Turn Your Unknowns into Knowns
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How much do you know about your profession? Whether you’re in real estate, proptech, or any other field, the continuous pursuit of new knowledge and experiences will ensure that your career is always moving forward. And a huge part of experience lies in knowing what you don’t know.
I’m a lifelong learner, yet the older and more experienced I get in real estate and proptech, the more I realize I don’t know. For example, I’m very confident in my abilities to execute NYC multifamily value add deals. And I continue to learn nuances about how the NYC market behaves in downturns. But I am very aware that I should not be trusted to run a logistics center deal in another country.
Donald Rumsfeld popularized a useful matrix to bucket your knowledge into four categories: Known Knowns, Known Unknowns, Unknown Knowns, and Unknown Unknowns.
Known Knowns
When you begin your career, you have very few known knowns. These are things you’re aware of and understand. Knowledge you’ve acquired through schooling, work experience, or practicing a skill. These experiences have shaped us in some way; they include successes and failures as well as pleasant and unpleasant memories. They remain etched in our minds and can be recalled easily, oftentimes serving as lessons for future decisions.
You can become proficient in your field by really refining your known knowns- especially if it’s obscure knowledge that very few others possess. That’s the backbone behind my exercise to discover what you’re the best in the world at.
In real estate, your known knowns can be expertise in a specific asset class, investment strategy, and location. You’ll grow your knowns through experience working on deals. Maybe you’ll start by working for someone else. I personally find that once you have skin in a deal, your learning accelerates exponentially.
In proptech startups, this can be specific engineering skills, or the ability to scale a particular business model. Again, working as an employee and on a team can really develop these skills. And working in real estate will really give you perspective on problems you can solve with a proptech company.
Known Unknowns
It’s easy to become comfortable with your current level of knowledge and not think about what else there is to learn, so actively challenging yourself and seeking out unknown knowledge can be difficult for many people. However, this is where real growth takes place, because once you start to learn something new, it can open up entirely new paths for exploration and potential development that wouldn’t have been possible before.
Known unknowns are things you’re aware of, but don’t understand. These are areas where you may have a basic level of understanding to the point that you realize that you have a lot more to learn. In some cases it’s just information you need to find out to complete a task. Known Unknowns introduce uncertainty and unpredictability into your work. Because you’re aware you’re missing information, but don’t know how this information will affect your decisions until you find out.
Throughout your career, you need to aggressively turn known unknowns into known knowns to widen your knowledge base, cover blind spots, and minimize risks.
As a real estate developer, I actively seek out deals where my known unknowns are minimal. My entire pre-development period on a transaction is spent trying to turn as many of the known unknowns into known knowns as possible. Because I need to figure out how the known unknowns will affect my ability to execute. For example, if I don’t know the current cost of lumber, concrete, or availability of electricians, my construction budget and schedule could slip if I find out that they’re all scarce and expensive.
For proptech startups, founders uncover known unknowns all throughout the early stages. Customer discovery is about understanding and empathizing with customers’ problems. And then incorporating that new knowledge into how the product can solve the problems. The entire journey from formation to MVP to PMF is a massive science experiment to turn unknowns into knowns.
Unknown Knowns
Unknown Knowns are the things that you don’t even realize you know. Meaning you have some experience or skill to deal with a situation that you’ve never encountered. And you’ll discover it only when you encounter that situation. So unknown knowns are mostly pleasant surprises.
In real estate, I probably have a lot of unknown knowns that would surface if I tackled a ground up hotel deal in Miami. There’s probably a ton of underlying similarities with the deals I’ve already worked on. I just wouldn’t find out unless I started a ground up hotel deal in Miami. But I almost definitely won’t, because my known unknowns make it a pretty risky endeavor.
In proptech, a lot of founders go in with the assumption that their previous experience will naturally manifest itself in the form of unknown knowns in a new industry. And they’re not wrong. Especially second-time founders. Because after you’ve run and exited a business, your experience is a valid framework for practically any future business.
Unknown Unknowns
Finally, there are the true unknowns – the unknown unknowns – which are essentially impossible for you to predict or plan for. Because you don’t know what you don’t know. If you’re just starting your career or entering a new industry, you’re going to get a beatdown from unknown unknowns for years to come. That’s why they call it the school of hard knocks.
Uncovering unknown unknowns requires an open mind and willingness to experiment. Constantly putting yourself in new situations will lead you accumulating new experience. And it’s especially important to do it while you’re young and have a higher risk appetite.
Alternatively, you could have a mentor or advisor straight up tell you what you don’t realize you don’t know. It’s a massive shortcut. (And if you’re a proptech founder without real estate experience, schedule an intro call with me and I’ll drop some real estate knowledge on you.)
In real estate, I absolutely dread the unknown unknowns. Real estate valuations rely on stability and predictability. Unknowns are the antithesis to predictability. Unknowns are why I have to budget 10-15% contingency into construction. Or plan for double the schedule I think I can complete a job in. Or set aside a portion of NOI for future capex. And uncovering an unknown is typically stressful and expensive.
For proptech startups, unknown unknowns are just as devastating. “The best laid plans of mice and men” sums it up quite nicely. You can run your customer discovery experiments and build a product, but you probably didn’t plan for a sudden tightening of VC funding or worldwide inflation. Unknown unknowns are startup killers.
On the bright side, they truly build character. Navigating tough situations successfully will make you better at whatever you do. For example, the market conditions in NYC that arose from the Covid-19 lockdowns were the toughest work situation I’ve ever dealt with in my life. I suffered health problems because of all the stress. But I emerged with the confidence to be able to handle most NYC multifamily deals blindfolded.
Keep Learning
No matter what field or profession you work in, growing your knowledge base is essential for improving your skillset and making progress towards whatever goals you may have set for yourself. Over time, as your experience grows, so too should your library of known knowns and known unknowns; expanding into ever more sophisticated concepts as well as providing a solid foundation upon which future learning can take place. With each success comes a greater understanding of both yourself and your environment; enabling further growth far beyond what was initially thought possible.
Derek is the founder of The Proptech Scout, as well as an NYC landlord and real estate developer. In a former career, he bootstrapped and exited an e-commerce business while side hustling as a strategy consultant.
