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.

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