Finite and Infinite Startups

Three weeks ago, Adam Wathan, the creator of Tailwind CSS, released a podcast containing an honest confession – "We had six months left" – and an explanation of why they had to let some folks go. For days, my social media feeds buzzed with discussions about the subject. I saw everything from "AI is killing startups" to "he doesn't know how to run a company," and even ridiculous accusations of deliberate exaggeration (why say 75% when it "only" affected three people). I never cease to be amazed by how many people fill the gaps left by scant information with assumptions and rush to judgment.

What Kind of Game?

I was a bit angry at AI too. I felt his pain and admired the courage to publicly admit mistakes. Part of me was thinking, "they should have seen it coming," while I genuinely hoped they’d survive it. But what really surprised me was that Tailwind wasn't behaving like most startups these days. I started listening to Adam's previous podcasts, and increasingly a thought formed in my mind. When the goal isn't to cash out at the highest possible valuation but to survive and continue your mission, you must play by different rules.

There are at least two kinds of games. One could be called finite; the other infinite. A finite game is played for the purpose of winning, an infinite game for the purpose of continuing the play.

- James P. Carse, Finite and Infinite Games, 2013

The above is the opening of one of my favorite books. In the following 150 pages, it walks the reader through the different rules each game kind is played by. I find it eye-opening and fascinating because everything, including running a startup, is a game. And I can tell from experience that there are at least two kinds of startups: those who play a finite game and those who play an infinite one.

Just to be clear—this isn't about right, wrong, or better. It's about understanding which rules apply. Because, regardless of whether you're among the founders, employed by a company, contracting with them, or even just applying for a position, you're in the game. It took me a very long time to realize that.

Finite Startups

I'm tempted to write that most startups today are finite ones, but I lack actual data to support the claim. It certainly feels that way though. Startups frequently and happily publicize their funding rounds, and it seems there's almost a weekly announcement of some mind-blowing valuation, occasionally culminating in an acquisition. Internally, the metrics that seem to "make sense" tend to always be some form of growth indicator. Incentives are structured around stock options and other promised gains after a successful exit.

A finite startup is one where the company itself is the product. Everything else—offered products, and services, ambitious plans, amazing innovations, impressive headcount—are simply means and tools to increase valuation. The game is played with a clear objective: to achieve a defined, though often unstated, win condition—typically, a sale above a specific ROI. The rules of the game are mostly fixed. While they don’t enforce particular behaviors, they restrain the freedom of the players within predefined boundaries.

Knowing (or, more accurately, sensing) and accepting the finite game rules is crucial when working for such an organization. It's very easy to fall for the various high-flown, inspirational, and motivational slogans—the bright future, exceptional culture, unseen innovation, and so on. It's not that those things are lies, exactly; rather, they're part of the play.

Infinite Startups

In my experience, these kinds of companies are rare, but far more challenging and interesting. They’re established with the intention to last—not to win the game, but to ensure the game goes on and things get better. They require players with a survival attitude and a broad perspective, which is quite different from a narrow, score-driven strategy focused on winning a prize. Take today's prominent examples of success like Google, Apple, and Facebook for instance. They started as fairly unknown startups and staying in the game is what made them the big tech giants.

One may argue it was easier to be an 'infinite player' in the past, when Venture Capital was less focused on chasing unicorns and more on investing in solving hard problems and building lasting businesses. I personally believe it's more a shift in societal mindset, fueled by the seemingly endless parade of success stories featuring young entrepreneurs and influencers. It’s not just the VCs, but also many founders (and even employees) who are now motivated by the prospect of a quick, substantial win. The reality, of course, is that playing a role in an infinite game has always been considerably harder and riskier.

An infinite startup doesn’t play by a standard set of rules. When it enters the arena, some rules are already established by previous players. It introduces new products and services, and their adoption eventually shifts the landscape. Other players do the same. Consequently, new rules emerge. Therefore, it's next to impossible to predict what the rules of the game will be in the future. Ultimately, what matters most isn't the valuation, but the share startup's products and services have in shaping the future playing field.

Why It Matters

After all I've read (and listened) about Tailwind, I can absolutely classify them as an infinite startup. Their products are definitely shaping the web development field, and they'll likely survive and perhaps even emerge stronger, after losing one of the many finite games that every infinite game consists of.

The way people misjudged Tailwind reminded me of the mistakes I've made in my own career. These go both ways; perhaps by sharing them, I can help you avoid the same friction.

There was a time I mistook a finite game for an infinite one. I knew the company was an infinite startup even though I wasn't familiar with that concept at the time. They were self-funded and resistant to selling, despite significant interest from some of the biggest players in IT. Their ambition was to be able to address as many of the world’s inequities as they possibly could. I loved their product; it was ahead of its time, successfully competing with solutions from billion-dollar companies. To me, the product was the infinite game. I was naively expecting it to forever improve, evolve, and garner more developer love. Perhaps they won that finite game, perhaps not, but the landscape changed, the product became legacy tech, and most developers moved on. I wasn't able to reconcile myself with that, so I left. I have no regrets; I've always been more attracted by chasing tech innovation, but I have to admit to myself my misjudgment. The company is still around and doing well (as far as I can tell) in their infinite game.

There was a time I let myself believe a finite startup was an infinite one. All the usual signs were there: a focus on short-term goals, an emphasis on conversions, the habit of calling everyone with an account a 'customer', and so on, but I ignored them. I guess deep down I knew what I was dealing with, but I desperately wanted to believe the message in those inspirational speeches was genuine. I wanted us to indeed be on a mission to shape the future, change mindsets, and improve things for all. So I kept pushing for products and services that could have a bigger role in shaping the future. But because those efforts didn't contribute to higher valuation, it only made me drown in frustration. A frustration born from a lack of appreciation for my hard work intended to ensure the bright future that, ultimately, no one was interested in. The misalignment of goals eventually led to our parting ways.

I didn't intend this to be that long when I started writing it. Yet, I feel there's still so much unsaid. But I'll end it here. If you haven't read Finite and Infinite Games, I highly recommend it. Either way, I hope I've prevented you from making some of my mistakes. Now go make your own ;)