If starting a business is so great, why don’t more people do it?
One of the perennial questions about startups is where to come up with good startup ideas. There’s been much written about it but, speaking from personal experience and anecdotes, too much of it exhausts more than it instructs.
Happily, understanding the mechanisms of how we learn and acquire new skills falls under the purview of meta-learning. This post seeks to apply the concepts of meta-learning to the fitting topic of “how to make a squillion dollars/passive income.”
To see the mechanics of meta-learning in action, let’s first turn to a similar but more digestible case study first. Acclaimed New York Times bestselling author Tim Ferriss uses cooking as his base. In The 4-Hour Chef, Ferriss writes:
“I don’t care for why people pick up cookbooks. I’m much more interested in why they put them down. The hypothesis: if I can address the primary, but often ignored, tripping points, I should be able to increase the number of people who eventually become master chefs. To develop a list of failure points—the reason people put cookbooks down—I polled more than 100,000 of my fans on Facebook (64% male, 36% female) and looked for patterns. Here are a few:
1. Too many ingredients (and therefore too much shopping and prep).The 4-Hour Chef, Ferriss, p. 21. Ferriss proceeds further to share useful meta-learning tools: DiSSS (Deconstruction, Selection, Sequencing, and Stakes,) along with CaFE (Compression, Frequency, and Encoding). Pending demonstrated interest, more in-depth posts about these concepts will be written about how they relate to startups and entrepreneurship.
2. Intimidating knife skills, introduced too early in cookbooks.
3. Too many tools, pots, and pans, which are expensive and require too much cleanup.
4. Food spoilage.
5. Different dishes finishing at different times, leading to cold food, undercooked food, burned food, etc.
6. Dishes that require constant tending, stirring, and watching.
In philosophy, there is a common joke that states “I’m uncertain what I am, but I’m certain what I’m not.” By measuring and optimizing for the most frequent “tripping points,” even if an instructor can reduce drop-offs by 5-10% consistently, that translates to a dramatic increase in total net impact.
We started with a grand question: “If starting a business is so great, why don’t more people do it?” By using the power of tripping points, more broadly categorized as inversion, we can entertain that perhaps the question itself is poorly formed.
What happens when we ask: “What are the most common reasons people give up in their entrepreneurial results?” To paraphrase the infamous opening line from Anna Karenina: everyone’s motivations for starting a business are similar: mastery, wealth, autonomy, etc. but each entrepreneur gives up due to his/her own specific obstacles. Lacking a ginormous audience and media empire, here’s a mash-up of Ferriss’ list most common cooking tripping points and business challenges:
- Too many factors (What’s the business idea? Whose the starting team? What are you selling to whom and why? Why is this the right time to start your business? Why are you the right person to start this business?)
- Intimidating business skills, introduced too early in the entrepreneurial process. (You need to do SEM! Facebook ads! Optimize for an audience that you don’t have with a product offering you’ve yet to create! Write a business plan and pitch the idea to a bank when you have zero experience and zero capital!)
- Too many tools, SaaS solutions, and costs of doing business, which are expensive and require too much maintenance when you don’t have revenues and customers to support the engine.
- Lack of market.
- Ambiguity of startup goals and needs: are you building a lifestyle business or a billion dollar valuation hopeful? When do you raise capital, if ever? What’s the difference between a small business, a startup, and HBO’s Silicon Valley? And how do you determine which one’s right for you?
- Businesses that require constant tending, servicing, and watching aka burnout.
Recalibrating to the destination
Did the previous two lists exhaust you? They exhausted me too. In fact, I eliminated away ~700 words before publishing this piece because there are so many more failure points in startups and entrepreneurship. As it turns out, starting a business has even more variability than cooking. Who knew.
Nevertheless, it seems that the best way hedge against the themes of excessive complexity, economic failure, and personal exhaustion is to find something that is both hyper specific enough to your life to seem obvious, and yet, serendipitous enough to unveil unthought-but-obvious-in-retrospect business opportunities. A subtle challenge, indeed.
Presenting: the Right Question
Our line of inquiry progressed as thus:
- If starting a business is so great, why don’t more people do it?
- What are the most common reasons people give up in their entrepreneurial results? And if we invert those, can we come up with a solution for how to increase the odds of starting a successful business?
- There seems to be too much variability in startup companies to merely invert tripping points. Thematically, excessive complexity, economic failure, and personal exhaustion are the biggest threats. How do you find problems hyper specific enough to your life to seem obvious, and yet, serendipitous enough to unveil unthought-but-obvious-in-retrospect business opportunities?
Related to the featured image, but expounded upon below:
For a B2B SaaS company, the easiest/most likely algorithm to succeed:
1) Be embedded in the industry for a while Clearly this is not the only way to be successful, but “I have a random idea lemme build it” is a great way to be not successful Succeed = your business that makes enough revenue to support you and a reasonable lifestyle, equating (and/or eventually surpassing) what you would typically make at a W2 gig, from a diversity of customers and not trading your personal time for money.https://news.ycombinator.com/item?id=17102981
2) Make lots of connections, build credibility
3) Build SaaS app to solve key pain point you experienced in #1
4) Sell to the folks you know from #2
5) For bonus points/de-risking: find 25 potential customers (from #2) and reach out to them and validate this idea (Jobs-to-be-Done). Get a handful of them to commit, even verbally, to buy this when you’ve got an MVP built.
The genius of this comment is its final transformation of the question: from “How do you find problems hyper specific enough to your life to seem obvious, and yet, serendipitous enough to unveil unthought-but-obvious-in-retrospect business opportunities?” to “how do I structure my life so that I’m frequently being exposed to startup/business/passive income ideas that I can make unique contributions to execute on?”
- If you’ve been working in your industry/company/professional context for over a year, or received a promotion, you probably are aware of how your company is spending money. Are there pain points and solutions you’d throw money at for someone to solve? Once I started flipping my mindset from disappointment at solutions I already pay for to sniffing for squillions, I began to see real opportunity everywhere:
- From: I can’t believe we’re out of water for the dispenser again, to: how much money would it take to build a SaaS CRUD app for water delivery that just works?
- From: I don’t have the bandwidth to do inventory, design, customer service, and shipping of merchandise, to: I wonder what kind of business model would allow a fulfillment firm to deliver these services at scale?
- From: Wow, providing health insurance is super expensive, inflexible, and generally opaque in its value, to: what would the business model of a insurance company that gives month-to-month flexibility while delivering the same (or even better!) peace of mind to gig economy workers look like? [Crucial note: this ties in to the importance of generating ideas from primary experience, but then evaluating business-founder fit ergo I am in no way well-positioned to start this company, which would arguably be one of the most transformative healthcare companies in present day America.]
- Similarly, how are you spending your free time socializing? Spending time with other young people in their 20’s is probably a picked clean environment to getting ideas. When was the last time you spent time socializing with mid-age to older individuals with a great deal of money to spend? Warren Buffett used to sell used/fished golf balls, and that’s the type of “problems” you see hanging around country clubs and affluent retirement homes.
- Tucker Max stumbled upon a business that booked $200k in revenue in 2 months because he regularly socialized with successful entrepreneurs: a group that has both a) lots of problems they need solving, and b) general ability and willingness to pay.
- Because of my fluency in Mandarin and Chinese ethnicity, I’ve had Chinese nationals and American businessmen each ask me for intros to each other for business relationships. Consequently, it eventually struck me that these two halves of my network could benefit from an EB-5 investor/investment matching platform.
- See this article: https://www.financialsamurai.com/increase-the-value-of-your-professional-network-by-befriending-these-five-archetypes/
- Technical solutions are not rare—but sales/money are. Interestingly enough, individual talent and labor is being commoditized too—brands and managed marketplaces are gaining further power in the winner-take-all economies. (See the featured image.) So what are the ingredients to getting to sales/money?
- Commitment, trust, and understanding.
- As someone whose professional experience has included vetting dozens of vendors (software, physical goods fulfillment, office management), I need the job done and peace of mind that the person I trust will take this job off my plate.
- If you can be that “boring” person or platform (I want my life interesting and my money boring, cool vs. cash), with a plausible chance of solving my problem, then I’ll give you the contract. (Bonus: this probably works for getting a technical cofounder. And your first investor. Maybe every meaningful relationship in life, but let’s not get ahead of ourselves.)