Using The Lindy Effect for Picking Startup Problems
A few years ago I was on the phone catching up with my old boss from the venture days. Whenever we chat I ask about whatever’s “new.”
During our call, Bitcoin came up briefly. He said he didn’t have much of an opinion, except that it was unlikely to ever replace the dollar.
When I asked why, he muttered, “Lindy Effect,” and moved on to his next thought. Luckily, I’m used to this — whenever I chat with him I have a browser window open and my fingers ready to Google the 500 things he assumes everyone knows but only he does.
After Googling, I found out that the Lindy Effect is beautifully simple — longevity is our best predictor of the future.
It’s not perfect, but it’s a useful tool. If something has remained relevant for 50 years, it’ll likely be relevant for another 50. Even if it seems ripe for disruption, five decades of relevance usually means deep, intricate roots. My boss’s point was that gold has been considered valuable for thousands of years, and it’s unlikely it’ll be unseated quickly.
Another example: To Kill a Mockingbird. Teachers have been assigning it to high school kids for decades. There might be better books to get across the message TKAM does, but those books would have to fight against the 50 years of roots TKAM has put down. A new book would require teachers to change lesson plans and curriculums, school libraries would have to buy/license new books, etc. It’s more likely than not that my kids and your kids will read TKAM in high school because, among other reasons, our parents did. And, if it’s been around that long, it’s probably doing it’s job.
So, what’s this got to do with your startup life?
Two big things: Problem/Solution Selection and Strategy.
When you’re picking a problem to work on, make sure it’ll still be painful and urgent and expensive and growing and…most of all… relevant in 5, 10, 15 years. And the best way to know that it’ll be relevant is to make sure it’s been relevant.
Fifteen years ago people and businesses struggled to track their expenses. Fifteen years from now people and businesses will still struggle to track their expenses. The problem is safe, now you’ve just got to niche down and find useful solutions.
And on that solution side, look for time-tested behaviors. I love grabbing a behavior that’s been table stakes in one industry but unused in another. Porting it over lets you benefit from a tested behavior and get all the value of it being novel to new customers. For example, brining classic consumer product sales and growth tactics to a new author trying to sell their first book. The more circles you have on your Venn Diagram, the better chance you’ll have of benefitting from this.
The last place to think about the Lindy Effect is in the strategy realm. Broadly with strategies that have worked for countless startups in the past, and specifically with the types of books you read.
New business books come out every week, and they might be great. But books that have been around for 20 years and are still talked about are almost definitely great, or at least useful. The 7 Habits of Highly Effective People has sold consistently since 1989, so, it’s probably got something in there worth reading. The Emyth, The Goal, etc.
It’s tempting to overestimate new stuff because it’s new. But the old stuff that’s already stood the test of time is way more likely to continue to do so than 99% of the new stuff.
Entrepreneurs need to predict the future, and, at the risk of sounding like a bit of a jackass, the best to do this is to look at the past.