The Bucketing Problem a take on Association Fallacy in the Start-up World
A (0 to 1) startup is -
- An organization in the making
- A business model in the making
- A revenue model in the making
- Everything in the making ….
It is all about “New” or “Novel” or “Different”. It is expected to have a novel element, either in the product, or the revenue model, or the distribution or anything that gives it an edge. While this is typically a state of all the (genuine) startups, one of the most challenging jobs for the founders is to answer a simple question:
“What does your startup do?”
It is a very intuitive question to ask, but it is one of the most difficult questions to answer. Why is that? Because it is yet to come into existence. A startup is a work in progress.
How do you explain something which is not yet made? Not yet concrete or tangibly explainable? That too in an elevator pitch?
There are only a few approaches to tackle this from a founder’s perspective:
- Personal Brand: It’s Elon Musk startup, He definitely is onto something !!!
- Comparables: “Uber of X”, “Airbnb of Y” and “Swiggy of Z”
- Get into technical details: Explain the details
While a personal brand is a very straight-forward answer, it takes success to build it. If you are already a brand, you have already surmounted this big challenge once.
The third approach is often very restricted as the target audience needs to be someone who already is exposed to the same domain to the depth where he/she can understand the intricacies. This approach is good to on-board the mentors who guide the startups. But not suitable for an “Elevator pitch”. At the end of the day, the startup needs to attract talent as well as capital.
This leaves us to only one option which can help in targeting a wider audience, “Comparables”; And which is where the challenge lies.
Working on comparables is a fight between facts and beliefs. On one side you have founders who believe in their work (and have no facts to support it), and on the other side, you have everyone who “know” and “believe” certain well established “facts” based on statistical data. It is a fight of minds.
Our minds and memory are associative in nature. In order to understand something new, we associate it with an existing idea in our minds. This is a very efficient mechanism our brains have developed in order to quickly make decisions. But the same ‘Associative mind’ which helps us make quick judgments and take quick decisions, also creates a bias in our interpretation. And this bias we call “Association Fallacy”.
Wikipedia defines ‘Association Fallacy’ as -
❝An association fallacy is an informal inductive fallacy of the hasty-generalization or red-herring type and which asserts, by irrelevant association and often by appeal to emotion, that qualities of one thing are inherently qualities of another. ❞
Let us take two examples which describe how it plays out in the real world:
Founder: We are a startup that solves the problem of working women who do not find time to get fresh vegetables. We take online orders and deliver the veggies, freshly sourced from local farmers within a 250 KM radius. We also sort, clean, and have standardized packaging which saves their time.
Person A: So you are like BigBasket, but for vegetables with a value-added service of sorting and cleaning?
Founder: Bigbasket is an order fulfillment platform, just like Amazon; It does cater to the “same domain of problems”, but not the “same problem”, which is “reliable vegetable sourcing”
Person B: But it would be really easy for Bigbasket to start the same service …
Founder: We are an Uber of ‘Medical Consultation’, We provide a platform that connects the patients to the doctors for a medical consultation based on standardized queries.
Person A: So you too will face the same problem of demand-supply skew. What if doctors register but do not answer queries? Same as Uber drivers.
Founder: Yes, we anticipated that, but the difference is that here we have a professional, while Uber anyone can be a driver. So there is a lot at stake for the doctor on our platform and we designed it as such.
Person A: I am not convinced, the doctor has no incentive to be loyal to the platform, which makes it a brittle business model.….
Above, we have seen how two conversations unfold and demonstrate the problem of association fallacy while explaining what a startup does. In the first, the conversation revolves around how it is different from Bigbasket. Primarily, because there is no data to prove the difference between “same problem domain” and “same problem”. In the second, the conversation revolves around the failure point of the model. Primarily because there is no scope for going into details as to how it will be done.
Acknowledgment & Acceptance as a problem
Many founders have faced these conversations. Many “Consultants / Mentors / Investors” have responded similarly. While we assume it as a way of the industry, we should first acknowledge that it is a problem, accept it and discuss it on public forums without prejudice.
So what is the solution?
It is an open-ended problem as of now. I believe that the solution is intensely personal to the stakeholders involved. While it would be utopian to think everyone will be on the same page, the responsibility falls on the Founders to understand the psychology of the system to conquer it.
Author: Harshal Ingale
CTO & Co-founder - SpiderG