Blink vs. Moneyball

June 29, 2010

Micah Rosenbloom and I had an endless debate at Brontes about whether Blink or Moneyball was more relevant to the founder’s skill set.  Blink argues that instincts are incredibly powerful and would suggest a more gut driven entrepreneurial style.  Moneyball chronicles how Billy Beane outflanked all other major league General Managers by largely ignoring instinctual decision-making (scouting), instead using data to make decisions.  We thought of this as a spectrum where Micah leaned toward the Blink side and I leaned in the Moneyball direction – probably a good combination.  I’d argue that I’d “Blink” to form a hypothesis, but use Moneyball analytics to decide whether to execute that hypothesis and how much to invest in testing the hypothesis.

As a seed stage investor, I think about this debate frequently.  I think there are early stage startups that are designed as more “Blink” style startups that are hugely successful.  I don’t know the true story of the founding of Facebook, but my guess is that Mark Zuckerberg didn’t start by getting his thoughts into a PowerPoint, doing market research or creating a financial model.  It almost seems laughable to suggest such a thing.  He was coding in his dorm room, had conviction about something users might want and built a minimum viable product to see how they reacted.  This was the furthest thing from a designed business.  100% on the Blink side of the spectrum.

Not to put the companies even in the same stratosphere, but at Brontes we were largely a designed business.  We used our instincts to figure out where to look and then did a ton of market research and put together a detailed plan in mid 2003.  If you look at that plan today, the business greatly resembles the plan. We made pivots along the way, based on customer data, and became much more sophisticated in our assumptions and implementation, but fundamentally we’re still in the business we set out to build in 2003.  Certainly some businesses lend themselves to more instinctual management than others, as iteration cycles can vary.

Which is better? I really can’t say.  If you compare these two companies, I’d rather be Mark Zuckerberg and the valuation math is about 1 to 250 in Facebook’s favor thus far.  However, I think it is dangerous to look at extreme outliers to draw conclusions, and despite not being Facebook, I’m not sure I’d change my approach the next time.

My feeling as an investor hasn’t changed much from my time as an entrepreneur.  I’m a big fan of the “designed” startup Moneyball approach.  While I value instincts, I think our instincts can greatly bias us and that the fly-by-the-seat-of-your-pants approach to entrepreneurship statistically results in failure at an overwhelming rate over the Moneyball approach.  It suggests to me that the founder may not listen to user data and pivot quickly based on facts, but solely on instinct.  Even in a highly iterative lean startup methodology (which I deeply support), I view the analysis of the data to make quick iteration decisions as a Moneyball skill.

I’ve invested in businesses that are examples of both of these approaches, but find the Moneyball model a much easier bet.  The Blink model requires me to either absolutely share the instinctual conviction of the founder, which is rare, or ask the founder to create evidence not in market analysis, but in actual user traction metrics. Imagine investing in Mark Zuckerberg when he had the first prototype for TheFacebook.com and no user traction, it would have been very improbable as an investor to share his instincts about what would work in social networking.  Peter Thiel was a genius for making the first investment in Facebook, but consider that the investment was made after Zuckerberg amassed evidence of hundreds of thoustands users with a astoundingly viral trend line.   It was still a big and early bet, but it wasn’t made solely on shared instincts.  Arguably, at that point, an investor could take a Moneyball approach to analyzing whether the user traction would continue.

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18 Responses to “Blink vs. Moneyball”

  1. Anonymous Says:

    Nice post. I’m definitely a mix, but it seems a lot of superangels are more in the Blink camp. That could be due partly to experience, and partly to the size of your warchest 😉

    I do think as you sort of got at with your examples, the approaches have a lot to do with whether the offering is new or fits into an existing value chain, and related, whether it’s highly Social. FB aside, sometime like BlockChalk, StickyBits etc. is hard to predict whether people will really do that with “data”- even comparables are hard. In B2B spaces or more evolutionary products it’s more feasible to build a case based on existing financial motivations and processes.

    I think the main point though is that both approaches have benefits and, whether individually or with a partner, are worth using.

  2. Anonymous Says:

    One of the reasons why I like Eric Ries is his balance of these two things: i.e. success comes from a combination of vision and problem/product instincts working hand in hand with rigorous validation and measurement. Nice post.

  3. Anonymous Says:

    I generally agree with your sentiments, but I think there is one major flaw in this argument as it’s applied to startups – market research and statistics generated for business plans and investor meetings are far less accurate than professional sports statistics which can track quantifiable metrics very accurately. It is also much harder to predict very complicated models such as market behavior as opposed to player performance based on previous stats.

    Thus, in my opinion, the moneyball approach is much less applicable to startups which are much more volatile and unpredictable compared to professional sports.

  4. John Prendergast Says:

    Great post Eric. My co-founder and I have these kinds of conversations too. As entrepreneurs, I think most of us lead with Blink. I’m not sure that should ever change. It’s the source of insight and making the non-linear connections that move ideas forward in big ways. I think the trick is to blend in the Moneyball approach to check sanity, vet your instincts and generally separate entrepreneurial vision from entrepreneurial delusion.

  5. Eric Paley Says:

    I think both extremes are pretty dangerous. I don’t think one can be an entrepreneur and be 100% Moneyball. By definition startups deal in great uncertainty. Having said that, I think lots of time can be saved by diving into customer data and market understanding, rather than just reacting to instincts which can often be misleading. It’s a spectrum. I’m probably 35% Blink and 65% Moneyball. I think Micah is likely the inverse.

  6. Anonymous Says:

    Eric, this is great. I think you should also attend to how Moneyball-type edge can be competed away over time; already by the end of the book, Lewis relates that other GMs are making bids for the players Beane and crew had wanted for cheap. And while Blink-type edge doesn’t share this unfortunate attribute, it has its own weakness: its fundamental unrepeatability and uniqueness to the circumstances.

    If I could mention two more books I think of in productive tension with each other, you and other entrepreneurs might enjoy considering Mohnish Pabrai’s ‘The Dhandho Investor’ and his advice to seek “heads I win, tails I don’t lose much” bets alongside Nassim Taleb’s ‘The Black Swan’ and his advice to “maximize the serendipity around you”.

    -Ben

  7. Anonymous Says:

    Eric, Great post. It’s all too rare that people acknowledge their way isn’t the only way to do things.

    Do you think it has to do with how well defined the market and problems are?

    With Brontes, I imagine the dental market was pretty well established and patients had clear needs (e.g. my tooth hurts). They might not have requested the solution you came up with, but there were identifiable problems. Additionally, I’m sure you had a lot of research to do just learning about dentists since you’re not one of them.

    With Facebook, it’s hard to imagine any useful market research Zuckerberg could have done. He could have estimated the size of the college market, but that turned out to only be a good starting point. If he asked college students what their problems were, I don’t think he’d have received any useful answers (“I have no way to poke my friend on the web”?). He was a college student himself and all his friends were too, so it’d make sense he could skip the step you had in learning about dentists and the medical industry.

    Could the lesson be more Moneyball for b2b, more Blink for consumer internet?

    Greg

  8. Charles Chase Says:

    My preference is to start with the Blink approach as I hammer out the business model. Once I’ve figured out how to do one full cycle with that model, I try and focus on the underlying metrics and begin navigating via the Moneyball approach. I don’t think you can operate at either end of the spectrum for very long, always someone in between, at least for me.

  9. Anonymous Says:

    I think a paradigm more helpful than Facebook/Brontes would be Facebook/Amazon. Bezos purportedly did a TON of research before/while starting Amazon.com.

  10. Anonymous Says:

    Interesting post. Seems like a challenge with start-ups is that you’re normally in uncharted territory. So, if you’re not careful, too much moneyball thinking can get you into a local maxima problem.

  11. Eric Paley Says:

    I like Greg’s comment about some of the differences between b2b and b2c and the former lending itself more to Moneyball than the later. It’s definitely true, but somewhat too easy a distraction based on my comparison. Perhaps Samuel is right that by using Brontes as an example (I try to write from what I know best), I did a disservice because the b2b/b2c divide is so stark. Amazon would be a way better example of a b2c business that was really built on strong data instead of just instincts. Amazon 30/60 Blink/Moneyball vs. Facebook 0/100% Blink day 1. No doubt the pendulum swung at Facebook once they had customer feedback to consider.

  12. marksbirch Says:

    It depends on what you build. If your environment is all about tech, bio-tech or clean tech start-ups, then Blink makes sense. It speaks to the creative, inspirational, innovative and disruptive. If you are simply trying to build a business in a mainstream industry, then Moneyball is the more sensible approach.

    For example, a restaurant is all about neighborhood analysis, foot or street traffic, local options, regulations, etc. These can be measured. Moneyball is going to be a safer approach for a viable business. It may not be sexy and have huge valuations, but you will not lose your shirt if your analysis is solid.

    However, if we take Facebook, what metrics could you go by? Same goes for LinkedIn or Twitter or FourSquare. There was not a good or reliable model. It was instinct that drove decisions and the ability to be agile to customer and market changes. You could not have predicted these businesses.

    Amazon and similar web companies are Moneyball businesses. While Amazon is heavily reliant on technology (much of which is highly innovative), they are a retailer which is a pretty well understood business model. Their “innovation” was taking other catalog-based businesses like LL Bean and applying it to the book business using only the website as the interface with the customer.

  13. Anonymous Says:

    Excellent article. At our startup company, we have this debate almost every day. I think our success is driven by the fact that our management team is comprised of both Blinks and Moneyballs. While we have more opportunities than we have time or resources to address, this combination has focused us on the most strategic and economically viable options.

  14. Anonymous Says:

    Im a blinker with a moneyball partner. When presented with the same info, his focus allows him to pick up market insights and minor details that I don’t see, while I notice more human behavior which makes for great debates about what our users will like.

  15. Anonymous Says:

    Obviously, the answer is probably “whatever Steven Blank says”. I think the interesting area to expose tension here is the difference between business model risk and product risk. If you are creating new markets, it has to be a little bit more of a gamble than if you are entering a space that is better understood.

    If you told Billy Beane that we were changing all the rules for baseball next year and next year the rules would be just like basketball, all his strategies go out the window. Is Alex Rodriquez or Roy Halladay going to be better at the point guard position? No idea.

  16. Anonymous Says:

    I think it also greatly depends on the costs of being more blink or more moneyball. In Mark Zuckerburg’s case the cost of doing something seemingly knee jerk would have been time. He had the ability, being a coder to let other people analyze the moneyball factor, meaning he dropped it in their lap and let them decide if it was needed or welcome. I think if the cost is minimal and its something that excites you anyway and you personally haven’t seen anything like it, letting rubber hit the road and doing “micro testsing” is a great start. Further, Zuckerburg didn’t need to worry about the moneyball factor because after gaining traction, that was moneyball enough for an investment or at least a closer look. A startup seeking capital without a tested product can’t afford not to use a moneyball approach as that will be what defines it in the investors eyes. When you can replace moneyball with traction and use, all you need to do is blink.

  17. Anonymous Says:

    nice post Eric.

    i’d suggest:
    1) Blink strategy for initial incubation/seed investments.
    2) Moneyball strategy for Series A/B & follow-on investments.

    in other words: a quick first check, followed by a more thoughtful second check after 6-12 months evaluation (or no check at all).

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