Latent demand: Do customers always "know" what they'll buy?

Hey Rob, welcome back. It's good to see you. You too.

How you doing?

I'm doing great. What's new? What's going on?

Well, I had the worst surprise this week, which I was going for my deadlift and I was sick, but I was like, I'm going to try for 445. I'm going to get my reps at 445. And I do it, or I think I do it. And I'm like super pumped and I go and start putting the weights away and I start counting in my head. I was like, wait a second, I'm missing weights on this bar. And then at that point I realized I did not do the weight I thought I did. And that feeling of like, I just crushed this, went to, I am an idiot, like 180 degrees. And I just, I just— I— that was more than 24 hours ago, and I don't think a minute has gone by when I haven't thought about it.

Just with a sense of dread deep in your stomach.

It's like when you feel like you have a good sales call too. You feel like you have a good sales call, you don't get a next step booked, and they like disappear, and you're just like, oh no, oh no.

And we successfully drew the line back to this one. But, you know, the other good The good part of that is it would've been a huge disappointment if you would've struggled at like 455 indefinitely because it would've been like a however big jump. But yeah, keep us posted. We hope you'll be at 445 next time.

We will see next Wednesday.

And today we are talking about latent demand. So that is an example of not latent demand. Lifting heavy things is an active project for you that you are very aware of. Today, we're— it's, uh, I, I think this is a topic that we get asked about a lot. Like, uh, well, nobody asked me about it because nobody cares, but they ask you about it. And, and, uh, yeah, so we see it coming from startups that basically, uh, it takes a couple different forms. Um, you know, what you write, the way you characterize it is what I would, as the customer, what a customer would prioritize right now if only there were a way. And the way that that shows up, I think, in the founder community and the office hours and teardowns that you do is basically founders that are like, what if I'm inventing a category? What if I'm creating something that it's not, it just doesn't, nobody's trying to do it because it's a new thing. And in particular, a lot of the AI startups that you work with, you know, a lot of the new technologies that are emerging, this is the type, this is the shape of question that's kind of like, at the heart of what they're wrestling with. And it bifurcates. It's like, is it not on anybody's to-do list? Is nobody aware of it because they don't care? Or is it just they didn't think it was possible? They didn't know it was a thing that could happen. And so that's what we're going to wrestle with today. Rob, could you give us just some context on what's going on? What caused this to be something that you're reflecting on right now? Yeah.

So it's, it's just a thing that I keep seeing in a lot of fast-growing startups. So not every fast-growing startup finds this kind of latent demand. They may find just like classic pull, something that's on everybody's to-do list right now that they know that they're trying to do and they have bad options for doing. And like, cool. That's, that's great. But I also see a lot that have this form of demand. And I haven't super— like, I've kind of touched on it a couple of times, but I haven't dedicated an entire post to this and like trying to explain. There's, there's a really important difference between the like demand side of this, of what a person would do if only there was a way, the project on their to-do list, and The new technology. And so we often conflate these 2, like technology, new category, like all of these kinds of things are on the supply side. And we often think because I'm building something that is new, like that's what's going to— and it offers new and differentiated value. That's on the supply side. We often think that that's what causes these startups to grow insanely fast. The ones that do zero to like $100 million ARR in 2 years or whatever.

Yeah.

And I don't think that's the right way to think about it. And so they often do find latent demand, but the latent demand was there already. It was not caused by a new category of product, a new technology emerging. The new technology simply revealed it, we can say. And so that's what this post is digging into, hopefully in a way that is intuitive.

Yeah, there's a couple of things that you hint at there that why don't we just jump into them? One is the way you close this, I thought, like, was a very direct, sharp way of articulating that. The market gives zero points for unblocking an irrelevant constraint. With magical technology. And I feel like that is the mistake that a lot of founders that you see, that it's like they're super jazzed about this thing that they've built that can do all these awesome things and they're met with market indifference. And so that's the situation. And then let's talk a little bit here about, you talk, you write about it as the customer is leaning against a constraint.

Yeah.

Like, that's what we're going to get to and understand, like, what is kind of the potential energy that latent demand has to tap into. Maybe realizing before that, let's— you talk about teleportation. It sounds kind of silly, but I like taking it to the extreme as a helpful way of wrapping our brain around what is the difference between latent demand and kind of like what you describe as classic pull.

Yeah.

where the customer is obviously struggling against something. It's on their to-do list. If you ask them about it, they tell you. Rob, help us tease apart those 2 and understand the difference between latent demand and kind of like this classic pull demand that we, we more frequently discuss.

Yeah. And I think, and I think the thing that I will call out too is if you're listening to this and you're like, I don't think these are actually 2 distinct categories, I think there's one way to describe both of them. Please reach out because I don't like having 2 different categories of things here. I don't, I think there is a kind of like simpler version of this and I think going to the most simple thing possible is ideal. And so what, like maybe let's talk about teleportation because it's just like this really, really good example of this, which is that, like it would be cool, right? Like it, so it, If it were possible, you and I'd be hanging out right now in the same room, right? We would. That's like, obviously we would, but we can't.

I just had the thought I would have to put on pants if that were— Me too.

Or maybe neither of us would, who knows? But we would. But like, And so like, that's a thing that you and I both know. And the same is true of like, okay, cool. I would have dinner with my parents, but they're in Ohio and I'm in New Hampshire. And so like, how do— and then I'd be back at home if only I could. And so these are all things that like are, they're just like, obviously I would do this.

Yeah.

But I can't right now. And if you look at me, if you ask me, these, these things, um, or if you watch me, you're not gonna see me trying to travel to Mexico right now, or trying to meet someone, or trying to travel to a hot— I'm not doing that. And if you ask me as well, like, like, are you happy where you are right now? Like, are you unhappy where you are right now? It's like, no, I'm perfectly fine. But I would basically go there in an— if, if this were an option, I would go there instantly.

Yeah.

And that's this weird thing of, it's not, it's like, it's just would do right now if only there was a way, is this kind of thing that is, that I think the teleportation example explains like super, super clearly.

Yeah. And it's like the, there's, a lack of like conscious awareness of it. It's, I don't know what the phenomenon that like is going on, but it's like what you're, what is maybe let's get into leaning against the constraint. Help. Can you bring that to life with the teleportation example? Like what is the leaning against there? Yeah.

So, Let me contrast this with, okay, so teleportation is one example of a technology that there is currently a constraint against my ability to easily travel to where you are or wherever I want to be. And I am like, if that constraint were removed, I would instantly take action. On it. Another example though is like the printer. If you made a printer that was 100x better or 1,000x faster than my current printer that I have at home, I wouldn't do anything about it because I don't care. Like there's no, I print one thing a year and so nobody cares. Like if I print it 1,000x faster, Cool. But it's, and it's not like, oh, I would print more things if only there was a way. The other, another example of this is like Uber versus taxis, right? The taxis were imposing constraints on would-be taxi riders, would-be travelers, variety of constraints we could talk about. That meant that when Uber showed up, the market revealed itself to be much larger. Because there were a bunch of people who were sitting at home, and if you ask them, they're totally fine sitting at home or getting there however, like they're asking a friend for a ride or whatever it is, who would have taken a transport if such a thing were available to them. And so there's— it's this— it's this— when I talk about leaning against the constraint, that's— it's a weird— it's a weird thing. In the case of The printer, I'm not leaning against the fact that my printer is slow. It's, there's nothing of like, if it were faster, I would do something different.

Yeah. Some of the other ways that you've talked about this in the past, like people in a state of disequilibrium where it's like, there's, you know, you're at no disequilibrium with your printer. Like it's a, you know, like it, It's fine. If we take Jump for an example, and there's a couple others, you write about Levity, you write about Segment, so we'll get into a couple others, but folks are probably familiar with Jump because we use it often. There was disequilibrium because there was something that was frustrating that they had to do, which was manually write, take and record notes after calls with, as a financial advisor with their customers. Or with clients, right? I don't know how they refer to them. There was a, you know, what they were leaning against was I would rather be doing something else right now. And so when you say like, okay, you can go do something else right now, you don't have to do this anymore. It resolved that like tension, the disequilibrium that was there. Maybe Rob, can you give us to broaden the spectrum of examples? Um, real quick. And then I actually, I think, I suspect this is something that people kind of intuit, even if we don't have the exact language around some of it. So I want to get pretty quick into what do you do with this? Like, how do you find latent demand? But can you, would Levity or Segment, either of those be worth taking a moment to discuss? Like what was the leaning against or what was latent demand for them?

Um, honestly, probably not because, because the stories there are that they just stumbled into They found something that they just like stumbled into demand. And so the points of those is the, look, the point is that there is, so if you kind of like do a little me-search, and I think this is like a very important thing. When I talk about teleportation, Right. And, and you imagine being unblocked in, in that regard. You, the listener, you, RC, um, uh, you instantly imagine being somewhere. Like, you're like, oh, I would be somewhere else right now. I would totally be somewhere. And you know that, you feel that. That is what we are. That, like, that's the thing. And so this requ— but it's not obvious from the outside. And that's, that's the weird thing about latent demand. And I think that's actually true of all demand is it's not necessarily visible from the outside. It's like only knowable from the inside. And so I think there's this element that we're going to, you're going to start seeing more of this as I start exploring this further. I've been reading a little too much Hayek on it. And so there's this element of like, you couldn't tell this from the outside. You can only see this from the inside or you get lucky. And that's how you find, I think, latent demand and demand generally is, and I've started practicing this myself, is you have to start, first of all, feeling it in yourself for all the things you would do right now if only there was a way. And then you have to learn to feel that on behalf of your, like, feel what your potential customers are feeling too. And it's very much feeling, like that feeling of, of where you would be right now if only there was a way. The, the kind of like certainty you have about that is what you are looking for applied to things other than teleportation. I just find teleportation is the easiest example of it because you, everybody knows exactly what the answer to that is.

Yeah. Well, let's talk about, um, Finding it, maybe there's two sides of this, that there's finding latent demand. If what you're looking for is latent demand, like what do you do with that? Or if you suspect, maybe more properly, like if you suspect there is latent demand that will be unlocked or released with a new technology, with an AI application, whatever it might be, how do you, what do you do with that? How do you validate it? And you also talk about how frequently latent demand comes from people who have been in a job, they've been living that role, and they feel it, they know the thing. It's like, I was working in supply chain and I could always feel like this was kind of wrong. And then I went and launched XYZ startup that was targeted at that. Rob, what do you say to founders who, or how do you, have you worked with founders who are looking for latent demand, who are trying to understand latent demand, like what do you advise them on versus, you know, a founder who's targeted a more classic, like, oh, you've got this project that, you know, you're working on and I can help you with that. Like how does the founder targeted at latent demand approach go-to-market and work, you know, in identifying it? Yeah.

So what I've found is that The hardest part of all of this is finding actual demand, whether it's latent or not. The hardest part of everything is because once you find demand, everything downstream of that is basically a math equation or a fill-in-the-blank thing. And it's everything from how you describe your product to, right? Like there's some creativity there, but there's a lot less creativity than you'd think. And so The real thing is just finding demand generally. And so the way that people tend to try to find demand is like a bunch of discovery interviews to find pain points. We talked about why all that kind of like doesn't seem to work. Then founders who are looking for active projects will often just throw the Hail Mary question out there. And you might, you often will find things there, which is like, is there anything you'd pay someone to solve right now? for you. And that also, like, if there is active pull, right? Classic active pull, you will find something by doing that, but you probably won't surface a latent project by doing that. And so the other example on my mind is HBS student who, who he like went and shadowed Independent physical therapists. And he, he basically just tried everything. He shadowed them. He, you know, just like followed them around, just tried to get a feel for it, even tried to buy an independent physical therapy practice. And in that, in doing that, he saw the P&L of the practice and realized that there was a huge line item there. That, oh, maybe people are leaning against that. And, or, or maybe it's like a thing that they would. And so it's, it's a question of where do you get the insight that forms your kind of anecdote about what pull is, your hypothesis about what pull is. And it's right, like you're probably not gonna get something from a Hail Mary. That is latent. Because if you ask me, like, you couldn't— if you ask me the Hail Mary question right now, I would never say, oh, I'd like to be in Mexico City right now. Like, I just would never— that wouldn't even come to mind. But if it were possible, I would be there right now.

Yeah.

And so there's an element of this of, right, like, of, of getting out of the second person or like the independent observer mode and getting into the first-person mode of like feeling exactly and knowing and like knowing in your own experience and being able to like experience what your customers are experiencing and have that conversation with them to figure out, to just generate where you think the pull actually is.

Yeah. You know, there's one of the active, like super active founders in our community. has talked about, actually, you know, 2 of them come to mind that have brought this up specifically. And one of them, the way that I feel like we've talked about it is that putting supply, like in general, we've talked about like understanding demand like that, you know, you start basically with demand and you kind of like go from there to supply that matches that demand, et cetera.

Yeah.

It feels linear. We've moved away from that a little bit with the pool anecdote, but But in general, it's been demand first and supply matches demand. And what this founder has, I don't know if you've worked with him on this specifically or how this has come up, but it's like, can putting your supply in front of someone reveal demand or create demand? Like, what's the right word for that? Because it feels like that is the latent demand that's like, oh, like I didn't, they wouldn't have volunteered that demand. But when they see that you can solve something, it reveals the demand that, or the leaning against, whatever the right way of talking about it is. But what do you think about either that founder, that startup situation, or just like, how do you think about like the relationship between supply? Because supply feels more important for latent demand than, you know, more classic or traditional approach.

Yeah, I don't think it is. And so I understand that like if You can only prove if latent demand is real by getting somebody to act. That is 100% true. And to get somebody to act, you have to put plausible supply in front of them. But like a lot of people will interpret that to say, okay, cool, I should just pitch my idea. And see how people react. And if you think about all of the infinite possible permutations of an idea that could exist in your mind, they basically— there's almost no chance that unless you get randomly lucky, that the idea that you pitch will fit a latent project on someone's to-do list. And so what you're going to find By just pitching supply is you are going to find that you get pleasant nods and wow, that seems awesome, but you don't actually find demand. And so you still have to develop a hypothesis or an anecdote or whatever it is, some sense of what pull is, whether you think it's a doing right now but blocked or would do right now if only there is a way. And then, and take that, then develop supply based on it. Like just a slide, right? Just say, you know, okay, you would be in Mexico City right now if only there was a way. And I'd say, yeah, of course I would. Right. Or, and then you say, okay, now this is possible with XYZ technology on the supply side. And And it's still the same exact method for like classic active pull, same exact method. And you just, in both cases, they communicate that their pull is real, that the pull is real by acting.

Is one of the things you write about latent demand is that It is frequently the force that is behind the fastest-growing startups. Like they have tapped into a latent demand that the market wasn't solving, that wasn't maybe a traditionally, like people probably couldn't have articulated that they needed it, but then the right startup shows up with the right technology. Somehow they're in front of the right people and they go, You know, they hit hypergrowth really, really fast. Is the playbook— well, I mean, why does that happen? Like, why is it that latent demand is potentially differentially like more powerful or faster or whatever it is? Or is it— do you agree with that? And then is the playbook different for if you've tapped into latent demand versus the project?

Or yeah, would love to know. No, I don't. So I don't know. I don't know. I haven't like actually I've like, when I look at startups like Lovable, for example, that we've talked about as a dam bursting. The reason there is a dam bursting is because there's a bunch of people like me and like you. We recently talked about your Lovable example of like, you were in a situation where you would change your website, your Squarespace or whatever website.

Yeah.

But you're not doing it because there isn't a— you would change it way faster if only there was a way.

Right.

And so there are a lot of people with that latent demand there who are just kind of piled up with latent demand. And the startup that shows up that attacks that latent demand, you have this massive group of people who are just there stuck. If only there was a way. Now there is a way, and it's like a, it's again, like a dam bursting. The other example that we've talked about is like classic. It might be a wave, more of a wave where it is, yeah, it's a small group of people right now, but it's going to be a bunch more people in the future. And these are people often who are tinkering at the frontier. It's people building with AI agents, people like building the frontier of the software factory. Who are like this size. They're tiny now, but we think, you know, X number of, you know, the market is 6 months behind. Like the normie is 6 months behind that.

And so, and so, um, I'm typically 12 to 18 months behind.

6 months, dude, wait until I tell you about ChatGPT. It's gonna blow your mind.

I think I mispronounced Claude for like 8 months, so I don't know. You know, one other thing that's, I feel like there's a huge risk with the idea of latent demand.

Yes.

And the one that I see is like just waiting. So it'd be like, it's there. I know it's there. You're pretty supply-focused. You're not impatient for understanding the demand. You're like, when I show up with the right product, People are going, it's like, it's almost like latent demand is what people think startups are before they like create a startup that works. And sometimes it's like some, for some startups it is latent demand, for a lot it's not. So wait, how do, how can a founder interrogate like if there's really latent demand or what do they do about that?

This is the thing. Yeah. So this is the thing we've been talking about. This comes to the very last point that you read out, which is, um, which is What startups tend to do, like our products tend to like unblock certain constraints. That's the whole point of building a product is you were blocked before, this product unblocks you. But you get no points for building something that unblocks people in a way they don't care about, in a way that they're not leaning against. And so the, if there's one core theme we keep coming back to is that demand rules everything. Demand rules everything. And, and so what we have to do is when we have this kind of fancy new idea of a product idea or whatever it is, we have to go and see if the demand is there, which is, which is again, independent of the technology. It is trying to do X or would do X if only there was a way. And we go out and test that through all the things that we have talked about. It's the same thing here. The only thing we're changing here, if we're changing anything, I think we're just describing, is that there are kind of 2 forms of demand that are kind of, if you squint, they're kind of the same thing. Sometimes you can find demand by just like asking, what would you pay for right now? What are you actively prioritizing? Whatever. Other times you can't because it takes this form. And in both cases, I think the way to figure out what demand is, is to learn to feel. Learn to feel it for yourself. Learn to observe it in yourself, and then apply those methods of observation to feeling what your potential customers are feeling so that you know the ways at which the things that they're, that are pulling at them.

It feels, do you mean empathizing with the things that are pulling at them in their job or understanding the body language of a sales call? Is it both of those things?

No, no, no. It's like, it's, so it's, I think we'll have an entire thing on this because this is like the me-search thing that we were told is the worst possible thing to do. Never do me-search, like never, Whatever. And I think that's entirely wrong. We have to— like, you have to know what pull feels like yourself, and then you have to know how to feel that as your potential customers do in order to know, okay, is this real pull or not? Like, let me give an example with AI Rob.

Yeah.

I don't know that this is right, but what I am sensing from the people that I'm talking to and from my own feelings It's just the real thing, the real kind of latent or whatever demand is like, I just want to know exactly what to do on go-to-market without having to overthink it.

Right.

It's just like, I, like, that's the thing in my soul that I, that I really, really, I want, I just want to figure out exactly how to grow this thing without overthinking it, without having to just like hit my head against the wall and feel like I'm getting lost and all that kind of stuff. And that's a, that's a That's a— when I did this activity for myself, I realized that I was looking at my potential customers from the outside in, trying to understand their behavior, trying to predict their behavior like an impartial scientist. And then what I realized is, oh no, I can actually think about what it feels like in this situation and like know what What it feels like in this situation. And so we're going to go a lot more into feeling in coming weeks, I think. But the takeaway is the same. This is just like the— like, use the teleportation example on yourself. Know what that feels like. Start observing how you feel in other places where you're observing your own latent demand. Would do X if only there was a way right now.

Yeah.

And then apply that to seeing through your customer's eyes and try to understand those things that they are. And so, which means you have to go spend time with them. You have to go like, this is not a kind of like outside-in type thing. It's very much inside out. And so, so if you want to find latent demand, you have to like, it's, I don't think it's going to come out in an interview. I don't think it's going to, right? Like, I don't think these things These things are felt.

Yeah. Well, Rob, why don't we wrap pretty close to this? And folks, I don't feel like I did a particularly good job interrogating latent demand in this one. If there's things that you wish we would've hit in this that are on your mind related to latent demand or other things, just like drop it in the comments. And this might be one that we continue to investigate and kind of push a little bit more on to get crisper with the articulation of it. And like Rob said, if there's a unifying theory that makes sense to you across latent, classic, like whatever this kind of like semi-false dichotomy is that I've portrayed, then just leave a comment on it. Rob, anything that you would say founders should do with this, like actions that they should take coming out of it?

So I think if you don't know what pull is, This, this will help you go and like, hopefully this will help you start to understand what it feels like to have pull and to then go and like observe that in others or feel like, learn, learn to feel that in others. It gives you just another tool in your toolkit if you feel stuck on that. Even then, if you're growing fast, but you feel like it's not quite clicking. is probably because you're observing pull outside in and you're writing things that don't speak to the souls of your buyers, that you don't know what they are actually trying to do. And you might be missing the real demand there. And that's what I often find. And I was just talking to a startup about this before. We realize, oh yeah, yeah, you're like, we're pitching the like, logical demand, but not the like real demand these people feel. And so, yeah, I don't know, give it a try.

I'm pumped about talking about feelings. I love the feeling part of startups. I hate it. All right, awesome. Well, thanks, Rob, and we'll catch everybody next week. See y'all.