Degrees of Freedom

I often talk to companies that come up with complex plans involving a technical challenge, going to market, then scaling and fending off competitors. They want to do X to leverage Y, then finally become Z when the time is just right. I suspect this stems from (incorrectly) feeling like the problem they’re solving isn’t innovative enough. Perhaps we glorify different strengths of successful businesses (the product obsession of Apple, the scale of FB, the community of Airbnb, etc) and forget that no company can possibly combine all of those virtues into one perfect startup. Or maybe investors build thought leadership by constantly talking about bleeding-edge buzzwords and founders accidentally make that their default set-point.

Think back to the best startups of the past decade. They all follow fairly simple plans which essentially bet on one core thesis: taxis that you can hail with app. A site where people can rent out a room in their house. Let teens send pictures that disappear. None of these companies had a multi-phase plan from the start. They didn’t solve particularly novel engineering challenges, at least until they were already super successful and hitting scale issues. There was only one singular problem to focus all attention on. And it often sounded like a somewhat lame problem, even though it ultimately wasn’t.

When evaluating startups, I often use a mental model I call degrees-of-freedom. Count how many things need to go right for the company to survive. Each additional degree of freedom makes execution exponentially harder and more complex. (I use that word exponential in the literal mathematical sense, not in the metaphorical sense!)

If you’re dealing with regulatory uncertainty, and building on a new decentralized protocol, and introducing a new business model, sure, you’re doing something innovative. But too many things have to go right. Too many things are simply out of your control.

My advice to these ambitious founders is: don’t feel like you need to do something impressive on every front. Pick one idea to bet the company on, and don’t lose sight of it. Use simple foolproof execution strategies for everything else. Reduce the number of degrees of freedom.

Let’s all get more excited about “simple” startups!