The Gate of Wisdom: On Education and Democracy in New Zealand, or, Why We Need the Liberal Arts


“To be taught to write or speak—but what is the use of speaking, if you have nothing to say? To be taught to think—nay, what is the use of being able to think, if you have nothing to think of? But to be taught to see is to gain word and thought at once, and both true.”

          — John Ruskin


“The eyes are not here

 There are no eyes here…

  Sightless, unless

  The eyes reappear.”

         — T. S. Eliot, The Hollow Men

— — — —

“He opened our eyes.”

That is what my grandparents always said appreciatively about the great, late professor John Beaglehole, scholar of Captain James Cook and one of this country’s foremost public intellectuals. During the many hours they and their classmates were lucky to spend with Beaglehole in his office at Victoria University and at his Karori home they saw a life and a mind filled with the best that had been thought, said, and created in New Zealand. My grandparents’ eyes were opened—opened to the history of this country, the inspirations and the consolations of art and music, and to the idea of a meaningful life spent in service to ideas and causes one believes in.

How different will be the recollections of university students today. We seem, often, to be exhorted not to open our eyes or to create meaningful lives, but rather to go about nothing more than maximising the monetary return on our educational “investment”—as if our time at university were no more than a matter of picking the right stock and knowing when to sell. That there might be more to an education than a ticket to a first job is a possibility rarely discussed, never praised; that we might learn of morals and values, or a sense of our responsibilities as individuals and as citizens, seems altogether too hard to believe, let alone to write about. Our present educational zeitgeist was summed up neatly by the Productivity Commission’s recent report on “New Models of Tertiary Education”, in which higher education has become naught but a matter of efficiency—professors, reduced merely to staff; students, to future workers. The report recommended that the government only fund university study based on the number and type of workers the country will need. It was all very well if we are intent on educating a nation of employees. Less so, if we are to be a country made up of citizens.

New Zealanders seem to me to be a people who understand implicitly that dollars are impotent when it comes to measuring the important things in life. Things like being able to take a walk in fresh air along the local beach, or the importance of our children having, you know, a childhood, rather than studying all night from age five. Whatever side of politics one lies on, I’ve always thought that we shared an essential belief in a Kiwi way of life being more important than money; that we all implicitly push against a system that sees children becoming automatons for the sake of economic gain.

So what I don’t understand is why, then, when it comes to our universities, we are a country that has so quickly and so readily given up the belief that there might be another kind of value in them. Values like individual discovery and civic responsibility: the opening of one’s eyes to what a good life might look like, and a belief in the power and obligations of citizenship. Why do we not see that it is precisely our education that determines the kind of values we see throughout life? Or how, in our eagerness to educate ourselves, and our children, merely for a first job, we miss out on the real ‘value’ that an education can provide? And why do we not remember, ultimately, that it is our education system that determines this country’s future: whether we slide easily into a winner-takes-all politics of the Trump era, or whether we are able to preserve some sense of community and some of the values we think to be uniquely our own?

This is about the future of education in this country. It’s therefore also about the future of our democracy. But most broadly, it’s about the victory of one kind of value at the ‘expense’ of all others: the extension of the tyranny of money and metrics into the very last place that can assert and preserve the value of all that is unmeasurable, including those things we New Zealanders value most highly.

It seems clear where we are heading. Yet thankfully these days distance seems not so tyrannical, and most of the time even beneficial. Might we use it to our advantage, looking with clear eyes at the future we are so eagerly running towards—and might we then step back from it; chart a different course?

— — — —

An article in a major New Zealand newspaper late last year called it the “Bachelor of Bugger All”—yes, that very kind of education that John Beaglehole so dedicatedly taught. The cheap formula summed up the prevailing attitude. Even people close to me have said similar about the Bachelor of Arts, in barely more polite terms. While clearly the ‘BA’ debate is alive and well in this country, what we don’t often think about is how circumstantial the terms of the debate here in New Zealand are—how our very understanding of the Bachelor of Arts is a result of the relative oddities of the development of our tertiary education system.

The history of the ‘arts’ is a long one. The term itself comes not from any reference to art or culture, but from the Greek idea of the ‘liberal arts’—liberal meaning done freely, or without compulsion, and arts meaning simply ways of doing things. In New Zealand we seem to have honed in on the less important of those two words, for it is the ‘liberal’ that matters more than the ‘arts’. The term ‘arts’ has no useful value on its own, for any way of doing something is an ‘art’.

The liberal arts always were contrasted with what can be called the instrumental arts—instrumental as in, done to achieve a productive, utilitarian end. For instance, writing is a skill that must be trained at, and when I write I attempt to manipulate words in order to persuade. Similarly, a pilot manipulates the controls in the cockpit of an airplane in order to safely fly passengers between two destinations. Instrumental arts require deep skill, as well as years of training and practice that often happens best in an educational institution.

But the liberal arts, by contrast, are not learned or studied for such practical ends. Learning about philosophy, or history, or reading literature (centrepieces of such an education): we study these not to get a job in these fields, but rather because these traditions help us to answer prior, human questions. Questions like what instrumental skills are worth learning, or what work one should dedicate oneself to; what a healthy democracy looks like, and how we can contribute to one. The liberal arts help us to determine what is worth wanting and what is worth doing, before we go about achieving those ends through instrumental arts we possess or may learn. The liberal arts are not productive in the way we usually understand the term (as immediately economically useful) and are therefore frequently criticised as useless, or impractical. But their role might in fact be to help us determine what is worth our valuing, and why.

It can be tempting here to keep the liberal and the instrumental arts dichotomised, to assume that one is for the more intellectual, the other for the more practical person. But in reality the one is useless without the other; they are two sides of the same coin. Knowing, from the liberal arts, what is worth doing and what is worth wanting is of limited ‘use’ if one cannot go about also achieving those things. We may decide that a given vaccine is of great importance to human health worldwide, but without instrumental arts like biology we cannot go about producing it. Contrariwise, knowing how to do many things, or how to produce a certain good or service, could be actively harmful if one does not first know whether that good or service is worth producing, worth humans’ wanting. Instrumental arts—science—created the atomic bomb, but no one asked the prior question of whether it should be created.

The one is not more important than the other, but the order in which we learn them does matter. This is something the American higher education system has right, amidst its many failings. In the United States, almost all undergraduate degrees are ‘arts’ degrees as we would understand them in New Zealand (they refer to theirs, more properly, as a system of ‘liberal education’). At Yale, for example, the only degree options at the undergraduate level are a BA or a BSc with Honours, completed over four years. And even under the BSc option, a number of what are called ‘distribution requirements’ necessitate that all undergraduates take a set of courses across all fields—philosophy, literature, history, art, science, math. All undergraduate degrees in America are ‘arts’ degrees as we call them.

That’s right: no law, no medicine, no commerce at the undergraduate level in the United States, those very vocations that here we seem to believe must be studied from age 18. In America, one studies these instrumental arts at a postgraduate ‘school’, once you have first spent four years immersing yourself in the liberal arts, so as to have a broad sense of the world before embarking on a narrow discipline of study. This strikes me as a sensible system, as I’ve come to see the interests and aspirations I held at age 18 change over the course of my education. For just how many young Kiwis know upon leaving high school what vocation they should dedicate themselves to for life? Where here in New Zealand I might have been forced to immediately turn youthful interests into a career, in my liberal arts education I’ve had the freedom to explore, to attempt to open my eyes to the world before specialising at a postgraduate level. In the words of the former president of an American undergraduate college, a liberal arts education is first and foremost about “making the inside of your head an interesting place to spend the rest of your life.” A rather essential undertaking, one should think.

(I wonder, too, whether the United States’ economic success could in fact be due, at least in part, to the liberal arts system; whether their economic productivity could even be because of this time taken for intellectual breadth, rather than in spite of it.)

When we talk about ‘arts’ degrees, we are trying but failing to talk about liberal education: the idea that every young person should have the opportunity to explore and to survey what life offers before embarking on vocational career training—the opportunity to have their “eyes opened” to the world before inevitably closing off parts of it. This is not such a radical idea. One might even say it is common sense.

But the irony is this: it is liberal education, the asking of “what” and “why” before “how”, that allows us to see other kinds of value in the world aside from the kind with dollar signs before it. The more we view the value of an education in terms of a “return on investment”—the more we favour pre-professional and vocational courses at the undergraduate level—the more quickly we move away from the very kind of education that most allows us to see and to understand a plurality of values; the less capacity we have to understand other values in education, like individual development and civic responsibility. It is an inexorable shift towards a society and a world of only one kind of value, and great minds have worried it may be irreversible.

We are talking about education here, yes. But education is about the kind of world we want to live in—what values we hope for our children to have, what priority we wish to give to all the different spheres of human activity. The kind of education system we shape in the coming decades will shape the kind of New Zealand we have in the decades after. Forgive me, then, for thinking the ‘arts’ degree debate has very great consequences, and is worth more than a flippant article about a “bachelor of bugger all”. Forgive me for worrying that I and my peers might not be able to speak reverently in old age about a professor who “opened our eyes”—who showed us what a good life, and a healthy society, might look like.

— — — —

Institutions we have long taken for granted seem these days to be, like New Zealand itself, on more shaky ground. Democracy most of all has taken a battering, or at least is being stretched to the limits of its political possibilities. Democratic engagement is at an all-time low in many parts of the world, at the same time as the consequences of politics have arguably never been greater. Young people feel disengaged, disenfranchised; many baby boomers, with sheer voting power, seem intent on a fallacious golden-ageism, putting up barriers at the same time as young people seem most to want them taken down. Fraying of the social fabric is producing an extremism reminiscent of the early to mid 20th century, and we in New Zealand feel perhaps for the first time thankful for a distance from Europe and the Americas. Yet we worry, nonetheless, of when and how our own politics may take a similar turn.

A democracy is made up of citizens. That citizens are individuals is self-evident, but it is rarely recognised that the inverse does not hold: not all individuals are citizens in a sense that has any meaning. To be a true citizen an individual must think themselves one. They must see themselves as political subjects, and therefore political actors; they must recognise their own power to shape politics and the responsibility that the benefits of citizenship require. One is born a citizen only in law. In fact, one must become a citizen. We learn to be one.

Might there be a relationship between an ever-increasing vocationalism at the undergraduate level—characteristics that encourage, even necessitate, a coldly rational individualism—and the fragmenting of and disengagement from politics? In other words, when we educate ourselves only for jobs instead of to “open our eyes”, do we lose sight of ourselves as being more than individual workers—do we lose sight of ourselves as citizens?

I do think there is a relationship. And I worry it might be very strong.

For there is an uncanny resemblance between the kinds of questions a liberal arts education requires us to think about, and the kinds of skills and thought that being a citizen requires. The relationship isn’t a chance one: the very system of the liberal arts, from where we still today derive our notion of an ‘arts’ education, is a product of Athens—Athens, the democracy, from where the concept of citizenship itself first came to be.

It is the task of citizens to first and foremost answer fundamental questions about their community. Questions like: how should we live? What do we value most highly? Who in our community is deserving of care and protection? These are questions of what we should do, and what we should want—the kinds of questions we learn to answer not through any practical or vocational training, but through having our eyes opened to the world. Literature, philosophy, art and history: we struggle with understanding their ‘value’ precisely because their value lies in helping us to determine what to value. We read a novel and learn of how others have lived across the ages, we see how people could act in certain situations. We judge our own lives and our own communities against the results, coming to conclusions about what to want, what to do—conclusions which through our power to vote and to act politically we then introduce into a healthy democracy.

Instead today we are all concerned with the secondary questions, those of how to do things. How to ‘solve’ a housing crisis and how to protect our rivers. But we are simultaneously trying to grow our economy: increase our exports, raise tourist numbers. Remember that the housing crisis is a housing boon to property owners, and unswimmable rivers are the result of a thriving farming industry. When we only focus on the ‘how’, we will reach divergent conclusions, for individuals see far less the effects of their own self-interest on other members of the community. We think that every ‘problem’ supposedly has a solution, yet because we never ask all the prior questions—because we do not know how to ask the human questions —we trip over ourselves, contradict ourselves, and then we wonder what’s going wrong. Technocracy can only ever answer the how, never the what or the why; it takes a stab at the ‘public interest’, so frequently forgetting that ‘interest’ can mean much more than money.

A healthy democracy, with an engaged and aware citizenry, goes hand in hand with a liberal education, an education for life rather than for a career. In literature we read of what another life might be like: we are put behind Rawls’ veil of ignorance, and learn what life is like when we cannot afford a home, or when land we have known to be sacred is taken from us and then soiled. In philosophy we learn a vocabulary for life’s important things: a vocabulary of morals and values, and an understanding of what foundations these values must stand upon. In history we learn not to repeat our ancestors’ mistakes; in art, we are called to live more honestly. We all need to have a common language with which to talk about the prior, more human questions that come before technocratic action, and this language is the result of an education worthy of citizens, rather than one solely for our careers.

Stuck inside the straitjacket we have all been educated into, it is often difficult to see how what our democracy needs may be different to what our economy needs—how human value may lie somewhere other than economic value. Yet that is what we must see if we at all believe that education affects the health of our democracy, not just the productivity of our workforce.

— — — —

In the Rutherford Building of Victoria University’s campus in central Wellington hangs an enormous painting, over ten metres wide and three metres tall. Its scale is the first thing one cannot help but notice: it towers over you, envelops you, makes you feel quite tiny. But because of that it also seems to give us something to aspire to.

Painted by Colin McCahon in 1970, it is one of his works to declare ‘I AM’ in giant letters that soar above us. We might read the assertion of I AM differently in different times, but recently this declaration has seemed to me to be a challenge, asking us: WHO ARE YOU? The painting is sure of its self, but are we, New Zealanders, sure of our selves?

Between the ‘I’ and the ‘A’ of ‘I AM’ there is, in McCahon’s iconic scrawl, a passage of text that reads:

“Teach us to order

our days rightly,

that we may enter

the gate



A statement of education if there ever were one. For what is wisdom but knowledge that we can apply to our lives?

The painting was purchased on behalf of Victoria University by Tim Beaglehole, son of my grandparents’ professor John, a man who himself opened so many of his students’ eyes during his life as a professor and later as chancellor of the university. Tim sadly died two years ago, yet I recently came across a video of him explaining why he thought the Victoria University art collection must have this painting.

In the video Beaglehole explains that a passage like the one above is, on the one hand, a religious text. Isn’t a secular university then an odd place, he asks, for a religious painting to hang? “But I didn’t see it that way at all”, Tim explains: “because I think a university too is concerned with the whole nature of life—and what we can make of it.”

We all need an education of the Beaglehole kind as individuals, if we are to live lives filled with meaning. And New Zealand needs its young people to have an education that opens their eyes to the whole nature of life, and what they can make of it, if this country is to find its own way in this Oedipus-like century, a century in which nations are seemingly intent on ignoring all prophecies and one day in desperation putting out their own eyes.


Privately circulated first in May 2017. Thank you to all who provided feedback and comments on the first drafts of this essay. 

Feature image of McCahon’s Gate III from Victoria University of Wellington’s Victorious Magazine, Autumn 2014.

The John Ruskin epigraph was added in September 2018 after a summer’s reading of Ruskin and my realisation that his whole project was concerned with giving sight.

“New Models of Tertiary Education”

New Zealand’s Productivity Commission recently completed its report into the future of tertiary education in the country. Released rather quietly in March, the report then came back into the headlines when it was discussed last week in select committee.

A article covering the committee’s discussion began by asking:

Just because someone wants to go to university, does that mean they’re entitled to a massive taxpayer subsidy?

The Productivity Commission doesn’t think so and neither does National MP Maurice Williamson.

Art history, ever the victim of public debate, was chosen by MP Maurice Williamson as his example to explain the report’s recommendation:

Put simply, the government would decide, for example, how many lawyers, vets, accountants or teachers it needed each year and subsidise accordingly.

Anyone falling outside of the “need” category would still have access to courses but would need to cough up the cash themselves.

Williamson broke down his argument by taking a look at art history.

His data suggests about 10,000 students took the subject at Auckland University, which he says he has no issue with but the question was whether taxpayers should fund it.

“Maybe we want 500 art historian graduates that we fund well, the next cohort moderately maybe and the last cohort is anyone who wants to can but they fund it themselves.”

The report deserves a longer response, but suffice it to say for now I think it shortsighted and disappointing. Worse—it thinks us a two-dimensional country, where students are just future workers, and professors merely employees. That higher education might have something to do with educating citizens, or determining what we in fact should value as a society, was wholly forgotten.

Montaigne Says We Should Be Better Learned, Not More Learned

Montaigne reminds us in his essay Of Pedantry of the difference between wisdom and knowledge, and laments the fact that we naturally favour the former:

“In truth, the care and expense of our fathers aims only at furnishing our heads with knowledge; of judgement and virtue, little news. Exclaim to our people about a passer-by “Oh, what a learned man!” and about another “Oh, what a good man!” They will not fail to turn their eyes and their respect towards the first. There should be a third exclamation: “Oh, what blockheads!” We are eager to inquire: “Does he know Greek or Latin? Does he write in verse or in prose?” But whether he has become better or wiser, which would be the main thing, that is left out. We should have asked who is better learned, not who is more learned.”

To be better learned is to have learned also to apply one’s knowledge to one’s life; to be more learned is to be a walking encyclopaedia. The latter, however, is more easily measured and more easily observed, for we can always recite facts. Wisdom must be demonstrated over time, and often requires certain circumstances to be seen.

The Startup Strategy Matrix: Defining the Limits of Lean Startup Methods

Note: The essay below is one I completed for my International Baccalaureate extended essay for high school, back in 2012. I’ve had a few questions about it recently (there are some links out there to an old blog post of mine on the topic) and so am re-publishing it now. At the time I was working on a startup of my own and was interested in how Eric Ries’ Lean Startup methods had become so popular that they were being used in all kinds of inappropriate circumstances. I wanted to work out the limits to their use. 

The original essay is published unedited (excuse the youthful writing) and footnotes have not transferred across. 


Empirical studies show that over a period of five years, seventy-eight percent of all early-stage Internet technology companies can be expected to fail. This is a dire result; interestingly, the vast majority of these companies utilize similar strategies for bringing their product to market.

In recent years, a subset of early-stage Internet companies (companies whose primary product is a website or Internet application) have been following different principles – lean methods – and have taken a step away from traditional methods for bringing a product to market. These new companies refer to themselves as “Lean Startups” (a term credited to Eric Ries, who has written an influential book by the same name), and label companies using traditional methods as “Fat Startups”. They take their name from lean manufacturing, which saw success in Japan with companies like Toyota being revolutionized. Lean manufacturing, and subsequently lean startups, at their core revolve around removing any activities that are wasteful.

Lean startup methods are tools and philosophies that allow early-stage companies to bring a successful product to market by focusing on learning through validation of hypotheses. A company will make a guess as to who their users are, and what product they want, and will then test this assumption in real life through a low-cost, basic version of the product. It will then continually adjust the product, or start all over again, based on the evidence shown through its customers’ usage. They do not spend on marketing or sales until they have a validated product, and therefore consume less capital than fat startups. They are capital efficient as they recognize sooner if they are heading towards success or failure. Other advantages and disadvantages of lean methods will be made clear throughout this essay.

As a number of companies utilizing lean methods reach success, the methods are increasingly being adopted. The vast majority of new Internet technology companies use lean methods. At the same time, numerous lean companies are failing, or not living up to expectations made of them. It is likely that there are scenarios under which utilizing lean methods will aid a company in bringing a successful product to market, and there are also definable scenarios where the use of lean methods will hinder a company. By defining these scenarios, we could help new companies to make more effective decisions about the methods they use to bring a successful product to market.

The aim of this essay, therefore, is to explore and discover the circumstances under which lean startup methods are appropriate for use by early-stage Internet technology companies. While lean methods are applicable to companies of all ages and industries, this essay is limited to early-stage Internet technology companies so that its findings can be particularly relevant, and therefore beneficial, to a specific group of companies.

Through this essay, circumstances where lean methods should and should not be used will be made clear. As a result, the failure rate of early-stage Internet technology companies could be reduced, as they begin to use methods appropriate to their individual situation.

Entrepreneurial ventures, if successful, can create jobs and growth in an economy. This leads to an improved standard of living for many individuals in society, and will lead to wider benefits for multiple reasons, such as the company’s ability to pay additional tax.

Therefore, if the failure rate of early-stage Internet technology companies is reduced, many people in society will be better off.

Appropriate Use Circumstances

i. Introduction to extreme uncertainty

For decades, traditional early-stage business methods (now referred to as fat startup methods) have been suitable for use by all businesses.  The majority of new companies simply bring an existing product into a new local context, or bring a new product into an existing market. In each case, the conditions are predictable, as numerous other businesses have carried out the same process. Eric Ries notes that this is why most traditional businesses can be funded by a bank loan – they are so predictable that a loan officer can assess their risk and give loans.

However, since the creation of the Internet, many new ventures are bringing new products into new, or re-segmented, markets. In these cases, the business knows nothing about its customers or their desires – it is operating under conditions of extreme uncertainty, or ambiguity.

Fat startup methods involve traditional, milestone-based product development. A concept is created and then undergoes development, including the development of marketing materials based upon market research. Next, it is tested, and finally it launches to users. Under scenarios where the market is known, these product development methods work well as the only variable the company needs to focus on is execution. The traditional product development method is illustrated below.

Lean Startups versus Fat Startups

For Internet technology companies, the product development method is largely ineffective. Companies will go through the cycle, consuming resources as they do, without knowing if the product is what the market wants. It can lead to a large waste of resources, as in the classic example of a failed fat startup, WebVan, an online grocery retailer that consumed approximately USD$1.2 billion in venture capital, and entered bankruptcy shortly after.

Lean methods, in comparison, are inherently useful to companies operating under extreme uncertainty. They focus on validated learning – “…a rigorous method for demonstrating progress when one is embedded in the soil of extreme uncertainty…”. Whereas the product development method is linear, lean methods (which include Steve Blank’s theories on customer development) are circular – a company will repeatedly carry out certain tasks in order to find what is successful.  In extreme uncertainty, a company’s knowledge of its customers and product is limited. Lean methods therefore force the company to focus on learning before investing and acting.

The following part of this essay explores the circumstances where it makes sense for an early-stage Internet technology company to utilize lean methods. It is assumed that all of the following scenarios are within the boundaries of extreme uncertainty.

ii. Entering a new or re-segmented market with a new product

Ansoff’s Growth Matrix is a tool that can simplify, and describe, the activities companies should undergo when entering different combinations of new and existing markets with new and existing products. According to Ansoff’s Matrix, companies are diversifying when entering new markets with a new product. However, Ansoff’s Matrix is designed for use by existing companies that are looking to grow – it is not ideal for use by early-stage companies with no existing product and no defined market.

For the purposes of early-stage Internet technology companies, I have developed a specifically revised version of Ansoff’s Matrix. Let it be called the Startup Strategy Matrix. It retains the axes and labels of Ansoff’s Matrix, which are still applicable and useful, but makes different recommendations to early-stage companies. It builds on the research of both Steve Blank and Eric Ries in making recommendations to companies on appropriate strategies.

Startup Strategy Matrix for Lean Startups by Michael Moore-Jones

The Startup Strategy Matrix tells us that if we are bringing a new product into a new market, lean startup methods should be pursued, and there should be a focus on innovative customer development. This is the corner of the Matrix where there is the most uncertainty – almost nothing is known about the company’s customers or their desires. The company should therefore focus on learning and discovering customers’ desires and preferences before embarking on any other activities. Lean methods will allow the company to do exactly this, while preserving capital.

Startup Strategy Matrix Lean Fat Startups

It is worth noting that if a company is re-segmenting an existing market as either a low-cost or niche entrant, the company essentially falls into the bottom-right of the Startup Strategy Matrix and should use lean startup methods. They have no solid evidence of their customers’ preferences, and are unsure which customers from the whole market will be a part of the re-segmented market. Therefore, they should use both lean and customer development methods in order to discover truths about their precise market.

There are very few circumstances in which it would make sense for a company with a new product entering a new or re-segmented market to use fat startup methods instead of lean ones. The company would be making too many imprecise inferences about fundamental parts of the business, such as their value proposition and growth strategy. If they do not know their customers yet, it is impossible to have any evidence on whether these assumptions are correct.

iii. Companies with an in-house technical development team

An early-stage Internet technology company employing a number of technical developers will be heavily advantaged through the use of lean startup methods. Here, business theory is heavily linked with technical development processes.

Traditional development methods are referred to as Waterfall, or Stage-Gate. A development team is given a brief with multiple milestones for a feature. They will complete multiple features, and then launch many features in one batch. This is a slow development method that gives a company little time to learn from its customers about how they actually use the product – this is not in line with the goals of a company using lean startup methods.

A lean startup, by contrast, will have its technical development team utilizing “Agile” development methods. The creators of such methods describe them as valuing “individuals and interactions over processes and tools, working software over comprehensive documentation, customer collaboration over contract negotiation, and responding to change over following a plan”. This description lies in stark contrast to the workings of Waterfall methods, which value the opposite concepts.

With Waterfall methods, if there is an error in a piece of code, the company will not discover this until it pushes the code to users, which will happen in a large batch along with many other features once every month or so. An error could potentially cause the failure of all of the company’s software, rendering its business temporarily unable to function. Because the company has also pushed other features and code to users at the same time, it will be hard to discover the error that caused the problem.

Agile development is one of the tenets of lean startup methods. It requires that the company publish code to its users the moment it is written, and then monitor the results. In terms of manufacturing, it is the equivalent of small batch sizes, which are proven to be more efficient. If there is a problem with the code, it will be discovered immediately, and can be fixed straight away because there will only have been one piece of code that could have caused the problem.

If a company employs an outside software or web design and development firm, it likely has little control over how its product is developed. However, if the company employs an in-house development team, and if one or more co-founders of the company is part of the technical team, then lean startup methods (and therefore agile development methods) should be used. Using agile methods will reduce the risk that an error in code could disrupt the company’s functioning, and will also allow the company to test many additional features on its users.

iv. Where virality is a company’s growth strategy

The nature of the Internet allows many technology companies to achieve organic viral growth. A user of a company’s product, such as a social network, will derive additional benefit from the product if more people are using it. Users therefore have an incentive to share the product quickly and with many people, allowing a company to gain very large numbers of new users, or customers, in a short space of time.

Many early-stage Internet technology companies base their entire growth forecasts upon Metcalfe’s Law; namely, that the value of the network of users as a whole is proportional to the square of the number of participants of the network. In order for their business model to function, the company is required to achieve viral growth. It should be noted that viral growth is a form of organic growth as it is achieved using the company’s existing resources.

Viral growth is a process that is not easily replicated, and many companies try in vain to achieve it. There are few rules for achieving viral growth, and so companies go about achieving it in their own ways. In order to best achieve viral growth, a company should carry out significant amounts of testing.

If the company were to use traditional fat startup methods, they might invest heavily in developing a product that turned out not to achieve viral growth. Lean startup methods, by contrast, involve testing different methods for achieving viral growth until one works.

We can see that by utilizing lean methods, a company can preserve resources until it has a working model for achieving its growth formula.

Inappropriate Use Circumstances

i. Entering existing markets with new products

Referring to the Startup Strategy Matrix (fig. 2), the top-right corner corresponds to a company entering an existing market with a new product. When a company enters a new market with a new product, it must first discover who its customers will be. Lean startup methods allow it to do this by continually testing different hypotheses to discover its market and their preferences. However, if a company is entering an existing market, it is not necessary for it to test hypotheses to discover its customers.

Instead, there will be existing knowledge of customers within the market and their likes and dislikes. The company can draw on this knowledge to create their new product, or can carry out market research to find out what their customers will buy before embarking on building the product.

Startup Strategy Matrix Fat Startups

The Startup Strategy Matrix states that innovative product development methods should be used when entering an existing market with a new product. As much is already known about the market, a company must simply carry out market research and then execute its plan correctly in order to succeed. Traditional product development methods (see fig. 1) will allow the company to execute successfully, while innovation will ensure that the company builds a new product with points of difference that the market will respond to favorably.

Were lean startup methods to be used in this situation, the company would waste time trying to gain knowledge that it could have discovered much more quickly through other methods. Because of this wasted time, the company could potentially be beaten to market by another company and miss the opportunity. Ben Horowitz, a successful entrepreneur and venture capitalist, says about using lean methods; “you may lose your opportunity to win the market, either because you fail to fund the R&D necessary to find product/market fit or you let a competitor out-execute you in taking the market.”

ii. Entering new markets with existing products

Groupon is an Internet technology company that saw huge success in the United States, quickly becoming the fastest-growing company the world has ever seen. Their business model involves selling coupons to large number of consumers who are incentivized to share the coupon with their friends. While Groupon quickly expanded and launched their service in many cities within the United States, other entrepreneurs saw their success and began replicating their business model and product (in this case their website) in new markets.

Again drawing upon the Startup Strategy Matrix (fig. 2), these Groupon “clones”, as they are referred to, correspond to the lower-left corner. They are companies entering new markets with existing products.

Startup Strategy Matrix Fat Startups

Groupon’s success was not market-specific. In every state within the United States that Groupon expanded into, the result was similarly large growth. It was clear that Groupon’s product was one that humans in many different markets desired.

It appears that having first-mover advantage is hugely important in launching companies based on Groupon’s business model. Indeed, the first four companies following this business model to launch in major cities in the United States now control an estimated 89% of the market.

Lean startup methods can take longer to execute than fat startup methods because they require a circular approach. Multiple hypotheses are tested until the company has a model that is proven to be working and has discovered its market. However, since companies have seen Groupon’s business model work in multiple markets, they can be sure it will work in any new market that they introduce it to. They have no real need to execute lean startup methods, as they already know what product should be built. They are also heavily incentivized to be first to market in order to gain large market share. Were lean startup methods to be used, companies could miss out on being first to market by working to  prove hypotheses that had already been proven correct by existing companies in other markets.

It is clear that in scenarios such as that of a Groupon clone – when entering a new market with an existing product – utilizing lean startup methods will lead to missed opportunities for many companies.

Utilizing fat startup methods, in contrast, will lead to faster execution because they take a linear approach, and allow the company to spend on marketing to take advantage of being amongst the first to market, gaining market share.

iii. When selling to quality-conscious market segments

Certain market segments, such as the super-wealthy, value quality as one of the most important factors in making a purchasing decision. As a result, the majority of companies, and fat startups, build products according to the theories of W. Edwards Deming. Deming believed that the customer was the most important part of the production process, and therefore high quality should be focused on to boost efficiency.  In addition, companies will utilize Kaizen theories of continuous improvement, as well as a Total Quality Culture, to ensure that quality is kept high.

Lean startup methods require that a “minimum viable product” (MVP) is created and launched to users in order to test assumptions about the market and product. An MVP allows the company to preserve resources by producing a product that is missing many features and is of lower quality, while still testing assumptions.

This essay argues that if a company is entering a market segment that is conscious about the quality of the product, lean startup methods should not be used. The low-quality MVP may damage the company’s reputation, and cause it to lose many sales in the future.

iv. When following an external growth strategy

Some early-stage Internet technology companies find themselves in situations where an external growth strategy will best allow them to take advantage of opportunities. For example, Twitter pursued external growth strategies by acquiring products such as Tweetie,  a mobile-application version of Twitter. Twitter had no mobile application of its own, and found that it could best take advantage of the opportunity in the mobile space through an acquisition, rather than building its own product in-house.

If a company finds that it can best respond to an opportunity through an acquisition, merger, or takeover of another company, then fat startup methods should be pursued. These methods will enable the company to raise sufficient capital in order to carry out external growth.

A company using lean startup methods, by contrast, would be unable to carry out external growth due to the time it would take to validate hypotheses about the opportunity being pursued. For example, Twitter noticed an opportunity in the market for mobile applications and decided it should enter this market immediately. If it had used lean methods, it would have had to first validate its hypotheses about the market. The time needed to do this could have allowed another company to take advantage of this market opportunity first.

Two things are worth noting here. Firstly, a company may at first follow lean startup methods but then spot a market opportunity. If the opportunity is large, it may be beneficial for the company to change to a fat startup strategy in order to pursue that opportunity quickly through external growth. Secondly, it can be said that companies using fat startup methods therefore carry more risk, as they do not take time to validate assumptions. They will simply enter a market to ensure that an opportunity is not missed, even if some of their assumptions later turn out to be incorrect.


The benefits of lean startup methods are clear. They allow companies operating under conditions of extreme uncertainty to reduce the risk inherent in their venture through validating hypotheses based on experience. They enable companies to operate using small batch sizes, and better manage in-house technical development.

However, it is also clear that lean startup methods are not appropriate for use by early-stage Internet technology companies in all situations. The use of lean startup methods in certain situations will damage a company’s ability to grasp an opportunity, and to react boldly enough with large amounts of financial capital.

The results of this essay – based on research by both scholars and entrepreneurs, as well as first-hand observations of companies – have led to a set of clearly defined scenarios where lean startup methods should, and should not, be used.

In initially deciding on a startup strategy, companies must examine the type of market they are entering, and what product they are entering it with. The Startup Strategy Matrix (fig. 2) was developed as part of this essay. It clearly describes the strategies that companies should use based on their market and product combinations. This should be the main factor in a company’s choice of startup strategy.

The Startup Strategy Matrix allows us to say that in general, if a company is entering a new market with a new product, it should use lean startup methods. However, a company must continue to examine whether lean startup methods remain relevant throughout its process of discovering its market and product.

This research has also shown that if a company discovers that it is entering a quality-conscious market segment, it should change strategy to traditional fat startup methods in order to take advantage of Deming’s theories on quality. Additionally, if a company deems that it needs an external growth strategy to take advantage of a market opportunity, it should alter course and utilize fat startup methods.

Many of the insights in this essay are non-exclusive. For example, if a company begins using lean startup methods because it is entering a new market with a new product, but then finds a lager opportunity in a different market segment, it should change its strategy accordingly. The initial strategy chosen should merely guide a company to discovering new information, at which point a company may be required to change strategy.

It should be noted that some unexplored areas could have added to the conclusiveness and scope of this essay. First, the real-life applicability and usefulness of the Startup Strategy Matrix should have been tested in order to understand how the Matrix affects the strategies that a real company uses. By giving the Matrix to various companies, and monitoring their results in comparison to new companies not using the Matrix, the effectiveness of the Matrix on company development could be tested. While this would have been ideal, it was not within the scope of this essay, as it would have required a large amount of time to determine differences between the companies’ development.

Secondly, additional examples of companies using different startup strategies would have helped to clarify the circumstances presented in this essay, such as a real-life example of a company trying to achieve viral growth. However, early-stage Internet technology companies are by nature protective of their internal company information, to ensure that competitors cannot prepare a similar product before the company launches its product. This made the finding of real-life examples difficult and outside the scope of this essay.

The findings of this essay offer clear scenarios relevant to all early-stage Internet technology companies. It is hoped that the conclusions will help companies to find the most relevant strategy, and to adjust it in the light of new information. Companies following startup strategies relevant to the circumstances presented in this essay should increase their chances of success.


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