Stop Innovating (On The Wrong Things)

Episode Summary

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In the episode titled "Stop Innovating (On The Wrong Things)" from the podcast Dalton plus Michael, the hosts delve into the common pitfalls that entrepreneurs and startups face when they misdirect their innovative efforts. They begin by setting the stage in what they describe as the "innovation economy," where there's a prevalent belief among founders that innovation should be applied to every aspect of their business. This approach, however, is critiqued as spreading "innovation juice" too thinly across various problems, rather than focusing it where it's most needed. The hosts argue that the core miracle of a startup is finding product-market fit and creating something that people genuinely want. They caution against attempting to perform multiple "miracles" simultaneously, as this significantly lowers the chances of success. Instead, they advocate for concentrating innovation on solving real customer problems and adhering to best practices in other areas of the business. The discussion highlights how some founders get sidetracked by less relevant innovations, such as unconventional corporate structures or attempting to disprove established startup advice, which often does not serve the customer's interests. Specific examples of misguided innovation efforts include choosing unusual legal incorporations, like a Wyoming LLC instead of a Delaware C Corp, or making high-risk technology choices that complicate the business unnecessarily. The hosts also criticize the tendency to innovate in areas like business model and pricing in ways that confuse customers, emphasizing that clarity and familiarity can be more beneficial. The episode concludes with a broader reflection on the sources of advice that founders might follow, cautioning against applying principles from the branding world directly to technology startups. They suggest that successful tech companies often build on what's already proven to work, making incremental rather than radical changes. The overarching message is to prioritize the customer's needs and to save the more experimental innovations for after establishing a successful first venture.

Episode Show Notes

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Startups need to innovate to succeed. But not all innovation is made equal and reinventing some common best practices could actually hinder your company. In this episode, Dalton Caldwell and Michael Seibel discuss the common innovation pitfalls founders should avoid so they can better focus on their product and their customers. Apply to Y Combinator: https://yc.link/DandM-apply Work at a Startup: https://yc.link/DandM-jobs

Episode Transcript

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SPEAKER_00: Headline ripped from the news is people looking at the corporate structure of open AI and being like, oh, this is an instruction manual. SPEAKER_02: All right.Welcome to Dalton plus Michael.Today, we're going to talk about how do you avoid innovating on the wrong things?So to set this up, right, we're in the... Innovation economy? SPEAKER_00: Oh, definitely.We're a major innovation. SPEAKER_02: It's right here, innovation economy.That's what's happening.We encounter a lot of founders who believe that They need to take what I call innovation juice and spread it across. SPEAKER_00: That's what you call it?Innovation juice?Innovation juice. SPEAKER_02: What I'm trying to insult it.And they have to spread it across every freaking problem they encounter.And I think that there's only a limited amount of innovation energy that any company can have.There's only so much juice is what you're saying. It's like I set that up.And we have maybe encountered some places where you should maybe just use the best practices.Yeah, here's how I think about this. SPEAKER_00: Making a startup work is a miracle.Yes, yes.And the fact that you got product market fit and made something people want, you literally performed a miracle to do that.It is amazing.Yes.People would... or so people would die to get what you got.Now the odds that you are going to be able to perform five miracles at once is much, much, much lower.Much lower.And so you want to focus the miracle juice on the single miracle, which is making something people want and making a product, right? You guys see what I'm saying?Yes.Solving a real customer problem.And then all this other stuff, yeah, just do best practices.Please don't innovate.Yes.Like you don't. need to have a low likelihood of success miracle.Like you don't want to have to be right on these long shot bets in five different ways.Yes. SPEAKER_02: And I think it's interesting because I think that I encounter some people who somehow are more religious about these side bets, right?It's like, well, I'll only do a startup if I can locate it in bumblefuck nowhere. Or I'll only do a startup if I get to do this weird corporate governance thing.And I'm like, what you're really saying is like, I'll only serve my customer and help them with a really important problem in their life if I get this other random thing that the customer doesn't give two shits about. And it always kind of blows my mind.In some ways, business is really about being selfless and putting your customer first.But it's like, I'll only put my customer first if I get to locate this startup in New York. That's obviously putting yourself first. SPEAKER_00: Let's start with the most common anti-patterns we see.Sure.What are the ones you see the most, man?What's offender number one of where people are trying to innovate where they probably shouldn't be? SPEAKER_02: I would say one that I see on the YC application that I love is when it's like some weird incorporation.Yes.We incorporated as a Wyoming LLC. And I'm like, this was a voluntary red flag.This is like, why would you do that?And sometimes they'll even write, well, because like, da, da, da, da. SPEAKER_00: And you're just like.Well, I think my theory is there's a lot of smart people.Again, they want to innovate in different ways.And they'll look at something like, corporate law and the existence of the Delaware C Corp and be like, I, someone that knows nothing about this, could do better.Yes.Yes.Obviously so.And everyone else is doing Delaware C Corps.Yes. That's not for me.I'm going to do a... And then crazy things happen.Yes.Right?And so probably corporate governance is not the best place to innovate.One thing that's been funny... headline ripped from the news is people looking at the corporate structure of open AI and being like, oh, this is an instruction manual. SPEAKER_02: A nonprofit that owns a for-profit. SPEAKER_00: Would not recommend that strategy, even the people that are working there.I mean, even Sam himself has suggested that that was perhaps not the wisest choice.And so again, the point here is is the miracle of making something you want is the hard part.But if you're just doing like a startup, you know, Delaware C Corps are pretty good. SPEAKER_02: You know, I see another one because, you know, corporate governance that covers, you know, your investment docs and where you're incorporating and all that kind of stuff, your vesting, blah, blah, blah, your classes of shares.Like I sometimes see founders doing crazy stuff.I see another one that you brought up, though, which I really love is the like, I'm going to make this startup, but I'm also going to disprove every piece of startup advice. Like I love this, like I'm only willing to help my customer if I can simultaneously prove that all of the startup advice is incorrect.And it's like, what? SPEAKER_00: And so, yeah.So the example of that is just to take something that is like widely considered useful or true and try to prove the opposite of it.Like my thing will be reliant upon making the small town that I live in the center of the startup ecosystem or something.Like somehow there'll be some other bet they're making that involves a super contrarian thing that has nothing to do.Actually, I can think of an example of these, by the way.One of these was, I remember a founder doing something unrelated.Again, I'll keep this anonymous.But they were like, the real thing, the real bet we're trying to make is the hydrogen economy and that no one will use gasoline or solar or wind or, or, or But then in the future, we're gonna use hydrogen everywhere. And I was like, hey man, maybe don't mention that.Like we'll keep this between us. Maybe when you're- That's the real secret sauce.Maybe you should keep that on the down low.Again, and the case was like, maybe he's right, but that had nothing to do with the actual bet of the startup. SPEAKER_02: No. SPEAKER_00: And to try to throw in this long shot bet that we're all going to be using hydrogen for everything.Again, maybe he's right.I don't know.That seemed like a completely unnecessary risk or thing to innovate on. SPEAKER_02: Yeah.And I think that what's so sad about these things is that... I think there's a misunderstanding of how hard it is to make something that people want, where people think that they have these extra points, this extra juice to spread, to do other things with.And I always like to tell people, it's like, this game is so hard. without this stuff, I'm like, why do you want the game to be harder?Like, I never understood that.Is it fun? SPEAKER_00: Yeah, okay, let me give you an example of something that's fun.Okay, sure.Like nerd bait kind of stuff.Sure.Again, this is my recollection, but my recollection is that when, I believe it was Asana, when they started, they wrote their own programming language Of course.First.Of course.And why would you do that?Because it's fun. I believe they back that out.Again, someone will correct me if I'm wrong on this.But a lot of times choosing very idiosyncratic programming languages or tech stacks, people choose to do it because it's fun.And who am I to fault them for that?But it's like they're optimizing for like, wouldn't it be cool if we wrote our entire thing in this new... idiosyncratic programming language? SPEAKER_02: Yeah, that's such a weird, it's like, I get it on one hand, and your startup should be fun, right?Like you're gonna be doing it for a while.I get it on one hand, but I've never seen a founder who didn't have the most fun by helping their customer. SPEAKER_00: Do you remember in the Reddit versus Digg wars, Digg made a lot of technical bets Along these lines.Meaning they made a lot of very high-risk technology choices, while Reddit was just like, not.Let's make a social news site.Well, I don't think they were taking any high-risk technical choices.And so this, again, is an example where Digg was taking on all this extra risk on something that had nothing to do with Digg.com loading news stories.It was literally about the technologies they were choosing to power the website.Yes. SPEAKER_02: And the one I remember was when they did the revision, and they couldn't roll it back when the site didn't work. Yes, that is correct.Yeah, they redesigned everything all the time.It was really impressive.I think the other thing that comes up a lot around innovation is business model and pricing.I think this, once again, is not putting the customer first.You know, hey, let's say you're selling cloud compute, right?Your customers have probably bought AWS before.Maybe you should charge like AWS does, right? Because maybe your customers will recognize that and that will give them comfort.Yep.No, that's wrong.We hate AWS. We can't do anything like AWS, including pricing.So now your customer looks at this pricing thing and they're like, well, I really like your product, but I don't understand. SPEAKER_00: Your pricing page doesn't make sense.It's not even that they don't want to pay.It's that they're like, I don't understand what you're saying or how this works.No.I have to buy floozles and then I get credits for floozles and then I transfer them into the, like super. SPEAKER_02: And by the time I'm at that page, I just want to know what it costs. And if I can't figure out what it costs, like how do I, you, I'm walking, you've invited me in your home and then you've shot me in the leg. SPEAKER_00: No, you've invited me in your home and I can't open the front door.Like the door handle, like I don't know how to use your door handle.And I really wanted to come in.I did.I was game.I had my money. SPEAKER_02: I was ready to buy something.So I think that like so much of this kind of pop entrepreneur shark tanky advice, right?I actually think comes from a different place.I think it actually comes from like weird branding. And I think that in the branding world, being different, being unique, that is a very, very important thing.And a lot of the examples in the branding world are people who did things radically different and then became successful.What I find funny is that a lot of the examples in the technology world are people who did things 80% the same. and 20% different.At least 80%. 80% was the minimum that they copied.And so I think one of the things that founders screw up is when they take advice that might work in fashion, and apply it to software, it might not work. SPEAKER_00: Again, this reminds me of usability.If people can't use your thing, like I remember back in the day, people would try to innovate on the website design and how the cursor worked and how you would even click buttons.And that was an example of probably not helpful innovation.No.And so watch out for unintentionally creating risk that you don't need to create. SPEAKER_02: Yeah.And I think that if you... Put your first, your customer first, second, and third.You might look at some of these other things and say, do I really need to do them?Or better yet, let me do it on my second startup.Let's get one successful startup out of the way.And then I can make programming languages.I can hire people all around the world.I can do all kinds of crazy things online.I can build rockets. I can do all kinds of cool things.Startup number two.All right, Dalton, good chat.Thanks.