I often tell people that if your business idea is not 1) creating a new market, or 2) 10x better than the alternative, you’re better off not doing it. Continue selling your skills instead while you keep learning, saving, and brainstorming/exploring new opportunities. Daniel Kahneman explains in “Thinking, Fast and Slow” that, given the same qualifications, people achieve higher average returns by selling their skills to employers than by setting out on their own. Alas, entrepreneurs are like drivers: 90% believe they are better than average, and that the odds don’t apply to them.
Side note: Don’t follow this advice if you’re starting a project for personal motives (learn new skills, meet new people, test your entrepreneurial fortitude, discover problems you care about, etc.). In such cases, the definition of success is subjective, not measured in market share, dollars, or pace of growth. You may even get lucky and still develop a profitable business, so keep running personal experiments because there’s little to lose.
The trap that gets most entrepreneurs is not that their idea is horrible, but that it’s decent. The most dangerous ideas are the ones that look good on paper and in the founders’ fantasy world of linear thinking and rational consumers. It’s easy to make the entrepreneurial mistake of finding something that is marginally better than the status quo in some aspects and believe it’s a great idea, while ignoring the other aspects that, combined, explain the consumers’ (seemingly irrational) current behavior. I’ve made this mistake multiple times.
When something is only marginally better than what people are doing, you’re jumping into a highly stressful and competitive market with a high risk of failure, or worse, mediocrity, because people don’t change their behavior for “marginally better.”
“Must have” versus “nice to have”
Jun Loayza, good friend and seasoned entrepreneur, told me once that he tries to avoid falling for the “nice to have” trap, and build “must have” products or services only.
A “must have” product/service is something that, once you understand how it works and what it will do for you, you pay to get it. You don’t simply “want it;” you make the necessary arrangements to get it as soon as possible. You understand how it’s an improvement of your life, therefore, you believe it would be stupid not to buy it.
A “must have” is a product or service that either creates a new market, or is 10x better than the alternative.
Uber is 10x better than taxis. For many travelers, Airbnb is 10x better than hotels and hostels. As long as there’s decent internet connection, Skype is 10x better than phone service. Netflix is 10x better than video rental. Book in a Box is 10x better than traditional publishing for busy wannabe authors. For regular people, Strikingly (and similar services) is 10x better than hiring a programmer and designer to create a new website.
On the other hand, a “nice to have” offer is a siren song; it sounds great, it looks great, people will tell you it’s great, and they fantasize with the idea of buying it and using it one day… And yet not enough buyers come. The fact that an idea can provide some value does not mean that it provides enough value for people to change their behavior to get it. Regardless of what they say, when it’s time to make the investment/sacrifice, people choose to stay in the status quo.
Look at traditional education. There’s been an explosion of new offers in education, both online and offline, but the system remains strong. Most people still choose to go to college and pursue MBAs, no matter the cost, than learn and craft their skills, credentials and networks via alternative programs. There are a few exceptions, but overall, most of these offers are “nice to haves”. Massive open online courses (“MOOCs”) are free but still have a 98% dropout rate. The explosion of independent “bootcamps” fail to deliver psychological benefits of college such as belonging, reputation or clarity. These products and services underestimate people’s inclination to the routine, the familiar and the culturally accepted, and therefore struggle to become a necessity instead of a luxury.
Side note: This doesn’t mean you shouldn’t build anything that doesn’t have the potential to become a multi-billion dollar monopoly. There’s nothing wrong with a small business, but 1) you still need to figure out what behavior you’re trying to change in the small group of people you want to serve, 2) there’s an usually unspoken toll to one’s wellbeing, relationships and finances when running a business in a crowded market, and 3) you may be able to make more money, work less hours, and be happier/healthier selling your skills to someone else.
For users/consumers, the question is never “is there any good to this?” but rather “is this the best thing for me?” As in life, decisions come to opportunity cost, not net value. I contend that to change behavior and overcome opportunity cost of any established consumer behavior, you need to offer something 10x more valuable than whatever people are already doing.
Is collaboration the new and only career multiplier?
In his best-selling book “The End of Certainty”, Simon Dudley exemplifies the importance of doing things 10x better with the story of how Netflix took over Blockbuster’s market by doing something radically different (10x better) than Blockbuster, which tried the old approach 10% better. Simon concludes:
“If challenged to be 10% better, any business can say, “I can probably squeeze 10% more out of my business by simply driving a little harder. I’ll make it slightly more efficient. I’ll make my sales people work slightly harder. I’ll make my marketing budget go a little further. I’ll push on my advertising agencies.
Looking for 10X better results can produce much better results within organizations because you actually have to think differently rather than become a slightly more efficient version of what you do today. […] In today’s world, where the rate of change is increasing at an exponential rate, the whole idea of keeping up by simply sweating the business for another 10% has become a losing strategy. If you’re not looking for dramatically different ways of doing your business, then you’re probably in a position where somebody else will replace you.”
So, what does this have to do with your career?
My thesis, which I’m still developing, is that to grow and remain relevant today we must dramatically reshape how we think about our jobs and careers, and just like businesses, look to create and serve untapped markets or become 10x better than the competition in the professional market we are in.
What’s more important, I believe, is that the only way to achieve this in a networked age is to understand and leverage the new dynamics of collaboration and information flow between people. I see huge potential in the idea of redefining ourselves as “information and collaboration agents”, instead of “reactive task accomplishers”, because that’s where software is becoming 10x better than humans.
Side note: It’s basically impossible to do something 10x better than existing software, because 1) software integrates new data immediately, meaning that it learns very fast, and 2) it taps into massive amounts of data coming from the behavior of thousands or millions of people. The opportunity, however, is that software is destined to run behind people’s imagination. Artificial intelligence is unable to imagine, and all value creation requires imagination first. As long as there are problems to be solved, there’s value to be created by humans before software can take over.
It’s ironic that, in a world where many things change faster than ever, it’s those that become experts on the things that don’t change–people, physics, chemistry, math–and understand how to adapt their value offered to the new formats who will thrive. The more complex and noisy the world gets, the higher the risk to misunderstand what people want, and therefore, to work on the wrong thing. For every business and every person in the world, there’s an increasing need to make sense of what’s going on, because most current institutions (education, media, governments, religion, online networks) are doing a horrible job at it.
Tyler Cowen famously said that “average is over.” My corollary is that “marginally better than average is risky.” Be unique or 10x better, or get ready to struggle like most businesses marginally better than the status quo.
The future of jobs?
If you want evidence that leveraging collaboration and information is already a trend, look at the way many recent multi-million dollar businesses create and deliver their value. Sangeet Paul Choudary, CEO of Platform Thinking Labs, explains in his book “Platform Scale” why a business that tries to understand and leverage human relationships is the best kind of business to build in our current technological context:
“It isn’t software itself that is eating the world. It is the ability of software to orchestrate people and resources, make intelligent decisions, and enable a connected global workforce to create value that is the real force driving disruption today. Uber orchestrates the physical movement of cars and travelers connected to the Internet, with its algorithms making intelligent decisions. Facebook intelligently identifies the content that is most relevant to a particular user, while Reddit organizes users around the world toward an editorial function. Airbnb isn’t merely an app or a website; it is a central market-making mechanism that allows the creation of an alternate market for accommodations. Likewise, Amazon has done much to change power structures in the publishing and retail industries.
We are no longer in the business of building software. We are increasingly moving into the business of enabling efficient social and business interactions, mediated by software.”
Enabling interactions. That is the future of jobs, I think, although we have only seen the tip of the iceberg of what “enabling interactions” might mean. I have mostly questions as to how things will play out, many of which I will explore through future newsletters. But as long as we keep thinking about our careers in terms of “delivering imagination,” I’m optimistic.