A really successful startup always increases its own market. E.g. the microcomputer market grew after VisiCalc was invented, which only happened because microcomputers existed.
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It's very dangerous for those in authority to require proof of the potential of an idea before allowing it to happen. The best ideas always embody this sort of self-growing cycle, but it tends to be impossible to predict, even by the people who have the idea.
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Two possible solutions for people who have to decide which projects to back: 1. Admit you're deciding based on hunches, and just try to be really good at that. 2. Make the cost of failure low. E.g. back a lot of small projects instead of one big one.
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Replying to @paulg
#2 is the only viable solution, everything else is deluding yourself to some degree.
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