What Truth do you Know which Nobody agrees with!
This is not an easy question to answer. Ponder for a minute and check if you are able to come up with an answer for yourself.
Paul Graham and Peter Thiel ask this question regularly to their potential investments to gauge the long term valuation of any company and it is, perhaps, the most important question that you can ask any startup founder.
I have thought long and hard. And one answer that I have been able to come up with is that:
“First 20-25 years of a Kid’s life should not be spent in School but in some worthwhile activities”
Now - Why should you answer this question. Your own answer to this question gives you the contrarian belief that you have learnt from your own life and you know every single detail about that belief. If you work on this contrarian belief then there is a good chance that you would be on to something which very few people would understand as of today. You can either keep that idea shut in your mind or you can try to use that INSIGHT to start a business.
When Investors say that “We fund founders who created the product to solve their own problem”. Essentially, what they mean is that the founder was able to unearth a contrarian truth which very few people have understood. Why? It’s a truth because the founder knows it from his own life and it is contrarian because if a lot of people understood that truth then they would have already captured that market.
How to use the Secret
Now, that you have access to the contrarian idea. Don’t go out and try to compete in a big market. Instead, what you need to do is that you need to go after a market which is seemingly very very small so that you can create a monopoly in that market.
This is What Facebook did with Harvard and then successively more colleges. Ditto for PinDuoDuo which started going after Tier 4 towns for their grocery needs and for Pinterest when Ben went after designers in early years. You need to, at all times, try and maintain a monopoly in whatever markets you are in.
The opposite of this philosophy is to foolishly go after a big market of 200 Bn$ (Example Indian Horizontal E-commerce) and assuming that even if the business manages to take a 1% share of that market - It would become a Unicorn. The only problem with that argument is “Why those 1% people jump ship to your product and why would competition not do anything about the same”.
The perfect market for a new product is a niche segment which is not served by anyone. Capture that market and then move on the adjacent markets without disrupting anyone. The sequencing of the markets is an art which all the successful entrepreneurs have mastered.
Why would users use your product?
For the users to try your product, the product has to be 10X better than the other products in the market. If your product is only 2X better (in your communication) - it would already be discarded by the potential users as marketing pitch. So it has to be 10X better for you to be able to transparently claim superiority.
The biggest issue is for your users to leave the comfort of the existing solution and try something new. Try using Bing instead of Google Search and Zee5 instead of Netflix and you would know how difficult it is.
Jumping products leads to a significant cognitive load on the human brain which all humans try and avoid. Why? Because Most of our life is run on auto pilot through strong neuron paths built through doing the same thing multiple times. Try closing your eyes right now and answer “What is the color of wall in front of you/behind you?”
Why do we run on auto pilot? Because Human Brain is an energy guzzler - At 3% of Body weight - it consumes 25% of our total energy needs. It, thus, tries and relegate everything to the subconscious to save every ounce of energy.
How can we make our product 10X better than the current solution
Four ways for your solution to be 10X Better:
Proprietary Tech: Example - Google
Network Effects: Facebook
Economies of Scale: Amazon
Brand: Coca Cola
Before starting to work on your contrarian idea - answer these Seven questions:
1. The Engineering Question
Can you create breakthrough technology instead of incremental improvements?
2. The Timing Question
Is now the right time to start your particular business?
3. The Monopoly Question
Are you starting with a big share of a small market?
4. The People Question
Do you have the right team?
5. The Distribution Question
Do you have a way to not just create but deliver your product?
6. The Durability Question
Will your market position be defensible 10 and 20 years into the future?
7. The Secret Question
Have you identified a unique opportunity that others don’t see?
These seven questions have been mentioned by Peter Thiel in his wonderful book - Zero to One. According to me, Q3 and Q7 are mostly neglected even in theory by most of us. We always want to start big which makes us susceptible to all the competition early on.
However, the secret question appearing last in the above list is the one which starts the whole chain reaction and is worth discussing in detail. There are two kinds of secrets - Secrets about Physical world or Secrets about People.
Nature’s secrets are all around us and are begging for someone to look deeply. However, secrets about people are interesting since people themselves don’t know these secrets about themselves
So while building a company - You need to ask two questions: 1) Which secrets is Nature hiding from you 2) Which secrets are people not telling you.
The best place to look for secrets is where no one else is looking. Most people think only in terms of what they’ve been taught; schooling itself aims to impart conventional wisdom. So you might ask: are there any fields that matter but haven’t been standardised and institutionalised at Universities? Some examples of such fields are Nutrition and Consumer Research.
So which secret are you holding on it. Reveal those in the comments and I am sure we would have an awesome discussion on the same even if we don’t end up building a Billion dollar company through the same.
If you are in India, pls stay safe - COVID- 19 is growing again so pls stay indoors.
Sayo Nara till next week!