The Market Ignores Inputs

About a decade ago, when I was finishing grad school and picking up various consulting engagements to keep afloat, I was reminded recently of one of those engagements. In the pursuit of as many leads as I could find, I accepted a statistical modeling assignment that, in retrospect, was a bit out of my league. I figured that I would figure it out. I asked all the right questions and clarified information with the client upfront. He went away for a month and I had to finish it in three months. It wasn’t for a lot of money, but I needed it, and I was excited to finally have this professor as a client after chasing him for a year.

As I was digging into the work, it became increasingly apparent that I was out over my skis. I asked a few friends for guidance, tried to learn the specific modeling technique on my own, and was committed to delivering the finished product to the client. Fast-forward to the due date, I sent him the zip file, and got this response a few days later:

I know you worked hard on the inputs, but I need the right outputs.”

I sent an invoice with the work but, and his office paid it, but in retrospect, they shouldn’t have. I was reminded of this episode recently for two reasons: (1) as I see many of the founders I work with put all of their energy into various inputs and struggle to sell the outputs as progress; and (2) I see the same dynamic (but slightly different) on the investor side, where it’s easy to write checks and look busy and “work hard” or take lots of meetings or any other inputs and the outputs are somewhat out of the investor’s control and take years to materialize.

Ultimately, the market doesn’t show emotion and could very well repeat the words of that professor 10 years ago: “I know you worked hard on the inputs, but I need the right outputs.”

Founders and investors, ultimately, only control the inputs. Which market or product decision did the founder make at the onset? How did that investor choose to spend his/her time every week? I could go on and on, and while the work ethic and precision of the inputs should be celebrated when done well, the inputs ultimately don’t get judged — it’s the outputs that matter. Perhaps that is not fair. It is easy to get a company or fund off the ground these days, but eventually, the belief in inputs shifts to a demand for outputs.