Lenny's PodcastPattern Breakers: How to find a breakthrough startup idea | Mike Maples, Jr. (Partner at Floodgate)
EVERY SPOKEN WORD
150 min read · 30,051 words- 0:00 – 3:10
Mike’s background
- LRLenny Rachitsky
You found that there's basically three elements of most breakthrough startup ideas.
- MJMike Maples Jr.
The three are inflections, insights, and then founder future fit. Business is never a fair fight. What inflections let the founder do is wage asymmetric warfare on the present.
- LRLenny Rachitsky
You reference this term that you use occasionally, the certain secret.
- MJMike Maples Jr.
The way inventions happen is people get their hands dirty, being awake to the possibility that secrets are there. If you're living in the future and you notice what's missing, your intuition about what to build is far more likely to be right.
- LRLenny Rachitsky
This connects with that stat that you shared that 80% of your biggest returning investments came from a pivot.
- MJMike Maples Jr.
So startup never beats a big company by executing better. The way startups win is because it proposes a radically different future, disorients the incumbent, and chaotically moves people to that different future. The rock is the inflection, the slingshot is the insight that David shoots at Goliath. We're looking to create the conditions where we're going to get to play an unfair game by unfair rules that favor us.
- LRLenny Rachitsky
Today my guest is Mike Maples Jr. Mike is a legendary early stage startup investor and with his firm Floodgate, which was founded over 20 years ago, was one of the earliest pioneers of seed stage investing as a category. He's made early bets on transformative companies like Twitter, Lyft, Twitch, Okta, Rappi, and Applied Intuition, and has been on the Forbes Midas List eight times. More recently, he's been spending a lot of his time researching where great startup ideas come from and what separates the startups and founders that break through and change the world from those that don't go anywhere. After spending years reviewing his notes and decks from the thousands of startups that he's met with over the past two decades, he's uncovered three ways that breakthrough founders think differently and act differently. In our conversation, Mike shares what he's uncovered, along with the pitfalls that he's seen many founders and startups fall into, how to apply these pattern breaking principles to large companies, and so much more. I have never seen anything like this sort of research done before on early stage investing and startups. And if you're a founder, a product builder, or an investor, this will change the way that you think about building successful products. Also, as an added bonus, Mike has offered listeners of this podcast a very cool offer. If you pre-order the book at patternbreakers.com/lenny, you will receive a second signed copy of the book for free. There are a limited number of copies available of this offer, so if you're interested, I'd encourage you to place your order ASAP. The book is coming out July 9th. To take advantage of this offer, go to patternbreakers.com/lenny. With that, I bring you Mike Maples Jr. Mike, thank you so much for being here and welcome to the podcast.
- MJMike Maples Jr.
Lenny, thanks for having me. It is absolutely an honor.
- LRLenny Rachitsky
It's my honor. What we're going to be talking about in our conversation today is how to come up with a startup idea and how to take the first few steps to make that idea real. You have a book coming out that is exactly this, helping people understand how to do this. It's called Pattern Breakers: Why Some Startups Change the Future.
- 3:10 – 8:09
The inspiration behind Pattern Breakers
- LRLenny Rachitsky
Let me just ask kind of a broad question. You're a very busy, very successful investor. Why did you decide to write a book?
- MJMike Maples Jr.
Yeah, and it, like a lot of things in life, it, it was kind of an outgrowth of an accident, an, uh, outgrowth of being down a certain rabbit hole. So you know, about, about 10 years ago, Twitch was acquired by Amazon for 970 million, and we made something like 85 times our money. And normally you'd think that's a really good thing. It was a good thing, but I had forgotten that I was even a shareholder at Twitch. And so, uh, so I had to go to my LPs and I had to explain to them, "Hey, I'm sorry I don't have this in my financial statements. Uh, you know, but do you want me to restate them?" And they, they were all like, "Nope, we're good. Just send us the money." And some of them even sent me, like, bottles of champagne and stuff and, and, and the good kind. Then I started to kind of feel a little bit unsettled because so wh- how was I a shareholder in Twitch? I invested in a company called Justin.tv that had morphed into two companies, Socialcam and Twitch, and then Socialcam got bought, and so I just thought that was the company. So then I looked at, at... I'd been investing for about 10 years and I noticed that like 80% of my exit profits had come from pivots. And, and I also noticed that, like, all the ones that had seemed to do well didn't necessarily follow the best practices that everybody talked about. I did- I didn't see the Twitter guys doing the business model canvas, for example, and I didn't see the Justin.tv team, even as they morphed into Twitch, being who I would hold up as like the most functioning management team I ever saw. Right? A- a lot of it was pretty crazy and wild and random and, and a lot of... At the same time, I was helping founders shut down their companies and they had seemed to do all the right things. They'd done the business model canvas, they'd done customer development, they'd done all the things you're supposed to do, hired well. Uh, they would have been a Harvard Business School case study except for the fact that they failed. And so the genesis of this project was really like, "Okay, should I just retire before I get exposed? Is this just all random? Am I just lucky or is there something else worth understanding?" And as I, as I started to develop conviction about what those things were, I started to talk to people about it and a lot of people said, "Oh, you should write a book. Founders ought to see this. It'd be really valuable for, for their thought process in coming up with their startup ideas."
- LRLenny Rachitsky
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- 8:09 – 11:37
Uncovering startup insights
- LRLenny Rachitsky
Amazing. I'm even more excited to get into the meat of this. I was already excited. Before we get into that, just can you share a bit about the work that you did to uncover these insights? I know you have hundreds of decks of all these early stage companies you've looked at. What is the work that went into this?
- MJMike Maples Jr.
Yeah. So there's, um, there's a movie that came out a few years ago called Trainspotting, right?
- LRLenny Rachitsky
Mm-hmm.
- MJMike Maples Jr.
And there's these guys, these, uh, dorky old British guys in anorak coats who chart the comings and goings of trains like it's the most interesting thing in the world. They put it in their journals and everything. I'm that way when it comes to startups. So I have a database of any startup where you would have made more than 100X on your first check. And what I wanna do is I want to get a time capsule for those startups. I want to understand what did it look like not after it succeeded, but what did it look like at precisely the time you would have needed to decide whether it was an interesting opportunity? So I have the original pitch deck for what was at the time called Airbed & Breakfast, which I foolishly passed on. And, um, you seem to have made a good career decision in joining.
- LRLenny Rachitsky
A little later, but yeah.
- MJMike Maples Jr.
Um, and, you know, I have the, I have the pitch deck for Pinterest. I have the pitch deck for all, all of these that we either, either passed on or said yes to. And the, the reason I want to do that is it's easy to misremember how things really happened. Uh, and what I find is even the founders themselves, we, we, we have a tendency to remember knowing more than we really did at the time. And so, you know, I really wanted to do the best job I could of understanding exactly what it was like, what were the, what was the origin story of this idea? How did they come up with it? If they pivoted, what caused them to pivot? You know, when did they first start to encounter success? What was the reason for that? All those things. And, and I had to be really careful in the questions that I asked because, y- Like, for example, you don't ask, "Why were you successful?" Because then they'll, they'll offer their reasons they thought they were successful. What, what, what you wanna do is you wanna say, "Okay, I notice here's the seed pitch deck and you called the product X, but now the product's called Y. When did you make that change? Why did that happen?" And so you're trying to do the very best you can of asking a very non-judgmental set of questions that are gonna give you a non-judgmental set of answers so that you can kind of be like a detective and get, kind of get to the root cause of why these things took off.
- LRLenny Rachitsky
Incredible. And I think what's also important is you have access to more data and more unique data than most other people because you invest so early stage.
- MJMike Maples Jr.
Y- Yeah, I think the other thing is I just have a pretty simpatico relationship with founders usually. And so I can kind of push for the real. And they're not, you know, unlike... Look, I'm not gonna, I'm, I won't share anything you don't want me to share. I'm just trying to understand. And so, so, you know, you, when you have kind of these informal relationships, that's the other thing I learned, is you try not to show up in a conference room interviewing them like a normal interview. You try to, you try to glean these facts over time with informal discussions and, you know, in the, in the midst of talking about other things as well. And so, so I think that that, that was part of what was really valuable about the exercise, was the, the sort of the opportunity to get the unvarnished wild story, uh, of what really happened.
- LRLenny Rachitsky
Amazing. Okay, so let's get into it.
- MJMike Maples Jr.
Sure.
- LRLenny Rachitsky
Your book's basically broken
- 11:37 – 13:52
A quick summary of Pattern Breakers
- LRLenny Rachitsky
up into kind of two parts, how to come up with an idea and then the actions you need to get right to move forward an idea. And you have a really cool way of framing how to do this and then we'll get, get into it, but maybe frame the, these two parts real quick.
- MJMike Maples Jr.
Yeah, so I'll give it my best shot. I mean, the, the main thing is that business is never a fair fight. So the incumbents start out with an advantage. And the default is they will maintain their advantage. And so the startup has to decide that it wants to fight unfair. And so how does a startup fight unfair? It has to harness a different set of powers than are obvious to most people, right? So, so for example, better doesn't matter when you're a startup, because better is an extension of the present. Better is when you think the future will resemble the present but only be slightly different. The way startups win is by being radically different. A startup wins by avoi- avoiding the comparison trap entirely. So like when, when Lyft launched ride sharing and then Uber-... closely followed, right? With UberX. Nobody after r- riding a rideshare said, "Oh, how's that different from taxis?" Right? It was just self-evident how different it was. And it- and so like, th- that's what- what we mean by forcing a choice and not a comparison. So the- the startup capitalist, it turns out, is a different type of capitalist, right? A corporate capitalist makes money by persistently compounding, makes money by extending their advantage, makes money by having a moat, makes money by, um, you know, doing things well over and over again in a compounding way. Startup has none of those things. There's nothing to compound. And so the way a startup wins is they just change the subject. They- they deny the premise of the rules and propose something completely different. And that was the- the original u- notion behind pattern-breaking was you wanna have an idea that just radically breaks the pattern, that can't be compared to anything that's come before. And that's when the startup has a chance to play offense.
- LRLenny Rachitsky
So coming back to the two parts are coming up with the idea and the actions
- 13:52 – 15:30
Coming up with an idea
- LRLenny Rachitsky
you gotta take. So let's dive into coming up with an idea. And this is where I wanna spend most of the time because I think this is where most people get it wrong or p- everything starts with the idea. So I think there's a lot of meat here. And what I love about your book is you have a very succinct, limited number of things you've uncovered that are elements, uh, across successful companies, pattern-breaking companies. So within the idea bucket, you found that there's basically three elements of most breakthrough startup ideas. Can you share the three and then let's talk about each one.
- MJMike Maples Jr.
Yeah. The three are inflections, insights, and then, uh, w- what I call founder future fit or another way I phrase it is, is this from the future? But those are the- those are the main three things that I've observed, uh, tend to suggest breakthrough potential. And here's an important thing. You'll notice I didn't say the implementation, right? So one of the things that I learned is that if you have the right insight, and we'll get to some of this, you have a first mover advantage into the future. And so a lot of times, your first implementation won't be right. But if your insight is correct, you can navigate the implementation to the right implementation to get product market fit. And so... But what- what we need to understand is there need to be these underlying forces underneath the idea to give it the power to escape the gravitational pull of the present, right? That's what we want. We want a set of powers that we could observe that make it worth pursuing and make it worth navigating the product to the ultimate place.
- LRLenny Rachitsky
So let's talk about the first power. You call it inflections. What is an inflection?
- 15:30 – 17:03
Inflections
- LRLenny Rachitsky
Why does it matter? What does an inflection look like?
- MJMike Maples Jr.
An inflection is a- an external event that creates the potential for radical change in how people think, feel, and act. Inflections happen external to any startup or any company for that matter. So y- y- we brought up, uh, Lyft a little bit ago, uh, so maybe we'll use them as an example. So the inflection that enabled Lyft was the iPhone 4S shipped with a GPS locator chip. And one of the things that that illustrates is, for example, Moore's Law is not an inflection. You know, an improvement curve is not an inflection. An inflection, I'm a little persnickety about. It's a turning point. And so, you know, in math, it's a turning point on a curve where the slope changes. But in- in- in tech startups, it's a point in time where something new gets introduced that creates new empowerment for the first time possible. And so, you know, people talk about timing and why now. Inflections for me were the unlock. You know, you could have- you could have had the idea for ride sharing before the iPhone 4S but it wouldn't have mattered because the riders and the drivers wouldn't have been able to locate each other well enough. If you'd waited too long after the iPhone 4S, it would have been obvious. And so there was this window of time, this magical moment when, uh, a new type of empowerment was possible for the first time ever. And the companies that... The founders who understood that were in a position to offer that kind of empowerment in the form of a radical product that
- 17:03 – 28:02
Examples of inflections
- MJMike Maples Jr.
changed the future.
- LRLenny Rachitsky
To make it even more real for people, what are some other examples of inflections either in the past, in the present?
- MJMike Maples Jr.
Another example would be the cameras getting better on the smartphones which enabled Instagram. So Instagram, uh, was at the convergence of a few inflections. Uh, first of all, there were smartphone adoptions so there were just more of them and so they crossed like 10 million smartphones. But then you had the- the cameras getting a lot better, you had more of them connected on Wi-Fi, you had the networks having better upload speed, uh, for smartphones. So all those factors converged and made it possible for Instagram to offer a product that was good enough to take most of your photos with. You know, you didn't start to think, "Oh, I need a digital camera separate from my smartphone. Now I can just use my smartphone everywhere I go." Uh, but, you know, Instagram could have come out in, uh, 2008, it probably wouldn't have worked. It probably... Or it wouldn't have worked to the extent that it did. You know, it's- it- its window of timing was just right. Wh- what are some other examples? You know, the- the locator chips in the smartphones powered other companies as well. It powered DoorDash, Instacart. They- they had different insights, which we'll get to, right? But they... There were- there were lots of different ways to harness that power. One thing I love about inflections, uh, um, and this- this kind of goes really old school, is just because you have a power doesn't mean you know how to use it, right? So like, um, the wheel was mounted horizontally for like 500 years before somebody mounted it vertically. So originally, people used the wheel to make pots and that was a good innovation because it accelerated making pots. But then somebody decides to mount it vertically-And now they're, now you're propelling wagons and, you know, you just changed transportation entirely. And so most people don't realize that the thing that's underneath us or the thing that's in our hands or the thing that's in our pocket might have a power that when unleashed could change the future. And it, and it's one of the very special things about founders that are great, is they recognize, they notice things that we don't know. All of us tend to just follow the patterns we've always followed, 'cause most of us tend to assume that tomorrow will be similar to yesterday, but sometimes the founder will notice, uh, an inflection. And, and I find that kind of inspiring because inflections are all around us all the time, but most of us don't, just don't bother to look. You know, most of us are so busy going about our day-to-day that we don't notice the emergence of a new empowering thing right under our nose or right in our pockets. Uh, but some founders do.
- LRLenny Rachitsky
It makes me think about ChatGPT when it came out. It was sitting on top of an existing model, and it just gave people a new interface to use it, and all sudden everyone went crazy. They're like, "Oh my God, that's the future." But it was already there. It just you couldn't chat with it the way that-
- MJMike Maples Jr.
Yep. Yep.
- LRLenny Rachitsky
... people wanted to chat.
- MJMike Maples Jr.
Yeah. You know, the, like, um, uh, Michael Saylor once, uh, I was talking to him and he said, you know, the, the Romans could have invented the printing press a lot earlier. They had sandals that would make marks in the mud. You could have in theory drawn the connection between those marks in the mud and the ability to have movable type and letter press, but nobody did, right? And so quite often these inflections will go, they'll just go unrecognized for a while, but they're always there. Like, they're always there. They're, they're there right now. Uh, you know, in the ambient atmosphere there's somebody about to harness an inflection that most of us would just walk right by and never see.
- LRLenny Rachitsky
Man, wow. My mind is racing, (laughs) what's out there right now? Uh, obviously AI is top of mind for a lot of people, I know you're a stickler for what is an inflection, what is not. Do you consider AI an inflection?
- MJMike Maples Jr.
Uh, I would say that, uh, I would probably be a little more specific about it. So I, I might say that certain, uh, large language models are an inflection, because like what, th- when I, when I think about an inflection and one of the, one of the things I emphasize in the book is, uh, stress tests. So like, it's funny, founders never really come to me and say, "Hey, can you help me come up with a good idea?" Right? They would think they're weak sauce if they had to do that, right? So usually what's the more common occurrence is they'll say, "I've got this idea. What do you think about it?" And so what I can say to them is, "It's not my place to have an opinion, but like, let me just ask you, does it embody one or more inflections?" And if it does, there's a few, there, we could stress test that. We can say what is the specific new thing that was just introduced? How does it empower people? How does it specifically empower specific people in specific ways? And under what conditions might that empowerment be realized and under what conditions might it not be? 'Cause like nuclear power has existed for a long, long time, but we haven't built any nuclear powerplant- plants in 50 years. And so just because you have a power doesn't mean it's gonna get used. It could get regulated out of existence. It, customers could decide they don't want it. And so w- we want to answer all three things. What's the specific new thing? What is the specific form of empowerment it offers and to who? And under what are the empowerment conditions? So like with the inflection for Lyft, the inf- the inflection was the new thing was the iPhone 4S with a GPS chip. The empowerment was you can locate anyone within one meter accuracy with an algorithm, and that's gonna be pretty much anybody with a smartphone, and that's a lot of people. And, you know, in order for this to be met, people are gonna have to want to share their location information with applications. The government's gonna have to not outlaw GPS chips in phones. Apple's gonna have to keep wanting to ship GPS chips in phones. And we felt like those were pretty reasonable bets, right? We felt like, um, it's pretty likely those empowerment conditions
- LRLenny Rachitsky
Amazing. I was just gonna ask for an example. You already provided one. Uh, what about in terms of Twitch? Was there, what was the inflection there?
- MJMike Maples Jr.
I, I think there were a couple. Uh, the first was the, um, the shift towards user-generated content and sort of internet celebrities. Justin Kan wanted to be an influencer before he, there was a term to describe him as an influencer, right? He was really building the product that he wanted for himself. But, you know, right before Twitch or right before Justin.tv, which was the original company, Time's Person of the Year had been you, and they had YouTube on the cover of the magazine. And so you had, that was a major turning point in how entertainment was happening. But simultaneously broadband penetration had reached critical mass. You had the CDNs were getting really good and, and, and, and we thought that they would get better. And so, you know, you, you, you were in the, a situation where the conditions to live stream video for the first time broadly over the internet were being met. Whereas, you know, you c- you couldn't have done that even two years before. In fact, Kyle Vogt had to invent some pretty miraculous stuff to even make it work when they did. But you could, you could see how, okay, once, once video starts streaming on the internet in real time, that could be a thing, right? You could just see how that would be a thing if it, if it worked. And so I'd say those are the inflection. You know, um, um, Airbnb, a company close to both of our hearts for different reasons, they benefited I think from a couple things. One was the proliferation of customer reviews online and people's trust of reviews as a substitute for trusting the brand of a hotel. But then also Facebook Connect made it possible to pass people's profile information and so the guest and the host didn't quite seem like as much of a stranger as they might have. And so there were a few things that, that happened at the same time. A- and then the f- great financial crisis, and so you had people upside down in their houses needing to find some way to generate income. And so all of those things came together at the same time to help Air- Airbnb.
- LRLenny Rachitsky
The examples you shared are a good reminder that the inflection doesn't have to be technological. You shared a few of the categories of types of inflections. Can you just do that again?
- MJMike Maples Jr.
I love that question and I'm glad you reminded me, right? Because like, like here's, here's a really recent example. When the, the laws were changed because of shelter in place for telemedicine visits, you know, it, it used to be illegal to do a telemedicine visit across state lines. But now all of a sudden with COVID and shelter in place, not only was it made legal, but it could even be reimbursed by the healthcare system. And so that's an inflection because it empowers patients to access more doctors and it empowers doctors to access more patients and it also changes the delivery mechanism in an empowering way. I- in no event was that a technology change, right? That was a regulatory change that allowed technology to be empowering in new ways. But, you know, it was a specific new thing, it meets that condition, it empowered specific people in specific ways, and there was a new set of empowerment conditions that ended up being made. And one of the, one of the things that we would ask at the time was, are they gonna, you know, once COVID shelter in place goes away, are they gonna revert back to the old laws? And if they did, that would've been a problem. And so that would be the empowerment condition. Um, but, but, you know, it's a, it's a fairly robust way of stress testing any inflection, right? Is to ask those three or four questions.
- LRLenny Rachitsky
So there's regulatory inflections, big changes in regulation, there's technological, there's also, I think you implied like an attitude, like the way people see the world.
- MJMike Maples Jr.
Yeah. There can be a belief inflection. Uh-
- LRLenny Rachitsky
Belief.
- MJMike Maples Jr.
... you know, so for example, uh, during COVID, the amount of telemedicine visits exploded. And so as a result, there was a permanent change in people's belief about whether they would want to do a telemedicine visit. Before that, the technology was there, but a lot of people just didn't do it. The doctors didn't want to or decide to, the patients didn't want to, decide to. But now all of a sudden people were doing it, they're like, "This is much better. I'd r- much rather do it this way than go visit the doctor and wait in line," and all that stuff. And the doctor's like, "I'd much rather do this than, than, you know, have these people backed up in my, my office." You know, I, I would argue that, uh, you know, here we are doing a podcast on a video, uh, platform, right? Even though it's not Zoom, I, I would say that Zoom was another example. You know, the, the idea of, um, people working from home a, a, a reasonable number of days a week is a permanent condition, I think is another inflection that happened with COVID.
- LRLenny Rachitsky
And so are those the three: regulatory, technological and belief?
- MJMike Maples Jr.
Those are the main ones. You know, and, and I would say that in, in, in many ways it's, um, you could say that from a macro point of view, it's two things. It's technology changing enablement and it's people socially changing their beliefs and their patterns of behavior. Uh, and, and either one of those changes can be an inflection because either one of those changes can represent a turning point in one's capacity to change the future.
- 28:02 – 36:49
Insights
- MJMike Maples Jr.
- LRLenny Rachitsky
Amazing. Okay. So we've talked about inflection. The next bucket is, and the next element of breakthrough companies that you found is an insight. Talk about that.
- MJMike Maples Jr.
Yeah. So an insight, uh, unlike an inflection, an insight does come from the founders. Uh, an insight, I like to say is a, is a non-obvious truth, uh, about how one or more inflections can be harnessed to change people's behavior. So, uh, if, in the example that we gave earlier with Lyft, the inflection was the iPhone 4S. Insight was, oh, that means you could do Airbnb for cars. And so you had to, you had to have some type of a creative insight to see that. Now, what was, uh, you know, what was non-obvious about it or non-consensus about it, who's gonna want to get in a stranger's car? That's crazy, right? And, uh, um, thank God, I mean, if there's one piece of goodness about us passing on air bed and breakfast at the time, Ann, Ann and I were like, "Man, you know, nobody's gonna want to stay in a stranger's house. That's crazy." And at the time, air bed and breakfast, the host and the guests stayed in the house at the same time, and the, you know, the, the host would feed Pop-Tarts or something like that to the guests the next morning. We're like, you know, this is right around the time that like the Craigslist killings and stuff, we're like, "This is just scary, you know, kind of crazy." Uh, you know, couch surfing is a service, you know? But by the time, uh, we, we saw what was Zimride at the time, what became Lyft, Ann and I were much more prepared to believe that insight than we would've been, right? Because we'd foolishly passed on Airbnb. So that's a really important aspect of insights, right? So the, the insight needs to leverage inflections, but this is the subtle part, it needs to be non-consensus and right, not just right. So in the world of opportunities, if you're right and consensus, you still don't do that well. And a, a- an idea that is right but consensus has a couple problems to it. One is if it's consensus, it's probably not radical enough. Because, you know, when you think about it, human beings are conditioned to like things. And so if everybody likes your startup idea, it means it's too similar to what they already know, what they're familiar with, which means it's probably too similar to the consensus. It's too similar to the incumbents. And so the best startup ideas have this trait where most people don't like it or are even hostile to it or just kind of meh about it, but some subset of people are just like, "Oh my God, where have you been all my life? This is amazing. I love this." You know, they fall irrationally in love with the idea. And so most of the great startups that I've seen have that attribute to them. And, and the reason is that a great startup, unlike a, a- unlike a conventional company that proposes the future as an extension of the present... So the normal companies forecast, they say, "I'm gonna look forward from the present and forward project what the future will be."Great founders, pattern breakers backcast. They say it's, it's, it's a, it's a given that the future has to be radically different for me to be a big winner. And so I'm gonna look for radically different futures, and work backwards from those radically different futures. And so the radically different future comes from that thinking different, thinking non-consensus, and then it's a- it's the different actions that get you to say, "Okay, now I'm out in this different future, but right now I'm all alone in this different future. I have to get people to come join me in that different future, and I have to find people who are ready to move with me to that different future." And that's where the pattern-breaking actions come in. And, like, not everybody's going to move at first. And so I can't waste my time with people who won't move. I can't waste any ergs of energy on anybody other than those ready to move or about to move. And then I need to co-create the future with those early believers. And so great startups happen when a subset of people in this world buy into the founder's insight and then move with them to co-create that future. And then eventually what was a heresy becomes the conventional wisdom as more and more people start to realize the advantage of it.
- LRLenny Rachitsky
There's so many threads I wanna follow here. One is the Airbnb story, interestingly enough, I had Jessica Livingston on the podcast recently, and you probably know this, but Paul Graham and her did not like the Airbnb idea. They were all like, "This is a terrible idea." This, we, we're just, we are gonna assume they will change the idea, but we love the founders. We're gonna take a bet on them.
- MJMike Maples Jr.
So I was introduced to the guys by, uh, Michael Seibel from... who was one of the co-founders of Justin.tv, Twitch. And Michael introduced me to Brian Chesky before they applied to Y Combinator. So like, like Michael's like, "They're not even close to ready to apply to YC," but like, you know, he thought that I was... maybe would think that it was the right kind of crazy. I, I get pitched by a lot of, like, uh, I'm, you know, I'm not very off-put by crazy ideas.
- LRLenny Rachitsky
I can, I could see why.
- MJMike Maples Jr.
Uh, uh, so it was, uh... And, and the meeting was totally discombobulated, right? It's a room full of cereal boxes, I'm like, "What's up with this? Why is there cereal here?" And then, and then he can't get the product to work. So we're like 20... A- a- and I'm like, "Okay, that's okay. Let's just look at the slides." And he goes, "Well, Michael Seibel told me that you don't like slides, you like demos." And I was like, "That's true, but it's not working." So we're like 20 minutes into this meeting in a room full of cereal boxes just looking at each other. And, and, uh, you know, you, you can't win 'em all, right? Uh, you, you win some, you lose some.
- LRLenny Rachitsky
I wouldn't blame myself if I were you in that, in that situation.
- MJMike Maples Jr.
Here, here, here's the other thing that's hilarious about Airbnb. So like, they, they do this thing because they can't pay their rent. They put up this WordPress site to pay for their rent, because there was a design conference in San Francisco. In the meantime, they're brainstorming startup ideas, so they wanted to do a startup together. But, but like never occurred to them at first that air- air bed and breakfast was like the startup idea. They were like, "We just need to use that to make money so we can go do a real startup." And so that's the irony too, right? Is that the... that, you know, you look back on it and almost smile at the fact that they didn't, they didn't know what they even had at first. You know, it was almost an accident.
- LRLenny Rachitsky
There's a lesson there of... L- like you find something that works, and even if you don't think it's a big idea, don't take that for granted.
- MJMike Maples Jr.
Oh, I very agree. And, and it... The other thing, the other great lesson is you don't want your initial startup bets to be too big to fail, right? You want, you want ideas that are small enough to fail a lot, because, you know, you don't want to be attached to success. You want to be able to just try things and play with stuff and tinker with things, because you don't really know where the fractal of new insight is gonna reveal itself. Uh, and so y- you know, there is a little bit of play to this, uh, that I think is pretty important.
- LRLenny Rachitsky
Do you remember what s- what some of the ideas they were brainstorming, by the way?
- MJMike Maples Jr.
I, I don't, and I, and I, I wonder if even they do, right?
- LRLenny Rachitsky
Yeah, probably not, probably not.
- MJMike Maples Jr.
Uh, there was probably the Airbnb story, right? In their book.
- LRLenny Rachitsky
I feel like them, uh, failing in your demo helped prepare them for YC and that's h- what helped them get in. So I think that you're a big part of their story.
- MJMike Maples Jr.
And to make it m- even more painful, like I'm in the book, right? Somebody, somebody called my wife Julie the other day and said, "Is that your husband in the Airbnb story?" And we, we get the... we get the book and there's a chapter and it talks about how hard it was to raise money, and they weren't dissing on me as a dumb VC, they were like, you know, "Look how bad we were at presenting this at first," right? It was just a complete catastrophe presentation. Uh, but that's another good lesson for me too. I learned a, a very permanent lesson from that, which is d- just because the presentation's good or bad, it, it has nothing to do with whether you should necessarily invest or not. Sometimes you have to be awake to the possibility of what it's gonna be, regardless of how messed up the presentation is.
- LRLenny Rachitsky
What was their, uh, valuation at that point?
- MJMike Maples Jr.
Oh God. Um, this hurts to... I thi- I think he offered me a chance to invest at a $1.5 million valuation.
- LRLenny Rachitsky
And now they're a $100 billion business, I believe.
- MJMike Maples Jr.
Oh, oh yeah. I would have made like 6,000 times on the money or something like that. It just-
- LRLenny Rachitsky
Okay, great. Let's move on, let's move on.
- MJMike Maples Jr.
Thank God... You know, thank God I said yes to Twitter and Justin.tv and, uh, you know, we said yes to Lyft, uh, and Okta. 'Cause if it... if we'd seen all of those and passed on all of them, I'd, you know, I've got... I'd be apoplectic.
- LRLenny Rachitsky
That's... I think that's what's interesting about your, uh, stage of investing is you, you just need a couple to work out for you to win.
- MJMike Maples Jr.
Yeah. That's right. It's... I-
- LRLenny Rachitsky
Yeah.
- MJMike Maples Jr.
And by the way, it's true when you're a founder too. You... if, if you do this right, you only have to be right once, right? And so that's, that's really important.
- LRLenny Rachitsky
Coming back to, uh, the insights lesson, one thing that you brought
- 36:49 – 47:31
The power of surprises
- LRLenny Rachitsky
up when we were chatting about this is the importance of being surprised and the power of surprises. Can you talk a bit about that?
- MJMike Maples Jr.
Yeah. So, so there's a couple things about insights that I think are really important, and this is one of them. I believe that there can't be a recipe for breakthrough. So, uh, you know, and, and why is that? Well, recipes exist for things that have already been discovered-So if, if I give you a recipe for making a cake, somebody has probably made that cake, right, before, the exact way they're defining it. And so breakthroughs, though by definition haven't happened yet. They haven't been discovered, right? The general theory of relativity had to be discovered by Einstein, right? And, and the, you know, the idea for ride sharing had to be discovered by the, the ride share companies, or Airbnb, by, by, by Chesky and Nate and those guys. And so what you want to adopt is the right mindset. And how do you adopt the mi- right mindset? You, you interact with new technologies at the cutting edge, but you actively savor surprises. And when you think about it, when you think about it through the lens of a breakthrough and what we just said, it makes sense, because if you want to find a breakthrough, you want to be surprised. You want to discover the undiscovered. You want to know something you didn't know before, because if all you do is an experiment that proves, that validates what you think, you didn't really learn anything when you think about it. You know, you just doubled down on your existing understanding or opinion. I learned this lesson from Scott Cook, who was the founder of Intuit. Whenever he would be presented a new product, people would present the, the idea to him and he would say, "What were your three biggest surprises as you were coming up with this plan?" And what he would find is quite often they couldn't name any. And he felt like when people can't name the surprises they came up with, they're too brain locked on what they want. They have, they have the agenda they have and they, they want validation rather than truth seeking. And so like if you're, if you're an authentic truth seeker, you're always hoping to be surprised and you think of surprise as a gift, because you think, "Wow, maybe I encounter that surprise before anybody ever has." And so, uh, so that's kind of what we mean. And you want to construct your experiments so that you're in a position to be surprised. So, uh, a good example would have been what the guys at Chegg did. So Chegg was wanting to see if people would te- do textbook rentals, so they created a fake site called Textbook Flix. But here's where Usman and Aayush were, were very savvy. Rather than just test whether people would rent $100 textbook for $35, they tested an arbitrary set of prices, all the way up to $75. And so they had the demand preference curve at different prices. And Textbook Flix wasn't a real site, so you'd get to the shopping cart and it would give you a 404 error. But we could tell that people wanted to rent textbooks and the surprise was that they would rent them for more than we thought. We thought, "We need to get at least 35," but some students were willing to pay 75. And so that understanding was huge. If we'd only done an experiment to validate the hypothesis of, yes, we'll they rent it for 35, our pricing model would've been totally different from, oh, wow. And when you think about it, it makes sense. Like the student didn't want to keep the textbook, you know, Econ 101, I'm gonna give it back anyway. So 75 bucks is less than 100, I can buy beer with the extra money. So that would be an example of the surprise. But, um, most of the startups that have had great outcomes, I find, there was a kind of a surprise like that, right? You know, being non-consensus is not the same as being contrarian. You know, being contrarian is another form of conformity because it's still relative to somebody else. Most of the great founders I see, they almost feel guilty that they found this secret, but they earned the secret by tinkering with the future and noticing surprises and having their noticing filter tuned to like volume 11, where most p- most of us wouldn't notice it. Most of us would just pass the secret w- right by because we're looking to validate what we think is already true.
- LRLenny Rachitsky
You referenced this term that is also one I love that you use occasionally, this earned secret. Can you talk a bit about that? It's basically the same idea that you uncovered something by trying things that no one else has seen yet. Is that the general idea?
- MJMike Maples Jr.
Right. So to me, secrets are earned. Like a lot of people I think have the wrong idea of what vision is. Like a lot of people tend to think visionaries, it's like they have a special pair of binoculars and they can look out farther than the rest of us can.
- LRLenny Rachitsky
Mm-hmm.
- MJMike Maples Jr.
But, but in my experience, that's not how inventions really happen. The way, the way inventions happen is people are, get their hands dirty and they, they, they learn about what's missing in the future because they, they're, they're, they're getting their hands dirty with what's new about it. And so they earn the secret by going down this rabbit hole of exploring something at the cutting edge for its own sake. And they become like, just like I'm a trained spotter for startups, they become a trained spotter for this new thing that they're excited about and, you know, they frustrate the people around them. It'll, they'll be at a party and everybody's talking about the basketball game and the Celtics against the Mavs and, and somehow that reminds them of the fact that they want to test prices for textbook rentals. And it's like they're, but they're that interested. It's the last thing they think about when they go to bed, the first thing they think about when they wake up. And so that's where I find most of the really great earned secrets come from. They're earned in the sense that you earn them by getting your hands dirty and you earn them by being awake to the possibility that secrets are there, that just most people aren't looking.
- LRLenny Rachitsky
This connects with that stat that you shared that 80% of your biggest returning investments came from a pivot. It all connects where you're just trying stuff, you're learning, seeing things people haven't tried and...
- MJMike Maples Jr.
That, that's right. You know, and in the early days of product market fit, I like to say we want to answer a very simple but profound question. What can we uniquely offer that people are desperate for? And if, if we have an insight, that makes us unique. Now, if a customer doesn't like your, your idea, a couple things could be true. One is your insight could be wrong. If your insight's wrong, you don't have a startup, right? You should just stop.The other thing though that could be true is your implementation is wrong. So like you had the right insight. So like Okta, at first they wanted to do cloud systems management. They thought that they needed to do problem resolution, but when they showed it to customers, they were kind of mad about it. And they said, "Well what, you know, why are you mad about this?" And they said, "Well, it's not a top priority." And they said, "What is your top priority?" They said, "Identity management." So they had the right insight, which was customers would struggle to manage cloud services, but they had the wrong implementation of the insight. So then they came back with identity management and it worked. So, you know, if, if somebody doesn't like your idea, if they're not desperate for it, either the insight's wrong, the implementation's wrong, or you could be talking to the wrong customer, right? Like some, some people that I have to talk to wanted to integrate it with on-prem software. And in that case, their opinion's irrelevant because they're not an innovative customer. They're not living in the future. They're not gonna give you product requirement ideas that are additive to your strategy. And so, you know, you want to be right insight, right inflections, right implementation, right early believers that you're talking to as you iterate towards product market fit. And if you're not succeeding at product market fit, then it's one of those, one or more of those variables isn't working yet.
- LRLenny Rachitsky
I think this might be a good time to remind people that you don't need to have every one of these for your business to potentially be a huge success. It's more that the more you have, the more likely it is that you'll find something massive. Is that right?
- MJMike Maples Jr.
That's right. And, and it's like, what... This is the hard part about being non-consensus and right, is you don't know for sure that you're right at first. You only know that you're non-consensus.
- LRLenny Rachitsky
Mm-hmm.
- MJMike Maples Jr.
And so you have to be willing to risk being wrong to be spectacularly right. And so what you're trying to do though is pursue opportunities where the odds are massively in your favor. And so like the, I kind of return back to business is never a fair fight. And so if I'm a founder, there's a se- there's a universe of ideas I can pursue. The mistake that a lot of founders make, and it's very understandable, they say, "I want to go after big market opportunities." So they analyze big markets, they find unserved customers with unmet needs in under-addressed markets, and then they go build a product to go solve that problem. And, and that's very appealing because it seems obvious and the dots connect forward in an obvious way, but unwittingly, it buys into a context. It buys into the current definition of the market, which was already set by the incumbents. And so what you instead want to do is pursue a slightly more ambiguous opportunity, but one that harnesses these powers. Ones where you look at the inflection, you say, "Wow, that's really powerful." You look at the insight and you say, "Yeah, I know that this is gonna be in the future. I know that this is where things are gonna be radically different someday." I would rather have those things present and be willing to pivot the product than not have those things and have a much clearer idea of what the product should be.
- LRLenny Rachitsky
Funny enough, one of my biggest investment successes did exactly what you're saying you shouldn't do, which is they looked at a huge market with a bad incumbent and built something better and it's working. But I think, again, it's not that you can't win that way. Your point and your research shows that your chances are a lot higher doing something totally different.
- MJMike Maples Jr.
That's right. And I would bet that this company, I don't, I don't know enough about it. I don't know what it is, right? But like-
- LRLenny Rachitsky
Yeah, yeah, yeah.
- MJMike Maples Jr.
... it wouldn't surprise me if they harnessed inflections in some way that was disorienting to the incumbent. It w- it wouldn't surprise me if they found a way to use inflections to fight an unfair bite. What I try to do with the insights is I realize there was a theory behind it, like a, a theory is not a recipe, it's an explanation. And what inflections let the founder do is wage asymmetric warfare on the present. And the insight is like the vessel that they use, right? It's, it's kind of like the, the rock is the inflection. The slingshot is the insight that they shoot at, at David or, or David shoots at Goliath, right? And so, so that's what we're looking for. We're looking to create the conditions where we're gonna get to play an unfair game by unfair rules that favor
- 47:31 – 55:28
Founder-future fit
- MJMike Maples Jr.
us.
- LRLenny Rachitsky
Great segue to the third bucket, the third element of breakthrough companies: future founder fit. What is that?
- MJMike Maples Jr.
Yeah, so this is one of my favorites. So a lot of times people will say, "What makes a great founder?" And, uh, there are some common traits, right? Passion for the idea, persistence, resilience, you know, all, all these things, right, that people talk about. Passion for the users. But w- what I find is that there's no canonical best founder, right? So Marc Andreessen started Netscape as a programmer making minimum wage at the University of Illinois. And everybody thought the digital highway at the time was gonna come from Time Warner or from Microsoft Network or from the US government. Nobody thought that some kid was gonna do it from the bottoms up. But it turns out that Marc was tinkering with a set of inflections around the worldwide web. And you know, right around that time, Microsoft, uh, introduced, uh, a better version of Windows. And right around that time, the Pentium processor came out. So there were, you know, more and more people had graphical user interface computers at the very time that browsing started to happen. But let's take another company, more recent, Applied Intuition, makes, uh, simulation software for autonomous vehicles. If, if you're gonna sell a giant contract to the CEO of a car company, he needs to look at you across the table and think, "These guys can do the job." Right? So, you know, Kasir and, um, Peter had been... They, they'd grown up in Detroit, in Michigan. They had worked at car companies in the past, in, in the big three, and then they worked in inside of Google at Waymo and Google Maps. And so, and they, and they'd had a successful startup before. And so if you looked what, what is a team from Central Casting to do this, it would be them. And so what I, what I mean by founder future fit is...There's a set of traits that a founder can have that make them ideally suited to a certain type of future. Sometimes they're really young, first-time founders. Mark Zuckerberg, Bill Gates, Paul Allen, um, you know, we just gave the example of, of Marc Andreessen. In that case, usually they're at the cutting edge of a new technology, and they have a beginner's mind, and they aren't even encumbered by the old way of looking things. Like, the entire world lives in Cartesian coordinates and they discover po- polar coordinates. And they don't even have to translate between the two, because they never understood Cartesian coordinates. And so in that case, their knowledge about the future is more valuable to success than their knowledge as businesspeople. But in the case of, like, Applied Intuition, if you're selling very large contracts to enterprise customers, they need to believe that you can do the job. If you're Okta and you're doing identity management for cloud customers, they're gonna tu- trust Todd McKinnon from Salesforce way before they're gonna trust a college dropout to do that job. And so I like to say Founder Future Fit is, you know, who knows the most about this future, who has the most intrinsic motivation to pursue it, who, um, has the best network and keeps the best company i- in that ecosystem of the future. You know, those are the types of things, you know, founders that, that show up differently on those dimensions usually do better, because they're more likely to understand what to build in the first place, and they're more likely to convince early believers to believe in their ideas in the first place.
- LRLenny Rachitsky
So it's not that these people have some vision of the future that is more, uh, accurate or more incredible than everyone else. It's that their background and even the way they look matches the problem that they're going after. So in this Applied Intuition case, you're saying, like, the founders look like people that a CEO of GM would be like, "I trust these people to build this thing for me."
- MJMike Maples Jr.
Yeah. I like to... You know, Louis Pasteur once said, "Chance favors the prepared mind."
- LRLenny Rachitsky
Hmm.
- MJMike Maples Jr.
And, and when I started working on this book, for the first time, I really understood what he meant, right? Like, chance favors the prepared mind, because a prepared mind attracts luck. A prepared mind is better positioned to notice a breakthrough than other minds. And a prepared mind sees the breakthrough, sees around the corner, because they're thinking about the subject all the time. And so like most people think that the way you come up with good startup ideas is to try to think of a startup, and I like to say, "No, that's exactly wrong." Uh, what you do to come up with great startup ideas is you live in the future, and you notice what's missing in the future. And it's like, it's, it's, it's axiomatic. If you're living in the future, there will be unbuilt missing things, because if it was all built, then you'd be living in the present. And so if you're, if you're living in the future, and you notice what's missing, your intuition about what to build is far more likely to be right. So like, um, you know, Andreessen didn't do the Mosaic browser because he thought there was a market for browsers, or the, he didn't even know about a digital highway. He was trying to make the internet immediately more useful for him and his team, and his intuition about what to build was very good, because he was building the thing he wanted that was missing in the world. You know, in the case of Okta, they knew all the early Salesforce customers, but the, but the principle still applies, right? Those customers weren't equal. You know, they were Lighthouse customers, kind of like when I was at Silicon Graphics. I didn't spend time with normal movie studios. I spent time with Industrial Light & Magic, because I thought, "If we solve their problem, they're going to take us to the Promised Land," right? All the stuff we build for Industrial Light & Magic will be the stuff that everybody wants someday. And so, like, not all customers are equal. You want to find customers that live in the future.
- LRLenny Rachitsky
I love this point. Uh, Justin.tv is another great example of this, where he just-
- MJMike Maples Jr.
(laughs)
- LRLenny Rachitsky
... assumed the future, everyone's going to be watching each other's r- reality shows, so he built his own backpack with a camera and a site just to stream himself.
- MJMike Maples Jr.
Yeah, and, and, and the Justin.tv example is a great one too, because, right, in Justin.tv, he built the thing that he wished he had-
- LRLenny Rachitsky
Mm-hmm.
- MJMike Maples Jr.
... even though it was a terrible idea, but it embodied attributes and embodied these inflections and these insights that led them ultimately to Twitch. Ironically, Justin's second company, Atrium, most people thought that that made sense. Automating legal tasks, and, you know, uh, Justin's a great founder, but Justin just didn't like the legal field. He had no passion for it, even... When he started Atrium, his passion was to be a higher status founder. And, you know, I've got a podcast with him recently where he talks about this, where he's like, "I wanted to be as big as Patrick Collison and Brian Chesky and Drew Houston," but it turns out that's not a very good reason to start a company, right? Like, Founder Future Fit is ultimately about authenticity, and it's about who is the most authentically matched for that different radical future? And that, whoever that team is has a really big head start at getting product-market fit, and you know, product-market fit is the game, right? Whoever gets it first wins.
- LRLenny Rachitsky
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- 55:28 – 56:33
Advice for aspiring founders
- LRLenny Rachitsky
So there's inflections, there's insights, there's future founder fit. To make this super real for, say, a product manager sitting at a company right now, "I want to start a startup," or someone just starting to ideate on ideas, what are some things that you recommend they start to do this week, next month to start to find a big idea or to start an idea? And it doesn't have to be a big idea, an idea that'll take them somewhere.
- MJMike Maples Jr.
The number one thing I like to say is, "Get out of the present." And so, like, what, what, you know, people talk about getting out of the building and, of, of course we should, but getting out of the present is a little bit more subtle than that, right? So William Gibson was right, you know, when he said i- i- um, "The future is already here, it's just not evenly distributed." So most great startup ideas come from a future that exists right now today. And so what, what I like to say to people i- i- and this is a question that I always ask when I'm pitched, "Is this from the future?" And, you know, and then some people will say to me, like,
- 56:33 – 58:32
Living in the future: valid opinions
- MJMike Maples Jr.
"Hey, I have a mental health startup. Mental health is a huge problem, it needs to be solved." And I'll say, "Why is your idea from the future?" "Well, in the future, I believe mental health needs to be solved." I'm like, "That's not what I'm asking. I'm asking what part of the future have you been living in that gives you the right to have an opinion about the future?" So I, I, I like to say, "If you're not living in the future, you don't... Your opinion about it isn't valid." It's kind of like saying, "I think a customer will do X" and you've never talked to a customer. I'm like, "Okay, your opinion's interesting but irrelevant." And so the, the only relevant future, the, the only relevant opinions about the future come from people who are living in it, and coming from people who understand what's new about it in a very visceral way. And, and, you know, there are people who do a good job of this, right? Like Maddie Hall who started Living Carbon, she was working at Zenefit. And at first, she tried to think of a startup and she had ideas that weren't that good. She had a laser tag idea and a few other things, but then she decided to go follow Sam Altman for a year to be his chief of staff. And Sam Altman visits the future multiple times a day with people and so that's what led her to this idea that for Living Carbon, which does genetically modified trees, but, I mean, couldn't be farther away from Zenefit, right? But, but, like, she saw Microsoft was about to spend a lot of money, a bunch of other companies th- about to spend a lot of money on carbon take out. She saw that the, the, the genetic engineering technology was getting good enough that you could engineer these trees. She married the inflections with the need and then off she went. But she was, you know, basically sampling a lot of different futures, uh, until she found one that she liked.
- LRLenny Rachitsky
I love that example because it makes it very real what living in the future looks like. So one is spend time with people that are very far along on some edge of technology or the way people behave. Another you shared is, uh, work with a company like, say, uh, that you worked with at Silicon Graphics-
- 58:32 – 1:00:45
Identifying lighthouse customers
- LRLenny Rachitsky
- MJMike Maples Jr.
Yep, Industrial Light & Magic.
- LRLenny Rachitsky
Industrial Light & Magic. Those, yeah.
- MJMike Maples Jr.
Yeah. So McCracken had a term for it, uh, that I've always liked, uh, lighthouse customers. And so like a lighthouse has this light that shines out and, and un-obscures the fog, and not all customers are equal, and some customers are living in the future and those customers are gold, and those customers will, if you solve their needs, take you to the promised land. And so, like, so yeah, you can, you can, you can build what's missing for yourself like Andreessen did, or Zuckerberg, or Steve Wozniak, or Bill Gates, or you can build something for lighthouse customers that you have a good relationship with, or if you can do neither of those things i- The number one question I get asked is, "Hey, that's great if you live in a supercomputer lab or if you, you know, uh, were selling to Industrial Light or Magic or like all the Salesforce customers." I'm not one of those. I'm a second-year student at Stanford Business School. I'm a product manager at Company X. I'm w- you know, whatever the case may be. That's where the Maddie Hall example is really powerful, because Maddie proactively got out of the present in a very intentional way. Uh, so I love her example, uh, as a case study.
- LRLenny Rachitsky
What signs tell you that a company is one of these lighthouse companies living in the future, or person is, is it just, like, you just feel it, like they're so far ahead of everyone else?
- MJMike Maples Jr.
U- usually it has to do with how tech forward they are. You know, there was, there was a time when a lot of people didn't think the cloud was gonna be a thing because it was insecure and, "I'm not gonna host my important data and let it, somebody else have it," but there were a set of customers who were re- really excited about the cloud and they tended to adopt certain kinds of products. When I used to work in, uh, client server startups, you knew that the early adopters were people who were using, like, relational database servers and scalable front-end programming, uh, interfaces and things like that, y- you know? We're trying to have distributed apps that they would roll out. You know, you could, you could tell who was trying to play offense with the new trends.
- LRLenny Rachitsky
Awesome. Okay, before we move on into actions, is there anything else you think might be useful to share in
- 1:00:45 – 1:03:49
The importance of desperation in customer needs
- LRLenny Rachitsky
terms of helping people come up with an idea, find a great idea?
- MJMike Maples Jr.
The number one thing about the, the ideas goes back to the not playing the comparison game. So the, the thing that I see people underestimate when they come up with ideas is the threshold of desperation required in the customer, right? So like, like, um, if we wanna solve problems for desperate people and, and, and it's like if we have powerful inflections that really empower and we have something unique, there should be somebody who is irresistibly drawn to that empowerment. They should say, "Oh my God, this is incredible. This is a game changer. I can't unsee that." Why is that important? I like to say that if a customer has the ability... to do something other than what you do to solve their problem, they won't be crazy enough to do business with a startup, right? So a customer has to be so desperate that when they see what you have, they're like, "I've gotta have it." And, and so I like to say, you wanna force a choice and not a comparison. If everybody's selling apples, I can't be a 10 times better apple. I wanna be the world's first banana. And I, I wanna say to people, "You may not want bananas. You may not like them. You not, may not value the advantage of bananas. But if you value banananess, I'm the only person that's got them." And it's like, you know, come to papa, right? And so that's like... An insight feels like that. Uh, and, and in the early days, don't spend any of your time with people who love apples, because they're not... you're not gonna convince them and they're gonna waste your time. What you wanna do is find everybody in the world who values the advantages of bananas as soon as possible, not wasting any time on the people who don't. And so that... I, I'd say that that kind of wrap up, wraps up the idea of insights is that like, we wanna force a choice and not a comparison. You know, nobody looks at the Tesla Cybertruck and says, "Oh yeah? Well, how does that compare to a Ford F-150?" And you may hate the Cybertruck, you may think it's stupid, but nobody's neutral about the Cybertruck, right? That's, that's... You wanna have a product that people can't be neutral about, but that the people who magnetize positively to it just can't i- imagine a world without it.
- LRLenny Rachitsky
Mm-hmm. I love that. And going back to your banana example, you want just a few people to be just like, "I need that banana no matter how much you're charging."
- MJMike Maples Jr.
That's right. And, and, you know, even if it's halfway ripe, even... You know, it's like, you know-
- LRLenny Rachitsky
Mm-hmm.
- MJMike Maples Jr.
Because that's the other thing, right? They, they need to be willing to tolerate the fact that you can't execute very well, because like, how could a startup execute really well? They have no resources.
- LRLenny Rachitsky
Mm-hmm.
- MJMike Maples Jr.
And so like, the only chance for a startup to win is to win on a playing field where better doesn't matter, where execution isn't as important as, "Gotta have that thing. I'll take any version of it you give me, because I am desperate for it."
- LRLenny Rachitsky
Speaking of execution, good segue to the second part of the chat, which is basically, you looked into what do
- 1:03:49 – 1:24:14
Creating movements and storytelling
- LRLenny Rachitsky
the most successful companies and founders do differently, and you also found three core things that they all do, and many of them do. Uh, movements, storytelling, disagreeableness. Let's talk about each one. Pick whichever one you wanna start with.
- MJMike Maples Jr.
Yeah. So, so, you know, we've talked about thinking different, but it's like th- th- the problem though is that, uh, you know, asking people to abandon the familiar for an uncertain tomorrow is a provocative act. Uh, all startups are fundamentally disagreeable. There are disagreement with how things are done, there are disagreement with the pattern of what is. And so, uh, we need, as founders, to persuade others to change their habits with our pattern-breaking actions. And so what the, what the pattern-breaking founder does is they create a stark dichotomy between the world that is and the world that could be, and they create an irresistible desire on the part of early believers to move to that different future with them. And so, you know, I like to say there are three aspects to acting different, right? One is movements, the other storytelling, and the other is, uh, disagreeableness. And so like the, the movement piece is, is the front and center piece, because like most people when they think of movements, they think of it as more like social movements, like the civil rights movement and Martin Luther King, or they think of, you know, there's artistic movements like cubism and Picasso. But like fundamentally, a movement is a different way of developing a market than how most marketing people think about developing a market. Most people when they think about marketing, they think, "Okay, I've got a set of targets, I've got a set of programs, I've got inbound and outbound, I've got, you know, these things I need to do." What a movement does is it, it leverages a grievance of a minority against the tyranny of a majority, and it takes that and animates it in a way that those early believers are emotionally committed to moving. So like, um, early customers are not animated by pragmatism. They're animated by belief. Uh, early, early customers, early employees, early investors don't decide to go into business with you because of the practical reasons that you unlock. They do it for aesthetic reasons. They do it because they believe what you believe. And so a movement is basically a set of people with the same belief moving together to a different future. And when you think about it, it's the s- equally the same, right, for the civil rights movement, and a movement is a way to crystallize the choice. Like if you're... if, if you believe in civil rights, you can't be half in on that. You either believe that, that it should be about the content of people's character, not their skin color. You can't be sort of not racist, right? You either believe or you don't believe. And, you know, the people who, who followed Martin Luther King bought into the aesthetically better future that his movement promised, and it turns out... And I don't mean to equate like... That was a pretty important movement, right? It's like some movements are more frivolous, you know, like say an artistic movement. But the notion is similar in that there's a set of early believers who believe they've been enlightened about something that the rest of the world doesn't get yet, and they think that the startup founder is, is sort of like the prime mover of that movement. And then what happens i- is that startup markets happen because the movements accumulate and accelerate and more and more people join them, and what was once heresy becomes the accepted conventional wisdom, and now the company's no longer a startup. It's a company, and now all of a sudden it is a valid market and all of a sudden they're the status quo and they gotta watch out for the next set of disruptors. So the movement is the first...... key thing, I think, in all of this.
- LRLenny Rachitsky
Is there an example? Uh, Lyft obviously comes to mind with this, the pink mustache is just, this is the future.
- MJMike Maples Jr.
Yeah, ride sharing, ride sharing was a movement. You know, in, in my early days starting Floodgate, uh, with Ann, we thought that seed investing was a movement. And so we thought that there was gonna be a day where seed funds would be a permanent feature of the venture landscape. But people didn't believe that in the late 2000s and so we're like, "It's not enough that we just succeed and invest in good companies. We need to get the best LPs in the world to buy into this," right? "We need to get Phil Horsley at Horsley Bridge and Dave Swenson at Yale and people who, you know, are respected in the ecosystem to say, 'Yeah, I, I buy into that.'" And so it was really important to us to get the right early believers, uh, in our movement. You know, Judith Elsey at WeatherGauge had just started a n- a new firm. Uh, one, one of my favorite examples actually, an old one, uh, Clarence Birdseye. So you know, you go into the supermarket and there's frozen food aisle. Well, Clarence Birdseye discovered how to flash freeze food when he was up in the Arctic looking at Eskimos. And they were flash freezing their fish and he wondered, could you do it for other things? And he found out you could, fruits and vegetables. But like, it wasn't enough to just flash freeze the fish or the fruits or the vegetables. You had to convince the trains to have a, a refrigerated car. You had to convince the supermarket to have a refrigerated aisle. And so he had to start a movement where a whole lot of people simultaneously believed in this idea of being able to eat food in a more convenient way, not always in season, not always, uh, grown locally from where you were. And so all movements have that characteristic where you're, you know, you kind of start with a higher purpose and then you move people to that different future.
- LRLenny Rachitsky
I'm trying to think about what are current movements that are happening. One that might be a movement is th- with LLMs, just this bet that transformers are the future of how this is gonna work, that just more compute is the answer versus trying to find something else.
- MJMike Maples Jr.
Yep.
- LRLenny Rachitsky
Does that sound right?
- MJMike Maples Jr.
A- a- another one that I really like is Tesla. So like, Tesla's mission says, "Accelerate the world's transition to sustainable energy." They don't even say they're a car company.
- LRLenny Rachitsky
(laughs)
- MJMike Maples Jr.
Right? So like, Tesla doesn't say, "Here's why we're better than Ford and Toyota." Th- and, and this is really important, right? Because the great movements do appeal to a higher purpose. Uh, they don't say, "I'm better, I'm better than company X." You know, "I'm Avis, I try harder than Hertz." They appeal to a more aesthetically higher purpose future.
- LRLenny Rachitsky
Mm-hmm.
- MJMike Maples Jr.
And then they show that this startup is the vehicle for that movement to be actualized, which is kind of a good segue to storytelling.
- LRLenny Rachitsky
Uh, one other quick example, I'm thinking about Linear, is kind of pushing this movement of craft and design and experience matters in B2B software, and you shouldn't settle for something that you don't love.
- MJMike Maples Jr.
V- very much so. And you know what? Chesky, this was a, I don't think he even knew he was fully doing this at the time.
- LRLenny Rachitsky
Mm-hmm.
- MJMike Maples Jr.
But Chesky did this brilliantly with Airbnb. So he created a, a movement around living like a local.
- LRLenny Rachitsky
Mm-hmm.
- MJMike Maples Jr.
And so the, the other thing that a movement does is it turns the greatest strength of the status quo into its biggest weakness. And so like, J- Brian never said, "Hotels suck," you know, death to the Four Season. He just said, "Hey look, you know, when you go to Paris, you have a choice. You can, you can hang out in the Four Seasons and it's gonna be just like the Four Seasons everywhere else in the world. It'll be in the middle of the town. Or you can live in Paris like a Parisian." And, and he's like, "I don't have to say that the Four Seasons is bad for you to decide to choose me. And oh by the way, if you wanna stay in the same kinda hotel everywhere you go, I'm not for you." But so like, now let's say you're Four Seasons. Your whole business is predicated on doing a good job of having a common experience that people can accept and that they're used to and that they expect. And so now you've t- you've taken all of this stuff that you invested decades in and turned it into something you have to apologize for all of a sudden.
- LRLenny Rachitsky
(laughs)
- MJMike Maples Jr.
And so, so like the gr- the great startups, they create movements not so much by criticizing the incumbent, but by, um, showing the weakness in the strength of the incumbent. And then just saying to the customer, "Hey look, you decide. It's not up to me to decide what's bad about Four Seasons. It's up to you to decide whether you value my difference or not."
- LRLenny Rachitsky
That reminds me of counter positioning from Hamilton, Hamilton Helmer's Seven Powers book.
- MJMike Maples Jr.
100%.
- LRLenny Rachitsky
Hmm. So to make it even more practical for people that are like, "Oh, I need to come up with a movement for my startup, that's why things aren't working," it sounds like it's kind of a, "Here's how we want the view- future to look and why we're doing this," and then it's a combination of marketing, positioning, messaging, repeating it, social media imagine. Is that, is that roughly how to think about it?
- MJMike Maples Jr.
A little bit, but I, but I would also say that, uh, it's about storytelling. And so like, storytelling, uh, there is a science to storytelling. And so like for example, you know, The Hero's Journey, you have somebody in the world that is the hero. Uh, let's say Luke Skywalker on Tatooine, dusty planet, he's bored out of his mind. And then a mentor shows up and offers them a call to adventure, Obi-Wan Kenobi. And at first they resist the call, but then something bad happens, you know, i- in this case, uh, Luke's like, "Hey, I can't, I can't come with you, I got chores to do for Aunt Beru and Uncle Owen." But then he comes back to his place and, uh, it's all burned down. The Stormtroopers killed his aunt and uncle. So then he accepts the call. The mentor has, uh, a tool and a magic. In this case it was the light saber was the tool or, uh, and the magic was the force. And, and they need those things because the hero has to have a reason to credibly believe that they can beat the bad guy. Right? And so then they, then what happens is you, you, you-Find co-conspirators along the way, Han Solo, Chewy, you know, u- ultimately the princess. You, you rescue her, you blow up the Death Star, you beat the empire, and then emerge transformed. They even get medals at the end of the movie, right? Now, it turns out that the exact same thing applies for startups. So like, if we take the Lyft example, let's just say I'm a rider. In the past, the world that is, taxis suck in San Francisco. I can't even get one, and when I get one it's gross and it smells bad and it's late and it, they won't take my credit cards so I have to have cash. Th- they, can't rely on them to get me there. I guess my alternative is to park, you can't ever get parking, people break into your car. That's the world that is. Logan and John would ca- w- engage in a call to adventure. Try this ridesharing app, it's g- it shows cars on a map, you know where they are all the time, they come within five minutes, uh, fist bump the driver. Now, this was where the genius of the pink mustache came in. So the pink mustache honored the fact that a lot of times people resist the call. It's scary to get in a stranger's car. So the pink mustache made it seem a little bit less scarier. When you see these cars driving around in San Francisco, you're like, "Hm, what's up with that pink mustache?" And you're talking to your friend, they say, "Oh, it's this new thing called Lyft, it's pretty cool. You know, it's an app, have you seen it?" And so Logan and John did among the best I've ever seen at honoring the fact that people might resist the call. But then part of this story is languaging. This was the genius of Twitter. They didn't call it microblogs inc., right? They, they created a metaphor around tweeting birds. You know, the T- the, the Tesla was this way, right? It wouldn't have survived a comparison with a Porsche 911. The seats weren't as good, the radio wasn't as good, but, but Elon was telling a story about a different future, and when you bought the Tesla Roadster, you weren't buying it for practical reasons, you were buying it for aesthetic reasons. You were buying it because you thought that that future was something you wanted to be part of. So the storytelling primitive ends up working spectacularly well for startups, right? We need to describe the world that is, we need to describe the world that could be, which is that different future. We need to understand, and this is important, right? That your job as the founder is to be Obi-Wan, not Luke. So the founders sometimes make the mistake of thinking that they're the hero, but they're not. The early believers are the heroes, and it's the job of the founder to tell a story that emotes early believers to wanna move with them and to co-create the future with them. And like, the story you tell an employee is different from the story you tell an investor is different from the story you tell a customer, because all of them have a different idea of what their hero's journey... You know, if you're an investor, maybe your idea of being a hero is to make 100 times your money and be on some fancy list, uh, and make money for your LPs. If you're a early customer, maybe you're a hero by solving an important business problem and getting recognized for it in your company. Uh, if you're an early employee, maybe it's you wanna work on something you're excited about with really awesome people that don't waste your time with politics and bureaucracy, right? And all of those are different journeys. All of those are different transformational ways to self-actualize, and we have to, we have to meet those people where they are and, and give them a reason to wanna come with us to the world that could be.
- LRLenny Rachitsky
I had Nancy Duarte on the podcast. She's one of the most famous presentation designers, and she had exactly the same advice when you're trying to tell a story. You basically bounce back between the world that is, the world that could be, what is, what could be, what is, what could be, and just kinda keep going back and forth.
- MJMike Maples Jr.
100%. In fact, um, Nancy is the person who helped me r- understand this better than any single person.
- LRLenny Rachitsky
Mm-hmm. Mm-hmm.
- MJMike Maples Jr.
Uh, so, so Nancy-
- LRLenny Rachitsky
Anything.
- MJMike Maples Jr.
... would show me how Steve Jobs' iPhone launch speech, she'd be like, "Okay, well n- now notice what he does. He shows how bad phones suck now. They have styluses, they have keyboards, and then he talks about what could be. You could combine an internet communicator. You could combine a, a, an iPod." And he goes back and forth between how bad the current stat, state of things is, how it should be, how bad it is, how it should be. Introducing the iPhone, how bad it was, how awesome it's gonna be, how awesome it is. Like, when you look at his speech, he's masterful at toggling. And by the way, the same is true of Abe Lincoln with the Gettysburg Address. War started seven years ago, new nation, now we're in a civil war. You know, we need to preserve what we stand for as a country, we need to go win this war, but, but, but he kinda goes back and forth, drawing attention between what has happened and the world that was and the world that could be.
Episode duration: 1:49:13
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