

  57. Otto

    Some of the things with the biggest followings tend to be the most dull and boring, like Facebook or the GOP/DNC. Maybe it’s just the law of diminishing returns. But sometimes popular equals good. Call this a relativistic cop out if you want, but I think it just depends on your perspective.

  58. Otto

    Disappointed to see comment voting still enabled. Based on the voter turnout for most comments it doesn’t appear to be getting much social proof here. And what so-called social proof it is or isn’t getting doesn’t seem to have much impact one way or another. IMO it hasn’t improved threads here at all, not that they needed improvement in the first place. Okay, I’ll just move on now.

  59. Andrew Ackerman

    The problem with social proof is that it (arguably) works when the “herd” is small and generally high quality but it inevitably expands as people jump on the bandwagon.There is a place in the investment process for taking into account social proof from a small group of people whose opinions, judgement, and skills you trust – it’s especially good for pre-qualifying the companies to look at – but once it becomes a numbers game, it simply amplifies the voices in the bubble and creates an unstable feedback loop.

  60. David Semeria

    Color me a woolly mammoth type dude, but I’m still not loving the new Disqus.

    1. fredwilson

      I know what you are feeling. I like some of the new stuff but miss some of the old stuff.

    2. Tyler Hayes

      Any specific thoughts or general feelings? I’m not sure if you’ve already submitted feedback using the form linked above the commenting box, but either way we’d love to know your thoughts. Feel free to keep the chat going here or email me [email protected].

      1. David Semeria

        Hi Tyler. Basically it feels colder, less of a community. For some reason I find the threads harder to follow (it’s less clear who’s replying to whom). I also appreciated being able to see who liked a comment (although I can see why this would be less appropriate for downvotes).If more comments come to mind I’ll drop you an email.

        1. Tyler Hayes

          Thanks for the candid thoughts. We’re definitely thinking about both of those specific points and how to address them in the near-term; you can expect improvements for those. The larger overall feel you allude to is of course paramount to us so that’s helpful to hear, thanks.

  61. Pete Griffiths

    IMHO this is just another example of a universal phenomena. In the old days nobody got fired for buying IBM. In Hollywood studio executives justifying a flop lament ‘Who’d a guessed? We had Ridley Scott and Will Smith.’The number of people who have the balls to make up their own mind on the true merits of a given situation is and has always been small. This quality seems to be poorly correlated with intelligence, education, training and experience.I have a sneaking suspicion that there are more truly disruptive companies out there in waiting that just aren’t recognized for what they can be.

    1. LE

      “In the old days nobody got fired for buying IBM.”Well in all fairness that might not have been that far off the mark as good career advice.IBM’s biggest competitors during that era (the BUNCH group) don’t really exist anymore in their current form: Burroughs, Univac, NCR, CDC, Honeywell.As the saying goes “pioneers get shot in the back..” sometimes at least.When I’ve had to buy machinery for something that I don’t know about yet, it is usually safest to not take chances and go with the ubiquitous choice. Need a label press? “Mark Andy” (a brand) as there are many people trained on it and spare parts and service are readily available.I deviated from this when I bought some servers in 1996. I asked someone with expertise what I should buy and they suggested SGI (with Irix) over Sun (with Solaris). The reason being that the performance on the SGI was much better for the money (it was). But the Sun was more ubiquitous and had way more software available and would have been a better choice in retrospect with what we were doing.

      1. Pete Griffiths

        It was indeed good career advice – if your primary concern is to avoid being blamed for anything that didn’t work out. And that is the prime motivation to this day for this kind of decision making. But it is hard to see how being risk averse is a great starting point for a VC. And this is particularly true if you review the returns for VC over the last decade say. Following the herd has not been a great strategy.

  62. MikeSchinkel

    Fully agree with all you’ve said on this post Fred, except I think the title was a bit extreme. Pacemakers not working, computer batteries exploding, freight train brakes failing, airplanes falling out of the sky are all dangerous. For investing maybe “Ill advised” or “a poor strategy” would be appropriate, but “dangerous?”

    1. fredwilson

      i changed it. it said nonsense.

  63. panterosa,

    Go Fred – the emperors are butt ass naked!While becoming yourself is the hardest work we do in life, so few even bother with it. Why? Such a pity and a waste. Who knows who you might be if you thought for yourself?Even worse, much education is designed not to teach you to think for yourself because you become hard to manage for the teachers. A quality education is measured by how broadly you are allowed to think. Or else you are back to a version of high school (which everyone claims to have hated), and tribes of rubberstampers approofing your thoughts, activities, dress and so on. America has become so conformist, while pretending not to be. Antithesis of how we started.It’s possible to have judgement and not be judgmental. To be open and have a critical eye. To think for yourself is empowerment.

  64. Shaan Rafiq

    Bad ass. That is all I have to say about this post.Although I will add one thing to the flip side of the coin (though it may already have been said/asked).Isn’t it the case that where the herd mentality goes popular culture and the mainstream follow? Doesn’t it follow from this observation that where there is ‘hype’ there is ‘value’ at least in the eyes of the general public?From an investors perspective “hype” / social proof = massive returns as more and more people rally around an idea / product / service / company.Isn’t this a great thing for the early investors though maybe much less so for the later stage investors? I’m a little confused.

    1. fredwilson

      sure, we benefit when everyone wants to pile into a company we are invested inbut none of that matters if the company can’t build a large revenue stream and a lot of cash flow.

  65. leigh

    A friend who I’m doing a project with sent me a great email the other day:Dismissed from drama school- Lucille BallCut from his high school basketball team – Michael JordanA teacher told him he was too stupid to learn anything – Thomas EdisonFired form a newspaper because he lacked imagination and had no ideas – Walt DisneyFailure is everything is nothing

    1. fredwilson

      “this album is dedicated to all the teachers that told me i’d amount to nothing”Notorious B.I.G.

      1. leigh

        Mad Men” was originally pitched to HBO β€” and they turned it down.

  66. PositOrange

    I disagree with this post because you’ve fallen in the trap of thinking that everybody is as smart as you – most of society thrives on social proof and has sort of a herd mentality. Look at how democracy works. Look at how restaurants seat people at windows to tell people passing by that people like its’ food. Nightclubs in cities rope crowds outside in the cold so people think that everybody is desperate to get in. I don’t think raw numbers are worthless in and of themselves because it is a filtering signal to others. The fact that there are so many companies listed at http://www.buyfacebookfansr… that help boost up follower counts is proof positive that a lot of businesses see this as valuable. That being said, the best way to do social media over the long run is to create great content that people will want to share. There’s no shortcut to creating great content, and thats where I think a lot of companies really struggle with social. This stuff is valuable to people, even if you think that you’re not personally affected by it.

    1. fredwilson

      i am not that smart. when i went to college i was surrounded by people who were smarter than me. and that is the case in startup land as well.

  67. Luke Chamberlin

    This is one of those great pieces of advice that everyone agrees with in principal but is almost impossible to follow in real life.

  68. Mrinal

    It gets really ironic that the guy who starts the company does it BECAUSE no one supposedly is doing ‘it’ and if (and probably) then partners with investors who are looking for social proof (if other investors are biting when ‘he is on the road’) – one of the few paradoxes in the tale of Starta

  69. Drew Bartkiewicz

    Social proof? A couple years ago someone 20 years my younger told me “letters were dead.” They were not alone in their opinion. At which time I realized that letters were not dead, they simply had not been revived and reinvented. And lettrs was born…delighted by the solitude of the path and empowered by the passion of the users individually finding out about it. The slower communications movement had begun. I appreciate “el camino” you have chosen in NYC Fred. We met a couple of times. Cheers, Drew

    1. fredwilson

      slow communicationsthat is contrariani like it

  70. Pete Griffiths

    There is a great piece on this on the Founder’s Fund website:…And this is the quote I love:”Investing in companies doing things that are breathtakingly new and ambitious is provocative. It is not what our industry is best at doing, at least, not in the past decade. And there is no way to assure a positive return – but at least it has a chance of working. Simply doing what everyone else does is not enough.”

  71. William Mougayar

    268 comments later, it just dawned on me that the expression “social proof” should be banned. It is just a short passage where the outcome and nothing else matters. What happened to real proof.

    1. Timothy Meade

      Take that, bottle it, and sell it. Every other ‘social dashboard’ out there sems to be about following the herd so refreshing to see something very, very different.

    2. Guest

      Social Proof is like popularity; its been around since high school! :)The concept of “real proof” is kind of like logic it involves work and risk…oh, and a little thinking for ones self.

  72. vruz

    Investors too, have to be their own bitch3s.Won’t mention names, but I roll my eyes whenever I see an investor tell his startups to favour one or another specific big vendor platform exclusively.That should probably answer the question “Why don’t you like investor X, @vruz?”

    1. fredwilson

      yes we do. thanks for saying that vruz

  73. Brookman

    Go where it makes sense. And hope the crowd there, if not small, is cool.

  74. Jim Shook

    Most (if not all) bubbles are probably a result of “social proof” run amok

  75. Eric Leebow

    I was talking to a VC a few months ago, and they told me that entrepreneurs shouldn’t expect interest from them without “a lot” of users or customers. I hear the same thing over, and over from others. Is there a minimum users or customer traction you like to see? I remember talking to one of your early portfolio company founders, and I think they didn’t have many members to start. Have expectations grown in this area over time as more competition has arrived? Some people think that a user who logs in from another service is a real user, yet they could be a lurker more than a user of the service they logged in with.

    1. Matt A. Myers

      I imagine every case is unique, though I have heard him say 100,000+ users. Whatever that engagement or activity level of those users is/needs to be, I don’t know.

    2. fredwilson

      here’s what we look for…note that we need to see the product in the market because we need to see if it is the right execution of the idea

  76. Ben Apple

    A true contrarian. p.s. I am now a “regular” on the site!

  77. Michael blue

    Social proof is a tool used to influence other people, not fool yourself!

  78. JimHirshfield

    Lunch soon?

  79. William Mougayar

    Thanks Charlie. The fun will start in the afternoon actually with our session at BlogWorld which will be a prelude/warm-up for the evening session. So, it’s a multi-orgasmic day for the worlds of online commenting and social conversations!…I’d like to come over to Lancaster/Philadelphia one day. Yes!

  80. ShanaC

    I actually wouldn’t mind spending a weekend sometime in Lancaster. Somewhere quiet with Yoga.

  81. awaldstein

    Come up and play.Let’s gather a minion and grab a table at someplace fun, like 10 Bells, and bring in the summer.

  82. JimHirshfield

    I’m in.

  83. Matt A. Myers

    That’ll be an amazing chat eh.. I’ll try to be watching Twitter feed for what comes out of that; Getting access to watch online is ~$300 I believe..

  84. William Mougayar

    A commenters love fest: Fred, JLM, Arnold and I. There will be an audio recording. Watch the tweets in the meantime at 2:30PM EST.

  85. kidmercury

    charlie, if you are ever concerned about your presentability, just remember me. then you’ll feel better. πŸ™‚

  86. Kirsten Lambertsen

    Inspiring! Thank you πŸ™‚

  87. Guest

    “You don’t lead by taking cues from the crowd.”That statement flashed an image in my head of a leader who was turned around facing his followers looking for cues. So, he wasn’t looking where he was going. Not looking where you’re going doesn’t sound good.Nice point.



  89. fredwilson

    27. hunter starts a company and invites me to invest [#bucketlist achievement still locked]

  90. Cam MacRae

    Me too. Just give me 27 hours notice, ok? πŸ˜‰

  91. falicon

    I would like to see the avc post that lays out #1-26 on that list as well πŸ˜‰

  92. fredwilson

    26 – back falicon some day

  93. falicon

    Technically you have already done that…just with words, ideas, and goodwill…not money Ultimately that is all much more valuable and useful to me than money anyway…so badge unlocked and thanks! πŸ™‚

  94. ShanaC

    You have a place for a yoga retreat in Lancaster? Where?????

  95. ShanaC

    thank you!