The Difference Between Demand and Product Market Fit

What's up everyone? Welcome back to another episode of Founder's Journal. This is Alex Lieberman, your host, the co-founder and executive chairman of Morning Brew. We are back with another episode of the show that is an entrepreneur's personal journal made public for the world. I'm recording this on Thursday, August 31st. After this episode, I'm gonna be driving up to Vermont to enjoy the long weekend. I'm gonna be honest with you, I was a bit lazy today. Didn't really script out a whole episode. I just wrote down a few thoughts, basically my musings from the last week of conversations with entrepreneurs, conversations with my co-founders for my businesses. And I just wrote down some things that came to mind of just reminders from the last week or things I've learned. So this episode's gonna be a little bit different. I'm not gonna be reading off of a script. I'm just kind of, kind of be going from the dome. Talking as if you and I were talking at a coffee shop. I'm interested to hear what you think. After you listen to this episode, shoot me an email at alex@morningbrew.com and tell me what you think about the, let's say, just like the more unscripted improv-like vibe. Did you like it better because it felt like a conversation? Did you like it worse because it felt like it was more all over the place and it was less efficient? Let me know because I'll decide whether I wanna do more of these riff-style episodes in the future. So without further ado, let's hop into the episode. I just got off a call with a buddy of mine who runs a family business. It's a very successful family business, does let's call it seventy million dollars a year in revenue, profitable business, and this friend also. has gotten really into creating content on Twitter and LinkedIn. Over the last few years, they've built up a 6-figure following in both places. And I was talking with him about how a lot of creators and a lot of people who have built audience on the internet have started to launch businesses, and they've launched businesses that, at least on the surface, seem to be very successful because they're able to drum up a ton of demand for those businesses on day one. It just feels like a different time we're living in because before the internet, before having platforms like Twitter or LinkedIn or Instagram or TikTok, the average entrepreneur or the average person wouldn't have a large enough audience to basically have a built-in marketing channel to get interest in a new business they launch on day one. But what I was saying to him is that something that I've realized with my executive ghostwriting business, StoryArb, that I launched 3 months ago with my co-founder Abby, I think a lot of creators or people who have audience are conflating 2 very different concepts: demand and product-market fit. And what I mean by that is I think a lot of these people will launch businesses because they are excited about the short-term cash grab, the idea of they could launch anything and they have a large enough audience that enough people will pay for the thing that they launch that they will make a lot of money from it. I think a lot of people fall into this trap. The issue with that is, one, I think it creates a false sense of security where people with audience are not focused on truly building great products that can support longstanding businesses. But I also think people aren't realizing the difference between demand and product-market fit. And I'll just use the example of StoryYard. There is a lot of demand for StoryArc. When I have posted on Twitter and LinkedIn about my new business that is helping entrepreneurs and executives create content on Twitter and LinkedIn to help drive demand for their businesses, there is, let's just call it, single-digit millions worth of interest in people who want to be StoryArc clients. And so that's very exciting, right? It feels like it could be a very large business. I remember when I first started posting about the business, I said to Abby, I was like, okay, we have to make $10 million a year, our target for top line revenue for this business. It should be doing, you know, $3 to $4 million in profit per year. But something that I didn't think enough about at the time and has become crystal clear over the last few weeks is that having a lot of demand for a business does not mean you have found product market fit. It simply means there are enough people interested in the problem you are trying to solve. that they want to talk more with you about your business. It takes so much time to figure out basically the 2 most important variables. Who is the right customer that you're trying to serve with your business? And what is the right product or service that you can give to that right customer? And I think we've realized over the last few weeks of building this ghostwriting agency a few things. One is, you know, let's say we have a dozen clients right now. My guess is only half of them are the right client. And that makes sense. When you start a business, you have no idea. You have theories on who your right client is, but you don't know exactly who it is. And so my guess is 6 of the clients we work with, while they really want our service to help create content for them, they're not the right person. Whether it's they're not the right person because they don't know enough about their industry or they're not the right person because they don't have a very clear product that they can sell. So it's gonna be hard to map ROI to the content they're creating online, or they're not the right person because they don't have realistic expectations about the work we're doing together. And then the second piece is the offering. Sure, there is interest in executives wanting someone to create content on their behalf on their social channels, but there's a lot of ways that can be done. Is it through us interviewing them monthly, getting content outta them, and then creating content from that? Is it us getting content asynchronously that we send via Slack messages or text messages? Do we personally respond to any replies on a client's social media posts on their platforms on their behalf, or do we have a client do that? We know there's appetite because there's a problem that executives are experiencing, which is they understand the value of an audience, but they don't have the time or the skillset to create their audience. But the way in which you go about that, my view is, is like it probably takes you a year to truly figure out what you're offering and who you're offering it to, to actually reach product market fit. So that's the first thought. The second is that humans always, always, always overreact. It is the most predictable human character flaw. The reason I say that is I posted on Twitter a few days ago just to ruffle some feathers and force myself to have views on things. I wrote, time for nods and pitchforks. And then I wrote what I'm bullish on and what I'm bearish on. I said, I'm bullish on B2B creators. I'm bullish on Disney as a company. I'm bullish on fractional executives, and I'm bullish on Zapier or automation tools. And then I said, I'm bearish on cold plunges. Sorry to people who enjoy cold plunges, pickleball, 99% of AI startups and B2C creator businesses. When I think about why am I bearish on those 4 things I just said, Cold plunges, pickleball, 99% of AI startups and B2C creator businesses. The reason I say I'm bearish on them is because I think these are specific spaces right now in the world that are very zeitgeisty, and they've been accelerated by just kind of the zeitgeist taking form on social media, which gets people excited. It gets people feeling FOMO. And I think that when that happens, you have this character flaw from humans, which is overreaction. I pick on pickleball because like, yeah, pickleball is huge. It's growing super fast and, you know, grew by like whatever, 1,000% or something in the last year. But the number of tennis courts that have been converted into pickleball courts, the amount of construction of new pickleball courts that's happening, you know, teams being formed and leagues being formed and people starting to think about media rights like there— it just feels like the pendulum has swung way too far. And it is innately human behavior because the only time where you don't have overreaction to things is when people do not act emotionally or based on FOMO. But that happens with anything where humans believe there is opportunity or monetary upside. And so we've seen this, you know, we've seen so many examples of this— the housing crisis, crypto overinvesting, the metaverse, the creator economy, and people overinvesting into that. Stock market corrections in general, individual stock corrections. So like when earnings come out for a company and you see the stock move a ton, typically there's an overreaction. Company overhiring, newsletter proliferation, podcast proliferation, every entrepreneur launching a rolling fund. Is the opportunity still here or is it too late? And there's simply FOMO-based overreaction to what's happening. Third thought is We live in an age where everything is expected to be faster and it creates unnecessary pressure. Basically, the thought here is that I think as a function of technology and the need for immediate gratification, we expect faster results in every area of life. When we're scrolling through social media, we expect to be entertained faster on TikTok and Instagram, which is why as a creator on TikTok or Instagram, it's all about How do you have really fast motion and you hook people in in the first 2 seconds? And then in business, you know, I think this is potentially just a function of the expectation of VCs. I think entrepreneurs feel a level of pressure of like they're never moving fast enough. And to be honest with you, I have felt that pressure. I think the right thing to do with this business right now is to not grow our customers. It is to make sure, going back to, you know, the first thought I had, It is to make sure we have the right product. We know who the right audience is, and we are serving that right audience with the right product in a way where we think we can retain our existing customers for a very long time. And I think we should get to that point before we get a single new customer. So I think that's logically what we should do. But I feel a level of pressure and guilt that is self-induced, and I think it's self-induced based on how I'm perceived by the world for the pace at which this business is moving, because I think there's a pressure. For businesses to scale super fast, and I think at unrealistic speeds. And then I think that is just exacerbated when you've sold a business before, you're building your second thing, all self-induced, but you feel like there's a pressure to build something bigger and build something faster than you did prior. The funny thing about this is in a world where everything is expected to be faster, the best wisdom is to slow yourself down as much as possible. It is to get off of social media, to take a walk, to slow down what's happening in your brain so you can actually hear your own thoughts. It's to slow down your business by getting outside of the weeds, outside of the day-to-day, and ask yourself, why are we trying to run so fast? Is it because we have the foundation and the infrastructure for our business to accelerate, or is it because we're creating self-induced pressure based on some non-realistic expectation that we think the world has of us? We're going to take a quick break, but more from Founders Journal when we get back. Fourth thought is that every business is hard. It's funny, I talked to so many founders who look at what we did with Morning Brew. I had an intro call earlier this week and I was talking to someone who was like, yeah, what you've done with Morning Brew is so impressive. Like it is. It seems so hard to build a newsletter business. But like I would always say the same thing about like a direct-to-consumer business. I would always say like, Yeah, you know, having a physical good business where you have to worry about like manufacturing in China or Vietnam and your supply chain and making sure your acquisition cost to LTV is constantly kept in check as prices of Facebook advertising go up. But it's like this same circle has always existed. It's like the direct-to-consumer founder thinks that software businesses are really hard. Software business founders think that media businesses are really hard. Any business is really hard because the market is relatively efficient. And if you are building something that is going to be successful, you're operating under the notion that you have an insight that the world has not yet had. And so you have to both prove that insight to be true and you have to execute well, even if you are right about that insight. All of this shit is hard. And that's why I just give so much credit to people for trying, because there's no such thing as having an easy business that you make an easy millions of dollars off of. Next thought is to make sure you have the right reference point. You know, so something I was thinking about earlier this week as I just reflect on the journey of Morning Brew is we've done a lot of things right. And what I feel really proud about is I think the things that we've done right relate oftentimes to our product or our users. Like, I think we've gotten to where we are because we have created great content for our audience and there was an unmet need in creating great business information for the modern business leader. And I think at the end of the day, if you don't do that for a long period of time, as in like great product that serves an unmet need for an audience or for a customer, you're not going to have success. So I feel great about that. But one of the things that I think naturally happened, given that my co-founder Austin and I are first-time founders and young entrepreneurs, is we have really struggled at hiring and building out a C-suite, an executive leadership team. And, you know, I think our leadership team is in a really Amazing place today, but we've had to go through many iterations of the exec team at Morning Brew. I want to say that we first created our leadership team for the Brew in 2019. Assume it's taken basically four years and turning over many members of the leadership team to end up getting it right. Why is that? Well, I think one of the reasons is anytime you're doing something net new. You can assume that you're going to be mediocre at it because you have a lot of blind spots. And so like the first time you're a CEO, the first time you're a manager, the first time you do any job, the first time you hire execs, just assume you're mediocre. And I think making that assumption is actually so important because by doing that, I think it allows you to acknowledge you have a lot of blind spots. And then the next question can be, okay, what are actions I can take now to hopefully reveal those blind spots. So I end up being not mediocre as quickly as possible. So I think in retrospect, there are things maybe we could have done to uncover our blind spots faster if we acted under the assumption that we were bad at hiring executives. The second reflection around this that I had is whenever you hire someone or whenever you replace someone, the quality of the new person you are hiring You are basing off of the quality of the old person who's leaving your company. Basically, the old person is always the reference point for the new person. Every time we have turned over our leadership team or an executive at Morning Brew, it has felt like we've hired someone super senior. Like, it's felt like every time we hire a new leader at Morning Brew, wow, this person is like a true veteran in the industry. And the really funny thing about it is actually like we are just starting to get to that place. But even still, Morning Brew's leadership team is relatively junior in the context of, you know, mature businesses, right? Like you go to— I'm just going to use a random example because I'm looking at Google right now and Eli Lilly is up. Like you go to Eli Lilly, you know, which is a $28 billion a year public business. If you look at the leadership team for Eli Lilly, Everyone on their leadership team has been in many leadership or executive roles or C-suite roles prior to being on the leadership team for Eli Lilly. And they've probably had a combined 150 years of professional experience. With Morning Brew, even today, a lot of our leaders are first-time executives and first-time leaders. And I think part of that is an awesome thing because we're giving people the ability to grow really fast in their careers. We're hiring people that we think have the critical thinking skills and kind of like the growth mind to be able to step up to the challenge. And the reason I bring up this reflection is because I think whenever you go about hiring a more senior employee or replacing someone who left your business with someone new, it's important for you to think about how are you evaluating this person? Are you evaluating this person based on their skill relative to the previous person who was in the role, or are you evaluating them based on what is out there in the market holistically? And what I'd caution you on from our own experience is the more you use a reference point from your own business, the more you open yourself to possibly making the mistake of hiring someone who maybe is 1 or 2x better versus 10 to 15x better because you don't truly have an understanding of what really senior and really good is in the overall market. And then the 6th and final reflection— it's so funny, I thought this was going to be a short episode and we're like 20 minutes in now. The 6th and final reflection is that— so I recorded an episode, I think right after I got back from my honeymoon, and I said, I am committing myself to you all that I'm going to hire an accountability coach to hold me accountable to spending my time being intentional with not going on social media a lot. And so I'm in the process of interviewing a bunch of different coaches and accountability partners slash coaches. And I was talking to this guy. He was awesome. He's a former helicopter pilot in the Marines. He was saying the way that he does— he does daily check-ins with his clients. That's one of the things he does. And he does this process of 3, 2, 1. It's every day I would text him with 3 things I'm grateful for, then 2 intentions, basically like what are the 2 things that are the most important things in your day that you have to get done? Like those are the most high-leverage things you want to get done today. And then 1 is theme. And he basically said there's a theme of the year that you're going to continue to repeat every day. And so for him, he was like, my theme is tenacity. He's like, it sounds cheesy, but it is the thing that keeps you focused on behaving in a certain manner. I said to him, My theme, I feel like it has been and it continues to be discipline. And the reason my theme is discipline is because I truly believe that discipline is one of the most important qualities for not only just a successful career, but a happy life. We like— we as people want to feel like we are in control of our destinies. We want to feel like we are in control of the trajectory of our life. Of course, there are always things that are outside of our control. But when you are disciplined, it allows you to have a level of confidence that when you set a goal or when you say you are going to do something, you have belief in yourself that that thing is going to get done. You feel like you are going to keep your word to yourself. And so to me, discipline is more than just the act of doing something that you say you're going to do. It is the thing that gives you confidence that you can be in control of your own career. Your own life and your own trajectory. And so those are my random musings from the last few weeks before I head out for a, a long weekend by the mountains of Vermont. To recap, they were demand for a business does not equal product-market fit. You can have demand on day one, but product-market fit takes a lot of work and time to find. The second is that humans always overreact. It is innate to us and the pendulum always swings too far. So make sure to take a look for it and make sure that when you're thinking about a decision you're making, is it based on FOMO or is it based on logic? The third is we live in an age where everything is expected to be faster. Ironically, the best thing you can do right now is to slow things down. The fourth is that every business is hard no matter what. And when I look at the 10 largest companies in the world, you have everything from Saudi Aramco, which was founded in 1933, to Microsoft and Apple, which were founded in 1975 and 1976. The 2 babies of the 10 largest companies in the world are Tesla and Meta or Facebook, which were founded in 2003 and 2004. So the youngest companies of the 10 largest in the world were founded 20 years ago. Long story short, everything takes time. Every business is really hard. Number 5, make sure you have the right reference point when you are making decisions in your businesses, especially when you're making decisions around hiring senior people. And number 6, discipline is one of the most important qualities for a happy career and a happy life because it makes you feel like you are in control of your own destiny. With that, thank you all for listening to this episode of Founders Journal. And reminder to shoot me an email to alex@morningbrew.com. This was a little bit different of a style. It was completely unscripted. I literally had 6 words written down and I was just riffing based on those topics. And so I'd love to hear what you thought. Did you like it and want to see more of these improv-style episodes, or do you want me to go back to the old style of scripting everything through? Thanks so much for listening, and I'll catch you next episode.