Business Ideas Are Predictions
A business idea is a prediction about the future that the entrepreneur can influence.
A business idea is a prediction about the future - but in contrast to sports betting or public market investing (for non-insiders) you have agency over the outcome. This is not just semantics but actually a useful way to frame the concept of business ideas and the act of coming up with and testing them.
Business ideas as predictions
A business typically starts with a guess about what people want and what the idea originator(-s) will be able to deliver to them with a cost lower than the willingness to pay for customers. In other words, a prediction that the product/service can be turned into a profitable business.
The predictive nature of business ideas illustrates a similarity between entrepreneurship and investing. Investors and entrepreneurs both try to predict the future and bet on that prediction (one with capital and the other with time and energy).
The main difference is that the entrepreneur has more agency over the outcome.
Not a passive prediction
The difference between the business idea form of prediction and many other predictions is that you both have agency over the outcome and skin in the game (i.e. something to win or lose on its success or failure). This means that by starting a business, you are giving yourself a chance to change the world. This might sound grandiose, but even the smallest entrepreneur will change the world and typically more so than the same person being an employee. This concept of agency and predictions is illustrated by the quoute:
The best way to predict the future is to create it.
A funny side note is that this quote has been attributed to everyone from Peter Drucker to Alan Kay to Abraham Lincoln and probably a few more. My interpretation of this is that it’s such a fundamental truth that no single individual can be attributed to the idea.
Building a business means updating the prediction
Good businesses are built on dynamic predictions that are updated as more information is available. Think of business-building as a two-step process that typically repeats with modifications between each iteration.
Predict how a future, profitable business might look like
Build it (incl. acquiring resources, skills, etc. as needed)
This process is not always as conscious as stated here but it’s a useful way of conceptualizing entrepreneurship and connecting the idea and the execution - two things typically separated. The downside from a bad first prediction or even 10 first bad predictions is low - you just need to survive until you find something that proves to be successful. As long as you learn something from each iteration of a failed experiment, you’ll increase the odds of the next experiment succeeding.
Startups fail, founders don’t
The consequence of the fact that you learn from each iteration or experiment is that founders do not fail, startups and ideas do. As long as you learn something from a failed business, you have increased the odds of the next experiment being successful.
One important precondition for this to happen is that you learn from your experiments. Thinking about business building as a series of Build-Measure-Learn cycles is a useful way of conceptualizing this.
Even if you end up with X failed startups and have to go back to being an employee - you will learn a lot from being an entrepreneur despite it not making you a millionaire.
Summary
Successful entrepreneurs don’t just predict the future—they build it.
Entrepreneurship can be framed as a two-step repeatable process:
Identify a thesis about the future
Do what you can to realize the truth.
Repeat 1 and 2 until you find success (however you define that).
Practical advice
Test early. Don’t be afraid to test your ideas with early prototypes. AI has reduced the cost of prototyping immensely.
Have bias to action. Don’t let your ideas stay in a notepad. Unlike in sports, you’re allowed to make a bet and then act to make it true.
Ideas vs Execution is a false dichotomy. Entrepreneurship is mostly about execution - but good predictions makes it more likely to success.