Are you earning enough secrets?

I heard about a new concept—new to me at least— the other day which has helped me make sense of something that I've been trying to figure out for a while.

There’s been a lot written about customer discovery and iteration. But there's very little said about what comes before that. How do you get to the point where you have an idea that’s worth investigating?

Solving problems that have been clearly defined is relatively easy if you have the relevant technical skills and enough perseverance. What's rare is the ability to look at the same world everyone else is looking at from a different angle and notice gaps and opportunities no one else has.

What is an earned secret?

I first heard about "earned secrets" while listening to a Shane Parrish interview with Mike Maples, though apparently Ben Horowitz was the first one to come up with the idea.

It's what you have after you've done the work to notice--and understand--something about the world hardly anyone else has noticed.

They both use Brian Cheskey’s experience coming up with the idea for Airbnb as an example of how earned secrets work:

He didn’t have any money. He wanted to go to a design conference... and he couldn’t afford a ticket. He put his apartment and an air mattress up on Craigslist and he got 400 to 500 people saying they wanted to rent his room.

Keep in mind how counterintuitive that must have been in 2007. A year later, there was the Craigslist killings and who’s going to want to stay in a stranger’s apartment and who’s going to want to invite a stranger into their apartment?

That’s crazy but he had hundreds of people wanting to do this, but Brian took it a step further. He said, “Huh, that’s interesting. Why did that happen? Oh, the town was out of hotel rooms. Why was the town out of a hotel rooms? There was a conference. Huh? I wonder if that happens a lot when there’s conferences? By the way, what’s up with the hotel business anyway? What’s their business model? How long have they been in business? Why do people go to hotels?

He started to realize that the main reason people go to hotels is because of trust. He started to realize, well, if you could have a trust rating, perhaps you could have all the benefits of a hotel business without having to own a hotel. By the time he starts Airbnb, he has a lot of earned secrets that are counterintuitive, but had been sort of validated by the fact that he was willing to do the work to discover whether they were true or not.

Let's unpack the two key elements that make an earned secret different from an ordinary insight.

It's a secret

First, it’s a secret. Ok, that may be a slight exaggeration. But it should be something non-obvious to everyone else.

Why? Because the fact that no one else is noticing what you're seeing becomes the first building block for differentiating yourself, and the beginnings of your competitive advantage.

This is where you start creating value. Because an insight that is shared by everyone is useful, but it's also commonplace, and therefore cheap by definition.

This is why one of Peter Thiel's questions for founders is "Tell me something that's true, that almost nobody agrees with you on."

It's earned

Second, it’s earned. The initial insight is just the beginning. You have to do the work and dig deeper to get a better understanding of what you've discovered. What work? Two types of work.

First, you need to research the situation as much as possible. “Get out of the building" and embed yourself in the context, get to know the community involved, and develop relationships with them, so you can understand what they are trying to do and what's creating friction for them.

Second, you need to really think about what you learn and come up with a perspective on it that isn't shared by others. And then you need to confirm your hunch through iteration loops on your definition of the 'job-to-be-done." That's what's meant by "earning" your secret.

Chesky’s first stage 'secret' was realising that lots of other people were coming to San Francisco and that the hotels were all booked. His first step towards 'earning' the secret--instead of just sitting with it--was putting his mattress on Craigslist. His second level'secret' was having evidence that lots of people were willing to stay in a complete stranger's house to attend a conference.

His next step towards 'earning' his secret was iterating the "Air Bed and Breakfast" concept at two other conferences over the next year or so.

But the "earning" went beyond iteration. He also started asking himself why this hadn't been invented before and realising that real reason people didn't want to stay with strangers or host them was a lack of trust.

This 'insight' became the cornerstone of what Airbnb is really about. The whole platform is built around addressing this trust gap and reducing the risk for hosts as well as guests. It’s the difference they’ve brought to the hospitality market and made them the largest and most valuable 'hotel' chain in the world.

This is a great example of how doing the work of 'earning' your secret yields deeper insights, deeper 'secrets', which are the key to building a compelling and differentiated value proposition.

Once your earned secret is deep enough, it becomes the first cog in building yourself a flywheel to scale and build sustainable advantage. Everything that is distinct about Airbnb's operations--reciprocal ratings, host insurance, professional photography, consistent design-- is built around addressing this core insight that hosts and guests need a platform which reduces the risk of sharing your personal space with strangers.

And it's really important to note that Airbnb's earned secret, its unfair advantage is not proprietary technology. They have invested in technology, but the tools they used were and remain available to anyone. What got them there was a simple insight that was available to anyone--if they were willing to put in the work of noticing and thinking about what they noticed.

So what secrets are you earning these days?

Other Stuff

We just finished the first FastForward cohort of the year with a Zoom Demo Day that worked quite well. The next cohort starts in late June. Please share this link with anyone you think might be interested: FFWDLondon

I’ve joined the Roam Cult. Don’t be alarmed, it’s not what it sounds like. It’s a note-taking/knowledge management/writing platform that you can use as a second brain. It is the most powerful tool I’ve come across in a very very long time. They’ve just closed access because of how popular they were becoming while in beta. But trust me, this is one queue you want to get in now. I have no ties with the company or founders.

Thanks for reading,

Paul

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Simple Venture Design is an occasional email from Paul Sturrock about ways to make a living doing what you like to do, are good at, and care about. If you enjoyed this one, please think about forwarding it to a friend. If you’re reading it for the first time, why not subscribe? It’s free!