A mental model for validating business ideas

Something to learn from a fence in a road

The basis for pretty much any new business is one of these claims:

  • [X] is not being done well. I am starting a company to do it better.
  • [X] should exist. I am starting a company to offer it.

There is a dangerous underlying assumption in these statements that is the source of countless business failures. To see why, just read the following:

There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.”

This is a quote from G. K. Chesterson’s 1929 book, The Thing, and the heuristic he presents here is what we now call “Chesterton’s Fence”.

“Chesterton’s Fence” is that idea that before you try to change something in the world, you should first understand why it exists as it does today.

To remove the assumption from the above statements, you might change from this:

  • e.g. “[X] should exist. I am starting a company to offer it.”

To this:

  • e.g. “[X] should exist because [Y]. I am starting a company to offer it.”

I know it sounds stupidly simple, like why would anyone be so stupid as to not have a “because”. But it’s not about just having the “because”, it’s about having a “because” that’s well-researched.

Having a “because” that is not well-researched is easy. It’s easy for that guy crossing the road, seeing the fence, to say “because it’s in the way”. But having the awareness to say “there was probably a reason why this was built here in the first place, let me figure out why”, is what’s really important. And getting to that answer is typically very, very hard.

The unlimited depth of “unknown unknowns”

If your market/strategy/methodology is new to you, how do you know what you don’t know? How do you know if your “because” is good enough? The ultimate question… if only I had a good answer. At some point, you’ll need to put on your “intellectual honesty hat” and decide that you’ve gathered enough information, and that your conclusion that “[X] should exist” is correct.

And maybe in even more abstract, this is about being humble and modest. Hubris causes you to think you know more than you actually do.

Investing at Brighton Park