Why some startups change the future
Pattern Breakers - behind the scenes of the inflection theory
So if the startups succeeded with a completely different product, could it be that his success as an investor is due to just dumb luck?
Maples set out to find the answer:
In Pattern Breakers: Why Some Start-Ups Change the Future, Mike Maples Jr. and Peter Zielbelman share the answer, which they call ‘The inflection theory’.
The basics of the inflection theory
It all begins with an inflection - an external event with the potential to significantly alter how people think, feel, and act. A good example is the introduction of an embedded GPS locator chip in the iPhone 4s in 2011.
Then comes the insight - “a way to use inflections in a nonobvious way to radically alter human capabilities and behaviors”.
An example of insight was the realization by start-ups like Uber and Lyft that the new embedded GPS location capabilities of smartphones could enable people to share their location to allow ridesharing between drivers and passengers.And last is an idea - a product or service that uses the insight (and inflection).
The interesting part that Maples found out is that your initial idea doesn’t have to be right. That idea is just a first attempt, which can miss the mark.
Figuring out a way - or the best way - to embody an insight and harness an inflection’s power might take some experimentation. However many false starts there are, the insight persists while the founders tinkers with the idea, leveraging the ongoing feedback of early believers in their insight.
Eventually, the founders create the correct solution with their early believers, based on relentless refinement.
Let’s take the example of Twitch.
In the 2010s, there was a big increase in internet speeds, an improvement in video compression technologies, and a rise in user-generated content platforms like YouTube. Together, these advancements made live video streaming more accessible and appealing to the general audience.
The insight can be formulated like this (my own interpretation):
“Live-streaming will create a unique and engaging experience that pre-recorded video content could not. There is potential for real-time interaction between streamers and viewers, creating a strong sense of community and higher engagement.”
The initial idea sucked - live streaming of Justin Kan’s life, called Justin.tv. He basically went everywhere with a camera on his head… But the inflection and insight behind it were right - paving the way for Twitch.
Same with Okta, which used the rise of SaaS apps each company consumed (inflection) to create a secure way to manage user identities and access across multiple cloud services.
Types of inflections
It’s easy to spot the inflections in hindsight. Most of them are huge, like:
Cloud computing - a specific point in time where you didn’t need hardware to start a software company.
Working from home - the shift Covid started towards a more flexible work environment.
The rollout of 5G networks - providing significantly faster data transfer rates and reduced latency.
But there are other types of inflections, less obvious ones:
Lyft and Uber used another inflection (combining 2 of them!) - Facebook’s release of 3rd party API, allowing you to somewhat trust a person you never met. Airbnb used the same inflection to convince people to stay at strangers’ homes!
The global financial crisis was also an inflection and had a massive impact on the world economy.
Wix (a tool for creating websites) used that inflection to power up its business - as many people lost their jobs, and went on to create smaller businesses of their own.
If we look around us, we can spot many trends, which we might be tempted to call inflections - the rise of GenAI, Blockchain, green technologies, Metaverse, and so on.
But for a trend to be an inflection, it needs to be much more specific. When large corporations will accept payment in Bitcoin - that’ll be an inflection.
The danger of mediocre ideas
So before you jump to develop that genius idea, check it against the inflection theory. This is also relevant for features in existing companies - do you REALLY need that next AI chatbot?
An inflection stress test can help you weed out some of the most dangerous ideas of all: plausibly good ideas that aren’t driven by any sort of inflection.
As an example, I’ve often been pitched on ideas related to mental health. The founder will say we’re in a mental health crisis, it’s gotten worse with the pandemic or Instagram, and we’ve got to do something about it.
I agree! People have personal experiences that will help them relate to the idea. They may get very positive encouragement from investors, advisers, and others touched by a mental health crisis. Despite the encouragement, the idea needs to be supported by an inflection that offers a set of empowering capabilities to change the future of mental health.
Don’t settle. If your idea is not grounded in a powerful inflection, that is a warning sign to think more deeply about what makes the idea powerful, or to question whether it is sufficiently powerful to be worthy of your time and sacrifice.
The limits of the theory
Honestly? I really enjoyed reading that book, but I didn’t agree with some parts of it. The main missing part was the lack of data - it discussed the same few startups in different examples. I would have expected a deeper analysis of hundreds of startups, but maybe they wanted to keep some secrets for themselves :)
Here is my take, in 3 parts:
Inflections are not a must
Let’s take as an example a few famous companies:
Tesla ($690B) - we can say that the rising environmental awareness was the inflection, but I think that Musk could have succeeded also if he had started in 2001, or 2006. The first electrical car was invented in the 19th century!
SpaceX ($210B) - what inflection allowed SpaceX to become what it is? Maybe SpaceX created an inflection, making space travel tens of times cheaper.
Monday ($12B) - started in 2012, 10(!) years after Atlassian and Basecamp. Nothing really new there, just like Jira (but a bit better).
Canva ($26B) - started in 2013, no obvious inflection here too.
There was nothing very original in any of those companies, but they are still huge successes.
Inflections are not enough
Let’s take WeWork as the classic example. There was definitely an inflection in the 2010s - many small companies were founded, and in parallel freelancers needed an office space to work quietly.
After raising $13B, WeWork completely crashed.
This leads me to the last point:
What’s good for VCs, might not be as good for you
For a VC to make money, they need a few HUGE winners. A profitable business, with $10M in revenue, growing slowly every year is NOT a very good outcome for a VC. So it makes sense that VCs would search for companies that would change the world, riding on the waves of inflections.
Maybe for you, a “mediocre” idea is good enough!
covered it very well in Why you shouldn't join Y Combinator.Final words
‘Inflection theory’ is another useful mental model you can use to evaluate ideas. I really like Ben Thompson’s model of what is a true software company (he analyzes Netflix, Uber, Airbnb, WeWork, and Peleton through his model in the article):
Software creates ecosystems.
Software has zero marginal costs.
Software improves over time.
Software offers infinite leverage.
Software enables zero transaction costs.
The question of whether companies are tech companies, then, depends on how much of their business is governed by software’s unique characteristics, and how much is limited by real world factors.
For more content from
about VCs and startups, check out his newsletter .