8 Reasons Outliers Come From Outsiders

• 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

Outsiders see the market from the customer’s perspective first and foremost.

They know the path to revenue is in better serving those customers in some faster or cheaper or more satisfying way, and that’s all they care about.

Insiders might be influenced by internal industry pressures and norms. They tend to be less focused on the subtle shifts in preferences of customers.

Willingness to Fail

Outsiders are mavericks. They don’t care if they fail. In fact, they usually welcome it as a way to learn faster.

Insiders have a reputation in the industry. If they make a fool of themselves, it could limit future opportunities (assuming they want to stay in this market as their historical choices would suggest).

Adaptability

Outsiders don’t mind pivoting whenever they uncover new insights.

That level of speed and iteration is essential for something new.

Insiders are more rigid since they’ve seen things work and not work in the past.

This type of thinking will hold every startup back.

A Range of Inspiration

Outsiders have a fresh perspective. The experiences they’ll pull on to understand and solve problems are varied, and may have never been explored in the context of a given market before.

Typically this means weirder, more interesting and innovative products pop out the other end.

Insiders only know what the market knows. Sure, they can research other areas to draw inspiration, but how should they know where, out of everything, to start?

This is a massive disadvantage since outsiders know exactly what to spend their time on.

Risk Appetite

Outsiders, just by nature of jumping into a new market, are demonstrating they are ok with risk.

There’s a high barrier of entry to jump into something new.

It’s daunting.

Someone who’s willing to do that will be willing to take other risks too.

Insiders, who stick around for years in a comfortable setting, need to train a new muscle.

These result in different skillsets and mindsets.

Guess which is better to build a big startup with?