Brad Hargreaves | Building Things

Brad Hargreaves on entrepreneurship, community and life

What we don’t know

with 4 comments

[T]here are known knowns; there are things we know we know.
We also know there are known unknowns;
that is to say we know there are some things we do not know.
But there are also unknown unknowns – the ones we don’t know we don’t know.
                                                                                         – Donald Rumsfeld

I first heard the word “de-risked” from a Silicon Valley VC as he passed on the GoCrossCampus deal a few years ago. I’ve heard it a number of times since, always in the same early-stage investment context. It’s an odd word. It has always reminded me of the Rumsfeld quote, at once mixing political doublespeak with a certain higher-level truth and meaning.

And in a way, Rumsfeld and the venture capitalists are saying the same thing, although I think Rumsfeld said it more meaningfully. At the simplest level, de-risking has two components:

–     Converting the unknown to the known
–     Converting unknown unknowns to known unknowns

That is, de-risking is about taking the unknowns of a business and turning them into knowns. But it’s also about discovering what we don’t know; it’s about cataloguing the unknowns and scheduling them for future exploration.

I think this has some significant implications for the entrepreneur. I’ve found that much of the work an entrepreneur should do prior to seed funding is not simply “proving things out” but rather exploring the key unknowns that stand in the way between the entrepreneur and massive success. Said another way, I see entrepreneurs doing too much work discovering and not enough work figuring out what they should be discovering.

Doing this will enable a healthy incrementalism and structure, bringing the spirit of a scientific experiment to an otherwise qualitative exercise in guesswork. As unknowns are converted to knowns in a deliberate fashion, the business is “de-risked” and the door is opened to more significant relationships with partners and investors. Without this discipline, the entrepreneur risks wasting time exploring things that aren’t all that meaningful – or worse, will lead to the wrong conclusion about where the business should go.

And from a purely practical perspective, an entrepreneur may be surprised at how well a list of the unknowns in their business – framed as a robust list of the things that must be proven out with the money they are raising – will go over with any investor.

Written by Brad Hargreaves

August 28th, 2011 at 8:54 am

  • Anand Chopra-McGowan

    This is great, Brad.

    The newer the business model, the more unknown unknowns there are likely
    to be. Applied to startups or task lists, there’s a strong need to take
    the time to uncover what we don’t know we don’t know.

  • EladSwifto

    This blog is an unknown unknown to me.  I had no idea what you were trying to say.  Could you put it in more concrete terms?

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  • transcription

    I fully agree with you! There are a lot of things that we don’t know! Thanks for your advice