is a concept coined by author Jim Collins in the book Good to Great

In this article you will learn:

What the Stockdale Paradox is and who it’s named after.

An example of a $20 billion company that embodies the paradox.

How understanding the paradox can help you succeed with your online business.

Let’s get started.

The Stockdale Paradox

The Stockdale Paradox is named after Admiral Jim Stockdale, who was a United States military officer held captive for eight years during the Vietnam War.

Stockdale was tortured more than twenty times by his captors, and never had much reason to believe he would survive the prison camp and someday get to return home and see his wife again.

And yet, as Stockdale revealed in Good to Great, he never lost faith during his ordeal:

“I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”

Then comes the paradox.

While Stockdale had remarkable faith in the unknowable, he noted that it was always the most optimistic of his prison mates who failed to make it out of there alive.

“They were the ones who said, ‘We’re going to be out by Christmas.’ And Christmas would come, and Christmas would go. Then they’d say, ‘We’re going to be out by Easter.’ And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart.”

What the optimists failed to do was confront the reality of their situation.

They preferred the ostrich approach, sticking their heads in the sand and hoping for the difficulties to go away.

That self-delusion might have made it easier on them in the short-term, but when they were eventually forced to face reality, it had become too much and they couldn’t handle it.

Stockdale approached adversity with a very different mindset: he accepted the reality of his situation.

Stockdale knew he was in hell, but, rather than bury his head in the sand, he stepped up and did everything he could to lift the morale and prolong the lives of his fellow prisoners.

He created a tapping code so they could communicate with each other.

He developed a milestone system that helped them deal with torture.

And he sent intelligence information to his wife, hidden in the seemingly innocent letters he wrote.

Author Jim Collins and his team observed a similar mindset in the good-to-great companies. They labeled it the Stockdale Paradox and described it like so:

You must retain faith that you will prevail in the end, regardless of the difficulties. AND at the same time… You must confront the most brutal facts of your current reality, whatever they might be.

A $20 billion company that embodies the Stockdale Paradox

That company is Stripe , the online payments powerhouse that disrupted an entire industry.

A former engineering manager for Stripe notes that optimism has long been a “top-level value” for the company:

When you’re trying to transform the global payments system with a staff of 200 people, a) things are constantly on fire and b) there are lots of good reasons to believe you’ll fail. Stripe’s optimism meant not letting those negative thoughts drag down the team. Optimism was the emotional equivalent of free money. It was thus highly beneficial for Stripe to adopt this as a top-level value.

But, as we’ve learned, optimism alone won’t get you very far.

To embody the Stockdale Paradox, you must also confront the brutal facts of your reality.

In the early days of Stripe, reality was brutal indeed.

The renowned Paul Graham touches on the complexity of the problem the company was trying to solve:

Though the idea of fixing payments was right there in plain sight, [most startups] never saw it, because their unconscious mind shrank from the complications involved. You’d have to make deals with banks. How do you do that? Plus you’re moving money, so you’re going to have to deal with fraud, and people trying to break into your servers. Plus there are probably all sorts of regulations to comply with.

Stripe founders John and Patrick Collison were both in their early 20’s when they started Stripe, and admit that the work was extremely difficult early on:

“It has taken a ton of work and there’s a good reason that no one has done this before.”

Technology writer Ashlee Vance notes that the company continues to fight tough battles despite being well established at this point:

Stripe is in a vicious universe dominated by banks and credit card companies and larded with regulations.

Stripe’s willingness to confront those brutal realities, combined with their relentless optimism, surely plays no small part in their success.

Applying the Stockdale Paradox to your online business

For me, the Stockdale Paradox boils down to a delicate balance of faith and honesty.

Have faith: never doubt that you can achieve your business goals, no matter how lofty they may be and no matter how many critics and naysayers you may have.

But at the same time…

Be honest: always take honest stock of your current situation. Don’t lie to yourself for fear of short-term embarrassment or discomfort, because such deception will only come back to bite you.

Living the first half of this paradox is relatively easy, since optimism really isn’t that hard. You just choose to believe that it will all turn out for the best, and everything that happens is a means to that end.

But optimism on its own can be a dangerous thing:

There’s no difference between a pessimist who says, “Oh, it’s hopeless, so don’t bother doing anything,” and an optimist who says, “Don’t bother doing anything, it’s going to turn out fine anyway.” Either way, nothing happens. – Yvon Chouinard, founder of Patagonia, Inc.

So you need to embrace the second half of the Stockdale Paradox to really make strides with your online business.

You must combine that optimism with brutal honesty and a willingness to take action.

Now of course, nobody likes admitting that their product or service sucks, that they don’t have time to work on their business, or that their skills simply aren’t up to scratch.

But admitting such truths is an absolute necessity if you want to grow and improve your business.

It might feel like you’re taking a few steps backward by doing so, but you can view that retreat as the pull-back on a sling shot: you’re just setting yourself up to make significant progress down the road.

Stockdale and You

How have you applied the Stockdale Paradox in your own life?

Let me know in the comments below.

I’m especially interested to hear examples related to building an online business.