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Really great video and lots to learn here. I think this may be the third time I've seen it, and I'm still getting more out of it. The biggest thing that hits m
by robterrin 8y ago
Really great video and lots to learn here. I think this may be the third time I've seen it, and I'm still getting more out of it.
The biggest thing that hits me this go round is that staying alive is key. PG may have said, you burned $500k and have nothing to show for it, but if they had quit then, they would never have made it through the Great Startup Filter(tm) https://en.wikipedia.org/wiki/Great_Filter https://en.wikipedia.org/wiki/Great_Filter. The lack of great businesses (90% failure rate) reveals that the hardest part of building a company is starting a company.
In earlier times when there was more low hanging fruit, the hardest part of starting a company was scaling it. You had to have government backing (e.g. East India Company) or sit in an important part of the supply chain (e.g. Standard Oil) or cover really high capital expenditure (e.g. FedEx). Now that it's easier than ever to start a company, the good ideas are mostly already picked, so finding one is harder.
In economics, this called the explore/exploit or multi-armed bandit problem. What is so interesting to me on this viewing is that Peter Reinhardt's unrelenting enthusiasm and self delusion were a feature, not a bug. There is no way they would have stayed in the game long enough to find product market fit without that. Even though the kernel of the idea existed early on, they needed to taste true desperation to humble themselves enough to do the simplest, stupidest thing that customers wanted.
- throwaway84742 8y agoFinding an “idea” is a mistake that most startups make. Ideas alone are worthless. The phrase you’re looking for is “finding a need”, preferably the kind you can address and charge a lot of money for solving. This is the hard part that most startups fail spectacularly at.
- robterrin 8y agothrowaway84742, you are correct. That is why I said, "thing that customers wanted" and not "idea." Even having the kernel of the idea was insufficient.
- _pdp_ 8y agoLow hanging fruit is everywhere - essentially anything that has not been done yet. All ideas look "low hanging" in retrospect.
- robterrin 8y agoRespectfully disagree with _pdp_ here. Many ideas are not low hanging in retrospect. The three pre-internet businesses I cite are obvious needs (trade, oil refining & transportation) and yet had requirements that made them untenable business ventures for people without the specific advantages required by those business models. Government support, a superior position in the supply chain or access to vast amounts of capital provided barriers to entry for potential competitors. Having demonstrated that the second claim is false, I will not address the first claim. Something that has not been done before is not low hanging fruit. To be sure, it is difficult to know if there are fewer good businesses to be started today, but the economic evidence has been stacking up for 30 some years now. Here are some papers showing the slowdown in productivity and new starts: - http://www.nber.org/papers/w21974 http://www.nber.org/papers/w21974 - https://www.brookings.edu/wp-content/uploads/2016/03/ByrneEtAl_ProductivityMeasurement_ConferenceDraft.pdf https://www.brookings.edu/wp-content/uploads/2016/03/ByrneEt... - https://www.nytimes.com/2017/09/20/business/economy/startup-business.html https://www.nytimes.com/2017/09/20/business/economy/startup-... Part of this is a sclerotic antitrust regulator that has been defanged by lobbyists. Part of it is the internet removing information asymmetries, leading to natural monopolies. Part of it is probably the cheap "bits" businesses crowding out "atoms" investments in VC. Another part is probably that we are simply running out of easy defensible businesses to create. This is ok! People will have to get more creative and humanity will progress more slowly, but from a higher base.