
I discovered Bitcoin by sheer luck. In the summer of 2012, I stumbled on Satoshi’s whitepaper while in Y Combinator.1
As someone who had worked in banking and and microfinance, I got excited about the idea of credible digital scarcity, programmable money, and open financial systems.2 I didn’t quite know the use cases that would follow, but it was clear to me that the world would never be the same.
A small group—largely software engineers and researchers—were even more canny. They liked Bitcoin’s stated use cases—destroying credit card fees, stopping hyperinflation, preventing totalitarian governments from seizing funds—but the spirit of what they were saying was much simpler: “This is cool.” That feeling superseded every rational critique they were told about why cryptocurrencies wouldn’t work.
Mostly though, everyone I respected thought cryptocurrencies were stupid. One MBA classmate haughtily wrote off cryptocurrencies as only useful for drugs and pornography. My old management consulting friends—all from elite American universities—pooh poohed Bitcoin and other open cryptocurrencies as they fixated on the needs of their lucrative banking clients. The vast majority of successful, rational people disdained everything about cryptocurrency.
In the end, it turns out that sliver of people that saw something in the chaos were right. Cryptocurrencies grew from a user base of “freaks” and “felons”—as the critics branded them—to a global movement increasingly explored by the largest financial institutions on the planet and funded by the smartest venture capitalists.
Time and again, most rational people get it wrong when looking at new disruptive markets. People who succeed as disruptive technology entrepreneurs are rationally irrational: they value irrationality and incorporate it into otherwise rational business decisions.
Why rational people get it wrong?
So why is rationality so problematic when assessing a new space?
My Stanford Business School professor liked to say that if he showed us an anonymized case study from when BASIC was Microsoft’s primary product, we would have eviscerated it. Deriding Microsoft’s business plan based on the evidence available in the late 1970s seemed entirely rational.
In disruptive spaces, there are no use cases. While founders and the media may have a long list of proposed uses, they usually seem laughable or impossible to achieve. Despite their excitement for the new tech, the founders and early adopters who speak for a space don’t have a good handle on the potential use cases. For example, Steve Jobs initially pitched the personal computer as a way to store recipes. It took years for the first killer use case, spreadsheets in the guise of VisiCalc, to appear.
Similarly, use cases proposed by cryptocurrency early adopters have been either proved wrong or before their time. Early adopters excitedly listed huge consumer industries that the new technology will topple. In the early 2010s, Bitcoin was meant to replace credit cards. Then OpenBazaar was going to replace eBay. Today Bitcoin is championed as a store of value akin to gold.
The public debate misses unsexy—but critical—use cases that few have heard of. Bitcoin might replace credit cards or bank the unbanked someday, but a more likely early use case is financial services for a legal marijuana dispensary or a currency for countries with hyperinflation.
Early use cases also don’t start by going head to head with the best served or most competitive markets. Instead, they succeed by finding unserved needs with weak alternatives. In reality, the huge hype around new technologies sets off a global scavenger hunt to find killer use cases.
With disruptive technologies, there is also no clear business model. Technology entrepreneurship is often about building a successful product and then figuring out much later how to monetize. But without a business model, few outsiders believe that the company or industry will succeed.
Famed investor, Mike Moritz, noted that at Google, “we really couldn’t figure out the business model.” The company finally figured it out years after its formation, when they stole what Overture was doing with pay per click search results. Facebook was similarly pilloried for its abysmal revenue3, even though premature monetization might have killed an early Facebook.
Early participants are just plain weird, leading rational people to dismiss them. In early cryptocurrencies, I spent time with gold bugs, anarchists, and people waiting for the post-nation state. The early developers were not the type of people who would fit in at elite technology companies or top computer science programs.

Founders and early adopters are often “weird”4, though. As Don Valentine, the founder of Sequoia Capital, remarked to a friend on meeting a young Steve Jobs, “Why did you send me this renegade from the human race?” It’s very hard to differentiate farsighted and crazy at the start.
The arguments the earliest adopters make for a new technology are often weak. The cryptocurrency startup Basis, for example, asked readers to “imagine that one day, Basis is so widely used as a medium of exchange that it actually starts to displace the USD in transaction volume.” After raising $133 million, it shut down. Outsiders confronted with weak argument after weak argument tend to erroneously dismiss the entire technology.
It’s also common for highly respected CEOS to look down on new technology. This is because large company CEOs are effective salespeople and managers, not entrepreneurs or technologists.
They focus on their existing and mass market customers, even when disruptive technologies change who the customer is. Imagine a mainframe computer executive dependent on rich enterprise customers, suddenly trying to understand why consumers might want an expensive home PC.5 Or how former Microsoft CEO Steve Ballmer would find it easy to scoff at the $600 price tag of the first iPhone.
This cycle repeats every time a disruptive technology appears. Jamie Dimon, the CEO of JPMorgan, initial views on Bitcoin consisted of pure vitriol:
“You can’t have a business where people can invent a currency out of thin air and think the people buying it are really smart. It’s worse than tulip bulbs, OK?”
(His views more recently have shifted, now that JP Morgan has its own blockchain projects6)
Many experts—say, a Nobel prize winning economist or a policy maker — are so highly specialized that they can’t have informed opinions on topics that require great breadth. Like the blind men and the elephant, they become highly opinionated even though they truly understand one isolated part of a whole. As a society, the halo effect means that we respect the views of these experts on many topics well beyond their narrow circle of competence.
When respected people dislike something, it makes it hard for many rational people, who care about the opinions of others, to take the challenging path. In the mid-2000s, Ivy League students chose a Goldman Sachs or McKinsey over Facebook because those companies conferred respect amongst their peers. Of course, all that changed once working at Facebook became the respectable choice. The rational have a hard time doing something respectable people look down on.
Media tends to warp the conversation about new technology. The reader and economic incentives make it very hard to be thoughtful when assessing new technologies. Media organizations focus on hype and catering to reader demand, rather than thoughtful assessment. Few reporters have the requisite technical training or a historical view of how new technologies develop. Yet the views of a single journalist writing for a mass market publication can dictate the conclusions that millions draw about new technology.7
In new spaces, rational people—the MBAs, journalists, the execs at elite Silicon Valley companies, even many well regarded engineers and scientists—are lagging indicators. Until a space has crossed a crucial threshold, their rationality needs to be discounted.
The power and perils of irrationality
By contrast, irrationality is powerful in new, disruptive spaces because it lets you surmount the obstacles that rational people face.
Early adopters are often irrational. For cryptocurrency early adopters, the idea of everyone paying their grocery bill tomorrow with digital tokens seems entirely reasonable, no matter how daft it sounds to others. These early adopters are akin to primary voters in America. They vote based on deep-seated beliefs that energize them, no matter how unlikely their goal may seem to the mainstream. They help the space move forward at a crucial time.
The irrational find it easy to think in exponential terms. After all, many technology innovations—like transistor density or the network effects—are exponential. What’s possible between the rational “linears” and the irrational “exponentials” isn’t that different in a one year period, but completely diverges over longer time spans. Exponential makes the crazy possible in short order.


What seems “irrational” or wrong to society is rational for these newcomers. New, disruptive spaces tend to attract outsiders and younger people because they have no frame of reference for what makes the new system wrong.8
To paraphrase Max Planck, science advances one funeral at a time.9 Progress doesn’t always mean changing the mind of existing people. It marches forward because a new generation without preexisting views aren’t bound to the existing system. Those who are ignorant of what is “correct”—in cryptocurrencies, people outside traditional finance—have a huge advantage.
The irrational find it easier to think of “worse as better” even though it seems logical to think that “better is better.”
Similarly, this community’s ability to embrace their outsider status—freaks, weirdos, and non-conformists in the views of the rational—means they don’t seek the favor of the rational. That provides a powerful inoculation against the flawed views the rational have.
Irrationality, however, comes with one debilitating issue: at some point rationality becomes a major asset, and it’s hard for the irrational to make that shift. It leaves them adrift when the space grows and changes. When the technology of a few suddenly needs to appeal to many, the irrational often give way.
Cultivate rational irrationality
There is a simple solution: take the best of irrationality, and add in important rational checks. In short, be rationally irrational.
In disruptive spaces, lean into irrationality. Irrationality is the activation energy for many an entrepreneurial journey.10 It gets the ball rolling when the odds seem insurmountable, the critics innumerable, and the future uncertain.
Pair this irrationality, with few critical rational strategies. Being rationally irrational starts by building your capacity for effectual reasoning.
The rational are used to causal thinking, where they begin with a pre-determined goal and seek to identify the optimal path there. This works well for known goals and stable environments, like attempting to get into a good college or copying a business from your competitor. It fails totally in new and rapidly shifting markets.

Source: Professor Saras Sarasvathy, “What Makes Entrepreneurs Entrepreneurial?”
Effectual reasoning, by contrast, “begins with a given set of means and allows goals to emerge contingently over time.”11 It works well for spaces where the environment changes rapidly and is unlike anything that came before.
Be open to letting the market pull you. Disruptive markets are often12 about emergent behavior that creators never imagined, rather than smart people getting into a room and decreeing what the future will be. Irrationality should be subservient to the evidence of credible behavior. When rational people see “crazy” things, they pass judgment, while the irrationally rational see the same behavior and think, “what if?”
Follow the proverbial “strong opinions, weakly held.” Keeping too open a mind means you’ll make little progress. On the other hand, hewing too strongly to your opinions will cause issues when your fundamental beliefs are proven wrong, as they inevitably will be. In the game of entrepreneurship, it’s more important to win than be right.
Cultivate a multidisciplinary mindset. Early adopters in tech today are often software engineers. This has tremendous advantages, and some critical issues. Engineering frameworks might give you a mistaken view when assessing user behavior. It devalues important skills like the importance of usability and user acquisition. It doesn’t give you a lens to identify important early markets.
Just like the original Mac, greatness comes from combining pieces—software, hardware, art, marketing, the liberal arts—that are worth more than the sum of their parts.13 The crypto economy of tomorrow similarly is going to require software, usability, economics, cryptography, and user acquisition to truly compete.
Be careful with surrounding yourself by rational people. It will inevitably diminish your ability to reason in disruptive spaces. Value spending time with “irrational” people while building your own capacity to assess emergent behavior you observe.
- I luckily found myself in the same batch as Coinbase, where I now work. ↩
- For me, there were a few reasons cryptocurrencies were so interesting. Trustless digital scarcity was a huge deal in computer science. Banks were terrible at technically innovating or building with developers in mind. Lack of trust led to debilitating regulation and limited the products available to the poorest. ↩
- And “boneheaded” $1 BN purchase of a no revenue Instagram. ↩
- In the view of polite society. ↩
- This mirrors what an old school baseball scout would think of sabremetrics. ↩
- Without Bitcoin, the blockchain that Dimon professes to value would never have happened. ↩
- This echoes an old Economist marketing campaign attributed to Larry Ellison: “I used to think, now I read The Economist” ↩
- I’m always reminded about the scene in Ender’s Game when he notices how soldiers entering the gravity-less game room maintain the stances they used when they were in gravity. ↩
- Technically, the quote is: “A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.” source ↩
- As my friend Shvet likes to say. ↩
- See Page 1 of Professor Saras Sarasvath’s What Makes Entrepreneurs Entrepreneurial ↩
- But obviously, not always. ↩
- Jobs full quote: “It’s in Apple’s DNA that technology alone is not enough — it’s technology married with liberal arts, married with the humanities, that yields us the results that make our heart sing.” ↩