Naval Ravikant on why founders shouldn’t chase trends

Trend chasing is a lot like macro chasing and often it's too late. So, for example, AI burst onto the scene thanks to OpenAI's work. Over the last few years, tons of companies were started in AI. Many of them talked themselves into this idea that they would build a specialized model that would be more cost efficient or better at a specialized domain than OpenAI. And I think a lot of them got crushed recently by the recent announcements that OpenAI made. And you could see that coming a mile away. Chasing someone who's already established an industry is usually not the right way to go. OpenAI is obviously building an ecosystem. People can still make money building apps and using OpenAI's tools or similar tools from Google or Microsoft or others, or the other foundational providers like Anthropic and so on. But trying to trend chase is generally a very bad idea. You just get drowned in a sea of copycats. You might get seed funded, but the A round, B round funding dries up. And so the thing that is always the best to do is something that you know really well and that you have conviction about. Usually it's you've worked on a product because you want it to exist for yourself, or you've worked in an industry that you know really well, or there's some technology that's coming up that you were just passionate about and other people don't get and you're intellectually obsessed with, and you convince yourself that it's going to work and you experiment with it and try it. And so my favorite companies are always the ones that are doing something technologically challenging and difficult and the founder is passionate about it, but it's not in any field that is currently a field or a trend or can be easily defined. If it can be very easily defined and you can fit into it, then I just don't think it's that interesting. Now, it's not to say that you can't make money there. Like, look at SaaS companies, right? Like SaaS ran for a long time and there were a lot of companies that were taking fairly simple products, but putting a certain pricing model, delivery model and user interface on it, and then delivering them to large enterprises. I just don't know how much longer that continues. AI sort of blows all of that away and makes it really easy for those companies to now have AI. I mean, it's never trivial, but makes it easier for them to have AI access to their database, natural language computing and processing, and so these highly specialized spreadsheet columns that are now like an app sort of start going away. But you can definitely make money doing it. But I just don't think trend chasing is that interesting. I think a lot of people get wiped out in it. It's like focusing on macro. It's like saying, oh, interest rates are up and AI is hot, therefore what company should I start? That's not how you innovate. Wealth is a byproduct of knowledge. I always like David Deutsch's definition of wealth. He says wealth is the set of physical transformations that you can affect. And if you think about that for a moment, that applies at the same time level and applies at the individual level and at the societal or individual level. That's a function of how much resources and capital and machinery that you have to effect physical transformations. And it is a function of knowledge. Like, do you know how to, for example, turn coal into diamonds or turn uranium into power and steam? And knowledge is a more important component by far, by far. Because the Earth has always had all these resources. They've always been lying around, despite what Marxists would have you believe, right? We're not running out of resources, we're just redefining things that before we didn't know were resources as resources. So then the scarce thing is knowledge. And so what you should be doing when you are creating a startup is not what space is hot or what resources can I bring to bear, it's rather, what knowledge do I have. It's as Peter Thiel says, you know, what is the secret? What is the thing that I believe and know to be true that other people don't? And you're only going to know that if you have an intellectual obsession around it. If you were obsessed with this space for some time, for just whatever reason it was your hobby, you couldn't look away, you were just really fascinated by the topic, you got into it, you figured something out. And because you figured something out, you can bet on that with deep conviction.