Don’t Judge a Business by its Idea
A humbling thought that I so often fall prey to
From the time I was in college, to the time I graduated and started my first job, and to now that I’ve been working as a full time software engineer for over 3.5 years, I’ve both had my share of business ideas and heard of many ideas from other people. I cannot tell you how many times both the person I’m speaking to and I — myself — was either skeptical, saying “I don’t think that will work” or enthused, saying “this is a great idea you should pursue it!”
Over the years, I’ve come to realize just how wrong it is to be thinking that way.
Why do I think we know if a business idea is good or bad?
Today, I feel this to be a deep truth: a business should not primarily be judged by its business idea, but this is a thought that has gotten fleshed out over time. I wanted to reflect, first, why so many of us tend to think that we can predict the success or failure of a business.
Truly, it’s because we see so many examples of it.
- In a world where there was no car, building something that can transport you from point A to point B much faster than a horse is unequivocally a good idea. It solves the huge logical pain point of transportation.
- In a world where there is no internet, the ability to easily get and share information via a device that is interconnected with many other devices is just too great. Again, it’s a huge pain point solved: no longer is there a need to go to the library (and countless many other problems).
- Housing: people need a place to live, so it makes sense to build houses for them.
I could go on forever citing examples upon examples, and because we see so many instances of “good” ideas—ideas that solve real problems that people have, we think we’re now able to discern what idea are “good” vs. “bad”. We think we can predict what ideas will generate money vs. what will flop. We think we can use logic to determine the success of an idea, and therein lies our mistake.
Logic doesn’t determine business success
There are many parallel lessons I’ve learned over the years that are all pointing in the same direction.
Through my work, I learned that when deciding a project to work on, it doesn’t matter how hard you work. Instead, what matters is the impact of your work. When I first started, I fell prey to that, but thanks to the guidance of my manager and other seasoned engineers, I was always directed to doing the most impactful work I could.
Recently, while reading Same as Ever by Morgan Housel, the author shares this key lesson from economist Per Bylund: “the concept of economic value is easy: whatever someone wants has value, regardless of the reason (if any).” And this one is equally easy to prove: how many times have you yourself purchased something that in hindsight doesn’t make any sense? Or, how many times have you spent too much when you could have saved?
I was speaking to a friend recently who had started a business while he was in college. I was telling him about some of my ideas, and the lesson he gave me (which I hope to apply one day) was to sell my product because I build it. This, he learned from his experience running a business and from his mentors, and he said it was especially important when you are looking for funding. Why?
Forget judging ideas logically, ask this instead
Another lesson from Same as Ever is when the author writes, “the ones who thrive long term are those who understand the real world is a never-ending chain of absurdity, confusion, messy relationships, and imperfect people.”
To me, that says it all. The world is absurd and people are imperfect. People make decisions based on their emotions. While those in your close circle may seem more or less logical, compound slightly illogical decisions over time and with millions and millions of people, and you get an absurd and imperfect world that just does not make any sense.
If that is truly what we start with, how wise would it be for me to use my little life experience, my 1 out of 8+ billions life experience that truly amounts to nothing, to judge any idea presented to me? Truly, it’s a bit egotistical for me to even try. What do I know? What can I possibly know? It’s such a paradoxical thought.
For perspective, think of the most successful people and companies, and look at the large number of books and articles that explain those successes. If it was so easily explainable, why don’t the explainers go ahead and build something of their own to be just as equally successful? Think of the many successful companies today that are trying but failing to innovate and grow. Haven’t they got it? The truth is, no one gets it, including those that have succeeded, and we’re all just trying our luck using whatever knowledge we’ve acquired to make decisions heuristically.
Instead, I find that it’s better to ask this question: “How many people are willing to pay for this?” It’s not even whether the idea solves a pain point or not. Though that could be another decent heuristic, the vitality of a for-profit business depends on whether it can bring in more revenue than incurred expenses, and that solely depend on how many people will pay for it (either directly or indirectly).
At least, the above are my current thoughts, but what do I know?
