Refreshing read John. Currently grappling with a venture that on paper doesn't full a monstrous market opportunity but opens the doors to much more innovation and customer value. This gives me confidence.
Businesses are somewhat of a proxy for human behaviour (no surprises there, I guess) - and while people are predictable in certain predetermined reference frames, human behaviour over several iterations across time is inherently unpredictable.
At best we can guess at what the general direction of success would look like for a business, but assigning precise dollar amounts for total addressable market etc, is likely to be incorrect. There are too many variables to account for, and a good number of these variables are unknown and do not even factor in our calculations.
Look at the most successful companies in the world today, go back in time to their early startup days, ... even the most bullish optimist could never have predicted the rarified heights of success these companies have attained.
I don’t think our inability to predict these outcomes is from a lack of trying, I think we just don’t know which ones in a gamut of variables are relevant, and to what degree they are relevant, and when in the lifecycle of the business they are relevant.
And these “small” miscalculations are amplified across time.
Not to get too nerdy, but a good analogy of this, I believe, is the way the GPS in cars work. The driver types in the destination and sets out for it. Satellites in orbit around the Earth triangulate the car’s position on the ground and keeps it on target.
But Einstein’s theory of Relativity posits that time passes faster with decreasing gravitational force - that is, clocks on the ground tick slower than clocks in orbit (in space).
Indeed, the clocks in the orbital satellites tick 38 microseconds faster than the clocks on Earth.
38 microseconds?
A microsecond is one-millionth of a second.
That’s seems far too small to be of any significance, right?
If this “insignificant” disparity in time is not factored into the GPS in cars, drivers will miss their intended destination always by a distance of 10 kilometers!!!
That’s a distance of 111 football fields joined end to end.
It would take the great Usain Bolt about 16 minutes running at his top speed to cover this error in destination.
The dynamics of human behaviour (businesses) across time is potentially more unpredictable than ticking clocks.
So true. When an investor's very first question is 'How big is the market?' I'd like to be able to just say, 'I don't know, does the world today look like you expected it to 5 or 10 years ago?'
Isn’t it also about making sure the founder has done the number crunching and gone through the thought process. You are correct in the fact that accuracy ultimately is pure luck but if a founder has gone through a logical process of looking at where they might fit, who they might be up against, how they might be compared in both the customer and investors mind that’s the important part. Adding to that they have a hypothesis and not fixed in their mindset but will test and experiment to see where the path take them.
As a Founder I really hate when investor ask me the question so what’s the Market size as I know we won’t agree. I can see the big vision, I can see that we are disrupting the market and creating a new one and no one knows yet how big this one can be! I wish that would stop as I think it’s useless. If the investor doesn’t like your idea it will tell you that the market size is too small or that your number is way too big and you will never get there. If you don’t have a consulting background and are a female founders the odds of getting this comment are even higher.. Anyway will stop with the rant.. will just have to prove them wrong ;)
Resonates 100% with me. As a founder my focus is how to get to the next 2x, then the next 2x and so on, not whether or not I'm operating in a $Bn TAM. Consistent growth gives you a lot of optionality to expand your TAM as you grow too.
However we disagree on the TAM, I'll keep making the intros and I'm sure you'll keep politely declining ;-)
Refreshing read John. Currently grappling with a venture that on paper doesn't full a monstrous market opportunity but opens the doors to much more innovation and customer value. This gives me confidence.
Great piece John. Entertaining and thought-provoking. 👍
Love the off the cuff writing style! (also enjoyed the actual content)
Businesses are somewhat of a proxy for human behaviour (no surprises there, I guess) - and while people are predictable in certain predetermined reference frames, human behaviour over several iterations across time is inherently unpredictable.
At best we can guess at what the general direction of success would look like for a business, but assigning precise dollar amounts for total addressable market etc, is likely to be incorrect. There are too many variables to account for, and a good number of these variables are unknown and do not even factor in our calculations.
Look at the most successful companies in the world today, go back in time to their early startup days, ... even the most bullish optimist could never have predicted the rarified heights of success these companies have attained.
I don’t think our inability to predict these outcomes is from a lack of trying, I think we just don’t know which ones in a gamut of variables are relevant, and to what degree they are relevant, and when in the lifecycle of the business they are relevant.
And these “small” miscalculations are amplified across time.
Not to get too nerdy, but a good analogy of this, I believe, is the way the GPS in cars work. The driver types in the destination and sets out for it. Satellites in orbit around the Earth triangulate the car’s position on the ground and keeps it on target.
But Einstein’s theory of Relativity posits that time passes faster with decreasing gravitational force - that is, clocks on the ground tick slower than clocks in orbit (in space).
Indeed, the clocks in the orbital satellites tick 38 microseconds faster than the clocks on Earth.
38 microseconds?
A microsecond is one-millionth of a second.
That’s seems far too small to be of any significance, right?
If this “insignificant” disparity in time is not factored into the GPS in cars, drivers will miss their intended destination always by a distance of 10 kilometers!!!
That’s a distance of 111 football fields joined end to end.
It would take the great Usain Bolt about 16 minutes running at his top speed to cover this error in destination.
The dynamics of human behaviour (businesses) across time is potentially more unpredictable than ticking clocks.
So true. When an investor's very first question is 'How big is the market?' I'd like to be able to just say, 'I don't know, does the world today look like you expected it to 5 or 10 years ago?'
Isn’t it also about making sure the founder has done the number crunching and gone through the thought process. You are correct in the fact that accuracy ultimately is pure luck but if a founder has gone through a logical process of looking at where they might fit, who they might be up against, how they might be compared in both the customer and investors mind that’s the important part. Adding to that they have a hypothesis and not fixed in their mindset but will test and experiment to see where the path take them.
As a Founder I really hate when investor ask me the question so what’s the Market size as I know we won’t agree. I can see the big vision, I can see that we are disrupting the market and creating a new one and no one knows yet how big this one can be! I wish that would stop as I think it’s useless. If the investor doesn’t like your idea it will tell you that the market size is too small or that your number is way too big and you will never get there. If you don’t have a consulting background and are a female founders the odds of getting this comment are even higher.. Anyway will stop with the rant.. will just have to prove them wrong ;)
Resonates 100% with me. As a founder my focus is how to get to the next 2x, then the next 2x and so on, not whether or not I'm operating in a $Bn TAM. Consistent growth gives you a lot of optionality to expand your TAM as you grow too.