The Expert Problem
Why disruptive companies are often created by outsiders and what it means for founders.
Many of the most successful and transformative startups were created by outsiders to their industries. Uber wasn’t started by a taxi company, Airbnb wasn’t started by a hotel company and digital cameras weren’t popularized by Kodak (even though they were one of the first to develop them). Why do incumbents, who are experts in their industries, miss these opportunities? This question has always interested me, particularly as I navigated my own journey from outsider to expert.
As I’ve written about previously, I started my first company, a B2B marketplace for capital equipment, after working for a year at an existing equipment brokerage company. My cofounders and I were shocked at how financially successful the brokerage company was despite having, what we believed to be, an out-of-date and predatory business model. After working there for a year, we had learned enough about the industry to start the obvious evolution of the business model: an online marketplace that cut out the brokers and allowed manufacturers to buy and sell directly from each other.
We were a prototypical example of how many startups get started. A group of outsiders gets exposed to a problem that the incumbents have come to accept and creates a solution to solve it. It’s counterintuitive because you would think that experts — the people who have been operating in an industry for decades — would be best positioned to solve these problems. Instead, it turns out that becoming an expert typically leads someone to form steadfast assumptions about their industry. Those assumptions serve them well in the status quo but they create blind spots that miss the inflection points that create disruptive opportunities.
When we’re exposed to something new (an experience, a person, a commute, etc.), it takes up a lot of our attention as we process how it fits into the rest of our world view. After repeated exposure, we start recognizing common patterns and develop heuristics and assumptions that shift it to our subconscious. This is a useful adaptive behavior as it allows us to apply mental bandwidth elsewhere and can prevent us from repeating mistakes.
Unfortunately, the same reasons that make an expert valuable are why they’ll often miss that next great idea. The most transformational startups are created as a result of an inflection point — a transformational change in technology, regulation, or behavior that changes the rules of an industry. i.e. mobile phones allowed for ride-sharing, comfort with online identities allowed for Airbnb, and the Volker rule which forced banks to divest private assets allowed for secondary funds. It’s hard for experts to see those shifts until it’s too late because it requires them to shift their own assumptions that had previously served them well. For a long time, it made sense for the CEO of Hilton to dismiss the idea that people would rent out their homes to strangers, until it didn’t. I had been curious about this phenomenon for a long time but it became more personal as I made my first transition from an outsider to an expert.
There’s plenty of experts who tell you why radically new things won’t work. I will say experts are experts in a previous version of the world, not the world you’re trying to create. And so relying on experts leads to conservatism and incrementalism
-Vinod Khosla
We started Asseta as outsiders with just enough domain experience to understand the problem while still seeing how it could be done much better. However, after a few years, I realized that we were now becoming experts and had built up a lot of our own assumptions. The easiest red flag to look out for is when you hear yourself saying some version of “No, I know that won’t work because…” When you start dismissing ideas based on your prior experience and don’t take the time to consider that underlying factors may have changed, you risk missing those fundamental shifts.
The solution to the expert problem isn’t to avoid becoming an expert. The vast majority of the time, being an expert makes you highly effective in your role. The solution is having the mental plasticity to view strategic decisions from multiple perspectives. A new perspective will often challenge your preconceived notions. Here’s how you can discover those different perspectives based on my experience and suggestions I received from some of our advisors.
Traveling to Different Cultures
The most effective (and surprising) tactic I unintentionally discovered was traveling. As part of my role at Asseta, I managed our global BD and sales efforts and would often travel to far-flung places like China, Korea, Taiwan, Japan and Germany to meet with executives. I would often do these trips alone and one of my favorite things to do was to go on long walks through whatever city I was in. I discovered that the strangeness of the surroundings actually led me to find a new point of view on whatever was top of mind. The more dissimilar the culture was from the US, the greater the effect.
First Principles Thinking
First Principles is a concept from physics where you try to solve a problem by getting down to its most fundamental components. Elon Musk has helped popularize the power of first principles in a business context. It’s effective in this context because it eliminates assumptions. For example, when Musk was starting SpaceX he was told it was a terrible idea because of the tremendous cost of building rockets. However, after reviewing the costs of each individual component on a rocket, he discovered that consumer electronics had progressed to the point where they could now replace military-grade tech for a fraction of the cost.
Science Fiction
Reading and watching science fiction stimulates the mind to think about what could be instead of just what is. These fictional worlds often explore the impossible which can spark a new perspective on what’s possible in the real world.
1. When a distinguished but elderly scientist states that something is possible, he is almost certainly right. When he states that something is impossible, he is very probably wrong.
2. The only way of discovering the limits of the possible is to venture a little way past them into the impossible.
3. Any sufficiently advanced technology is indistinguishable from magic.
Experts in Related Industries
If you’re a neuroscientist working on a therapeutic, other experts in the same field are unlikely to provide you a radically different perspective. However, a cell biologist working on a vaccine will have enough overlapping foundational knowledge to understand what you’re doing without the baggage of your field’s established assumptions.
While experts might be hindered from creating “the next big thing”, you definitely want their help on your team. In fact, your ability to recruit experts to your team (or as advisors) and winning them over to your breakthrough perspective is often a good test of if your idea will succeed.
As a founder, you should strive to be an expert in what you do — a master of your craft. But you should also be mindful of the blind spots expertise can create and have a system in place for getting new perspectives. At the very least, this is a good excuse for a vacation to Japan or to watch Star Wars.
Thank you to our advisors Dr. Garry Nolan and Dr. Robert Booth for providing your perspectives.
Prime Movers Lab invests in breakthrough scientific startups founded by Prime Movers, the inventors who transform billions of lives. We invest in seed-stage companies reinventing energy, transportation, infrastructure, manufacturing, human augmentation and computing.
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