Building Something People Want: A first-principles perspective
Market Curve Episode 41.
Build something people want. That’s the mantra in the startup world. Paul Graham’s words changed the way founders looked at startups. And for good reason. The wisdom is sound.
What is even more sound is the intent behind the words. So let’s dive into that today, shall we?
I’m Shounak - founder of Market Curve, a humble startup that helps SaaS companies communicate their value proposition persuasively across their website.
When I first started my company 2 years back, I was deeply inspired by Paul’s work and so I think it’s only fitting that I share my thoughts on his now-pretty-famous quote.
In my last essay, I touched upon what it means to find a market and how to build a product within that market. “Building something people want” is an extension of that.
It’s at the heart of finding product market fit. In fact, I would say it’s the start of finding product-market fit. Because once you have found a market, you will have “built something that people want”.
But building something people want doesn't come intuitively to us. Partly because it requires us to decode what the “want” part of the equation is.
And humans are not pretty good at that. And the reason behind that is human beings, in the majority of cases, employ what is known as System 1-thinking.
System 1 thinking was coined by Daniel Kahneman - a behavioral economist who studied how human beings think and make decisions.
System 1 thinking comes naturally to us humans - it’s intuitive and fast. And the reason behind that is something that in Physics is known as the law of conservation of energy.
Understanding complex systems:
The law of conservation of energy states that a complex system will try to conserve energy as much as possible in order to reduce entropy. Okay, a lot of words are thrown in here. Let’s break it down.
What is a complex system?
Complex systems are systems like society, nature, the Universe, a business - entities that have many moving parts.
The funny thing about complex systems is that each of its moving parts has a behavior that is unique and different from the rest of the parts. And the complex system itself has a behavior that is different than its constituent parts.
This latter property is known as emergence. And it is a key qualifying criterion of whether a system is complex or not.
There are 2 other important factors that are key to deciding whether a system is complex or not. The first one is entropy and the second one is feedback loops.
Let’s understand entropy in complex systems first.
Complex systems are high in entropy. What this means is that any complex system has pre-built “destruction elements” built into it.
The higher the entropy, the more prone to destruction it is. In Physics, if you want to reduce entropy, you have to reduce the heat present within the system.
By that, I mean, you have to conserve energy within that system. And that’s what the law of conservation of energy states. So any system seeks to reduce the amount of energy it spends to create an output.
Another feature of complex systems is that it has feedback loops built into it. This is because complex systems are highly adaptive in nature.
As in, the system takes in information from the environment and modifies its behavior to suit and adapt to the environment.
Take the law of evolution for example. Any organism evolves based on the feedback it receives from the environment.
A random mutation that occurred in the genes would be dead if it was not deemed “essential” in the eyes of Mother nature. Therefore, only the essential components would stay behind and pass on that particular trait to the next generation.
System 1 and System 2 thinking:
Okay. Let’s go back to Kahnemann and system 1- thinking. As I said, System 1-thinking employs the law of conservation of energy.
Our brain has trillions of neural pathways built into it. There are more neural pathways in your brain than there are galaxies in the observable universe. Imagine the amount of entropy in that system!
So naturally, the brain devised a shortcut for us to operate without going full-destruct mode. System 1 thinking is one such shortcut.
It basically takes in information and intuitively processes it and generates an output super fast without spending too much cognitive energy.
And in order to generate that output, it uses tools like cognitive biases and heuristics. And it’s super helpful.
Imagine if you spent your energy deciding what food to eat or how to wake up, or how to brush your teeth, you would barely get any work done.
S-1 thinking basically abstracts away the details and allows the brain to focus on more high-energy stuff.
And while that may be helpful, it’s also a bit unhelpful. Just because we arrive at something fast doesn't mean it’s the right answer. And oftentimes, these biases and heuristics get in the way of us finding the truth.
Enter System-2 thinking.
System 2 is the exact opposite. It’s slow and deliberate and uses much more of the prefrontal cortex, the part of the brain that makes decisions and thinks logically and rationally.
And as you can guess, it takes up a s**t ton of energy. So naturally, our default mode isn’t S2. It’s S1.
S2 is also a big fan of feedback loops. When we use our rational mind (to take a big decision for example), we often take in different pieces of information to make an “informed” decision. There’s feedback built into that process.
And though at first glance, it may seem that we are rational humans, evidence suggests that humans tend to overestimate how rational they are.
Building something people want.
Now, how does building something people want fit into this system?
Since we have established that people are mostly irrational at making their own decisions, we can safely deduce that people are also bad predictors at guessing what other people want. And that’s a big part of what entrepreneurship is - decoding what people want.
Common business wisdom prevalent in Silicon Valley states that you should build an MVP and stay lean and keep iterating. Which is good advice.
A part of the reason it's good advice is because (a) it’s in line with our evolutionary roots and (b) it doesn't spend too much energy.
The reason it’s in line with our evolutionary roots is that when we build something, we built it on an assumption. And an assumption is just that - an assumption. An experimental physicist would call it a hypothesis.
And the fun fact about a hypothesis is that it can be both be true and false at the same time - similar to Schrodinger’s cat. Unless you observe it, the cat is, at any moment of time, both alive and dead.
The same is true for your business hypothesis as well. Unless you observe the data, the hypothesis is both a success and a failure.
It is only when you observe it and test it against the market, does it become “objectively true”, and you will know whether the proverbial cat is “dead” or “alive”.
Now as you begin to test your assumption against the market, a funny thing will happen.
Much like Darwin, you will begin to observe that some “parts” of your product will be deemed “unnecessary” by the market - and that’s a sign you’re going to have to get rid of it.
And once you begin doing that over and over, you will begin to see patterns emerge that are way better at adapting themselves to the market than the first hypothesis you put out.
The second part of the equation why it’s good to build an MVP is that it doesn't take too much energy to build it.
Since what you’re creating is a complex system (remember a business is a complex system), you are better off keeping the inherent entropy as low as possible.
And an MVP does just that - it creates a bare-bones functional system that is open to feedback and highly adaptive to feedback loops. This means it can change shape much faster than a bulky, high-entropy complex system.
This is important because the market (much like the environment) is highly malleable and changes its nature very frequently.
And much like the bearded homo sapiens who roam the earth in this digital world, your product will also have to evolve and adapt to the needs of its particular market.
Concluding Thoughts:
It’s therefore useful to think of your product like an organism that has just been created and it’s your job as a creator to make sure that your creation survives and thrives in its environment. .
At least that’s the way I look at it. And though what I’ve said here has been said many times before (stay lean, build a MVP, get feedback from your customers), I want to make an argument and convince both you and myself why that is a good idea.
If you know me, you know I’m big on questioning things and non-conforming to the herd mentality. Just because Peter Thiel says something is good won't make me blindly follow him.
I will try and distill it down and convince myself if that’s a reasonable argument. And only if I’m convinced will I experiment with that.
And it's the same for this essay too. If you think that this essay doesn't make sense, question it, reason it, and challenge me. Don't just take my word for it.
If there’s anything law school has taught me, it’s to question things and challenge assumptions. And I should be no exception to this rule.
That being said, I do hope you liked my essay - I’m enjoying this thoroughly I must say. And if you wanna talk more about this stuff, I’m only an email or a DM away.
And if you wanna see me in action nerding out about your business and want to hire my brains to help persuade your prospects about your product and your offering, then feel free to book a slot on my calendar. Always happy to connect with like-minded people :))
Shounak out.
PS: A big thank you to Justin for reviewing this essay - check out his not-so-humble startup Transistor FM - it lets you create a website for your podcast using no-code, gives you analytics on your performance, and distributes your podcast to Spotify, Apple Podcasts, and all the other channels.
PPS: If you liked this essay, consider sharing it with your friends. I need more subscribers xD