Three Types of Problems Worth Your Time to Solve

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• The Seasons of your Business (and Life)

Why This Episode Exists + Nerdy Stuff Not In The Pod 💡

Today’s episode exists because lots of people waste their time with problems that aren’t sturdy enough to support a business. The effort spent looking for a problem that’s worth your time to solve is well worth it. Go at problems with a skeptical eye - most aren’t worth solving. The Hole, Teleporter, and Status Level Jump frameworks make it easier to spot the fakes and the ones worth going all-in on.

Here’s some other nerdy stuff 🤓:

• The Psychology Deep Cut - There's some fascinating research from behavioral economics about how humans make decisions under different types of pressure. Daniel Kahneman's work shows that when facing losses (hole problems), people make decisions 2-3x faster and are willing to pay 2.5x more than when pursuing gains (status problems). We cut this because it messed with the Chi of the pod, but it explains why hole problems are such powerful foundations for startups.

• We're Doubling Down - This framework has become so useful that we're actually restructuring part of Tacklebox around it. We now explicitly ask founders to classify their problem type and defend their categorization as they’re going through customer interviews. It's already helping us keep our founders away from crappy problems.

That’s it for the nerd deep dive today. Hope you enjoyed 🤓

Pod References

• Tacklebox Customer Interview Workshop

• Getting Good at the Wrong Thing
   

00:40 The Types of Problems Customers Will Solve
01:00 Manhattan in 2007
05:48 Achievement Incentives
06:30 Be Careful What You’re Getting Good At
07:37 Nat Eliason - Getting Too Good at the Wrong Thing
08:21 Bad Early Decisions James Clear
09:53 Tacklebox
10:54 Problem Archetype 1: Hole Problems
14:23 Baby Quip
17:04 Problem Archetype 2: Teleporter Problems
19:19 Problem Archetype 3: Status Level Jump

Transcript - Feel Free to Read it Like a Long-form Article:

Today, we’re going to talk through the three archetypes of problems customers will solve. Which implies that there are others - hundreds - of problem archetypes customers won’t solve.

This is one of my favorite types of episodes - the Charlie Munger let’s try to be consistently less stupid rather than trying to be very intelligent - type. Let’s focus on the problems that have a chance and ignore all the ones that probably don’t.

To get to those three types of problems we’ve got to first take a quick pitstop, a detour, to downtown manhattan in 2007. To not quite wall street - but an office a couple of blocks away, to a company that didn’t quite do finance, but, just like their location, they did something sort of close. If you squinted, it all looked the same.

I’d just graduated college and spent 6 months trying to play basketball overseas, but an injury kept me from it. Also, possibly skill level. But for your purposes, let’s say it was 100% the injury.

Anyway, I recovered from ankle surgery on my parents couch, frantically trying to figure out what I was going to do now that my basketball career was over. I’d been an econ major, and it was 2007, so, finance, I shrugged? A friend from college a year older worked at that sorta finance company and got me an interview which led to a job I happily accepted.

I had absolutely no idea what this company actually did, but I didn’t care. I figured it was my foot in the door and I could head anywhere after a year or two if I didn’t like it.

I joined a group of 25 other recent college grad hires who all seemed to have a similar thought process - at happy hour after our first day, one of the 25 said to the rest - “so… does anyone have any idea what we do?”

We all cracked up. No one had a clue. We’d just get our foot in the door and figure it out.

That group of 25 went through a 10 week training program where we found out what our job actually entailed and it was… odd.

I’ll explain it to you how they explained it to me.

Basically, our trainers told us, your job is to track your client’s stocks. If your client is Home Depot, you watch their stock all day and try to figure out who’s buying and selling so you can tell Home Depot.

You might assume, as I did, that who owns your stock is public information, and it is… sort of. Every quarter funds are required to disclose ownership, but not before. So, an activist hedge fund who wants to fire the CEO of Home Depot could be buying up millions of shares for 2 months leading up to the end of the quarter and not have to disclose it. But, obviously the CEO would like to know if that was happening.

So, our goal was to keep an ongoing, real-time record of who was buying and selling their stock inbetween these quarterly disclosures.

The whole thing makes sense, and you can see why it’s important… but… we all thought.. this is kind of strange. I remember thinking - is this just what finance is?

The method we used for tracking stocks was even stranger.

There’s a thing called the DTC, the depository trust company, which is basically a book entry system for trades in real-time. So, you can see the brokerages that execute the trades.

If you’re that hedge fund trying to fire the CEO of Home Depot, you might use the brokerage, say, State Street to execute the trade that gets you your 5 million shares. And THAT happens in real time. So, on the day of the trade, the DTC, might say “400k shares purchased by state street.” But it doesn’t say who it was on behalf of.

Our job was to put together the puzzle. To figure out who was behind the 400k shares buy.

To do this, we looked for clues. What hedge funds used state street historically? What funds were active in the space? Maybe you had a contact at state street you could ask - legally a tad iffy, but highly effective.

Hedge funds knew we did this, so they’d use more misdirection - like using multiple brokerages to hide what they were doing.

Our product to our customers was a real-time log of current shareholders based on all of our sleuthing. At the end of the quarter, we matched our list to the actual filing list and saw how we did. That was the most stressful day of the year.

The people who were best able to solve the “whos buying or selling” puzzle got more clients and got promoted and made more money.

So… why the heck am I telling you all of this? Why did I just go into excruciating detail on my objectively very boring first job?

Because all of the smart, bushy eyed recent grads I was training with noticed the same thing you just did. That this is a totally niche skill and a knowledge-base that doesn’t translate at all.

We’d all planned to stay 12-24 months, max. Then, we’d leave and head to an investment bank or a hedge fund or switch careers completely.

And that’s why I’m telling the story. Because, at some point, despite what we knew about the future prospects of the job, the human thing started to take over. High achievers, of which there were many, of which I guarantee you are too if you’re listening to this, focused on short-term achievement incentives. I focused on short-term achievement incentives.

How could I get better at tracking stocks? How could I get a contact at State Street to game the system? How could I nail a hedge fund moving in and get my boss to announce it to the floor - something that happened routinely?

There are two broader points which will tie us all the way back to startup problems.

Here’s the first.

I remember one day telling my dad that I’d absolutely nailed a hedge fund trying to get into Abercrombie and Fitch by knowing they’d used a similar strategy a few months ago and he said that was great, but, to .. quote… be careful about what I was getting good at. You could be using this time to get good at anything - make sure it’s something you’ll be happy in ten years you got good at.

And that’s the first broader point .

Lots of people are spending lots of time getting really good at things that don’t matter.

Or, better put, they get good at things that don’t lead them to a place they would’ve chosen in a vacuum. And that all comes back to short-term incentives, one of our favorite things as humans.

Another famous charlie munger quote works here:

“Never, ever, think about something else when you should be thinking about the power of incentives.”

Short-term achievement incentives urged me to focus on how to better predict hedge fund moves without ever asking the bigger question - what happens if I get really good at predicting hedge fund moves? What does that mean? If I get more and more clients, what does my life look like? In ten years, where am I?

Nat Eliason mentions this in a post I’ll link to in the show notes. He talks about how writing blog posts and tweets is a skill people can get really good at, and it’s something that’s easy to focus on and improve because of the short feedback loop. But, if you want to write a book… that’s a different skill. And writing lots of tweets and blog posts is not going to lead you directly to a book. It’ll lead you to being good at tweets and blog posts - and maybe you can convince yourself that in some roundabout way it’ll get you to a book - but… you’re doing hoops to avoid doing the thing that’ll get you where you want.

This leads us to the second part of why I told you the story.

Lots of people make bad early decisions and then try to salvage them with good decisions later on. And this, usually, doesn’t work.

This is a thought I first heard from James Clear. He follows with these examples:

• it’s hard to have a best selling book with an unpopular topic

• it’s hard to have a happy marriage with an unhappy person

• and it’s hard to make money in real estate if you overpay in the beginning.

• For me, it would’ve been hard to have a career I enjoyed if I spend years learning skills that wouldn’t contribute to a job I enjoyed

The entrepreneur version of this is what we’re after today. It’s hard to build a successful startup if you start with a bad problem.

When startups show up to Tacklebox after they’ve been operating for a year or two and say they want to quote get back to basics, the problem is always the problem. They might’ve made a bunch of good decisions later - hiring a good team, raising money, following best practices on a product and acquisition channel - but those are all trying to salvage the initial bad decision - choosing a problem people don’t care about as the foundation to your startup skyscraper.

The pattern of choosing the wrong problem, then finding wrong metrics to track, then trying to solve it all later, is a terribly human one. Let’s fight back against it today.

Let’s go through the problems that are worth solving, the stuff that’ll set you off on the path to get you somewhere you really want to be.

And let’s do it… After.. a message from our good friends at byldd.

This episode of idea to startup is brought to you by Byldd,

Byldd is a development agency that we trust. A number of our non-technical founders have used them to build successful, revenue generating products. Other businesses they’ve helped build have generated hundreds of thousands of dollars in revenue, gotten into accelerator programs like Y Combinator, and raised millions from VCs.

Byldd is uniquely positioned to help non-technical founders get their first product out.

Usually, this is a disaster, for all the reasons you know. Finding a CTO is hard and unlikely, and they probably won’t be able to build the whole product - design and all - anyway. Hiring a dev shop is a black box, and unless you’re spending $200k or more, it’s unlikely your project will be a priority. Hiring developers off of upwork and managing them yourself is probably the least likely to work of the three.

Or, you could work with Byldd. Their whole business is organized around early stage, non-technical founders. For $10k and roughly a month’s work, they’ll get the first version of your product up and out.

Reach out to Byldd, ask for Ayush, and say you came from Idea to Startup. In a month, you could have a revenue generating product.

Back to it.

Problem Archetype #1: The Hole

OK! Enough sorta finance talk. Let’s talk problems. As I said, starting with a bad problem is the type of decision that no matter how many good decisions you throw at it down the road, you’re unlikely to be able to salvage. Spend the time to find the right one.

There’s a quote by someone smart I can’t find that said something to the effect of - if you give me an hour to build a startup I’ll spend 55 minutes on the problem and 5 on the solution and I couldn’t agree more.

There are three problem archetypes that customers will solve. And, honestly, I don’t love the third. But lots of people go after it and some are successful, so we’ll talk it through. But don’t fall in love with it. Even though I know some of you will.

The three types are:

1. The Hole

2. The Teleporter

3. The Status Level Jumper

We’ll start with the hole. My personal favorite and the one I’d urge you to try and find. A good problem stacks the deck in your favor, and there are no better problems than hole problems.

Hole problems exist when your customer is… in a hole. Staying in the hole will cost them their business or leave them without a spouse or have some other massive consequence. They need to get out.

A quick note - if you know a customer is in a hole, but they don’t know they’re in a hole, then they aren’t in a hole. A customer sees the world as they see it, not as we want them to see it.

The key characteristic with hole problems is that they’re urgent. They usually have a timeline. Every second they aren’t solved is quantifiably painful to the customer. It’s hitting on loss aversion. Something they’ve worked hard on is at risk.

This scenario leads the customer to be far less discerning - when you throw them a rope - the solution for any hole problem - they aren’t going to ask if it’s organic. They’re going to start climbing it and kiss you on both cheeks when they’re out.

I think about businesses and the problems that anchor them using a see-saw visual. I know a podcast isn’t the best medium for visuals but this ones simple. On one side of the see-saw is the urgency of the problem. On the other is the quality of the product you have to build.

The more urgency there is, the worse your product can be. The reverse is true, too. The less urgent the problem, the higher the value placed on execution.

It’s a much better use of your time to find customers that’ll be happy with a terrible product - a shabby rope that gets them out of the hole - then to try and build an incredible product that someone strolling down the street will be so blown away by that they’ll have to purchase it.

It’s also far more likely. Nearly all of our successful companies were successful because the problem was so urgent it covered up for endless mistakes on the operational side.

Go back to our incentives quote from Charlie munger. Someone with pain they can feel is incentivized to stop that pain. Other people aren’t. Work with the first.

Here’s an example.

Recently my wife and I took the little guy away for the weekend. It’s amazing how a 20 pound human can turn a CRV into a mini cooper. After his stroller and pack and play and car seat and diaper bag and cooler full of food and of course Ruby’s bed and young rubes herself, all 85 pounds of her, the car was filled to the brim.

We got to our airbnb around 7pm and immediately realized that in all the chaos we’d forgotten something critical - the baby monitor.

We didn’t know anyone in the area and the stores were closed. We texted a friend who knows these things, and in a minute they replied - use Baby Quip. We googled it and saw that it’s basically a rental service for parents. A family nearby had a profile page that displayed all the baby items they owned that we could rent along with a daily price. A baby monitor was $9 bucks. We reached out, and the woman on the other side said she’d be there in 20 minutes, and asked if there was anything else we needed. While we were at it, we added a baby bath tub and a wheelbarrow.

The baby monitor was $9, but honestly we probably would’ve paid $50. We needed it. We were in a hole and they had a rope. And yes I know we could’ve just not had a baby monitor, but, we’re first time parents so cut me a little slack.

Back to the see saw.

Was the baby monitor the one we would’ve chosen? Definitely not. Did we spend time to see if this person had good reviews? Were we worried about someone coming to our home to drop something off? Did we think about cleanliness or chemicals or the eco impact or anything else that we usually think about when buying for our baby? Nope. We didn’t care if the rope was organic. We needed to get out of the hole.

Baby Quip itself isn’t objectively great - it’s buggy, the communication tool is a bit weird, it’s hard to search, and they take a pretty big cut. And I don’t care. Because, again, the hole.

Urgent problems are a giant eraser - they get rid of product mistakes, marketing mistakes, even pricing and team mistakes. If you solve an urgent problem, you’ll give yourself slack on every other business function.

The last, and maybe best, part about solving a Hole problem is that you build an enormous amount of trust with the customer. So, last week when we flew out to Florida and brought the little man, we started by reaching out over Baby Quip to a family near where we were staying and rented the works - everything we’d need. And, every time we travel from here on out, I’m sure we’ll do the same.

Looking for a hole as a Wedge problem - what we talked about last week - is a great way to build a business. It’s a moat. I feel an emotional tie to Baby Quip.

Finding hole problems is tricky, since, obviously, they’re liquid gold to entrepreneurs. The key, as always, is narrowing in on customer. Getting more specific on the exact moment in time a customer feels the pain - adding qualifiers to the persona until you get to a place that’s too specific for bigger companies to target. Then, expanding in concentric circles as you nail each slightly less urgent moment.

Problem Archetype #2 - The Teleporter.

The Teleporter problem is all about commitment and process.

In this case, you identify a process your customer is committed to and remove the hardest, most painful step. You teleport them past the thing they hate doing. The thing they dread.

This requires you to know the customer and their process like the back of your hand. Better than anyone else.

We got pitched by a founder the other day with a classic teleporter business. He’d been in the real estate world for a while helping people sell homes, and he’d noticed a specific type of customer with a specific problem.

This customer owned a house they wanted to sell but, the, house needed a fair amount of work. Usually things like basic repairs, updates to the kitchen or the HVAC system, maybe a paved driveway - that sort of thing. He knew exactly how much these sorts of repairs would boost the value of the house, and he had all the connections to get them done. So, his business idea is to give you an offer for your house as is. Then, he does the hard part and sells it.

The step of repair and update - something that’s painful, foreign, time consuming and opaque - is taken out of the selling process.

As he started offering this service, he realized the customers who got disproportionate value were the ones who’d recently lost a parent and were trying to sell that house. So, he began offering a service to itemize and box everything in the home and move it to storage.

This gives us an important lesson I haven’t mentioned yet. As always, the magic happens after. You probably won’t start with some great, unknown problem. You’ll need to work with a customer for a while to find it. The key is to know what that looks like and not settle for less.

Commitment, process, most painful step.

Finding Teleporter problems is usually an exercise in domain expertise. You need to understand the process better than anyone else, which usually means you’ll need to have lived it.

The shortcut here is ethnographic research. Convince a customer you’re interested in helping to let you shadow them for a week. You’re almost certain to find some teleporter problems.

Problem Archetype #3: The Status Jump

The last archetype is a lot more flimsy in my mind, but, it can work. It’s based on the theory - and in my mind, fact - that humans are motivated by envy, not greed.

Your job is to understand who your customer currently compares themselves to, and what would make them feel like they were better than those people. Ideally, it helps them jump to a new group of people.

This may sound ugly, but it’s how humans gauge success - how we’re doing relative to the peer group we currently see ourselves with and relative to the peer group we’d eventually like to be a part of.

One of my first businesses was a status jump business, although I didn’t know it at the time.

While I was working in sorta finance, I decided to make a little extra money on weekends giving basketball lessons on the upper east side. My pitch was that I would help kids who wanted to eventually play college basketball. I’d done it, and I could help them do it, too.

The kids I taught were 10 years olds, so… they had a ways to go… but, I thought that was my best differentiating pitch. Plus, it let me charge a few hundred dollars an hour, because I said that if I was able to get your kid a scholarship, it’d be a 400k savings. So, 300 bucks was nothing.

I couldn’t believe I got customers, but I now know why. I helped parents jump status levels.

I’d coach the kids one on one right next to the group lessons that were far cheaper. I gave parents a way to show that they cared more about their kid, or that their kid was talented, or that their kid’s goal was to play in college. This let them leave the status level of the other parents. This gave them a scoreboard they could read.

I even held “try outs” for the honor of doing my silly dribbling drills to add a bit more exclusivity. People showed up.

Status jumps are tricky. You need to deeply understand your customers job to be done and realize that you are solving a problem with moving goal posts.

People were interested in my basketball lessons for a few weeks… until they weren’t. The goal of any business is to make your customers successful, and, with this sort of problem, that can be tricky because of how emotional success actually is. How many other variables there are.

It can work, but try it at your own peril.

The End

There are lots of things you can do with your life. If you’re listening to this podcast, I’d assume that one of those things - probably one of the big ones - is to start and build your own successful company.

To improve the odds, I’d do two things.

First, recognize what it is you’re getting good at and make sure it translates to the type of life you want to live eventually. Most people don’t do that. And it’s a conscious choice - what you do each day - but it can be torpedoed by achievement incentives. If my dad hadn’t forced some perspective, I might still be tracking stocks, 17 years later.

Second, when you pick a startup to go after, remember that a bad decision early might not be able to be salvaged by good decisions late. The problem you pick is that decision that matters. The only types of problems people solve are the ones that are painful, urgent, frequent, growing and expensive. Problems they know about. Problems they talk about. If that’s not the type of problem you’re solving, keep thrashing around in the space until you get to one.

And, as always, it’s unlikely you’ll start with the great problem. Start where you start - but it is important you realize you need to get yourself to one to be successful.

Hole problems are the holy grail. Throw people a rope.

Teleporter problems are close behind. Help people skip the hardest step of something they absolutely have to do.

And status problems… those aren’t for the faint of heart.

Most other problems don’t matter. And no one solves problems that don’t matter.

A great problem makes everything else significantly easier. Don’t settle.

This was the idea to startup podcast, brought to you by tacklebox. If you’ve got a startup idea and a ft job, head to gt and apply. we’ll get back to you in 72 hours and can be working on your idea by the weekend.

Have a great week.