In financial services there’s a concept called Know Your Customer (KYC). The one liner is that banks need to be able to verify their customers and assess their suitability from a compliance perspective - is this person laundering money from the Russians or just a retired school teacher?

The same concept applies to startups. You should know your customers. Not to prevent banking charades (maybe that too) but mainly to maximize your chance of success. In fact, it’s even better if in a past life, you’ve been your target customer. The solve-your-own-problem strategy.

The way to get startup ideas is not to try to think of startup ideas. It’s to look for problems, preferably problems you have yourself. - Paul Graham

In any case, Twitter and Paul Graham (and maybe Paul Graham on Twitter) will convince you that solving your own problem is a really good place to start. And they’re probably right. And the second thing they’ll convince you of is to build something that customers need (not want but really need). And that the best way to build something that customers need is to speak with them. To know your customers. Lastly, they’ll also recommend that you build it yourself (or find a technical cofounder).

And their strategy seems to have worked pretty well! I mean Facebook was founded by Zuckerberg to solve a problem, of sorts. Namely, that he wanted to meet up with attractive partners despite not really knowing who these attractive partners were (despite them living down the hall or sitting one desk away). And so he built Facebook. Not sure if that’s really the story, but you get the point. And there are other examples too. Like Slack! One of the latest contestants in IPO SZN 2019. Slack was originally a gaming company (called Tiny Speck). They were annoyed at the state of IRC and set out to build their own workplace communication software. And now they’ve become a verb - success!

The list goes on and on. And sure, you may start near your own pain and drift away from it as find PMF and speak to your customers - but at the end of the day it’s fair to say that your odds of success are higher if you’ve been your own target customer in a past life and/or if you speak with them throughout product development, all while developing the product yourself.

And so, the people who have been able to build it themselves have built things that they need! And that other people they know need, too! And so you got a lot of things that had a distinctively tech-y feel to them.

Like coworking spaces… because you never want to sign a medium-term lease when there’s a 90% chance you run out of money, or fire half your company. Or, software management tools… because the first thing software engineers realized is that they’re bad at planning and estimating so they built a big clunky tool to help them.

And so the world has seen some success from this trend. But what’s more interesting than looking back on it, is to try to project it out a bit. And when you do that, you realize that there are a few ways it could play out… assuming that most successful enterprises were started with checking off the criteria above:

1, Innovation stops when upper-middleclass white men living in SF run out of problems to solve with technology.

How would that happen? Well, they (at some point) won’t be experiencing any big new problems worth solving and all of their friends are other upper-middleclass white men who also aren’t experiencing any big new problems worth solving. So maybe they all move down to Puerto Rico and live in cryptoparadise.

And, on the flip side, the people who ARE experiencing big problems that could probably be solved with technology either (a) can’t build it themselves, because coding in hs wasn’t an option or (b) don’t even consider starting a company because of the absurd risk level.

Sad!

2, We figure out how to give people the skillsets to build solutions to problems and the opportunity to know that starting a company is even an option.

Both of these require changes to education. Whether it’s how to start a company or how to build it yourself on a technical level. But the impact of making this a reality would be incredible. It would open up and surface problems that would otherwise never be surfaced by the tourists in SV (Jason Calicanis came up with that term, pretty clever).

And people are starting to work on this! With coding schools like Thinkful or Lambda School and the re-introduction of existing but now novel financial instruments like ISAs (oooh). But it’s probably not getting the attention it deserves and needs a lot more people working on it from a lot more angles.

3, The same people keep trying to start companies and get some right and get some wrong but an incredible amount of wealth creation is never tapped.

This seems like the most likely outcome. We never get the equal opportunity and education solutions nailed down, so in reality only a select few can really build it themselves but they still don’t have a ton of big new problems where really know their customers… but they do try! Because an article in TechCrunch will make their fathers proud and that’s really what they’ve been seeking all their lives. So, they try 10 different startups and go on job tourism to try to find new problems to solve and most of the time they never really get it and their startup fails, but sometimes it works! And they’re heroes. Making the lives better for all those unfortunate people who weren’t smart enough to think of it themselves.

And this is probably the most unfortunate outcome, too. Because the solutions won’t be as great, and the economic outcomes will still be concentrated to people who look like Brad from the lacrosse club, and the whole process will reinforce itself, and the local communities, and country and world will miss out on some awesome companies that will change the lives of a customer base that feels forgotten and is missing out on a lot.

So yeah, this is all over the place but that was my line of thinking on the walk home from work. In short, we should try to make outcome #2 happen and do our part to make it happen.