[Off-Topic] Tech Startups, B2C overcrowding. Boring.

When I was in San Francisco in 2012, I attended Techcrunch Disrupt (personally, boring). Anyway, among the few things I remember, was something Reid Hoffman, founder of LinkedIn, mentioned. I don’t remember the exact phrase, but in summary it was something like:

"Everyone's doing B2C startups, almost no one is solving the 'Enterprise' problem, the billion-dollar B2B market."

Let me simplify — I’m considering “B2C,” business to consumer, as all the common sites we see today: social networks, instant messaging, content management — anyway, everything whose final target audience is the mass of individual consumers. And I’m considering “B2B,” business to business, as all software-based solutions that solve both internal problems of a corporation and problems that connect multiple corporations, that is, solutions where the final target audience is legal entities. It’s a simplification, but it helps my purpose.

I’ll repeat something I tweeted recently: “entrepreneur” isn’t a career and isn’t even a profession. It’s a state. The irrelevance is that any person, individual or legal entity, by definition, is an entrepreneur. Even a student is entrepreneuring, undertaking the construction of their knowledge to solve some problem in the future. A house cleaner is an entrepreneur, and today some even earn at scale by subcontracting others and distributing services. It’s not just software developers who, by chance, won this “privilege.” In practice, there’s nothing special about being an entrepreneur — you just have to not be a procrastinator.

Many young people, many even still not in college, are deluded by the false “glamour” of this short period that can even be considered a bubble, or at least a temporary market anomaly. If you’re still in this group, I recommend reading my previous article, the translation of Alex Payne’s post, Letter to a Young Programmer Considering a Startup.

The exercise here is simple: why do you think the overwhelming majority of tech startups are investing in B2C web applications? In particular, why are they all so similar to each other? Basically if you change the logo, the name and a few colors, many of them are practically identical. Ecommerces are obvious. Vertical social networks. Mix a network-of-acquaintances component with verticals like jobs, classifieds, transportation (taxi), exercise and health, etc.

The answer is frighteningly simple: because that’s all an inexperienced person knows. Their day-to-day boils down to using Facebook, Instagram, Medium, and Tumblr. It boils down to taking the bus, the subway. Going to an emergency room or getting some exams. Going to the gym. Attending a university. And all of this, from the point of view of a consumer, never the provider or producer. So everything will be more or less the same.

The Corporate World Is Very Boring

The even more frightening side effect is that “tech startups” and the pseudo-career of “entrepreneur” come as the salvation of those who read blogs and tweets and Facebook posts talking about how ‘horrendous’ the life of a worker at an agency, at a big company, at a corporation is. The bureaucracy, the politicking, the hierarchical structure. All of this was painted as if getting a job were equivalent to walking down death row, and as if being employed at a corporation were being daily tortured in cruel ways.

And worst: most young and inexperienced people believe this. TL;DR: it isn’t entirely true.

To make the already bad situation worse, Black Swans really do appear along the way. Facebook, Tumblr, Snapchat, Twitter. And this gives the impression that it’s possible to repeat. Not understanding what the Law of Large Numbers is can be fatal. In summary: given millions of people trying to win the lottery, eventually one wins. But there’s no repeatable process that leads to it. It’s a dead-end of randomness. Thanks to Bernoulli and Poisson for warning us about this, although few know it today.

I’m not saying there’s no value in B2C — of course there is, but much more limited than imagined. The other side of the coin, the corporate world, is almost immune to startups. We know the big names: SAP, Oracle, Microsoft, Totus. We know that on the ‘purely technical’ side, it’s very low-quality software that — ‘magically’ for some — moves billions of dollars. And it’s a market that has seen little or almost no disruption in decades.

And the reason for this is simple: few have stopped to understand how this world works. For example, anyone trying to enter the ecommerce world. The simple understanding is that an ecommerce is a “virtual store.” I see it differently — I understand ecommerce as just another distribution channel. Behind it there are countless consolidated processes that anyone who’s worked in retail knows very well. Distribution centers, Supply Chain, pricing strategies, taxation and material transportation, purchase approval, inventory and warehouse management, etc. As I said, territory for anyone who’s worked with Sales and Distribution. Alien for anyone else.

Job sites. Few understand what this means but it’s a small leg in the area known as HR, Human Resources. It means understanding labor law, understanding what labor liability means, benefits, recruitment and selection, training, payroll, timesheets, travel, etc.

Understand: you have absolutely no condition to offer anything to the corporate market without having actively participated in the corporate world. For someone who’s never been in this world, a corporation is a black box. And the problem is that most immediatist people tend to back away from what they don’t understand, instead of trying to explore it. A “hacker” does exactly that: breaks black boxes. Whoever just consumes isn’t a hacker, they’re just a script kid thinking they’re more than they are.

When you go through several companies, several contexts and situations, different processes at different stages, only then do you start to understand the problem domain. Do this a few times and possibly you can start to see how to improve or, even better, “innovate” in this segment. Innovation in the corporate market starts with simple process optimization, and can end with the complete replacement of an old process with a new one or the creation of an entirely new vertical that didn’t exist before. But innovation, by itself, is a process, with stages that need to be crossed one by one. And the first stage is invariably ‘acquiring knowledge.’

There are no shortcuts. Even in the B2C world it amazes me to see someone trying to create a product for the masses of consumers without understanding the techniques of mass persuasion accumulated in the body of knowledge known as “marketing.”

The young people’s shortcut of creating copy-cat tech startups blindly believing in a non-existent promise is creating a generation that’s unaware of all the processes that govern this enormous market. And some things are time-dependent. I took advantage of that by entering the market early with the goal of figuring out how its gears work. When you’re the youngest, errors are considered less bad, hits are overvalued. When you’re past the age, errors are intolerable and hits are considered normal. And the later it is, the less chance you’ll have to understand how the world works — more and more doors will be closed.

Obviously I’m generalizing, there are — exceptional — cases where this works differently, but if you don’t know yet whether you’re an exceptional case, the chances are that you aren’t.

Serendipity only happens when you expose yourself to as many different situations as possible, creating opportunities. In a single “product,” a single startup, a single unproven idea, the chances of serendipity are reduced. The advantage of an SAP in its several decades of existence was to accumulate the knowledge of all processes, of all industries, sweeping through practically everything important in the corporate world. And even so there are areas it still can’t quite touch right, which makes it possible for a Salesforce.com to stand out, for example. Imagine those who are artificially limiting themselves.

More than that, by not having any knowledge and with the illusion that “errors” are good because they turn into learning, we’re forgetting the obvious: erring is human, erring at what is already notoriously wrong is stupidity. Pure and simple. Charging a client for a service without having signed a contract first and then calling the client dishonest for not paying everything — although wrong — demonstrates the stupidity of whoever didn’t sign the contract. Spending money before time as “investment” and then having problems with payroll, again, is amateurism for not knowing the basics of cash flow. Rewriting entire systems without knowing how much it will cost not only the development hours, but the training of all users, integrations with other systems, data migration, opportunity cost, etc., is another huge stupidity from someone who doesn’t know how to do basic cost analysis. All of this is simple stupidity — you don’t need to err to learn it. Just seeing it happen once was enough to know it exists, every company does this, for decades, long before you were born.

This is inexperience, which is normal — no one is born knowing everything. That’s why acquiring experience is so important, or you’ll always be at a disadvantage because you wanted a shortcut you thought would save 5 years and will leave you 10 years behind.

The B2C world is over-saturated. The B2B world will remain free of important startups for a few more years since this generation is also wasting time and effort in inefficient ways, wasting everything we already know for years. And remember: avoiding waste — as I recall — is the pillar of “Lean.”