🔍
Simple Products That Became Big Companies – Dalton Caldwell and Michael Seibel - YouTube
Channel: unknown
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a product that doesn't work with lots of
[1]
features is infinitely worse
[4]
than a product with one feature that
[6]
works
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and again like let's play that out
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let's play that out right imagine if
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it's like they were like you get health
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care and you get benefits and you get
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401k and payroll and none of those
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features work and sometimes we lose the
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money
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yes
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it's like you would hate them you would
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hate that
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that sounds like verizon or something
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you know exactly
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hey this is michael seibel with dalton
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caldwell and welcome to rookie mistakes
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we asked yc founders for their rookie
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mistakes so we could share them with you
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and help you avoid them
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here's the first mistake that was
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written in
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in my company we tried to accommodate
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more than one use case in our product
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before nailing
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a single use case and proving out that
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they even existed business
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serving that customer
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yeah this this is super common it's
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definitely a problem we call this
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boiling the ocean right it's you're
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trying to do something that's basically
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impossible or intractable
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and all of your instincts are to build a
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complete fully formed product without
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getting a single user in your mind you
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have this elaborate plan
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and so your your plan to start
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the elaborate plan is to build it all at
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once before getting a single user i
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think that every founder starts their
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company with the lie in their head
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that they know
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about what their customer wants and they
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know how to solve the problem
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and the more you build before putting
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your product in front of a user the more
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you just let that lie go wild whereas as
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soon as you get something in front of a
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user you can actually learn
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how many of my hypotheses were correct
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and how much of this stuff was just the
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lie that got me started doing my company
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a useful lie but maybe not the best lie
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if you want to solve your user's problem
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i also think there's a little bit of
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i'll invent the term google itis like
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people looking at companies that they
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use today
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and not understanding what they looked
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like at the beginning
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yeah they're just looking at google and
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a current product
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you're like oh we're the next amazon so
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we're gonna build everything amazon has
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and not hey when amazon started it was
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like a really simple website that just
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sold books it didn't do anything else
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like i think it didn't even do that that
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well wasn't that
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fair
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let's talk about some other examples
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though you were mentioning that open c
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is a good example of something that
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started super simple yeah i mean look
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open c is a company in the zeitgeist
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it's really famous it feels like it came
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out of nowhere if you're like a like a
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normal person you're like wow open c
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what a huge deal well open c was in yc
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in 2018
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and
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you know
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it was a rough start they they changed
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their idea they were working on
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something else to begin with and they
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pivoted into open c and they actually
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spent something like a year to two years
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grinding it out with this really simple
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website
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that just let you buy and sell nfts and
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like barely worked
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and they shipped tons of features they
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shipped like once a day or once a week
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constantly
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they didn't build their own wallet like
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if you use openc today you'll notice
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this you have to use a third-party
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wallet there's all these other things
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they didn't build
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and by grinding away and being super
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focused on the simple use case
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they got something that people wanted
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they got network effects and then boom
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we all woke up one day and this is one
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of the hottest companies you know
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in the world and everyone wants to
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invest and you know they're worth
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billions of dollars well
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don't forget
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the two or three years they
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were grinding away in obscurity
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just trying to make the dang thing work
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doing the simplest thing that had
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basically no features the feature was a
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website
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to buy an nft
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and transfer to someone else
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you know what i'm saying it still has a
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lot of work to do on the basics before
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they add really complex features there's
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a lot more basic work to do on that
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thing and so
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again like the story here is the reason
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that thing worked is they started simple
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and they made the simple thing work and
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now they're adding more complexity to it
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and so if someone wanted to like compete
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with them or make an nft startup they
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should be doing the simple fundamentals
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first and not
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try to get feature parody
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with with all these other companies
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first you know
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i totally agree i remember you know when
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gusto
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um
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went through yc because they were
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actually in my second batch in winter
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12.
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and another example of you know if you
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look at gusto today you would say oh
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you can do payroll you could do benefits
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you can see your org chart you can do
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401k like it's like this
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tool chest full of amazing hr tools
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when gusto started it was a company
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named zen payroll it did exactly one
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thing your payroll back then
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if you didn't use zen payroll you'd have
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to call up adp
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and adp would bring someone to your
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office for you to sign stuff
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so that you could run payroll and then
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every month you had to call someone on
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the phone and say yes
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i do want to run payroll this month like
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like that was state of the art and then
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gusto said we can just do that online
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and all that's all it's going to do and
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you're going to love it and you're going
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to sign up and you're going to forget
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about it because that's what good
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payroll is right you forget about it and
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so
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like imagine a version of of gust or zen
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payroll that had a lot of features but
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constantly didn't
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pay your employees
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like like a broken version a product
[348]
that doesn't work with lots of features
[350]
is infinitely worse
[352]
than a product with one feature that
[354]
works
[356]
and again like let's play that out
[358]
let's play that out right imagine if
[359]
it's like they were like you get
[361]
healthcare and you get benefits and you
[363]
get 401k and payroll and none of those
[366]
features were and sometimes we lose the
[369]
money
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yes and it's like you would hate them
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you would hate that
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that sounds like verizon or something
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you know like exactly
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that's a great way to learn a hated
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company is to have a lot of features
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that don't reliably work
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all right here's the next one that was
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written by yc founder
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um they wrote
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we copied another successful business
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model from an overseas market
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and wrongly assumed that product market
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fit was a given if the product works in
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country x it's going to work in country
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y
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we scaled up hiring quickly and burnt a
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lot of money before we realized that the
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users we were selling to did not want
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our product
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this is something that happens so
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commonly and what's tricky
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is that
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investors often like funding these ideas
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because they're so simple right
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this is a very simple thesis if blank
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works here it should work there so
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oftentimes these companies like get
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money
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but then fail after getting money how
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have you seen this
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i think i think what we want to believe
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is banners and this applied to me too
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is that
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by getting validation from
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investors or the press or my friends or
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employees or winning a startup
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competition whatever
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that meant it was good and that that was
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the validation you know hey i've got
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i've got validation
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and
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it's pretty frightening to realize
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that you can get validation from all
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those things and it could still not work
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you know and that getting the stamp of
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approval
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like ultimately you're responsible for
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the thing works or not
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and no one it's like no one else's
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problem to make it work other than the
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founder you're kind of you're kind of on
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your own on this one um
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and so
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it's almost like it's like thinking that
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if you can pass the driver's license
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test to get a driver's license it means
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you're a good driver
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like i think all of us that have a
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driver's license know
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you can still be a pretty bad you know
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there's a lot of variation in the
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quality of driving and lots of people
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can get into trouble with their driving
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habits even though you have a driving
[502]
license
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there's no and there's no mechanism you
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know unless you get pulled over like
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things have to go bad or you get unlucky
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for an authority figure to get involved
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but for the most part you can get into
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all sorts of trouble even though you
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have a driver's license that's how i
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view this
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is that
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you know you can have your startup
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license hey i have a website i got you
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know i got an article i i raise some
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money
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but man you can really do poorly
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and no one's gonna stop you
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yeah
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i think this also comes
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from historical context like by that i
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mean
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i still think that most founders are
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kind of
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looking back to what's worked in their
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past
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and almost everything that's happened in
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their past almost everything they've
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learned they didn't have to learn from
[546]
first principles they didn't have to
[547]
observe personally right you learn
[550]
physics from a physics teacher
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and so i think what's so tricky is what
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we're basically saying is that like all
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of the ways that you learned in the past
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don't work here you actually have to go
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observe the problem
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talk to the people who have the problem
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try to figure out what's going on and
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iterate
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whereas like no one learns things that
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way in school like no one's like hey
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like we're gonna drop a rock off of a
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building see it fall and then figure out
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what happened right you never learn
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physics that way and so i think that
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what happens is that when these founders
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go into startups they're looking for the
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teacher
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is the teacher is the cheat right like
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how much harder would it be to learn
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physics without the teacher right it's
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funny
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like you know people people email you
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and me sometimes after these videos they
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watch these videos and our whole point
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is go talk to customers go figure it out
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and they email us and they're like can
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you give me advice
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like they kind of aren't getting the
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video the point of these videos at all
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which is what we're saying which is a
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little bit frightening
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is that authority figures don't have the
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answers for a lot of these questions and
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if you're looking for authority figures
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to tell you
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your idea is good
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you still aren't really getting the
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point of these videos
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we're kind of telling you
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you have to
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go
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get ground truth answers
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from customers and that you really can't
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substitute anything for ground truth
[631]
answers no
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it doesn't suck yeah that sucks
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sorry i wish i could tell you that i had
[640]
all the facts
[643]
i feel like we can't make it not suck
[645]
but isn't it nice that we're just being
[646]
honest with you and being like this is
[648]
exactly how much it's gonna suck you
[649]
know it's not
[651]
it's not easy
[652]
what i find distressing though is how
[655]
investors often get this wrong
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investors often believe that
[660]
founders don't need this ground truth or
[662]
you can just take solution from a and
[663]
put it in place b and work
[665]
give companies money
[667]
those companies start doing company
[669]
building
[670]
hiring the exacts hiring the team
[672]
and this happens why i see companies all
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the time you know you talk to them two
[675]
years later and you're like you know
[676]
they come to you and they're like it's
[678]
not working and this happens why i see
[679]
companies a lot they'll go raise a lot
[681]
of money
[682]
ignore us for two years come back when
[684]
it's not working but they have a team of
[686]
50 and be like michael dalton like what
[688]
happened it's like well
[690]
did anyone like your pro like did you
[692]
solve any problem for anyone like
[696]
or like let's look at a core stat right
[698]
like you charge people what's your
[700]
revenue look like you're you know and
[702]
then well we're not really focused on
[703]
revenue right now we want to grow we
[705]
want to grow we have to increase the nu
[707]
we know this company personally i won't
[709]
say it is we have to increase the number
[710]
of customers who could buy us
[713]
before we increase
[715]
the customers who do buy us it's like
[717]
well
[720]
it's a great logic yeah it's good i do
[723]
what is comforting
[724]
to me though is that when the runway
[727]
gets down to about 12 months
[729]
the magical thinking starts
[731]
fading you know suddenly it's funny
[733]
don't you wish you could bottle up
[736]
like if you see someone's performance
[738]
say there's you know you have 18 months
[740]
of cash
[741]
the first like
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you know 15 months
[745]
when someone's back is against the wall
[747]
the quality of their decisions get much
[749]
better if there is a way to like gamify
[752]
like if you bottle up the quality of
[754]
execution and thinking and like i don't
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know we see people do great work
[760]
it's just you wish they would do this
[762]
great work when their back is not
[764]
against the wall again it reminds me of
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being in college or something yes where
[767]
the papers do
[768]
yeah and you know you didn't go to the
[770]
class you didn't show up to anything
[772]
and then like in the final 24 hours you
[774]
like
[777]
you do great work
[779]
but you could have done that the whole
[780]
time and not had a whole fire drill
[782]
right is that a shame
[784]
it is a shame you know the only solution
[787]
that's worked for me
[789]
is just like do companies that have such
[791]
a hard time raising money that it's
[793]
always a fire truck
[797]
um but yeah you know
[799]
it comes back to you that like the best
[801]
founders are disciplined what you talked
[802]
about is that's discipline
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right
[804]
that's doing the right thing when no
[806]
one's forcing to you or no situations
[808]
forcing you to and i think that
[811]
too often
[813]
genius is mistaken for discipline it's
[816]
like
[818]
you know a lot of people think oh this
[820]
person out executed all their peers
[822]
because they were smarter and it's like
[824]
that assumes the peers were actually
[826]
working on the thing they said they were
[827]
working on as opposed to like hiring and
[829]
going to conferences and talking to
[831]
reporters
[833]
disciplined to avoid the distractions um
[837]
i mean that should be comforting a lot
[838]
of people it's like yeah for every ounce
[840]
of discipline you have you can probably
[842]
lose five ten ounces of intelligence and
[845]
still outperform you know yeah that's a
[848]
great point it's funny how many people
[851]
that we see again let me think about how
[852]
to phrase it with like
[854]
you'd think they'd be really good at a
[855]
lot of things
[857]
but they i'm not sure what they do with
[858]
their time
[860]
they have a great resume but it appears
[862]
they just don't really do work
[864]
and the people that sit down and do the
[867]
focused work and again we all know what
[868]
this is like and think back to college
[870]
yeah you know lots of reasons to not
[872]
work on something
[874]
um if you could bottle up those moments
[876]
where you're actually doing focused work
[879]
the people that succeed just seem better
[881]
at that that's actually the criteria
[883]
that they seem better at if you if you
[884]
looked at their calendar if you shadowed
[886]
them or something
[887]
the folks that are really good at this
[889]
are just
[890]
better at doing focused work
[893]
there's kind of nothing else i mean at
[895]
least yeah
[896]
and by the way you can't you can't
[898]
really change your raw intelligence but
[900]
you can get better at this like this is
[902]
a little bit like working out like you
[904]
can
[906]
you know if doing focused work for
[907]
someone who likes to procrastinate is a
[908]
little bit painful the more they do it
[910]
the less painful it gets you know and so
[914]
hey you know smart people certainly have
[916]
an advantage but man hard workers
[919]
hard workers are dangerous
[921]
[Laughter]
[922]
hard workers are dangerous lazy people
[925]
are um
[927]
you know as a startup founder lazy
[929]
people lazy competitors
[931]
are your friends
[933]
yeah it's good when your competitors are
[934]
focused on the wrong things yeah um
[936]
along these same lines like
[939]
i wanted to i wanted to talk about what
[940]
we learned from uh hardware crowdfunding
[943]
a little bit yeah so so here's the
[945]
here's the issue
[947]
if you need to manufacture a lot of a
[949]
product
[951]
it's much cheaper to do a big order in
[953]
quantity right follow me like say we
[955]
want to let's talk about t-shirts let's
[957]
say we want to create dalton and michael
[959]
t-shirts it's much cheaper to do an
[961]
order for 10 000
[964]
than it is to do one at a time right of
[966]
the same t-shirt ten thousand seam
[968]
t-shirt yeah makes sense right and so
[970]
crowdfunding and kickstarter made sense
[972]
because you could raise you could sell
[975]
the t-shirts at once we actually had a
[976]
yc community that's called teespring
[978]
didn't work out but it was like a way to
[979]
order a bunch of t-shirts and a quantity
[981]
and um then you get a big pile of money
[983]
and then everything goes perfectly and
[985]
you engineer it and you manufacture the
[987]
product and all the backers of your
[988]
kickstarter get the product and
[990]
everyone's happy and you write you know
[991]
you right off into the sunset right
[993]
that's how it works right michael like
[994]
that's exactly and then you then you're
[995]
apple
[996]
again i don't think people are going to
[997]
get the irony we're being i'm i'm being
[999]
facetious for my foreign friends that
[1002]
don't get the irony so in practice
[1004]
michael what actually happens what do we
[1006]
see with all these companies at
[1007]
crowdfunding
[1008]
no idea how to build it
[1010]
no idea how much how much building it
[1012]
would cost no no idea how much the thing
[1015]
should cost
[1016]
so they're charging users for a product
[1018]
that they don't even know what the right
[1019]
price is
[1021]
the people who buy it have no idea how
[1022]
long it's going to take to build which
[1024]
is only matched by the people who are
[1025]
building it having no idea how much it
[1027]
takes to build
[1029]
and we haven't even gotten to the best
[1030]
part no idea whether the thing actually
[1033]
solves the problem for the person
[1036]
but a lot of money up front and god like
[1039]
a lot of expectations
[1041]
a lot of untested plans
[1044]
you know
[1045]
well that's
[1046]
that's what's funny is like when you
[1048]
think about it it seems like the
[1049]
greatest thing in the world to be able
[1050]
to raise money from a crowdfund for your
[1052]
hardware company but in fact there's no
[1054]
sure way to make strangers on the
[1057]
internet
[1058]
hate you
[1060]
like like it's a really great way
[1062]
to become like infamous on the internet
[1065]
is to be like you know here's here's a
[1069]
a cooler with a blender on it and it's
[1072]
like 200 and back my kickstarter and
[1075]
then you like don't ship it and like you
[1076]
send out updates the dog ate your
[1078]
homework and oh it's chinese new year
[1080]
like i don't know like happens
[1082]
and like man people don't people really
[1085]
hate you you're like a villain for like
[1088]
and thousands of people spend a lot of
[1089]
time trying to like track you down yeah
[1091]
and get the refunds and calling you a
[1093]
scammer like it kind of we've seen this
[1095]
ruin people we knows lives doing this
[1096]
kind of thing
[1098]
i think that
[1100]
more and more there are other areas
[1103]
of the startup world that are starting
[1105]
to resemble this kind of model and i
[1107]
think that
[1109]
it's hard man it's it's so hard because
[1112]
i remember the run-up to hardware if
[1114]
you're a hardware company everyone else
[1116]
was doing this
[1117]
you look like an idiot if you weren't
[1118]
crowdfunding you know and so like
[1121]
it kind of goes back to the like hey man
[1123]
sometimes when everyone's doing
[1124]
something it doesn't mean that's gonna
[1126]
work like yeah crowdfunding was what
[1128]
like a six seven year cycle
[1131]
yep and i think it still could be cool
[1133]
like like there's situations where it's
[1135]
a it's a tool i just think i think our
[1137]
startups seven eight years ago thought
[1139]
it was a panacea they thought it was the
[1141]
solution yes like if you were a hardware
[1143]
company the only way to do it was to do
[1146]
a crowdfunding always
[1148]
right and now it's just it's a tool that
[1150]
you could bring to market but honestly
[1152]
you know what the real story here is is
[1153]
usually do it after you've shipped and
[1155]
manufactured
[1157]
a couple of versions already
[1159]
like i think best practices if anyone
[1161]
here is doing a hardware startup um
[1163]
think best practices
[1164]
is you don't do it at the early stages
[1166]
and you do it later when you have like
[1168]
v2 v3 and you're ready to manufacture at
[1171]
scale because then you won't
[1173]
create
[1174]
thousands of enemies on the internet
[1176]
that think you're trying to scam them
[1177]
you know and again like all these people
[1178]
had good intentions i don't think anyone
[1180]
like no one was actually trying to scam
[1182]
anyone
[1184]
but intent doesn't matter to strangers
[1186]
on the internet does it michael no you
[1188]
know there is one better strategy
[1190]
do a software company a lot easier
[1193]
a lot easier yeah and then and then in
[1195]
all things lines you know clearly
[1197]
there's a lot of stuff happening in
[1198]
crypto and this relevant to this but
[1199]
just just be aware if you take money
[1202]
from people
[1203]
at scale
[1204]
yeah on the internet they rightfully
[1207]
will hold you accountable and i just
[1208]
don't know if peop it looks like people
[1211]
are handing out free money on the
[1212]
internet and i get why people want that
[1214]
just understand that there's a cost
[1217]
and if people think that you you know
[1219]
rugged them if you're if you rubbed the
[1221]
people with your thing you know
[1224]
it's gonna be bad for your life
[1227]
right like there's a cost like there's
[1229]
no there is no free lunch i think in
[1230]
this sense and so
[1233]
you know just be aware of that
[1235]
i i don't and again i know people that
[1237]
have been on the other side of this um
[1240]
it's not great if they start trying to
[1241]
track you down and it can change your
[1243]
life forever
[1245]
i mean like literally forever like like
[1249]
there are a few things in the startup
[1250]
world that kind of are like one shot
[1252]
kill
[1253]
and and you know this is one of them you
[1256]
screw up with enough people's money
[1259]
it never leaves you like you get that
[1261]
permanent wikipedia page
[1264]
that's not what's not what you want
[1266]
all right well that was a good wrap up
[1269]
great chatting dalton
[1278]
you
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