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Ma4: Assumptions (A Wrestling Match)

On fundamental hypotheses, testing and MVPs.

Air date: Thursday, 22nd Oct. 2020, 07 : 30 AM Pacific/US.

1 What you're supposed to be doing

We are not supposed to just guess; per Ries, we're supposed to build an organization that will test our fundamental assumptions, our life-or-death business beliefs, as quickly as possible.1

Side note—don't tell plans

When you tell outsiders your plans, the weaknesses of your predictive powers become an awkward burden of conversation, even when you're doing everything right on the business side.

Your boss

Your customers are your boss, and until you have customers, you're applying for jobs.

Wrestling with the question

Are we building an organization that will test our fundamental assumptions?

'Don't make me bankrupt'

Businesses do not have forever to run such tests. See Doug Edwards quoting Sheryl Sandberg quoting Eric Schmidt:

"Even with Larry [Page] and Sergey [Brin]'s high tolerance for risk, no one wanted the company to die under a load of corporate IOUs, especially the new CEO, Eric Schmidt. 'Don't make me bankrupt,' Sheryl Sandberg recalls Eric telling Salar [Kamangar]. 'Don't run out of cash.' "2

Business death

It is a cousin of physical death. You can only do something about it before it happens.

Assumptions we've tested

Retraice assumption: Lots of preparation would lead to content that presents well. (somewhat false)

Margin assumption: Minimal preparation would lead to content that presents well. (also false, but less so)

Pinching

Retraice and Margin are approaches to the problem from different, opposing directions. See mathematician Jordan Ellenberg:

"[I]t's a common piece of folk advice—I know I heard it from my Ph.D. advisor, and presumably he from his, etc.—that when you're working hard on a theorem you should try to prove it by day and disprove it by night. (The precise frequency of the toggle isn't critical; it's said of the topologist R. H. Bing that his habit was to split each month between two weeks trying to prove the Poincaré Conjecture and two weeks trying to find a counterexample.)"3

Assumption 1, 2

1: 'The more preparation the better, but you can't do too much if you're going to produce every day.'

2: 'No preparation might be good, but for a different kind of product.'

Running out of time

If your assumption is true, and you don't test it, fine, great. If it's false, you're walking into traffic.

'Minimum viable product'

An MVP should test fundamental business assumptions as quickly as possible.4

Delivering the wrestling match to customers

Talking on mic about wrestling with assumptions is an attempt to deliver the value of the wrestling to customers.

If customers can't buy, you aren't testing

Dan Norris on payment buttons:

"It's imperative that on Day 7 you have a page with a payment button on it, because that is the only way you'll learn if people want what you are offering."5

The Retraice, Inc. case

A single podcast segment can't be a product iteration: the product is the podcast (as a whole), not particular segments; and everything that affects the customer experience might be part of the product, from website to thumbnail to paywall.

The boundaries of the MVP

How much of the business, beyond the ostensible product (in our case, an mp3 file), is part of the MVP? How would you know if you found the boundaries?

And if you do find them, you then have to ask the Ries question: Is the MVP testing your fundamental hypotheses?

2 Now, the wrestling match

For Margin, a central hypothesis is that entrepreneurs will pay for a podcast that walks the fine line between being pleasant listening and unvarnished reality.

Honorable mention—Linus Sebastian on competition

(Side Note) Asked about having any regrets, Linus Sebastian said something like this: In hindsight, thinking competitively about his fellow content producers was a mistake, because cooperating with them would've lifted the whole industry to command more advertising dollars.6

Empty chairs and a ketchup bottle

Almost every detail of, say, a coffee shop, might be part of the minimum viable product: the tables, the chairs, the wall decor, the trees outside (or lack thereof).

You are the experiment

Again, while there is much experimenting that an entrepreneur and a business can do, ultimately they aren't running the experiment—they're in it.

It's like AI (go listen to Retraice)

Experimental results depend heavily on environmental conditions. In AI, the joint concept of agent and environment is central. We'll talk about this in Retraice soon.

Having a dog in the fight

In business, as in science, one must be biased in favor of one's own assumptions, because the exciting possibility of guessing correctly is a source of much-needed energy. But if that bias is blinding, if the response to falsified hypotheses is denial, failure is inevitable. Responding well to falsification is preferable.

And, wherever possible, don't build businesses to be vulnerable to falsification.

References

Edwards, D. (2011). I'm Feeling Lucky: The Confessions of Google Employee Number 59. Houghton Mifflin Harcourt. ISBN: 978-0547416991. Searches: https://www.amazon.com/s?k=978-0547416991 https://www.google.com/search?q=isbn+978-0547416991 https://lccn.loc.gov/2010052588

Ellenberg, J. (2014). How Not to Be Wrong: The Power of Mathematical Thinking. Penguin. ISBN: 978-0143127536. Searches: https://www.amazon.com/s?k=978-0143127536 https://www.google.com/search?q=isbn+978-0143127536 https://lccn.loc.gov/2014005394

Norris, D. (2014). The 7 Day Startup: You Don't Learn Until You Launch. Dan Norris. ISBN: 978-1502472397. Searches: https://www.amazon.com/s?k=978-1502472397 https://www.google.com/search?q=isbn+978-1502472397

Ries, E. (2011). The Lean Startup. Currency / Crown / Penguin Random House. ISBN: 978-0307887894. Searches: https://www.amazon.com/s?k=978-0307887894 https://www.google.com/search?q=isbn+978-0307887894 https://lccn.loc.gov/2011012100

Index Eric Schmidt, 1

Larry Page, 1 Linus Sebastian, 2 Linus Tech Tips, 2

MVP (minimum viable product), 1, 2

Salar Kamangar, 1 Sergey Brin, 1 Sheryl Sandberg, 1

1Ries (2011), e.g. p. 20, p. 81.

2Edwards (2011) p. 279.

3Ellenberg (2014) p. 433.

4Ries (2011) pp. 93-94.

5Norris (2014) p. 110.

6We couldn't find the source for this. From memory, it was either in an ask-me-anything thread (text) or in a video Q&A. Write to us if you find it.