- Ask an expert and they'll say it'll never work
but then we'll never do anything.
How do we know when something won't work
versus when they will?
In most fields, we rely on experts.
- Experts say--
- Our experts say--
- But what works for TV news doesn't work for us,
the people who want to build and create the future.
If you listen to experts,
you'd be wildly wrong.
In 1927, the founder of Warner Brothers said,
"Who the hell wants to hear actors talk?"
In 1962,
Decca Recording Co rejected The Beatles saying,
"We don't like their sound.
"Guitar music is on the way out."
And in 1943, Thomas Watson of IBM said,
"I think there's a world market for maybe five computers."
And if that wasn't enough,
look at Microsoft CEO at the time
when someone asked him about the iPhone.
- $500, fully subsidized with a plan,
I said that is the most expensive phone in the world
and it doesn't appeal to business customers
because it doesn't have a keyboard.
- Each of these people were clearly eminent in their fields
when they failed to see what was about to happen to them
and their businesses.
Today, we are talking about why you can't rely on experts
and what you can rely on.
If you can do the things we talk about in this video,
you'll be able to see through the knee-jerk reaction
of it will never work.
Let's get started.
In the end, when you are surrounded by people
who say you are right,
and of course, society wants you to project that
if you're a leader
that you're right all the time.
Well, the problem with that
is you start to believe what you're told
and that's where we get into trouble.
Ballmer's reaction to the iPhone
is a classic fatal flaw of successful CEOs.
We're so big.
We believe in ourselves completely.
So there couldn't be another worldview
that is more predictive or more right.
Author Chip Heath says,
"Experts aren't any good about predicting the future.
"What they are good at is explaining
"how similar situations have worked out in the past."
So that's the rub.
Experts can tell you how things happened in the past
but are terrible at telling you
what is going to happen in the future.
Prolific expertise in a field
does not mean they know what the future is.
And embedded in that
is an idea that things tend to stay the same.
The thing is
you'd be generally right about that.
In 1987, The New York Times wrote an article
about famous investor, John Templeton,
where he said,
the four most dangerous words in investing are
"it's different this time"
But in that same article,
Templeton admits about 20% of the time,
it really is different.
Relying on experts to tell you what the future is
makes sense,
but it betrays one big mistake
that you might not actually fully trust yourself.
Philosopher Alan Watts talks about that right here.
- [Alan] So you see,
when you select an authority
who will help you to improve yourself,
it's like hiring the police out of your tax money
and putting them in charge of seeing that you obey the law.
Can't you take care of yourselves?
- It's just like that.
You can't rely on other people
to tell you how the world will be.
They can inform and guide you,
but it's no substitution for you deciding for yourself.
Nobody is coming to save us.
We all have only ourselves.
This world is changing.
It might actually really be different this time
and you should take heart.
Hey, 20% of the time, it really is.
But the thing to remember
is if you have the skills and the network
and the capital to make it happen,
those are actually the missing pieces.
You can turn that 20% into 100% certainty.
Paul Graham says,
"Instead of trying to point yourself
"in the right right direction,
"admit you have no idea what the right direction is
"and try instead to be super sensitive
"to the winds of change.
"The way to come up with new ideas
"is not to try explicitly to,
"but to try to solve problems
"and simply not discount weird hunches you have in the process."
One of my favorite questions to shake these things out is
why won't this work?
Saman Farid of robotics as a service company
Formic, an Initialized Co actually got off the ground
because of that exact question,
why won't this work?
As longtime robotics investors,
we discovered most robotic startups focus on the tech
and do the business and go to market financing side later.
Formic focused on the go to market and customer first.
Do factories actually want software and hardware?
No, they actually just want to be doing things
more efficiently with robots.
They want the outcome.
So what if Formic focused on that
and used whatever technology was best?
Saman pitched this to us and said,
"Garry, tell me why this won't work."
We looked into the numbers,
the model and the market size,
and the competitive alternatives.
And for me,
we honestly couldn't find any reason why it wouldn't work.
- I have no reason to doubt
that I can put a robot in front of every single press
and produce.
- So we funded it.
And now Formic is working in dozens of factories
across the United States
doing machine tending jobs.
There will be thousands of these robots
that will deploy across the country
over the next few years.
I think Formic is probably going to be
the defining robotic startup of our generation.
Saman did what Paul Graham mentioned earlier.
Don't try to come up with ideas explicitly.
Try to solve problems and follow your hunches.
The rest is in you trying to do a thing
and have it work and grow.
If you can transition from why not
to actually building it,
you enter a magic state
that allows you to manifest the crazy ideas into reality.
Imagine for a moment being Businessman Ray Kroc
and going to order a burger for the very first time
at one of the first McDonald's restaurants.
- 15 cents is your change.
Here you are.
- What's this?
- Your food.
- No, no, no, I just ordered.
- And now it's here.
- If you find something truly different,
it will feel just like that.
Why couldn't it work?
Of course, it could.
If you want to see how this works in real life,
you got to look at what Sam Bankman-Fried did with FTX
and Alameda Research,
his trading firm,
and he did this in the last two years.
He took advantage of a once in a lifetime
crypto spread trade.
This is on my friend, John Coogan's channel.
You got to check out his channel
after watching this video.
- In theory, you could arbitrage this.
Buy Bitcoin in the United States,
transfer it to a Korean exchange,
sell it for Korean won,
transfer the money out from Korea back to the US
and make a 30% to 50% profit on each trade.
But this strategy wouldn't scale
because Korean capital control laws
limit foreign transactions over $5,000.
However, Sam found a similar opportunity in Japan.
The premiums were lower,
only 5% to 20% above US prices,
but this could still prove immensely profitable.
- Alameda could only do this for a few weeks
but they still made over $20 million cash.
They rolled a million dollars into 20 million.
And Sam now has a fortune of over $10 billion.
Go watch John's channel for the amazing video
that he actually made about this whole whole process.
It's one of the craziest stories I've ever seen,
and it underscores how supremely powerful it is
when you translate an idea into action.
I'm pretty sure that at some point
Sam had to ask his friends,
"Why wouldn't it work?"
The answer was,
it would and it did.
That's actually the feeling I'm generally looking for
when we at Initialized take pitches.
Is there something that is happening in the world
that means this is going to take over everything?
Are the founders the kind of people
to walk into a problem space and have good intuition
about how to build a durable business
that can grow the way we need a startup to grow?
Why can't it work?
And if it can,
we really might have something,
sometimes something that could be worth tens
or hundreds of billions of dollars.
In the book, "The Rational Optimist"
Matt Ridley writes,
"A constant drumbeat of pessimism
"usually drowns out any triumphalist song.
"If you say the world has been getting better,
"you may get away with being called naive and insensitive.
"If you say the world is going to go on getting better,
"you are considered embarrassingly mad.
"If, on the other hand,
"you say catastrophe is imminent,
"you may expect a McArthur genius award
"or even a Nobel peace prize."
In a fallen world,
the world we live in,
it's easy to get down about what's possible,
but the people who are going to create something from nothing,
they know it's going to come from a concrete
definite version of optimism
that pushes you into problem spaces that need you,
into markets that are yet unknown,
but ready for the taking,
and into that very special moment where you,
yes you can prove the experts wrong.
That's it for this week.
If you found my channel for the first time,
thanks for watching all the way to the end.
I'm a designer, engineer, and product manager,
who became a founder
and now a venture capitalist investor.
We were the first investors in hundreds of startups,
25 of which have become unicorns.
And we were early investors in startups
that have now gone on to create
more than $200 billion worth of market value.
Why YouTube?
Because I believe this is the most growth mindset time
to ever be alive.
There's more money in the world than ever.
And now, with knowhow and people networks,
it is more important than ever
that you, yes you work on solving the infinite problems
that surround us
through engineering, design,
great PM,
building great teams.
That's the path
and I want you to play a part in that.
If you like this,
please share this on LinkedIn, Twitter,
or wherever you might be.
Hit subscribe and the bell icon.
And if you have questions about your journey into startups
and what you can do to be a part of this revolution,
leave a comment right down below.
We are here to make this pie as big as possible.
Tech is remaking this world.
What will your line of code be?
I'll see you next week.