(2024-08-28) Chin The Idea Maze Is A Useless Idea

Cedric Chin: The Idea Maze is a Useless Idea. In 2022, I launched an experimental series of cases on the ‘Idea Maze’. The term ‘Idea Maze’ is a Silicon Valley (or tech industry)-ism ; it was originally coined by former Coinbase exec Balaji Srinivasan and then expanded on in a subsequent essay by venture capitalist Chris Dixon. ((2022-08-23) Chin The Idea Maze Cases)

The idea behind my case experiment was simple: what might we learn if we examined the concept of the Idea Maze through a sequence of real world cases? Earlier, I had run an experiment publishing cases on companies with a Scale Economies competitive advantage, which was quite successful. I expected that with this experiment — much like the Scale Economies experiment before it — we would pick up certain common patterns across the cases.

We did not.

You can read the summary essay I wrote at the end of that test and squint; you’ll see that I struggled to find commonalities across all the different cases. ((2022-08-29) Chin Brief Notes On The Idea Maze)

What was the problem with our conclusions? The problem is that none of what we noticed was very useful.

Yes, the phrase ‘Idea Maze’ is useful as a shorthand to describe the difficult journey that all successful companies must travel on the way to finding product market fit. But … so what?... How does the concept of the ‘Idea Maze’ make you better at traversing your individual maze? The short answer is that it doesn’t.

So what do we conclude instead?

The Journey to Product Market Fit is Idiosyncratic

In nearly every case of business success, entrepreneurs make ad-hoc decisions to the best of their ability based on information they receive from execution and then look back and go “Huh, I never expected to end up here. But what a journey!”

you will not believe what I am saying. You will think there are generalisable ‘rules’ that you can follow, certain … ‘good ideas’ that will increase your odds of success, and certain ‘bad ideas’ that will decrease the odds of your finding a successful startup idea.

most articles about finding product market fit will say that “there is no formula to finding product market fit”, but will then follow that up with “but this is what has worked for me”, or “but here are certain ideas that will increase the odds of your success.” Notice that I am not saying this second bit. I am saying, quite literally, “product market fit is idiosyncratic and there is no one formula” and I am stopping there. (ill-structured)

when you have commissioned cases on capitalistic pursuits as varied as Teledyne, Estée Lauder, Vanguard, and Munger, Tolles, Olson … any belief that there are general principles for navigating the Idea Maze quickly vanishes. The reality is that there are countless world-changing businesses that have emerged from (take your pick): nepotism, regulatory capture, post-war dreaming, corruption, curiosity, political revolution, loyalty to colleagues or … revenge.

Remember Balaji Srinivasan? In his original articulation of the Idea Maze, he asserted that “A good founder is capable of anticipating which turns lead to treasure and which lead to certain death. A bad founder is just running to the entrance of (say) the ‘movies/music/filesharing/P2P’ maze or the ‘photosharing’ maze without any sense for the history of the industry, the players in the maze, the casualties of the past, and the technologies that are likely to move walls and change assumptions.”

Ok, so: Milton Hershey had zero idea what it took to make milk chocolate. He ran into the idea maze with no sense at all for the history of the industry. He bought a farm and some cows and spent three years literally reinventing the wheel — not even bothering to go to Europe like his (later) rival Forrest Mars; Europe had been making milk chocolate for three decades by that point. By pure luck his stubbornness produced a recipe that created a slightly sour chocolate, and his egalitarian beliefs led him to price his chocolate at a nickel, and he pushed for distribution of the chocolate throughout the entire United States. Decades later, when ‘better’ European chocolates sought to invade Hershey’s market, they faced an uphill challenge thanks to the Branding moat Hershey had built — an entire generation of Americans had grown up used to the sour taste of Hershey’s milk chocolate.

Hershey’s story is an existence proof that you don’t have to navigate the Idea Maze intelligently. (In reality, if you read all 19 cases in Commoncog’s Case Library — or even stay on the lookout for instantiations of the concept in real life — you will find that intelligent navigation of the maze is the exception, not the norm).

For instance: Henry Singleton started Teledyne, a high technology conglomerate, in 1959. From the outset, Singleton made it known that he ran Teledyne with no business plan, saying, at one annual meeting: “I know a lot of people have very strong and definite plans that they’ve worked out on all kinds of things, but we’re subject to a tremendous number of outside influences and the vast majority of them cannot be predicted. So my idea is to stay flexible.”

It’s worth noting that Teledyne was venture backed — pioneering venture capitalist Arthur Rock invested money at formation and sat on Teledyne’s board; Rock was one of the few people Singleton consulted when he started on his share repurchase program. But it’s worth asking if the Idea Maze even applied to Teledyne.

Sony was founded in post-war Japan, got its start with radio adapters, then primarily made tape recorders for 22 years. They launched the world dominating Trinitron colour television system only in 1968 — 22 years after founding, and the Walkman in 1979, 33 years after founding.

TSMC’s growth was terribly slow in the early years. It had to fight mainstream wisdom, and also it had to demonstrate that it would never compete on chip design. A business model that is built on trust takes a lot of time. TSMC started in 1985. It grew anaemically — customer by hard-won customer — for the first decade of its life. In the late 90s there was a sudden boom of graphics chip companies: at its peak, there were 70 startups duking it out in a ruthless fight for survival. Of the 70 companies, only two survived: ATI and Nvidia. TSMC rode this wave of growth up, and then — as its customers started dying on the other end of the capital cycle — used the revenue it made from the boom to reinvest in technology and fabs.

Danny Meyer ran a restaurant business for 15 years before starting a hot dog stand as part of a Madison Square Park art project. Four years later, in 2004, the city opened bids for a kiosk-style restaurant in the Park; Meyer improvised on the original stand and submitted a bid for a new concept he called ‘the modern version of a roadside burger stand’.

At which point were any of these companies startups, and at which point did any of these companies commit to search for a fast growing idea?

There are companies that fit Paul Graham’s essay. He has funded many of them. But then there are also many companies that do not fit the essay.

To be fair, people who come up with frameworks usually have some context in which they are working or thinking, and their frameworks make sense for their specific context.

But if folk were serious about making universal pronouncements, they would sound less like framework thinkers and instead start sounding like … well, Charlie Munger, I guess. Munger always drove me nuts with his unwillingness to make first-principles-based pronouncements on business success. He nearly always talked in terms of “this is something that can happen” or “here is a mental model that illuminates this specific scenario”, and then he would always, always, throw an analogous case at you.

But I now know why he does this, of course. Munger has internalised — more than nearly anyone else — that finding a path to a working business is always unique.

Context-Free Principles for Navigating The Idea Maze

a natural question that arises is … what works? What generalisations can you make across all the cases?

What you get boils down to more conservative things like “you must find a secret” or “you must get lucky”.

”Get lucky?” I hear you say, “How is this better advice?!” Counter-intuitively, “go get lucky” is better advice. It is honest about the shape of reality. It is universal across all cases. Most importantly, it is context-free.*

So how do you get lucky? The answer to this question is one that we’ve already examined on Commoncog, thanks to the work of academic Saras Sarasvathy. It turns out that Sarasvathy’s work is the only thing I’ve found that actually fits with the full range of evidence.

She discovered that all of them thought about entrepreneurship in the exact same way: they do something called ‘effectual thinking’. (effectual reasoning)

Effectual thinking is the opposite of causal thinking... These principles are the only universal thing across all the cases in the Idea Maze concept sequence. In pretty much every story, you will see that at some point a bet starts to gain traction, and it works because the person has hung around long enough for a gap to emerge; their latest bet exploits that gap when it still isn’t widely recognised. The only thing that uncovers the gap is action — this is the ‘discovering a secret’ observation that Peter Thiel talks about. But how you uncover a secret is idiosyncratic. There is no ex-ante strategy for finding a secret beyond “fuck around and find out”.

Which, ok, maybe we can do slightly better than that. The better advice might be: “be curious, develop good taste in businesses and in products by consuming lots of cases (case study), and then put yourself in a situation where you can keep messing around for years and years.”

Two More Things

The ‘Idea Maze’ is a useless idea for execution, and you’re better off learning to think effectually. What else can we conclude from this essay?

First, you should probably realise that much of the bloviating about product market fit is nothing more than content marketing. To be fair, I think this has become fairly common knowledge. If you have found product market fit, your problems change and there’s typically expertise and frameworks you can tap to solve the problems you encounter. But before you find product market fit, it is fairly well known — at least in startup circles — that no amount of advice would do anything for you

There is a second observation we can make.

It is common to find individuals in the startup world who ‘have taken a year off to find an idea for a company’. Like me, you may have noticed that this tends to be less effective than ‘working on a side project for several months or years before starting a company around it’ or ‘faff around with random projects for an indeterminate period until something catches on.’ (idea generation)

I am generally sympathetic to such ‘start a company for a year’ attempts, because I think people should try to start companies if they are interested in entrepreneurship. But I now think that any attempt with a deadline is not a great way to start a new business.

This is not something I would have said even a few months ago. The cases on the Idea Maze have changed my mind — and perhaps they might change yours. The simple truth is that finding a good business takes time. Sometimes it takes a decade. It is trite to say this, but reading 19 cases end-to-end has a way of driving this home, in a way that simply asserting it might not.

Deadlines are fake. The more realistic approach is: “how can I structure my life to conduct a years-long search for a workable business idea?”

You also want to be maximally open to opportunities. This is not a trivial thing. Deadlines have a curious ability to shut down your curiosity.

deadlines also prevent you from fully committing to an idea. You only have one good shot, after all. What if you waste it on a dumb business? Your self-imposed date looms large in your head, and so you fret. And then you hedge. And the simple act of hedging prevents you from making any single idea actually work.

A couple of links on product market fit in technology that are actually useful:

• Excuse Me? Is There a Problem by Jason Cohen. (2023-04-16) Cohen Excuse Me Is There A Problem
• Four Fits for 100M Growth by Brian Balfour*