What We Learnt From Speedrunning the Idea Maze - Commoncog

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In July last year Commoncog case writer Rhea Purohit and I ran a course titled Speedrunning the Idea Maze. It was a bit of an experiment: how would a course built around the Calibration Case Method work? Would we be able to change the way people think about finding product market fit? Could we change their perceptions of uncertainty and risk? Could we make them act differently?

This is a companion discussion topic for the original entry at https://commoncog.com/what-we-learnt-from-speedrunning-the-idea-maze
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You believe you can go it alone, and do not build the skill to develop partners who are invested in your success. (And mark my words, this is a skill).

I am very curious about this and want to dig. Do you have cases of people building the skill of “partnership development?” What would the future “Speedrunning the Skill of Building Partnerships” be based on?

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But we do! It’s actually hidden in many of the cases of the Idea Maze. Some more than others of course. The example I keep going back to is Danny Meyer — who structured Shake Shack to have its profits go to the authority responsible for maintaining Madison Square Park, since Eleven Madison Square and the Shake Shack kiosk were part of a plan to rejuvenate the area. What a way to get your landlord on your side!

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Now I need to go back and reread these cases because, as you mention in the article, the understanding of the concept changes how you experience the case.

I don’t know why it took so long, but before this I never thought of partnership building as a skill and instead it was just this thing they did because the opportunity to fell into their lap or something. I know this is ridiculous but alas.

So now with this realization, there is probably a whole layer of understanding to build in how partnerships can be made that I have been completely glossing over. Thanks Cedric!

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Oh I have to give credit where credit is due. @Varun_Gandhi wrote in his effectuation template (or perhaps he said it in class? I can’t remember) that “building partnerships is something I’d not thought about, and I’ve done a poor job in the past.” I’m paraphrasing, of course, because I can’t remember his exact words, but when I read that I thought to myself: “oh god, that’s me, too!”

The other big thing that’s changed me is that effectuation gives you permission to do things that fail. The verdict is still out, but perhaps increasing the cohort size to 45 and raising the price to US$1500 was the wrong move. (I do not regret raising the price, I think, because the course is such a huge lift for Rhea and I, but I would rethink doing two changes at the same time). But! I know from effectuation that doing both at the same time is exactly the sort of mistake an entrepreneur would make, and in fact must make, because that’s the only way to generate lots of information!

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I’ve been working on that skill in what I do since I started doing networking last September. I was told early on by an investor that being able to attract others to support the idea was one of the things that would be expected. At the time I had no idea where I’d find a CEO (I’m a technical founder, not really schooled in CEO stuff). I am close now to having that solved, and having other people attached too. Part of it is selling myself, that I have the chops to make things that actually work. But also, selling the “idea”. I am working counter-cyclical, in that I’m NOT building an “AI” business, but I AM building a Machine Learning business, and basically convincing others that this is the way to go right now instead.

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Yeah I think what’s interesting is that ‘networking’ seems a bit icky, and can probably better be rephrased as ‘building relationships’ (or ‘making friends’?). But ‘creating partners’ is more than just ‘networking’. If you look at the example given in one of Sarasvathy’s original papers (about U-Haul, all bold emphasis mine — intended to highlight the ‘create partners’ principle of effectuation):

In 1945, newly married, and with barely $5,000, Leonard Shoen set out on his effectual journey that led to the creation of U-Haul. By the end of 1949, it was possible to rent a trailer one-way from city to city throughout most of the United States. When we examine his journey, we find that this feat could not have been accomplished except through the use of effectual reasoning. When students today set out to write a business plan for this venture (using causal processes), they conclude that the plan is financially infeasible, or even psychologically infeasible, since it requires a large and risky capital outlay, most of which gets locked up in relatively worthless assets such as trucks and location rental. Moreover, the logistics of starting the business at a much smaller scale and growing it as fast as Shoen did overwhelms the analytical prowess of the best of causal thinkers. The final nail in the coffin usually is the complete lack of any entry barriers to imitators with deep pockets after the concept is proved on a smaller scale.

Shoen, however, did not do elaborate market research or detailed forecasting and fund-raising in the sense in which we use the terms today. Instead, using effectual means, (who he was, what he knew, and whom he knew), he plunged into action, creating the market as he grew the business. In his own words, “Since my fortune was just about enough to make the down payment on a home and furnish it, and knowing that if I did this we would be sunk, we started the life of nomads by putting our belongings in a trailer and living between in-laws and parents for the next six months. I barbered part time and bought trailers of the kind I thought we needed to rent from anybody who happened to have one at the price I thought was right. By the fall of 1945, I was in so deep into the trailer rental deal economically that it was either make it or lose the whole thing.”

At that time he moved with his wife Anna Mary Carty Shoen and their young child to the Carty ranch in Ridgefield, Washington. There, with the help of the Carty family, the Shoens built the first trailers in the fall of 1945, painted in striking orange with the evocative name UHaul on the sides, using the ranch’s automobile garage (and milk house) as the first manufacturing plant. Shoen then practically gave away the initial trailers to renters so they could establish dealerships in cities they moved to. He would also purchase trailers and trucks and sell them to employees, family members, friends, and investors who would then lease them back to AMERCO, the parent company of U-Haul. He contracted with national gas station chains to utilize their unused space for parking and to manage the paperwork. Together, this vast network of stakeholders formed a substantial entry barrier to any imitator who would have to risk a large capital outlay to compete. Advertising was entirely limited to Yellow Pages and to the sudden and startling sight of growing numbers of distinctively painted vans being driven along the freeways of the country. At any given moment, U-Haul could have failed, but the resulting financial fall-out would not have been a disaster since the investments were spread across so many stakeholders. This brings us to the key implication of effectual reasoning for the success or failure of entrepreneurial ventures. Effectual reasoning may not necessarily increase the probability of success of new enterprises, but it reduces the costs of failure by enabling the failure to occur earlier and at lower levels of investment.

(Exercise for the alert reader: was this an affordable loss bet? Or did he make it more affordable as time went on? This is the sort of discussion we would have in the course, but you can reason by yourself and compare to other cases that you know, to construct positive examples to emulate.)

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