False Positives

by Sean Foster | October 21, 2021 | Newsletter

First, some more context. Do you recall the pre-Facebook era?

There were several similar platforms, Friendster being a notable one. Founded in 2002, became a hit and then had its death in 2006. Then Myspace- peaked in 2008 with nearly 76 million users. They overcame the technical and saleability challenges that Friendster had, although their system was less user-friendly than Face book eventually came up with. 

At the time, this was a crowded development space and the Facebook start-up was just another example of a ‘wannabe’ young techno entrepreneur. But for one person at least, Peter Thiel, who saw this differently and invested $500K in mid-2004, which he then mostly sold off 8 years later for more than $1 billion. 

How did Peter view these False Positives in 2004 when he made that astute investment? After all, many were of the belief that these social media platforms could never become profit generating platforms. They appeared to be more about hype: the type of thing that causes a frenzied bubble only to later pop. 

Albert Einstein famously quoted: ‘Insanity is doing the same thing over and over again, but expecting different results.’ Umm, how do you interpret that? How do you match up the need for developing resilience and persistence in striving towards an outcome, while at the same time ensuring that you are not ‘flogging a dead horse?’ 

To be honest, I am not sure I have the perfect answer to this, but after some reflective thought, I did come up with a possible structure. 

The three critical elements are: understanding what the market wants; having some idea of what the system improvement options are; and lastly, backing yourself in believing that if the above two are correct, then flog that horse because it ain’t dead. 

Demand: This first requirement seems obvious yet is sadly often overlooked as it gets wrapped up by developer enthusiasm, wishful thinking and selective hearing.  

The only way to know if further developing an opportunity (product or service) warrants the effort is by being reasonably sure that enough people will part with their hard-earned cash for your thing. Developing minimal viable products, surveying a wider range of customers (not just the ones you get on with), and testing the market for price sensitivity, re-purchasing etc are the way to go. 

Avoiding False Positives

In the case of employees, how often have you been held to ransom either by a highly competent employee who comes with their fair share of toxicity, or you end up paying over the odds for a new promising employee because your options are limited – the classic supply and demand curve that plays against you. 

In this situation the False Positive signal could be that you will be worse off if you rock that boat with your employee, or that you are almost desperate now for that new employee, despite the warning bells sounding off. Usually, the long-term pain is way worse than the short-term pain. 

System Improvements: Very seldom do great things stem from truly original ideas. Nine times out of ten, great things come from developing insights around how things can be improved.  

In our opening example, Myspace had the jump on Friendster as they saw that system crashes and poor scalability were the issue. They both believed and demonstrated that their system would be a winner if they fixed those issues. This was very much about system improvement. They won some of the battles but not the war. 

Clearly Myspace did not go far enough down this path, as along came Facebook. They made further system improvements resulting in a product that was even more stable and scalable than Myspace. However, they also made the product more user friendly: signing up was especially easier. 

As you know, Facebook won the war. I am sure that Zuckerberg will give you a long list of reasons why, however at the top of the list was understanding the market and many ‘small’ system improvements. 

The lesson here for you the business owner is this: is the product or service you are offering not getting the traction, not because the market does not want your thing, but because of other ‘technical’ issues that you should be working on. Is that ‘promising employee’ who is now letting you down, still promising if only you did some more training or removed another toxic employee, that just so happens to be very good at knowing exactly what pleases you?  

The message here is to be super critical in your thinking. Remove the emotion, seek divergent perspectives, and ask many times over the ‘what if’ question. 

What if the customers are not willing to pay $X because of … 

What if this employee is making errors because of … 

What if the reason why I am considering employing this new recruit, at this exorbitant salary, is because of … 

What if the sales for this service is lack lustre because of … 

Belief: If you had to describe the first two parts of the model, then we could say those are the ‘hard’ or ‘logical’ factors. They absolutely should be the first two considerations before tapping into the ‘Belief’ bucket, which is where the emotional triggers lie.  

Have you met someone before (I have), who doggedly believes that what they are doing is absolutely the right thing? You can try and reason with them, but they remain staunch in their beliefs. Sometimes you can make sense of their reasoning, other times not. Some of these people end up with complete flops, while others end up with winners. 

So how do you know if you are correct or maybe going a little insane? My answer here would be that you should be able to logically apply your reasoning (understanding the Demand and the System Improvement opportunities), and to only then have the energy and passion in expressing your belief in that what you are doing is in fact the exact thing that you should be doing – i.e. not the other way round.  

Belief comes last, but because it is stacked with emotion, it is the thing that you need to nurture as when the going gets tough it is often the only thing left. Well until you come up with another brainstorming idea on how to improve the process within the system. 

About: Sean Foster is a business coach and advisor. Having developed the ADD model which highlights the primary development areas within a business that require expertise, the overarching challenge continued to be around how do we make the rubber hit the road? How do we take the theory and put this into practice? The answer was found in developing a business strategy (S.O.A.P. – strategy on a page), and continual 90-day plans, where the strategy could be effectively executed. This article encompasses this same theory but emphasises system thinking.. 

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