Video of the Week: Chris Dixon on Good Ideas That Looked Like Bad Ideas

Chris gave this talk last year at startup school. It’s great. It’s about 20mins so an easy watch.


Comments (Archived):

  1. jason wright…”Cowan’s college friend rented her garage to Sergey and Larry for their first year. In 1999 and 2000 she tried to introduce Cowan to “these two really smart Stanford students writing a search engine”. Students? A new search engine? In the most important moment ever for Bessemer’s anti-portfolio, Cowan asked her, “How can I get out of this house without going anywhere near your garage?”

    1. fredwilson

      Chris used to work at Bessemer

      1. jason wright

        do you have an anti-portfolio?

        1. fredwilson

          yes, but we have not published itnot for any reason other than it hasn’t reached a high enough priority list

          1. jason wright

            the contrarian view might be that the portfolio is the priority.Chris’s message seems to be all about that.

          2. Matt A. Myers

            I imagine Airbnb would be one of them?It’d be interesting to see the list to see why you might have not as easily seen the opportunity.

          3. LE

            I imagine Airbnb would be one of them?To me airbnb shows that the system works actually.Was considered and rejected because seat of the pants didn’t seem like something that would work.Don’t tell me about the ones that got away tell me about the 1000’s that the same filter disposed of that never went anywhere.Of course if Fred just wants to listen to everytime PG sends an email and says “this is good and will work” then he will have a lot more time on his hands to ski and take vacations and vet Brandon Burns esq ideas I guess.I’d have to re-read those emails between PG and Fred (about airbnb if I can find the link) but my guess is that PG didn’t sell it well enough to answer the base objection that Fred had.For the record I would never airbnb my place or stay at an airbnb. But if I was presented with compelling evidence as to why it worked (and I invested in these types of things which I don’t) I would certainly listen.

          4. JimHirshfield

            “Don’t tell me about the ones that got away tell me about the 1000’s that the same filter disposed of that never went anywhere.”Best point you’ve made all day.

          5. LE

            Yeah simpletons [1] always like to talk about the one patient that the doctor misdiagnosed without recognizing that almost every headache is not “the big one” and that’s why they doctor didn’t do a battery of tests and “missed it”.[1] and Matt Taibbi (writing for the Rolling Stone).

          6. Matt A. Myers

            This is what I was actually interested in, though couldn’t think of how to word it.

          7. Matt A. Myers

            But what if Fred et al were just a little looser on the reigns – would the cost of those extra investments that don’t turn a return outweigh the few mega gems that will likely get exposed? I doubt it.You won’t even Airbnb it to me? 😉

          8. LE

            would the cost of those extra investments that don’t turn a return outweigh the few mega gems that will likely get exposed? I doubt it.The “cost” is not just the money. If it were then you would take a piece of many things for sure.So if your question is “wouldn’t it pay to throw some dollars at those extra investments?” well the answer (if only $$) would be yes. But it’s not.There is also the time factor.More investments mean more meetings, more emails, more events, press requests, more problems and of course babysitting.So it’s the cost of the investors time. That’s fixed.I think I told the story of the partners who open a chain of very successful card and gift shops (sold out to Hallmark). In the beginning there was one store. No problem. Then they added another store. No problem went to one in the am, the other in the pm. Then they added a third and then hundreds (iirc). All the sudden things changed they ran out of time to manage the old way. Fortunately they were able to scale it with managers.But in terms of what Fred does it’s quite clear that from his past experience he doesn’t want to have the type of organization where he is not intimately involved with his investments. Ntim, I’d be exactly the same way so this is a matter of personal style and comfort more than anything.

          9. Matt A. Myers

            True about the time factor. I just got back from lots of yoga, a analytical brain isn’t kicked back on apparently. 🙂

          10. Eric Snyder

            Any guess as to how many of these were turned down for some reason other than you & your team not thinking it would provide a good $ return? E.g. conflicts of interest, lack of fit with your investment thesis, etc

          11. fredwilson

            we have not done a deep analysis of the anti portfoliobut my bet is it is mostly plain stupidity at work on our part

          12. LE

            it is mostly plain stupidityAt the point in time you made the decision you based it on the way the world looked and all the available information at the time. After careful consideration. Not knowing anymore than I read here that is a long process and involves much back and forth. And obviously there is gambling involved in assessing the information and making decision.I don’t see how it even comes close to “plain stupidity at work on our part”.Plain stupidity is my mother putting up a hot water vaporizer on a flimsy table with the cord stretched to the wall and the resulting accident (I got burned and spent 5 days in the hospital as a kid).That said there is more of a chance that you’ve erred (or would have erred) in the opposite direction. Why?Because you simply don’t have the time to vet every Brandon Burns who writes to you and you have to make a snap judgement as to whether to invest or investigate further. But that’s not stupidity either it’s just the nature of the business you are in.

          13. Tyler Hayes

            I’m no parent but seems to me like VC is like parenting.You do the best you can with what you got when you got it.Sometimes you’re angry or tired or hungry or just want to sleep in 10 more minutes. Can’t catch ’em all. Best you can do is set yourself and your children up for success by taking care of yourself first and becoming the best person you can be.

          14. LE

            Sometimes you’re angry or tired or hungry or just want to sleep in 10 more minutes.Are you saying the kids want to “sleep in” or the parents want to “sleep in”?

          15. Tyler Hayes

            all of the above

          16. awaldstein

            There is no course to be a parent and you certainly don’t choose your children.Investing–quite the opposite to me.

          17. JimHirshfield

            Daddy Tyler. Call me when that happens.

          18. Tyler Hayes

            got you on speed dial

          19. LE

            I’m no parent but ..Hold off on parenting until you get this established and off the ground: don’t need sleep deprivation and parental responsibilities making things more difficult for you. You need every advantage you can get.And, to mimic my other comments elsewhere, make sure that if you read or hear stories of people who were able to make it happen with kids you fully research the people who failed with kids as well. (Of course you won’t be able to do that.)

          20. Tyler Hayes

            You’ve got yourself a deal friend. Also I’ve already got two cofounders if you catch my drift.

          21. JLM

            .The notion that decision makers are impacted by their local environment is one of the realities of life but a brilliant insight under any circumstances.Well played.This is why I never pitch a deal to anyone at 11:00 AM unless I am taking them to lunch. Prime deal times to increase probability of getting to lunch are first thing in the morning and right after lunch.JLM.

          22. LE

            Along the same lines if you stuff someone with food they will be more likely to lose the brain power to think through all the details. You know that glossed over feeling if someone eats or eats to much. So unless I misunderstand your point I think we agree on that one, right?Liquor obviously also plays a role in terms of getting people to do things they normally wouldn’t do.I sometimes wonder about the attorney that must present his case to the jury that has just eaten lunch and somewhat sleepy. In that case you would want the prosecution to be in the PM and the defense to go in the am but not right before lunch.Prime time for me to get something from my dad was as follows:a) After he had eatenb) After he had started to read the paperc) After he had read a few stories but always between stories.I actually had to plan things like that or face certain rejection of whatever I wanted.

          23. JLM

            .You are being way too tough on yourself on this score.If you played professional baseball and batted .300, you’d be a star.If you play professional VC and bat 0.150 — long balls with men on base — you are a star.You have to grade on the reality of your undertaking.So I had to down vote you on it but with no malice intended, my friend.JLM.

          24. pointsnfigures

            On the floor we used to say if 30% of all the trades we did were winners 10-20% losers, and the rest scratch-we’d be in the Hall of Fame! Key to success is how to handle your losers. Limit loss

          25. vruz

            I was watching an old Guy Kawasaki speech yesterday, whilst most of his views seem a bit dated to me now, there were some insights he offered about companies that looked to him like total losers in the beginning, and later went on to become great successes. He was offered to be CEO of Yahoo at some point, he didn’t see a future for Yahoo, Guy was thinking in terms of the PC revolution, not the Internet revolution. He also mentions in passing how it was impossible for him to see how it was a good idea to sink millions ramping up a free web service where people can post worse-than-VHS quality videos of cats and stolen content. Namely YouTube.The lesson I glean is that nobody is safe from marketing myopia, even renowned marketing guys. Especially renowned people who have already been successful.The worldview of success of the past shapes the topology of our respective networks of thoughts in our brains, and our ability to make connections between seemingly unrelated things.But how can you tell order from chaos? Where’s the emerging beauty in the fetid disorder of a decaying dead horse?Our instincts crave for the specific order/beauty of the things we know, but we’re ill prepared to make sense of the order unknown, because the unknown looks like disorder, and smells of decomposition, before the order/beauty becomes apparent to us, identifying the connections that compose it.So, more than anything, I think a good strategy to overcome this problem, is asking more, to a fault, from those who see the order/beauty, where exactly do they see structure, where exactly do they see order, beauty, logic and topology.To a fault and beyond.Because if we can’t see it ourselves, we need help leading the blind.

          26. LE

            Airing dirty laundry is something that was, unlike sex, just invented in the internet era.Possible only other cases, old school, where you air dirty laundry is in a trial [1] or in public relations where you want to get out in front of something so the other guy can’t make hay with it.Other than that and unless it’sl like the waitress [2] who tells you what not to order to gain your trust, if I fly with JLM in his private plane it doesn’t give me confidence to hear about his near misses. And make me want to fly with him.Of course I guess Harvard could publish a list of people who graduated who didn’t achieve success and can’t find a job. And you know maybe that would enhance their image. Or the Cleveland clinic runs a full page ad about the cases where they screwed up and someone died. Or the doctor that you are visiting telling you about mishaps with patients “thanks for your honesty!”To me it’s in the direction of a hail mary strategy or maybe an “Avis” we try harder something that someone does to set themselves apart when they feel that they have more to gain than to lose by airing that info.Oh yeah and the peanut gallery doesn’t understand the nuance of negative information either so they will no doubt jump to conclusions that aren’t warranted about it.[1] Yes folks I’m going to show you that my client is a philander but that doesn’t mean that he murdered his wife.[2] Or the electrician I mentioned the other day “you don’t have to replace those fixtures we can just change the ballast”.

    2. Matt A. Myers

      That doesn’t sound like a person that’s really interested in innovation – other than the making money from it part – not in their core being.

  2. Matt A. Myers

    To know the best secrets, be involved with, around, and part of thought leadership. Evolve your own ideas and theories.This is where you’ll find secrets “no one” else has yet figured out.AVC is a good place to start joining conversation and engaging with your own ideas and theories of the internet – of the world.EDIT: Blog post I did similar to this, “Thinking Ahead, Efficiencies Discovered” –

  3. pointsnfigures

    At the end, he talks about his own investing, and which were successful. Makes sense to invest in someone that had direct experience. Very relevant point.

    1. Matt A. Myers

      Isn’t that common sense though?

      1. pointsnfigures

        A lot of times, innovation happens from people outside the industry because insiders have such tunnel vision and can’t see it. I don’t think it’s common sense. He also said innovation comes from hobbies. I guess that could be construed as common sense. There are a lot of things in the world that are common sense that people refuse to believe. For example, raising minimum wage creates more unemployment. Common sense.

        1. Matt A. Myers

          Funny example because its scope is so narrow. Another example, giving everyone a minimum living wage will reduce unemployment.

          1. pointsnfigures

            No it won’t.

          2. Matt A. Myers

            It will under the same light that raising minimum wage creates more unemployment. If you give everyone the money they need to survive, then everyone gets what they need – so there’s no more worry of unemployment, unemployment no longer becomes a fear, so it becomes a moot point.

        2. Twain Twain

          “A lot of times, innovation happens from people outside the industry because insiders have such tunnel vision and can’t see it.”Yet, paradoxically, investors prefer to invest in people who have track records and direct experiences from inside the industry they’re trying to solve because those experiences have cultivated some sort of “proven domain expertise”.

      2. Drew Meyers

        I think so?

        1. Matt A. Myers

          Could just be a bias bubble we have …

  4. JLM

    .Vision — the ability to see things that others may not — is a skill that can be acquired over time with careful study.OTOH, the ability to jettison distractions and to quickly say NO is also a skill that will serve one well.Like many things, it is which pony that gets saddled up which is important.There are a great number of things which were destined for the ash heap which have been salvaged through hard work.JLM.

    1. LE

      OTOH, the ability to jettison distractions and to quickly say NO is also a skill that will serve one well.Otoh otoh any good businessperson gives extra points to the person who is especially persistent [1] (to the point of being annoying) and doesn’t take “no” for an answer. At a certain point the brainwashing sets in and there is familiarity and something happens that shouldn’t. (Explains how I got into Wharton by the way because it wasn’t from grades or SAT scores or family.)[1] Remember the Charlie Sheen character in Wall Street?

      1. sigmaalgebra

        Sheen’s character? He went so far he let theMichael Douglas character use him to doillegal stuff. So, Sheen’s character didn’tshow ‘persistence’ so much as ease inbeing manipulated.

  5. Terry J Leach

    The best startup ideas are a journey to the idea. You may start at one end of the problem, but after “listening” to many people in and around the problem you begin to see the big picture. It’s not an overnight process. Chris Dixon talk was dead on.

  6. William Mougayar

    “Entrepreneurs, startups and VCs are in the business of the leftovers.”So true. I like that line a lot. Most startups land in uncontested areas, typically flanking incumbents or creating new categories.But out of leftovers, spectacular dishes can come out!

    1. Jim Peterson

      Good points.”Creating New Categories”That’s the whole point, right, taking an uncontested area and becoming synonymous with the new category you create. Miller took the Lite Beer Category (at the time), with “Tastes Great, Less Filling”.Coke owned soda, a 100 year old brand. Pepsi chose to drive home they were for “The New Generation,” and grabbed a huge piece of the market.

  7. LE

    By definition we investors and entrepreneurs are in the business of the leftovers things that everyone else thinks are bad ideas but that we think and we discover are good ideas Very romantic but not true.If they think they are bad ideas it is because there is no proven market or logic as to why it would work or it goes contrary to the established business model they have and the way they make money.If the legacy search engines, who wanted sticky visitors, (so they could sell ads) thought that google was bad because it was so good people wouldn’t stay around (in essence what CD is saying) then they had a valid reason for not using google’s technology.And by the way (and most importantly) google at the time had no way to generate revenue the adsense/adwords didn’t come until much later. To wit when I spoke with Excite back in the 90’s it was very clear “you can’t pay to get to the top” it was very well known that what google does today was not the way things were done.So perhaps Larry and Sergey weren’t really that clear on their vision and as academics they just thought that the best search engine should work and would be floated by KPCB until they figured it all out.Any what is CD saying? That the legacy search engines should have upended their entire model of doing business at the time and “click their heals and wish” that a way came along to monetize that google traffic?You know back when I had my first copier they were built so that you essentially had a repairman there every few days to keep it running (was high volume). So they made money from the service as well as the equipment. Now you expect that Xerox or Kodak (they also did high volume copiers) is going to make more reliable equipment that will end that revenue stream? (This is all Clayton Christensen stuff, right?)Separately the ebay example wasn’t good at all. There was a history of people selling used stuff (which he highlights as well) and markets (I used to buy equipment from ads in local pubs) and it would be obvious to most people that something like ebay (if well executed and as the internet grew) would be a good enough idea to work. I don’t really even understand that might be something lost in the history or added for dramatic effect.

    1. JimHirshfield

      I’m no successful investor, but I remember my initial reaction to eBay: why build a company for Pez dispenser traders? It just seemed too niche and obscure.Then a couple of my friends went to work there and became multi millionaires. Makes me feel niche and obscure.

      1. LE

        why build a company for Pez dispenser traders?The pez dispenser myth is the typical angle that the media picked up on to make an interesting story line. Of course there is a hint of truth in that. A leg to stand on. But that’s it.Since I’ve been known to manipulate the media in the past (landed on the front page of the WSJ and other places) I would never believe this even if I didn’t find the following info below (from wikipedia ebay page):The frequently repeated story that eBay was founded to help Omidyar’s fiancée trade Pez candy dispensers was fabricated by a public relations manager in 1997 to interest the media, which were not interested in the company’s previous explanation about wanting to create a “perfect market”.[11] This was revealed in Adam Cohen’s book, The Perfect Store (2002),[9] and confirmed by eBay.

        1. JimHirshfield

          Pez or no Pez, I dispensed of it.

          1. LE

            Your jokes have been getting better by the way. [1]Yesterday, you know, on valentines day, I almost put a condom in my wife’s valentines day card. Yourself? What did you buy your wife/girlfriend (umm boyfriend?). [2][1] Hope this doesn’t sound like when you tell someone they have lost weight and you are actually implying that they looked fat before..[2] I’d personally like to see you be a bit more raunchy and not say things that would be ok for mom to hear on Leno.

          2. JimHirshfield

            re [1] Thanks, I’ll consider that a compliment unless informed otherwise. re [2] I find gift giving difficult. But I see you got the hard part covered. Keep it up.

          3. LE

            “But I see you got the hard part covered.”Superb!

          4. Andrew Kennedy

            I’d pay to see u do stand up. Just saying

          5. JimHirshfield

            Thanks. But wouldn’t that be kinda awkward? Me standing up there and just you sitting in the audience?

          6. Andrew Kennedy

            You can’t be stopped!

      2. sigmaalgebra

        > If they think they are bad ideas it is because there is no proven market or logic as to why it would work or it goes contrary to the established business model they have and the way they make money.Yup. Both reasons are important. And if get past thefirst, then hit the second.For the second, they already have a way to makemoney, and usually they focus just on that. So,they focus on their bird in the hand and not thetwo birds in the bush.Besides, for an established, on-going business,nearly everyone there has been hired to do afairly well defined job working on the bird in thehand instead of birds in the bush, and that ishow their compensation is determined.In one step more detail, for that existing job,getting the defined job done with enough quality and speed is paramount and otherwisepeople can get fired.For going after a bird in the bush, there isa big downside: The project is risky; theeffort might fail; and with the quality andspeed standards of the bird in the handsomeone is likely to get fired. E.g., nearlyno middle manager is dumb enough to bethis career on something so risky; betterjust to stay with the bird in the hand andbe sure can pay the mortgage, contributeto the IRA, get money for college for thekids, and replace the eight year old car.So, the downside is big. Even the CEO canbe reluctant to pursue a risky project; theBoard might conclude that he wasted $1million or more and might fire him for that.For the upside? Mostly not much for the existing worker bees and the middle managers. Also there are some accounting issues thatdiscourage such internal innovation.Also, when an established company wantsmore earnings, there’s an accepted,standard way to do that — don’t try toinnovate and, instead, just cut expenses.Indeed, it’s long been observed that companiesrarely ‘renew’ themselves and, instead, gothrough essentially ‘life stages’, risky,energetic youth, stable middle age, andold age to a slow death.So, typically what happens with a big companyis, when they want something new, they finda small company doing that and just buythe small company — as I understand theaccounting, this looks better. So, do someM&A and f’get about internal innovation.Tough to overestimate the resistance ofan established, successful company to dosomething new. CD’s claim that VCs getonly the “leftovers” is wildly false.

  8. James Ferguson @kWIQly

    I liked the comment “take conventional wisdom and diff it with personal experience”This ability to see the differences comes in two formsA) Often it takes deep domain experience to beat conventional wisdom.OTOH sometimes,B) it is that personal experience and conventional wisdom have no intersection . “I did it because I didn’t know it couldn’t be done”Surely the essence of true entrepreneur from french “entreprendre” is the one who undertakes “it”.Who acts on their experience regardless of conventional wisdom or in spite of it does not matter. Whence “Do or do not – there is no try”

  9. JimHirshfield

    “Wobs and Jozniak” – had a good laugh at that one. Chris handled it well.

  10. Guest

    So, to maybe state the obvious, why should Chris be a person to give us a direction on this. I like the guy , don’t see the relevance.

  11. Pete Griffiths

    I’m more concerned about bad ideas that look like good ideas. 🙂

    1. Matt A. Myers

      Just look for people that use a lot of highly energetic sounding words to describe what they’re doing. 🙂

    2. sigmaalgebra

      You want to hear about the ‘false positives’,and he was talking about the ‘false negatives’.It’s all separating the wheat from the chaff, the baby from the bathwater, the gold fromthe mud and gravel.

  12. Chris Phenner

    A procedural comment.Count the steps it takes to get an embedded YouTube video into a Chromecast device.’Pocket for Chromecast’ (and similar) devices is about to happen.Maybe it exists already (does anyone know?)The SDK is about 10 days public, so perhaps soon.Thanks for the share.

  13. sigmaalgebra

    Dixon’s talk has some relatively good thoughts (fora VC!).(1) “Bad Ideas”. Just because UGE Corporation(thank you John Kenneth Galbraith) doesn’t pursueproject X is quite weak evidence that project X is a”bad idea”.E.g., Microsoft was very slow to pursue shirtpocket, mobile computing; IBM was very slow topursue personal computing or even ‘personalproductivity’ computing; Microsoft was very slow topursue Internet search; MySpace was very slow torespond to Facebook; IBM was very slow to pursue anInternet server operating system based on x86 chips;Microsoft is now very slow to pursue virtualmachines that will permit running malicious softwaresafely; Wal-Mart is slow to respond to Amazon;McDonald’s is slow to respond to Subway; etc.So, really, VCs are not left with “the leftovers”.(2) CD’s first substantive slide particular to histalk has,”You need to know a secret.”.Okay. Tell the VCs? But VCs won’t sign NDAs.And, even if tell a VC, will they understand it?E.g., here at AVC on 2/12/2014 at…was “The Perception Of Conflict Is Conflict” wheresome of Taleb’s writing was considered thatmentioned ‘concave’ and ‘convex’, and in response Iposted…Continuing, for a “secret”. let’s setH = { X | X is a real valued random variable andE[X^2] is finite }Then with the set of real numbers R, it turns outthat H is a Hilbert space. The surprising part isthat H is ‘complete’. Yes, with a local Euclideanapproximation, we live in a Hilbert space; that theset H is also a Hilbert space is amazing.Why do we care? First, because with the more moderntreatments of random variables, they can representdarned near anything, any data we can gather.Indeed, constructing something that is not a randomvariable takes high cleverness and, apparently, theaxiom of choice! Second, because ‘complete’ meansthat, if a sequence in H ‘appears’ (in the sense ofCauchy) to converge, then there is something in Hfor the sequence to converge to and the sequencereally does converge; such a sequence, then, is onetechnique to get an arbitrarily accurateapproximation of darned near anything. How ’boutthat!The random variable concepts are heavily due to A.Kolmogorov. I believe that the Hilbert space ideaswere heavily due to J. von Neumann. Might as well,no extra cost, “stand on the shoulders of giants”,right?Well, as in my earlier post, suppose C is a convexsubset of H. Intuitively that means that for anytwo points u, v in C, the ‘line’ between them, thatistu + (1 – t)vfor t between 0 and 1, is also in C — simpleconcept. Suppose if a sequence in C converges topoint x in H, then point x is also in C. Then set Cis ‘closed’. So, C is closed and convex. Thenthere is a unique y in C so that the length of y isthe smallest of the lengths of all the points in C;curiously the usual proof of this result is based onthe high school parallelogram equality (we live in aHilbert space) and also the completeness of aHilbert space.Now, what can we do with that? Ah, “secret”!Now, how to tell a VC this so that they will see thevalue of the “secret”? Ah, f’get about it! Sorry,CD; having a secret is one thing; getting a VC tounderstand and value it is very much something else![E.g., Chris check your e-mail as of, say,Date: Wed, 13 Feb 2013 19:29:40 -0500]E.g., CD’s definition of a ‘secret’ is “Somethingyou believe that most other people don’t believe.”.Semi-, pseudo-, quasi-great CD: Who the heck elseis going to believe it?Of course, on how to find such a secret, CDcontinues with”Know the tools better than anyone else.”.Okay, but with this approach the secret threatens tobe just a tempest in a teapot if no one else knowsthe tools well enough to appreciate the secret. Andif a lot of people know the tools that well, thenthe ‘secret’ may not remain a secret for long.”Usually in our business, the software business, thetools mean knowing the computer science andtechnology better than anyone else.”Yes, Dropbox, although it sounds a lot like theTCP/IP network file system (NFS) that apparently Sunhad working fairly well, is apparently a goodexample.Still, sorry, CD,”knowing the computer science and technology betterthan anyone else.”is no longer very promising: The computing takes indata, manipulates it, and sends out the results. Sofar, nearly all the manipulations have been wellunderstood in advance from what we did, orunderstood in principle how to do, just manually sothat in this case the main ‘tools’ to “know betterthan anyone else” seemed to be just “the computerscience and technology”. Alas, using computing onlyto do the manipulations we know how to do justmanually is very limiting, especially for our goal”Know the tools better than anyone else.”.So, we need to know the “tools” well enough to findsome new and more powerful ways to have thecomputing manipulate the data to get a valuable”secret”. One way, when appropriate, is to startwith some mathematics, e.g., Hilbert space theory.If someone is not concentrating on mathematics morethan the unpromising”knowing the computer science and technology betterthan anyone else.”then they are not working very hard to find”secrets”!CD went on with”Know the problem better than anyone else.”.Pretty much good advice, but, if 100 million peoplehave the problem, then likely a lot of peopleunderstand the problem quite well so that knowingthe problem is not very promising as a barrier toentry, business advantage, or “secret”. Yes, thefirst good solution might get a barrier to entryfrom, say, a network effect. So, maybe everyoneuses Dropbox because it is good and due to a networkeffect that ‘market’ is a ‘natural monopoly’ so thatthere will be some one winner. Seeing this winnerin advance, however, might be challenging; that is,we know that there will be at most one big winner;so, was the cause of winning that the winner wasreally much better or just that they won out ofhappenstance? E.g., we know that a lottery has onebig winner, but was the reason some Joe won thelottery due to his having a “secret” — in a wellrun lottery, no!”I’ve noticed that like when you’ve sort of, I thinkwhen you’ve sort of really developed a secret itactually ends up being quite frustrating talking topeople who haven’t because you are just trying toshow them what you think is obvious but they can’tsee.”Right, CD!!!Well, even with”Know the problem better than anyone else.”.if want 100+ million users, then should find it easyenough to show the common man on the street theimportance of “the problem” and that so far there isno well known, good solution.CD, there’s an easier explanation for the path toconvincing VCs: (A) Mention the problem beingsolved and, then, just give them numbers showingthat you have ‘traction’ significant and growingrapidly. (B) Be like, say, SnapChat: Cute businessidea; nearly trivial to implement; the businessadvantage is that the idea has such a powerfulnetwork effect it is nearly a natural monopoly; sofar, surprisingly, nothing much like it issuccessful in the market; so, move fast and thenexit before the product becomes just a small featureof something else or just goes out of fashion. So,(B) is risky; (A) is is better for building asustainable, financially significant business. So,it boils down mostly to just either traction or afashion fad.But, there’s some more news — the VC business needsto do better: For one, here at AVC has been areport of the low average ROI of the VC ‘assetclass’. For another, there’s a recent statement byM. Andreessen that there are only about 15 projectsa year worth a Series A. For one more, we can alllook back over 10 years and count the number ofGoogles, Facebooks, and Twitters — there aren’tvery many.I propose that entrepreneurship and VCs are veryshort on attracting good people with good projects,and, also, with such people and projects the VCsmostly would not be able to evaluate the projects,essentially just as in your,”I’ve noticed that like when you’ve sort of, I thinkwhen you’ve sort of really developed a secret itactually ends up being quite frustrating talking topeople who haven’t because you are just trying toshow them what you think is obvious but they can’tsee.”In strong contrast, major parts of our society,outside of entrepreneurship and VC, are quite goodat developing new, powerful ‘secrets’ and gettingthen carefully and accurately evaluated.Net, if VCs want to make money from ‘secrets’, thenthey will need to learn how to evaluate them, andthere is a huge part of our society that does thateveryday routinely that VC can learn from.

  14. aweissman

    This is a GREAT talk. I like how he describes AirBnB as some hipster activity “you’d expect to see in the Mission or Brooklyn”!!!

  15. Abdullah Akbar Shafi

    Well He talk Wise..!

  16. John Saddington

    Just a small design thought here… with WordPress you can now just insert the direct Youtube link and it’ll auto-embed the full player. But… make sure you’ve defined the media content width so that it scales to the full width of the content area! that’ll look a lot better!tell your guy to double-check functions.php file and insert:if ( ! isset( $content_width ) )$content_width = 666;(… wow. nice width. :P)