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Move fast and break things: How Brexit is like Silicon Valley

MOUNTAIN VIEW, California — For an entrepreneur watching Bre..

MOUNTAIN VIEW, California — For an entrepreneur watching Brexit from California, its hard not to notice a familiar pattern. In Silicon Valley, startups famously follow the so-called Transition Curve, cycling from “uniformed optimism” to “informed pessimism,” followed by a “crisis of meaning,” and then, almost inevitably: “crash and burn.”

After growing up in a small Scottish town, then getting my start with semiconductors in the Netherlands, I have lived in Silicon Valley for nearly 25 years. What Im seeing in my homeland looks like nothing more than the emotional rollercoaster that most entrepreneurs experience while trying to realize their vision of a startup.

The question, of course, for the United Kingdom is simple. Will Brexit end up like so many Silicon Valley dreams, in disappointment and failure? Or does it have a chance of reaching the elusive alternate ending: “informed optimism,” a pivot to a more modest venture that, while far from the original vision, is nonetheless sustainable, comfortable and — most of all — realistic?

Heres how Brexit is following Silicon Valleys Transition Curve.

Uninformed optimism

Launching a startup requires an entrepreneur capable of articulating a compelling vision to potential investors. This is where a swirl of charisma, wishful thinking and optimism helps. In most cases, theres no prototype, so everything depends on the sales job. Any “pitch” that threatens to disrupt incumbents with a “seasoned” team of professionals usually gets attention.

The dangerous temptation at this stage is overselling. Since the product or technology does not exist, potential investors usually bring in experts to do technical due diligence. But the charisma of the entrepreneur can sometimes overcome any doubts that are raised. This is great in the rare cases the vision pans out, but it stores up trouble when it doesnt.

Brexit was sold on the promise that the U.K. would be better off if it left the European Union and “took back control.” What exactly this means was left ambiguous, but very specific statements were made to encourage “investment” from the electorate: Brexit would be easy with no downsides; the U.K. would hold all the cards in talks with the EU; there would be no need for a transition deal; everyone outside the EU, including the United States, is eager to strike a trade deal; these deals would be ready to go on the day the U.K. leaves; etc.

Due diligence from experts was rubbished as “Project Fear.” Charisma — or at least what passes for it in the U.K. in the form of upper-class accents and backgrounds — was wheeled out to encourage belief in the “seasoned” nature of the team. That managed to seal the deal, with the 2016 Brexit referendum. But the overselling done on the way has been causing trouble ever since.

Informed pessimism

After the first round of investment, a startup has to deliver on the promises that were made. This is the point at which reality starts to bite: The market isnt as big as we thought; the technology doesnt quite work the way we said it would; another company has a blocking patent in the same area; arguments within the founding team lead to resignations; the charisma starts wearing thin. Its important at this stage to be absolutely honest with the investors, but some entrepreneurs nonetheless try to hide the truth and insist that its just a matter of time before the fruits of their efforts become apparent.

In Brexit, this point was reached on the morning after the vote, judging by the looks on the faces of the main Brexiteers. It was clear that the “seasoned” team had oversold their product. The reasons for pessimism have only increased with daily news of impending problems in all areas of the economy. The “investors” are now getting angry, either for being duped or for the lack of progress toward what was promised. Resignations from the “founding team” and a search for scapegoats are leading to fractures in British society.

Crisis of meaning

This is the critical point for any startup — the moment that will determine whether it eventually goes bust pursuing its original dreams or whether it can pivot toward a different product that has a better prospect of being successful. Mounting doubts and troubles have focused the minds of the management and ejected those whose egos got in the way of progress. The dreams of market domination are quietly shelved and replaced with a less ambitious but more realistic plan that can still persuade investors to back the company. Pivots are difficult, but they can lead to concerns.

Brexit has not yet reached this point, but its getting there. Just how much the product was oversold has become apparent. Those who made the original pitch are scurrying to disown it, claiming their promises were taken out of context or misunderstood. Investors are still trying to do the due diligence, even if their money has already been spent.

Crash and burn

Any startup that was so oversold would deserve to reach the usual final phase: crash and burn. The companys assets would be sold. The investors would get some of their money back and look for more promising startups to recoup their losses. The founders would move on to the next “gig,” but anyone who was tainted by overselling to the point of lying would find it difficult to find a job. The Silicon Valley startup Theranos is a prime example. After raising hundreds of millions of dollars on the promise of a new technology for blood testing, the company eventually collapsed and its founders were charged by the Securities and Exchange Commission with “massive fraud.”

But here is where the similarities to Brexit break down. In Silicon Valley, failure is considered the best teacher, and entrepreneurs often use the valuable experience to try again. But, with Brexit, theres no second U.K. with which we can try again. British voters are not investors who can “recoup their loss.” The countrys assets cannot be broken up and sold off — even if some might like to. Thats why its crucial that the U.K. somehow find a way to reach a happier conclusion.

Informed optimism

The alternative to crashing and burning is pivoting to a less ambitious goal. With a startup this means investors have agreed to support a new plan with a second round of investment. The biggest egos likely have departed. Reality doesnt seem so bad after all. A business model has evolved to the point that money can be made to sustain and grow the company. The entrepreneur is usually now not the person to lead the company. What is needed is the safe pair of hands of professional management.

Some might look at the course of Brexit so far and despair of ever reaching a phase like this. But, having been through the Transition Curve several times, I am positive about the future for the U.K. The Brexit process has brought out the worst in people and created fissures in society. British Prime Minister Theresa Mays statement that “If you believe you are a citizen of the world, you are a citizen of nowhere” is something akin, in my opinion, to a wound delivered in the heat of an argument that is later regretted. The so-called charisma of the well-known Brexiteers is coming to be seen for what it is: personal opportunism.

The one driving attribute of an entrepreneur is unshakable optimism. It is of profound importance when launching a startup. It turns out to be of even greater importance, since the stakes are higher, when the crisis of meaning has been reached. The entrepreneur who doesnt learn how to fuse optimism with reality is destined for failure. The one who does can go back to the investors with a revised plan and ultimately succeed.

The U.K. is full of people with decent common sense and driving optimism wedded to reality. Now that this reality is rushing in from all sides, the next step is to check with the original Brexit “investors” and see if they back what was pitched in the first place.

Andrew Walker is a Silicon Valley entrepreneur educated in Scotland and the Netherlands.

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