The Bad-Hair Days of Business

In startups, risk and opportunity go hand-in-hand. But for every gut-wrenching loss, remember – the gains can always grow back.

When I was a kid I had the shortest hair of any girl in my class because my mum couldn't face the hassle of hair maintenance. As soon as I got old enough to take care of it myself, I grew my hair as long as possible, and by the time I graduated from university it reached halfway down my back. Then I got my first real job and needed a grown-up look, so I gritted my teeth and asked for a modest trim. Instead, my stylist sheared me back to my ear-baring elementary school years, and I left the salon in an emotional state usually reserved for breakups and natural disasters.

That trauma led to an important discovery: hair grows back. Lost wallets are returned or replaced, thoughtless comments are forgiven, a bad week at work is followed by a good one. Divorced couples get back together; hurricane-flattened cities get rebuilt. Friendships collapse; groundbreaking legislation gets overturned. Things change, then change back, all the time.

It's humbling to realize that whatever you do or create is rarely lasting or significant. And it's liberating to realize that whatever mistakes you make are rarely lasting or significant. The hair grows back.

With that realization comes risk tolerance, an essential quality of any successful entrepreneur. To launch and build a business, you have to live with the constant gnawing anxiety of not knowing whether you'll succeed – or even meet the next month's payroll. Once you accept that success and failure are equally reversible, it's much easier to live with the pain of not knowing which will be your fate.

This mindset helps people like me start companies such as Social Signal, a social media agency I launched with my husband just four years ago. We had the entrepreneur's fearlessness and curiosity: could we build a company in a field that barely had a name? It turned out we could, and as social media emerged as a discrete and increasingly hot field, our client list, team, and consulting revenues grew.

Then the fearlessness went away. We made the mistakes that everyone makes in a new business, and our start-up debt felt a lot more permanent than a bad haircut. We developed skills, methods, and a reputation that we couldn't bear to lose.

So we did the things that businesses are supposed to do to protect their assets. We branded our methodologies and sold them as unique, proprietary tools. We signed non-disclosure agreements and non-competes with our staff and subcontractors. We fostered the long-term, mutually dependent client relationships that are the bread-and-butter of consultants living on retainer.

These are terrific strategies for managing risk – but they are also recipes for limiting success. If you won't let your clients go, you can't make room for new ones. If you can't have a conversation without a contract, you close off opportunities to learn and collaborate. If you won't share your own knowledge, your impact is limited by the size of your company. You can transcend some of these limitations by scaling up, but that involves taking on investors, diluting ownership, and limiting your upside in a different way.

If we worked in a conventional consulting business we might have stuck within that proven model, betting that the opportunity costs were lower than the security gains. But we don't work in a conventional consulting business – we work in a field that didn't exist when we started our company. And most of our projects are built by open-source software developers who run their businesses on an entirely different model, contributing the code they write to a larger community that continually revises and improves on each contribution.

Our open-source software colleagues inspired us to look at our business in a new way. What if we ignored all the consulting wisdom about accumulating proprietary intellectual property and tried giving it away for free? The risks were enormous – we'd be giving all these newly-minted social media consultants the benefit of our years of experience – but so was the potential benefit. Going open-source could scale our reach, impact, and reputation much more quickly, without requiring us to court (or live with) venture capitalists.

While the open-source model has proven itself in the world of software, we'd never heard of a consulting services firm that took the same approach. In a consulting firm, intellectual property is the only significant asset that can't just walk out the door. If we gave that asset away, we might have nothing left.

We're giving it away, anyhow. This week, we announced our plan to open-source all the methodologies, tools, and deliverables behind Social Signal's success. It could be the smartest thing we've ever done. It could also gut our company.

The night before we open-sourced, our daughter gave herself a haircut. Her bangs are about two centimetres long on one side of her face, and fifteen centimetres on the other, sort of an Edward Scissorhands-meets-early Cyndi Lauper. This haircut will be immortalized in her class photo next week. And then it will grow back.