How to Pick a Startup Idea That Won't Fail

TL;DR

The best startup ideas sit in overlooked, low-competition niches, not crowded, exciting markets like restaurants or AI companies. Following Charlie Munger's advice to 'fish where the fish are,' target boring, high-margin businesses such as pest control or funeral homes. First-timers should start with an easy business that delivers a quick win, then build from there.

Transcript

You don't want to walk into the gym on  day one and try and deadlift 300 pounds. So when someone comes to me and they're  a first time entrepreneur and they say,   "I'm going to make the next great AI  company," I think that is the equivalent. I feel like you've actually started and  run more companies than maybe anyone else   in the world. What is... Read More

Key Insights

• Charlie Munger's rule 'fish where the fish are' means seeking small niches with plenty of demand and little competition, because more competitors force lower prices and thinner margins, making the whole business harder to win.
• Boring, unglamorous businesses like pest control, funeral homes, or government form-filling software face far less competition than exciting ideas like cafes or restaurants that millions of people dream about starting every morning.
• First-time entrepreneurs should not chase highly complex, regulated, competitive ventures such as launching a new bank or 'the next great AI company,' which Andrew compares to trying to deadlift 300 pounds on day one at the gym.
• An initial business win matters because it builds a personal narrative of competence; Andrew's early web design agency succeeded immediately and convinced him he was good at business, fueling him to keep going despite later failures.
• Andrew has been a primary contributor to about 75 different projects or businesses, calling his tendency to start too many an Achilles heel of being 'an inch deep and a mile wide,' though it exposed him to nearly every business model.
• After his first win, Andrew lost money almost immediately on a pizzeria, a designer cat furniture business, an online DJ school, and a skin cream business, showing that even experienced founders repeatedly fail on wrong ideas.
• A business can make money and still trap you in work you hate; Andrew cites a coffee shop owner who realized his real job was just buying and replacing milk all day rather than the creative venture he imagined.
• Andrew describes AI as 'the world's most reliable employee who costs $200 a month and works 24/7,' predicting many knowledge work jobs will change massively and questioning whether all jobs eventually become a single prompt.

Questions & Answers

Q: What is the best advice for coming up with a great startup idea?

Choose something you are genuinely interested in, but avoid ideas that everybody else is interested in. Andrew Wilkinson recommends following Charlie Munger's rule to 'fish where the fish are,' meaning target overlooked niches with strong demand and little competition. Crowded, exciting markets like cafes force lower prices and thinner margins, while boring, less glamorous businesses face fewer competitors and can generate real, sustainable money.

Q: What does 'fish where the fish are' mean for business?

It is a Charlie Munger quote Andrew Wilkinson uses to describe finding niches with lots of opportunity and little competition. Munger's analogy is a fisherman avoiding a crowded pond where everyone elbows each other with the best lures, and instead walking into the forest to find a small hole full of fish and almost no competitors. In business, competition equals lower margins, so uncontested niches make it easier to earn real money.

Q: Why should you avoid exciting business ideas like restaurants or cafes?

Because millions of people wake up every morning wanting to start a cool cafe or restaurant, these markets are extremely crowded and competitive, which drives down prices and margins. People are drawn to the fun parts like designing a logo or menu, but actually operating the business is miserable. Andrew contrasts this with businesses almost nobody dreams of starting, like funeral homes or pest control, which face far less competition.

Q: Why shouldn't first-time entrepreneurs start with a big, ambitious idea?

Andrew compares it to walking into the gym on day one and trying to deadlift 300 pounds. When a first-time founder says they will build the next great AI company or launch a new bank, they are attempting something rigorous, complicated, highly competitive, and regulated. He advises taking the baby weights first, starting with a simpler business to build your muscle, get an early win, and gradually develop the skills and confidence to take on harder ventures.

Q: Why is getting an initial business win so important?

An early win builds a personal narrative that you are good at business and can keep going. Andrew's first business, a web design agency that became Metalab, worked immediately because he only had to build websites, talk to customers, send a $5,000 invoice, and do the work. That positive feedback convinced him he could succeed, so even after later failures he kept pushing forward. He believes it is critical that people choose a business where they get that first win.

Q: What businesses did Andrew Wilkinson fail at?

After his first success with his web design agency, Andrew took his earnings and lost money almost immediately on several ventures. He started a pizzeria and lost all his money, then a designer cat furniture business, an online DJ school, and a skin cream business, all of which failed quickly. He shares these failures to show that even someone who has run many companies repeatedly picks wrong ideas, and that the earlier win is what kept him going.

Q: How do you avoid creating a business you hate running?

Andrew warns that many ideas can make money yet still trap you in daily work you never wanted. His wife tells of a friend who started a coffee shop expecting a creative venture but found his real job was just buying and replacing milk all day. The lesson is to look past the exciting surface of an idea and honestly consider whether you actually want to spend your life doing that kind of operational work, even if it is profitable.

Q: What does Andrew Wilkinson say about AI replacing jobs?

Andrew has become AI obsessed and describes it as having the world's most reliable employee who costs $200 a month and works 24/7. He believes many knowledge work jobs are going to change massively and raises the fundamental question of whether all jobs eventually become a single prompt. In the broader conversation he also predicts most knowledge work will be automated and discusses what skills to teach kids now to prepare for that future.

Summary & Key Takeaways

• Andrew Wilkinson is co-founder and CEO of Tiny, a bootstrapped holding company called the Berkshire Hathaway of the internet that owns over 40 profitable businesses, including Dribbble, WeCommerce, and the AeroPress coffee maker, held for the long term.

• The core startup advice is to pick something you find genuinely interesting but that most people overlook. Crowded, exciting markets like cafes and restaurants carry brutal competition and low margins, while boring niches such as pest control offer real money and room to profit.

• New entrepreneurs should start with an easy business that produces a fast win, like Andrew's early web design agency, rather than tackling complex, regulated ventures. He also warns that profitable ideas can trap founders in daily work they hate, so pick carefully.