8 Reasons Outliers Come From Outsiders

Hey y’all — who’s better at finding outlier startup opportunities:

• Experts in a field

• Outsiders coming into the field for the first time

You can build good businesses with industry expertise, but disruptive innovations tend to come from outsiders.

At first this seems confusing — wouldn’t experts in a field better understand the problems in that field, and see the opportunities sooner?

This week I’m digging into why the opposite is actually true.

8 Reasons Outliers Come From Outsiders

Taxi companies existed for decades, but the idea for Uber came from Garrett Camp and Travis Kalanick. Two guys who’d never worked in the taxi industry.

Boston Dynamics has been building robots since 1992, but wasn’t able to execute to bring humanoid robots to market. Now Brett Adcock’s (here’s my interview with him) company Figure (disclosure: I’m an investor) is moving at lightning speed to do so after hiring a bunch of their engineers who were tired of the glacial pace. Before this, Brett hadn’t worked in robotics.

And, of course, Elon is the best at this — every company he builds is in an entirely new industry where he had no prior experience. Even X is growing substantially relative to when he took it over.

There are many other examples. In fact, Vinod Khosla says he can’t think of a single example of the opposite case (maybe you can?).

Regardless, here are the 8 reasons:

Fresh Eyes on Old Problems

Outsiders have no preconceived notions.

They believe nothing deeply about the market because they don’t know it.

Without ingrained beliefs from built on years of first-hand evidence, they’re free to imagine possibilities that seem silly or unlikely to succeed.

Insiders tend to overlook these opportunities because they know too much and, instead, look to improve existing solutions.

They’ve seen traditional practices work too many times.

First-Principles Thinking

Taken further, outsiders are able to break a problem down into its core components.

Everything’s on the table.

Has technology improved since the conventional way was designed? If so, the outsider has an advantage.

I wrote about how Elon does this almost two years ago.

Insiders optimize instead of reinvent.

Legacy Constraints

Outsiders have no loyalty or relationships to what currently exists.

This opens them up more than most people think. They’re not afraid of ruffling features or ruining connections.

They also are evaluating every tool, and even the traditional business model, since they’re seeing it for the first time.

Insiders default to what they know works, to keep things simple. And they have a lot more relationship capital to lose, which can restrict their thinking.

Relentless Focus on Customers

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