Patrick

Excerpt from Jonathan Siegel’s Book

The following is an excerpt from Jonathan Siegel’s (my college roommate at UCSB) new book, The San Francisco Fallacy:

By the age of thirty, I was firmly established—in my image of myself—as an ideas man, an innovator. I already had fifteen years of execution of my own startup ideas behind me.

I had brought product ideas to collaborators, to investors, and even to market. Even though all had ultimately failed, I had been at least partly validated by the reactions of those collaborators and investors.

They were great ideas, but other things were wrong: the market wasn’t ready; the team or investors lost confidence; I managed them badly. But I never doubted that one of my ideas would break through someday.

It didn’t work out like that. Instead, when I did finally have a success, it wasn’t with my own idea. In fact, I didn’t even like the idea.

The Idea Fallacy afflicts not just the tech sector, but the wider culture. The Idea Fallacy is the deep-rooted belief that what really counts is the idea, not the implementation. There’s nothing wrong with a good idea—but an idea without implementation is largely worthless. Good ideas are far less rare than we think—what’s really scarce is the ability to execute.


How I Finally Succeeded—With Someone Else’s Idea

Having wound down BillASAP, I was left with a loyal and talented team and a burning desire to pursue a new product before the communal energy of the group dissipated.

Then, as we were racking our brains for our “next big thing”, I bumped into Kevin Milden in the supermarket in Santa Barbara.

Back in 2005, Kevin had helped a small team of developers position a document-sharing wiki as the “Web Word Processor.” This became Writely; after being bought by Google, it became Google Docs. He had that same touch that Blinksale had displayed: an intuitive sense of simplicity and minimalism. I told him of our recent catastrophe. 

“We need a new project,” I said. “Quickly.”

“What about e-commerce?” he said.

“Too boring,” I said. 

Online, there was a rush to bring every retailer onto the web. There was an endless succession of sites being built—one by one—for companies trying to play catch up and sell their goods online. Unfortunately, to me – as a techie – it was about the most boring software I could envision writing.

“So make it so you never have to write another online store ever again,” Kevin said. “Make a shopping cart that you can take with you from website to website.”

From video games to sports software to ideas born in my own eureka moments, I was used to working on projects to which I felt a personal attachment. This idea had no such attraction.

But I could see that the technological challenge could be interesting, and I had a team on hold. I needed an idea. Any idea.

We started to thrash it out that night in the shed. We decided to work in Ruby on Rails, the same technology framework that Blinksale had used.

We worked all night. By morning, we had a heap of code and a draft business presentation. I called Kevin and told him to come round.

“Holy shit,” he said, “you already built it!”

And we had. It was crude and ungainly, but it was there: a personalized shopping cart for the web. Kevin came on board officially, and we worked hell for leather to get it to market.

For six weeks, I slept two hours a night; most of the rest was spent in the shed, barring a few hours a day with my family. By the end of that period, we were ready to test it. We called it RightCart.

Within weeks, it had been written up on TechCrunch and was installed on tens of thousands of sites. Individual carts had had millions of views.

And so, finally—after multiple failures—I had a success. And then the VCs came calling.
RightCart’s ethos of making selling and shopping easier—of democratizing e-commerce—was in tune with the zeitgeist.

But the VCs wanted me to tell a more dramatic story—one of revolutionary proportions. The VCs wanted me to talk of “social web e-commerce.” In this brave new world, they said, every blogger would be a business. This, they said, would make RightCart a multimillion company.

I didn’t believe them. I had wanted to improve the online shopping experience. I had no interest in creating and running a social media widget company. 

So instead of courting the VCs, I did a tour of company boardrooms. I visited Visa, Amazon, Buy.com, Adbrite, and others. I was touting my company, but I was also using it to get inside those rooms and to gain contacts and insights into how the market leaders ran their businesses.

With the VCs whispering promises of multimillions in my ear, I took an offer of $250,000 from Buy.com. 

It had cost me $120,000 and six months to develop RightCart. (Although I could argue that it had taken two years, given that the PostASAP and BillASAP failures were effectively part of the “development” process.) To the market, and my startup peers, $250,000 was not a dramatic exit.

Modest though this success may have been, it was efficient, and it was exhilarating. It gave me some financial freedom to take risks with new products, and it gave me the confidence to back myself in doing so.

It was, finally, a validation from the market (not merely from investors). It was also, of course, a validation of Kevin Milden’s idea. But the fact that the original idea was not mine in no way lessened my sense of achievement.

Had Kevin wanted to, he could have developed the product himself. He was generous in sharing the idea, but he also knew that he wasn’t going to develop it.

A less mature entrepreneur would have clutched that idea selfishly to himself, jealous of the hypothetical success anybody else might have with it. But Kevin understood that the tech ecosystem relies on cooperation and collaboration. Good ideas well executed make everybody’s lives better. Good ideas kept secret add nothing to the world.

The Idea Fallacy Revisited

During the dot-com boom, in 2001, it seemed like anyone with a half-baked idea for a dot-com had money thrown at them.

This was the epitome of the Idea Fallacy: “It’s all about the idea,” the VCs screamed and the media chorused; the would-be founders soaked it up and were duly soaked in cash, no matter that many of them lacked so badly in the ability to execute.

Websites for selling pet supplies (pets.com) and groceries (Webvan) attracted hundreds of millions of dollars in venture capital almost overnight and then went spectacularly bust because their models were chronically unprofitable. Webvan, for example, had raised $800 million and taken thirty-year leases on warehouses, only to find that its core business of grocery deliveries didn’t work in the market.

Then came the backlash: following the bursting of the dot-com bubble, the market swung back to place new emphasis on execution. This helped foster the excesses of the Tech Fallacy, where investors encouraged techies to play to their instinctive bias and focus on the tech to the exclusion of all else.

These things move in cycles. Still, the Idea Fallacy remains pervasive. That’s because it is at the heart of contemporary popular culture, not merely the tech sector.

Every time someone looks at a work of art and says, “I could have done that if I’d thought of it,” that’s the Idea Fallacy at work. Every time somebody reads about Mark Zuckerberg or Jack Dorsey or Larry Page or Sergey Brin and thinks, “Lucky bastard. I wish I’d thought of that,” that’s the Idea Fallacy again.

The Idea Fallacy is the belief that inspiration, not perspiration, is the fount of creative success, whether in the arts, the creative industries, or in startups. It is the belief that the root of success lies in the idea rather than the execution—the belief that ideas have substantial intrinsic value—that they are the key item in the startup value chain.

Not only was RightCart not my idea, it wasn’t even a new idea at all. Shopping carts were everywhere. There were even preexisting shopping carts that would follow you around the web: Yahoo Stores, Shopify, and others.

What distinguished us was near-perfect execution. We chose the right technology. We had a beautiful design. We came to market fast—with what I would come to think of as a “minimum viable product” (which I’ll talk more about in Fallacy Nine). We invested barely anything in the product (in time or money) till we had market feedback. We had a good PR story. We took our exit at our very first opportunity.

Rarely is an idea original. Society’s focus on the “Big Idea” is misplaced. As Jim Collins shows in Great by Choice, many of our business icons build their success on the back of other people’s ideas: it wasn’t the McDonald brothers who built McDonald’s into an empire, it was Ray Kroc who saw the seed of greater success in their operation and bought it from them.

Southwest Airlines copied its model directly from Pacific Southwest Airlines. Ryanair, Europe’s largest airline – named after one of its founders, Tony Ryan – was a loss-making tiny Irish airline until Michael O’Leary applied the Southwest model and duly revolutionized the European airline industry.

Facebook, Google, Apple, Uber, Airbnb, Zappos—none of them were built on original ideas. Competitors were doing the same thing at the same time, sometimes even before them. But they executed better.

The Idea Fallacy warns us not to be seduced by the brilliance of our ideas—an idea without execution is worthless. But it also tells us not to be intimidated by the fact that others may already be executing the same idea.

This is counterintuitive to many first-time founders. Let’s say you have what you think is a brilliant business idea and you want to see if it’s viable. Which of these situations would you prefer to find?

a) There are existing businesses with the same idea that are thriving.
b) There are existing businesses with the same idea that are struggling.
c) There are no businesses with that idea.

First-time founders always answer (c). For me, the answer is always (a).

One of the first challenges a startup faces is to prove that there is a market for its product. The existence of thriving competitors proves that there is a market. After that, it’s all about execution: if you execute better than the competitors, you will win market share.

If, instead, there are competitors but they are struggling, that may be because they were seduced by their idea and failed to realize that there were intrinsic obstacles to executing it. It may mean the market is inadequate.

If there are no businesses with that idea, then perhaps there is simply no market for it—no matter how brilliant you think it is.

I face this as an investor all the time. Give me nine founders with amazing ideas but minimal execution abilities and one founder with proven execution ability but a bland and predictable idea, and I’ll go for the latter every time.

That was an excerpt from Jonathan Siegel’s (my college roommate at UCSB) new book, The San Francisco Fallacy.

Go and get it, you’ll love it.

One of the most interesting phenomena in my adulthood is watching things that weren’t considered particularly cool in my childhood, become the definition of cool today. The city of Budapest is one of those.

Budapest is popping up on the radar of international visitors and thanks to the efforts of the tech/startup community, is hosting large tech gatherings like Brain Bar Budapest and Crunch Conf, to name two.

My parents are Hungarian émigrés to the States. I speak Hungarian fairly well albeit not perfectly and most summers find me and my family visiting relatives in Budapest. I have visited (and even lived in Budapest sporadically) since 1976. Budapest is, without question, my favorite city in the world.

Friends of mine who pop into Bp to speak often ask to me to give them tips and recommendations before they show up so they can enjoy the city. I have compiled these notes and posted here. If you’re a conference speaker or startupper, and you plan to be in Bp. soon — this guide’s for you.

NOTE: This guide will be subjective, incomplete and may even be incorrect at times. I will do my best to update it. Let me know if I have made an especially egregious errors or if you have better tips or ideas.

My buddy and fellow Hungaro-American Mike Globits put together this wonderful video short love-letter to Budapest. He captures the romance of a Budapestian summer perfectly.

Abbreviated Notes on Budapest History

Budapest is the unification of three, not two, cities. Most people know that the hilly area west of the Danube is Buda. And the flat area east of the Danube is Pest. Buda-Pest. Budapest.

Turns out that in 1873, Buda and Pest officially merged with Óbuda (Old/Ancient Buda). Remember three cities, not two.

At the turn of the 20th century, Budapest was the 6th largest city in Europe and a thriving metropolis of the Austro-Hungarian empire. Commercially and culturally speaking, that was probably the zenith of Budapestian life. Looking at pictures of Budapest of yesteryear, it is plain as day that after WWI Budapest entered a decline from which it emerged, slowly, in 1989.

While today, 99.9999% of the population speaks Hungarian as their first language. Historically, Budapest had seen large numbers of native German and Yiddish speakers. In fact, the Greatest Hungarian™, István Széchenyi didn’t learn to speak Hungarian till he was a teenager. He was born in Vienna and as a member of the nobility spoke mostly German. The reason I point this is to highlight the Austrian nobility’s role in shaping the Budapest cityscape. (If you have even an elementary grasp of Hungarian, you will notice that many of the plaques on the buildings built pre-1900 cite the architect, and a non-trivial amount are ethnic Austrian or German names.)

You can catch glimpses of that era and hold-over effects of the old k. u. k. monarchy in the city’s plan, architecture, and food. If you’re wondering why today Hungarians appear to eat more tortes and delicious confectionaries than the average European — it is precisely because the economy was set up around the Hungarian Royal (and Austrian Imperial) courts more than 150 years ago. To say that cultural knowledge about the manufacture of confections is strong in Budapest (and the rest of Hungary) is an understatement.

Quick Budapest Geography

The Danube cuts through Budapest almost precisely from north to south. Buda, the residential hilly portion is to the west. Pest lies flat to the east. Buda and Pest are connected by a number of bridges. On the Buda side, there are two unmissable hills (there are other hills too but unimportant for the casual tourist), Gellert Hill and Castle Hill. Atop of Castle Hill in Buda rests, you guessed it, Buda Castle — while on Gellert Hill, to the south of Castle Hill, sits the Citadel.

Fun fact: The Austrians erected the Citadel on Gellert Hill to keep their eyes (and cannons) trained on unruly Hungarians following the revolution of 1848. The Citadel replaced an existing celestial observatory on site.

Almost exactly due north of the citadel is Margaret Island. Think of it like NYC Central Park. Except on an island in the middle of the Danube. This is why the lookout spot looking north over the Danube on Gellert Hill is such a tourist attraction. It affords a fabulous view of the Budapest core. Over on the Pest side, clearly visible on the Danube banks is the Hungarian parliament building.

Hungarian Food and Restaurants

Hungarians love sweets, and Budapest is filled with bakeries and confectionaries. Marzipan is popular as a dessert as well as a flavoring. If I am not mistaken, I have seen Hungarian McDonalds and Starbucks advertising marzipan-flavored shakes and coffees.

The Szamos family is well-known for its high quality marzipan and has multiple confectionaries in and around Budapest. There are two in District V, albeit my favorite Szamos is the one in District XII at Böszörményi út 44.

Enter any confectionary and you will see a vast assortment of tortes. I count 24 different types at Szamos and almost 40 at Daubner.

When in a Budapest cafe, I recommend a cappucino and a slice of the Cake of Kings, The King of Cakes, and my close, personal friend: The Dobos Torta.

Where to go? Some of my go-to spots are:

Daubner. No frills. Almost exclusively locals-only spot as it is mostly out of the way for the random tourist in Budapest. Down the street from my in-laws. Some consider this to be the best confectionary in all of Budapest.

Gerbeaud. Don’t be taken aback by the surly waitstaff, tourist-based pricing (5-10x more expensive than a local confectionary) and highly-trafficked location. If you’re walking through Vörösmarty square — and on a visit to Budapest, there is a 97% probability you will be – it makes absolute sense to pop in for a cap and cake. This was my grandmother’s favorite spot.

I’ll add some more later, but rest assured, there are more than plenty of confectionaries in Budapest that are better than good.

In terms of savory dishes, it wouldn’t be inaccurate to say that anyone can make any food Hungarian by adding the Hungarian Holy Trinity: Lard, Paprika and Sour Cream.

Let us kneel and pray. And VOILA! Insta-Hungarian-dish!

Let’s start with the most famous Hungarian dish. Goulash. Now pay close attention here. Goulash is soup, not a stew. I know. I know. Your grandmama made the best goulash stew ever. Believe me, every outside Hungary thinks goulash is a stew — it’s not. It’s a soup. And it’s delicious. So when you order it, expect a soup.

But you wanted a meat stew? Plenty of meat stews in Hungarian cookery. Stews are called pörkölt in Hungarian.

My advice for foreigners traveling to Hungary is to do what I do. Eat and sample foods that I cannot normally get access to. In Budapest, for most people, that means traditional Hungarian dishes like goulash-soup, Chicken Paprikash — but don’t forget that the Hungarian culinary tradition is experienced with cooking game and goose-liver too. Goose-liver being relatively affordable to foreign tourists when priced against the rest of the western world.

Café Kör serves the tourist, business-lunchers and locals. The general style is traditional Hungarian meets French cooking techniques. I try to pop in whenever I am in District V.

If you want a ‘traditional Hungarian’ restaurant, which means the gypsy musicians come by your table and play for you (and then you tip them), then one of my father-in-law’s restaurants, Margitkert might be a good fit.

This summer of 2016, I had a few wonderful meals at Fioka. Modern versions of Hungarian stand-bys. Not sure what Fioka is like in winter, but when I was there, the food and service were strong.

Minimal Viable Budapest Tour (you can break this up into multiple walks):

As I mentioned before, a lot of what can one easily appreciate is Budapest’s past — specifically, the Belle Epoque, from late 1800s to outbreak of WWI. During that time, Budapest was a thriving, growing metropolis with all sorts of beautiful luxuries seen in its restaurants, architecture, confections, baths, hotels etc etc

SO when you come to Budapest, what you can really get a taste of, literally, is what life looked, smelled like in early 1900s.

Generally, Budapest is very, very, VERY safe — just know you will stick out and potentially be targeted for pickpocketing. So keep passports in hotel safe and wallet in front pocket. On public transport, I keep my hand on my wallet because I am a bit paranoid. Also, purses should be kept near their owners, preferably with owner between purse and public space.

Nothing to worry about — but there is some small probability that your pocket encounters a pick-pocket.

On the Pest side (easily walkable):

Start at Gerbaud at Vorosmarty ter.

Walk south down:

Vaci utca (Vaci Street) — this is on the Pest side, parallel to to Danube and roughly one block east of the river. At the north end, it terminates at Vorosmarty ter (Vorosmarty Square) while at the south end it ends at the Vasarcsanok (Central Market Hall)

This is a main tourist-y shopping drag. There are various boutiques and tourist shops selling Hungarian knickknacks. Walking down it is quite pleasant, as the architecture is scenic and there is a lot to see. There are many over-priced restaurants on the street. I haven’t eaten at any of them, with the exception of Fatál. Not fatal. But ‘fa’ + ‘tál’ = wooden platter.

It is certainly tourist-y and provides over-sized portions, but generally aims to please with its offerings. Not a bad place to eat a massive meal and down a few (or more) beers.

End up at:

Vasarcsarnok (Central Market Hall)

A huge public market hall with vendors selling everything from goose liver to Hungarian salami to fresh fruit and vegetables. Fun to stroll around. I remember buying fish there with grandfather as a 4 year old.

Further south, below the Vasarcsarnok is the ‘Balna‘ (means whale in Hungarian), where you can find restaurants overlooking the Danube. Grab a bite there. FUN FACT: The NASA control room scenes in the Matt Damon film, The Martian, were shot in the Balna.

Crossing to the Buda side, you can also walk across the Szabadsag hid (“Freedom Bridge”) which is next to Vasarcsarnok and arrive at the Gellert Hotel and Thermal Spa. This was the finest hotel in the 1900s in Bp (abeit beat-up these days), it also sits on top of a thermal spring, so has a beautiful indoor thermal bathing area. The Gellert was one of the many ‘Grand Hotels’ built during the Belle Epoque that inspired Wes Anderson’s Grand Budapest Hotel.

Walk up Gellert Hill (or take taxi) to:

Citadella (The Citadel)

Great views. Walk around a bit and take in the view to the south over Csepel Island too. From there, grab a cab over to the Varkert Bazar (Castle Garden Bazaar) and hike up into the castle.

This is on Varhegy (Castle Hill) on the Buda side prominently overlooking the city, it faces eastward looking over the river and Pest. You can’t miss it. At night, when it is lit up, it is absolutely gorgeous. This is the site of the various royal palace and castle throughout Hungarian history. .

You are now at the south end of Castle Hill, and can walk north across Castle Hill to Matyas Templom (Matthias Church)
Beautiful, well-preserved church in the Buda Castle and stop in at Ruszwurm, another famous confectionery.

From there walk across the chain bridge (Lanchid) to

Szent Istvan Baszilika (St. Steven’s Basilica)

Budapest’s most beautiful Catholic cathedral/basilica. My three kiddos were baptized there. This is on Szent Istvan Square. Around the corner from the cathedral is Cafe Kor, which I love.

From there walk to the Hungarian Parliament (Kossuth Lajos Square) — site of the beginnings of the Hungarian revolution in 1956.

Then walk down to the korut (inner boulevard) to Andrassy ut (Andrassy Boulevard)

A typical attractive European boulevard which boasts many nice cafes and restaurants. Most scenic portion is between Deak Ferenc Square and Oktogon square. Site of the Hungarian opera house. The first underground metro on the European continent runs directly underneath the length of Andrassy.

Continue down Andrassy to:

Hosok tere (Heroes’ Square)

East terminus of Andrassy Boulevard. Iconic representations of the seven tribal chiefs that led the Hungarians to present day Hungary. Also site of the Hungarian National Museum.

After Heroes’ Square, take a thermal outdoor bath at:

Szechenyi Furdok (Szechenyi Baths) — across from Budapest Zoo and behind Heroes’ Square. Budapest is teeming with thermal hot springs and Hungary is a bathing culture. These public baths are remarkable for their beautiful architecture. Their waters are said to have healing powers. It really is quite pleasant, especially in cold weather.

More coming soon.

A book about stealing?

“Why would you want to write a book about stealing?”

-My Father

In the spring of 2014 I started kicking around the idea of writing a book on hustle with my friends Neil Patel and Jonas Koffler. We began developing the book in earnest in the fall of 2014 by searching for an agent to represent us. After a few false starts, we pitched and ended up clicking with Scott Hoffman of Folio Lit.

Scott agreed with us. Words matter. And hustle was changing meaning and was growing in use. The word meant more than simply grinding away or moving fast. There was a there there.

Scott agreed to represent us and we all agreed we wanted to do a so-called ‘big book’. That meant pitching the book to NYC Tier 1 publishers after we faced our greatest fear: sitting down to write our proposal.

The proposal was a bear. A big bear. With claws. And fangs. And big fuckin’ teeth. And we were like little bunnies. Cowering. Shivering.

Each time we felt we had — finally — finished the proposal, Scott told us how trite our writing was and ordered us to do a total rewrite.

One rewrite? Ouch.

Two? Okay, it comes with the territory….

But three of these? FML.

Four? I was seething. Luckily for both of us, Scott gave us feedback over the phone, which meant that he got away unscathed and I didn’t go to jail for assault. Moreover, Scott wasn’t wrong. Our writing was hackneyed.

To make matters more complicated, in the midst of wrestling with the proposal I moved my family from Orange County, California to Austin, Texas. That meant getting squared away in our new home, finding a new pre-school, packing our stuff away, fixing up the house — and getting up at 4am in the morning to write…trite shite.

After generating and tossing aside mountains of cliches for another 5 months, by May 2015 we had whittled down to a novel angle on what hustle meant and how we could help readers. Scott gave his blessing and it was time to pitch in the mean streets of New York. That’s the next post.

PS pre-order HUSTLE at Amazon | Barnes & Noble | BAM! | 800-CEO-READ | iBooks | Indiebound

A Note about Seth Roberts

Seth Roberts has unexpectedly passed away. Others who knew him more intimately than I did, have already penned, quite eloquently, why he will be missed.  See John, Tucker, Ryan, and Richard.

I only want to add, that in our emails and Skype chats and our occasional meeting in meat-space, what I admired most about Seth was his ability to explore, defend and test interesting, and often unpopular ideas (and even people) – the hallmark of a bonafide truth-seeker.

 

The Engineer’s Conceit

In tech startups, The Engineer’s Conceit is thinking that:

a) you know what needs to be built

b) you create value by rolling up your proverbial sleeves and coding it yourself

Need a CMS? I’ll code it myself. Screw WordPress, Drupal, Joomla or any of thousands of CMS already built with massive developer communities.

Need an ad network? I’ll code it myself. Consider taking an off-the-shelf open-source version to test it?  Nah. That doesn’t create value.

Need a data-warehouse?  I’ll code the best fucking data-warehouse the startup community has ever seen — even though my startup sells Brony t-shirts through PayPal.

Until your startup has significant momentum and traction, you usually don’t know what needs to be built, you shouldn’t be building it and you probably aren’t creating value by coding — and The Engineer’s Conceit shouldn’t have you destroying value by coding commodity stuff that can be bought — get your self-actualization elsewhere.

A quick test to see if you or someone you know has fallen prey to the The Engineer’s Conceit is if they have built something that someone else could have installed in 20 mins — and has nothing to do with their core business.

Engineers, don’t fret — marketing folks have similar hang-ups about The Marketer’s Conceit.

The Marketer’s Conceit

In tech startups, The Marketer’s Conceit is thinking that:

a) you only have one chance to ‘make a good first impression’

b) your ‘brand’ matters (usually conflated with your logo)

Until your startup has significant momentum and traction, your brand doesn’t matter — and The Marketer’s Conceit shouldn’t keep you from aggressive experimentation.

A quick test to see if a ‘brand matters’ is to imagine the business in question shutting down operations permanently and then asking yourself, “Would anyone buy that company just for the brand?”

The answer for organizations like Coca-Cola and Harley-Davidson is “Of course, someone would.”

For the vast majority of tech startups, the answer is “No way”.

Marketers, most of the engineers you know have the same hang-up, just other side of the same coin with The Engineer’s Conceit.

 

Because the current criticism of lean startup and customer development is, for the most part, so markedly atrocious, so lacking concrete insight and usually amounts to no more than an annoying child playing with a noisy cap gun loaded with sour grapes and Freudian projection; I will happily provide the critics with some real, live ammunition with which they might be able to arm themselves.

The following are meant to be constructive critical observations of various facets of lean startup and customer development. I have provided a few brief thoughts about each one, albeit each one probably merits multiple blog posts.

In no particular order and surely not exhaustive:

PIVOT, PERSEVERE OR PORTFOLIO: Lean Startup may be optimized for investors, not entrepreneurs.

The startup then becomes nothing more than an option for a Jane McVentureCapitalist, who has access to data and information rights which inform her future investments, the ones she actually cares about. Even assuming the VC is not malicious, this could engender back-seat driving behavior.

NATURAL LIMITATIONS ON HYPOTHESIS TESTING: Some environments are too complex and too chaotic for meaningful hypotheses to be formed and tested.

Hypothesis testing is appropriate for a complex system where the decision-making process is: Probe, Sense, Respond. But in a chaotic system, the decision-making process is Act (quickly), Sense, and Respond to stabilize the situation.

If this seems familiar, then you likely know of David Snowden’s Cynefin framework.

Also, if you really wanted to pedantically quibble, one might be able to make the case that Talebian stochastic tinkering/bricolage is fundamentally different than Lean Startup trial-and-error hypothesis testing. Or not.  (See note 116 for further background.)

LEAN STARTUP ITSELF IS THE RESISTANCE: Coming up with perfect experiments is the perfect excuse not to take action.

If you are unfamiliar with The Resistance, buy The War of Art immediately.

PEOPLE VS PROCESS: Lean startup is just another battle in the never-ending People vs Process war.

Moreover, Lean Startup enthusiasts miss the point that fighting over People vs Process is mostly sand-in-your-eyes.

STARTUP CULT-BUILDING IS NEXT TO IMPOSSIBLE WITH LEAN STARTUP: Hard to get people fired up to fight in the startup trenches when upon a pivot, you decide that this isn’t a war to fight for.

Synching a romantic and adventurous raison d’être-cum-vision (“We’re gonna change the world or die trying!”) that motivates foot soldiers and investors with boring metrics is not trivial, perhaps harder with Lean Startup.

You are warned: all of the above are dialetheia, at some level, both simultaneously true and false. Also, most of the above are not exclusive to Lean Startup.

Critics, consider yourselves armed – so fire away, try not to shoot yourself in the process.

Penicillin was discovered on September 28, 1928 by the serendipitous efforts of Scottish scientist, Alexander Fleming. Legend has it that Fleming noticed an open petri dish that had failed to show bacterial growth due to a mold growing in the agar. The penicillium mold produced a toxin that inhibited bacterial reproduction.

A short 17 years later, Fleming was (jointly) awarded the Nobel Prize in Physiology or Medicine in 1945 for “the discovery of penicillin and its curative effect in various infectious diseases”.

By 1945, it was crystal clear that the discovery of penicillin was a good idea – in the parlance of the Silicon Valley, was a truly BIG idea — penicillin and related discoveries are credited with saving more than 100 million lives in the 20th century.

Which is why we, as entrepreneurs, intrapreneurs, developers, hackers, designers and investors should endeavor to work on truly big ideas, because it is our labor invested into big ideas that make the world a better place.

Discovery and Rediscovery

Yet…

The antibiotic effects of penicillin were independently discovered as folk medicine and empirically harvested science — and forgotten — multiple times before Fleming’s accidental re-discovery in his laboratory in the basement of St. Mary’s Hospital in London.

Not only did Lister discover penicillin in 1870 – a 58 or so years before Fleming is credited with the same discovery, but Fleming himself pursued the purification and manufacture of penicillin in fits and starts before giving up in 1940.

Now stories of independent discovery and re-discovery in the history of science are nothing new – so what is it that you, as someone involved in innovation, can learn from my reinterpretation of medical history?

Simply put, the history of penicillin puts a lie to the most arrogant and self-serving of notions – oft repeated and tacitly accepted – that humans have any facility in determining the intrinsic quality of innovative ideas.

If we did, the venture capital industry wouldn’t be fundamentally broken.

If we did, penicillin wouldn’t have been treated as a small idea, and would have been explored and exploited much much earlier.

 Good Ideas vs. Bad Ideas

 In the world of technology innovation, good ideas are often referred to as BIG ideas, while bad ideas are often referred to as small ideas, as if there were two, discrete and easily identifiable populations of ideas.

We imagine one set of ideas, seen to be, very clearly to all observers, bad and small abutting a separate population of ideas, good and big.  Sometimes, we make casual reference to the notion that truly disruptive ideas often appear to be cute toys, which implies that there is some overlap between good and bad ideas.

While this illusion may be how we perceive innovative ideas, not a lot in the history of innovation and technology suggests this is an accurate or usable reflection of reality.  In fact, with a bit of reading, the exact opposite appears to be true – as a brief review of the history of penicillin demonstrates, we are remarkably bad at discerning the difference between good and bad ideas at early stages.

Another example from the history of medicine: Leeuwenhoek peered at bacteria through a crude version of a microscope in 1677; yet the microscope wasn’t put to wide-scale in medical research until about the 1880s.

This explains the many apocryphal stories in Silicon Valley wherein plucky entrepreneurs pitching their startups are laughed at by potential investors and potential employees; only to have the last laugh when their startup hockey-sticks to the moon, disrupts the giants of the day, and begins to rain cash into the founders’ pockets…much to the chagrin of all the people that passed on them.

For a contemporary example, read this remarkable Quora thread that demonstrates how hard it was for Instragram to hire developers.

Aside: Good investors understand this and maintain a sense of humor about it. Hence, the hilariously self-deprecating Bessemer Anti-Portfolio.

Lack of Context

Because at early stages we lack the context and data to judge innovative ideas on merit – instead, we filter them through our own cramped, personal paradigms, biases and experiences.

Contrary to popular opinion, there is nothing intrinsically wrong with filtering ideas vis-à-vis personal biases – even if you try to remove all personal biases from your life and attempt to imitate Art by becoming Spock-like – you will fail.

Ultimately, your mind will conspire against you and provide (biased) context in the vacuum of hyper-logic.

The failure is not in applying your personal filter – the failure is not admitting you have applied a personal filter and pretending to be both omniscient and hyper-rational (and not having a sense of humor about it).

So how do we in innovation-land coax ideas to reveal their true selves?

Firstly, we accept that a landscape of innovative ideas isn’t composed of two separate mountains, clearly labeled GOOD and BAD – rather, we are looking at a bi-modal distribution where most ideas are of an indeterminate quality until proven otherwise.  Yes, with some confidence, we can clearly identify some bad ideas and some good ideas at the tails – but the vast majority is unknown to us until we begin to manufacture context and data through application and manipulation of the idea.

Secondly, what motivates us more: the risk of an idea being a False Negative or a False Positive?

The False Positive is what most startups fear. A startup is born with a terminal illness and has nothing to lose. Knowing you will die is liberating in that you are not afraid that an ugly but big idea will get away from you – but rather that a seductive idea that ultimately reveals itself to be nothing more than a cruel illusion.

On the other hand, The False Negative is what the enterprise is concerned about. Large organizations, especially public traded ones, have a lot to lose, and are constantly in fear of missing an idea that initially looks to be bad, but upon further inspection is a truly BIG idea.

Knowing our motivations will help determine if the decision-making processes – either formal or informal – are suitably calibrated.  This means different things for startups and for enterprise level organizations. I’ll write more about this in a future post.

Written on June 20, 2013 at Callas in Budapest, Hungary.

How Lean Startup helped a Skateboard Company

An entrepreneur named Nick Jones recently reached out to me after reading The Entrepreneur’s Guide to Customer Development. Nick is the founder of Lavish Longboards.

“Skateboards?”, you might be asking yourself? Yes, I might answer you, “skateboards”.

You might then ask, “But don’t Lean Startup and Customer Development only pertain to technology startups?”

While I could outline why I have a passion for applying Lean Startup thinking to all sorts of domains outside of technology startups — I thought Nick’s own words speak volumes.

(Nick has allowed me to share our conversation over Facebook, which I have annotated slightly.)

Nick Jones:
Hey Patrick–Thanks for putting the Entrepreneurs Guide to Customer Development out there! It’s helped me with both longboard customers, and growing a user base for my skate-app! Looking forward to your next book!

Patrick Vlaskovits:
awesome. great to hear. would love any specific stories about how it helped.

Nick Jones:
It helped me with the boards by pushing us to define our actual target customer, and getting a little more precise with our product-market fit.

We were under the assumption that our eco-friendly board was a “one size fits all” product, which was complete BS. We were using google/facebook ads and targeting everyone from teenagers, to age 40-50 athletic/outdoor men.

[This is the default belief upon which many entrepreneurs first operate.

Who wants my product? Everyone.  WRONG! 

With The Lean Entrepreneur we hope to stamp this out once and forever.]

After 18 months of basically shooting for every possible skate demographic under the sun, breaking even, and marketing to skate shops nonstop, we decided to drill down and only market to two key groups.

One was the new entrants to the sport, the other was ppl who liked #Longboarding or #Skateboarding, and #Recycling on facebook. So we hit those two groups hard with ads, and sales grew by 2.5x in a 2 month period.

[As Brant Cooper often notes, think ‘small’ to get big.]

Of course we realized that these were our 2 biggest segments based on returns from our previous ad spends, but we were skeptical about ONLY marketing to them. We haven’t looked back since, now we’re hitting them hard, as well as only marketing to small handmade/funky/quirky retail shops.

[A product and segment are a dyad. Like two puzzle pieces, they have to fit without being forced.]

Stings a little bit to not be killing it with skate shops, but having a high return with the quirky shops helps ease the pain. We estimate that 70% of our customer’s first board is a Lavish one, so moving forward we’re slowly rolling out more advanced models for the riders looking for a more intense experience (downhill/freestyle).

[This shows strong understanding of their segment.]

Whenever we design a concept board, we email just 10 cruiser-customers to hear their response on it, usually around 4 are interested and willing to pre-order. So I guess my major takeaway would be committing to segments, and not thinking our board is a one size fits all type product.

[Sounds simple, right? Certainly simple, but not easy. Kudos to Nick for getting this far. The future of Lavish Skateboards is a bright one.]

Brant Cooper’s and my next book, The Lean Entrepreneur takes Lean Startup to the mainstream. Expect more stories about how a Lean Startup approach moves the needle in businesses big and small.

PS You should order The Startup Pack so you can get video tutorials on how to segment your market properly.