“Be in love with your problem, not your solution.”

Requests for Startups: Matt Wallaert (Microsoft Ventures)

A behavioral psychologist and entrepreneur, Matt Wallaert’s focus is “onbuilding products and programs that create behavior change to help people lead better, happier lives.He is currently a Director at Microsoft Ventures, where he works with VCs and startups to help discover how Microsoft’s resources can be best leveraged to address the needs of growth stage companies. Before Microsoft Ventures, he was a Behavioral Scientist at Microsoft, where he headed product design focused on removing obstacles for users, so that they could “take action on their ideas, questions, beliefs, and desires.” He started his tech career at Thrive where he was Lead Scientist (and Product Lead), stayed on at LendingTree when Thrive was acquired, cofounded Churnless, and serves as an advisor/angel for a number of other companies.

How does your academic background in behavioral psychology influence the way you think about building and growing companies?

As a social psychologist, my specialty is something called JDM: judgment and decision making. So when I look at startups, I’m usually evaluating them through the lens of how people will use them to make decisions (or how they will be used to automate so people don’t have to make a decision). I’m also always looking for the behavioral goal: if the startup wins and the world is the way they want it to be, what will people who use their product do? What is the behavior that rises to the top?

Take Uber. Their behavioral statement might look something like “When people want to go from Point A to Point B and they are in a urban area, they’ll take an Uber.” Startups with a clear focus like that are ones I like: Uber didn’t try to make people want to go from Point A to Point B. And they didn’t try to tackle absolutely everyone, everywhere. They knew what existing motivation they were going to capitalize on and they focused that in a place where they felt they could succeed. That’s the kind of sharp, pointy startup I like.

You focus on the idea of competing pressures quite often. Could you summarize this idea and comment on why founders might overlook these competing pressures? What are some examples of companies that confront these competing pressures effectively?

Competing pressures is a pretty simple notion, borrowed from psychology. All human behavior is the product of promoting pressures (reasons to do something) and inhibiting pressures (reasons not to do something). They compete against each other and the winner drives the behavior.

Now, that may not seem very profound, and it isn’t. But designing thoughtfully using competing pressures can bring you to some interesting places. Let’s go back to the Uber example: one of the strengths of the company is that they didn’t try to make people want to go from Point A to Point B. While every other black car company was out there trying to introduce new promoting pressures (“It’ll be a silver Audi, with an awesome driver, and it will play your favorite music and have wifi and a disco ball!”), Uber realized that the problem wasn’t promoting pressures: the promoting pressures were as strong as they needed to be. Instead, the problem was inhibiting pressures: it was hard to get a black car, they were expensive, tough to schedule on demand, etc. That laser focus on inhibiting pressures is a big part of their success.

And they carry it over into their marketing. Look at Uber emails. Every once in awhile they do a promoting pressure, puppies or fancy cars or something. But most their emails are about three things: it is now cheaper than it was, there are now more drivers (and so Ubers are more available, quicker), or they can now go somewhere they couldn’t go before. All three are strong inhibiting pressures and concentrating on these has paid off.

You have said that companies should derive “structured, diverse thoughts about consumers’ behaviors.” What are the best methods for companies to do this? What does such information allow companies to do?

We’ve all heard it a million times and yet so few really do it: talk to your customers. I don’t mean email them generic surveys or run user tests with Camtasia. I mean actually talk to them. Get to know them as people, befriend them. When I was Head of Product at Thrive (sold to LendingTree, competed with Mint), our weekly emails had a little note at the bottom: “Live in New York City? Want a free lunch? Our scientist Matt Wallaert will take you out to talk about Thrive.” And I just met people, over and over and over. I didn’t talk about Thrive. I asked them about how they felt about money and why. I listened to their descriptions of how it affected their lives and relationships. I got to know them and honestly, I’m still friends with a few of those folks, all these many years later.

Some of our best product revelations came from those sessions and just listening. I remember being in a bar with Avi Karnani (Thrive CEO) and talking about finance and drawing other people into the conversation. And I ended up talking to this Italian woman who said something that changed the way I look at goal-based saving. She said Americans always saved for something specific, but in Europe, they save for the possibility of something unknown. Like that spur-of-the-moment trip that you need $100 for. Or the sidewalk artwork that just calls to you. It completely changed the way I did our savings goals at Thrive, for the better.

What is the major piece of advice you give to entrepreneurs in the Microsoft Ventures network?

I try to listen to where they are and where they want to be, rather than just giving generic advice. But if there is any lesson I see over and over again, it is that startups need to move away from the middle, toward the extremes. Either you’re for people who care a lot and want to go deep or you are for people who don’t care at all and want to automate. Everything in the middle falls away.

Maybe the most generic truth I can give is be in love with your problem, not your solution.” I challenge founders all the time that if I can come up with better solution to their problem, would they be willing to throw their existing solution away and start building it? If they say no, that’s a huge red flag.

What are the most frequent reasons you see startups fail?

Well, there are some startups that just shouldn’t have existed in the first place. They didn’t have a real problem to solve and they weren’t interested in finding one. But if you’re talking about the good startups, the ones that should have succeeded and didn’t? I think it is mostly just simple exhaustion. I don’t mean “let’s stay up until 2am every night” exhaustion butmental fatigue. You make a million decisions at startups and if you question and maximize and perfect each one, you die. Good enough has to be good enough or startups just…self-destruct.

What startup verticals interest you most right now?

Automation. Not industrial automation, but “I can pay you money so I don’t have to think about something” automation. As people’s discretionary income increases, they need access to services that allow them to focus their time on things they actually care about. For example, I don’t care about fashion. I need to look good enough but beyond that, I want to spend zero mental energy on clothes. So I built a little script that just auto-buys the clothes that I know fit off eBay. Same brand, same size, under $30? Presto, in my closet.

For double points, automation for women, families, and “unexotic underclass.” Too many startups are focused on people they have easy access to. I love unsexy solutions to unsexy problems that have huge, broad appeal.

What are your biggest predictions for the year ahead?

I know better than to play this game. My prediction for the year is that I’ll continue to be wrong about a lot of things, right about a few key things, and that will be enough. My son will grow up, I’ll grow out (woof, new dad weight is a killer)…it’ll be a good year.

Or maybe this: Lots of good companies won’t get funded, lots of bad companies will. Women and minorities will still get the short end of the stick. Don’t like those predictions? Do something about it. I’m sure trying.

Are there any specific company ideas that you really want someone to build and would potentially fund?

I have an idea around analytics and management of sponsorships as an enterprise SaaS that I’d really like to see built. I’ve pitched it to a million folks looking for good ideas, but in the end, most people gravitate toward something sexier.

You spearheaded the digital literacy program Bing in the Classroom (BitC) at Microsoft to foster digital literacy in K-12 students. How do you see these kinds of socially responsible product extensions within the context of large technology companies like Microsoft? Is this different for earlier-stage companies? Do you think that companies should have a double bottom line baked into their business plan?

Customizing your products to reach new audiences isn’t something you should have to do out of the goodness of your heart; it just makes good business sense. In schools that use BitC, we see 40% increases in search volume. That’s a huge, huge number. Teaching kids to be computer literate, even if it isn’t on our platforms, is good business, because all technology touches our ecosystem, whether we directly own it or not. When technology is doing well, Microsoft does well.

I have sort of mixed feelings about double bottom line companies, because I think profit is actually a fine motive; that isn’t where companies start to behave badly. Companies go awry when they get too focused on the short term and not enough on the long term. It is one of the reasons I think non-public companies are really, really interesting, because they don’t have to show quarter-over-quarter growth. Rather than destroy their customer base through churn-and-burn, they can be thoughtful, cultivate community, etc.

So if we need to institute a double bottom line in order to get people to think far enough ahead, that’s fine, but we should be clear the problem is time horizon. Take one of the more popular double bottom line motives: environment. Polluting the earth is bad for every single business on it if you just take a long enough time horizon, because all the people who buy your products end up dead when the oceans rise. I think we need CEOs to start making those sorts of arguments.

By Ascanio Guarini, recent Swarthmore grad and intern at Bridgewater (email). You can reach Matt Wallaert via email here.

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Requests for Startups is a newsletter of entrepreneurial ideas & perspectives by investors, operators, and influencers. If you think there’s someone we should feature in an upcoming issue, nominate them by sending Isaac an email.

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