Author: MIKE

An Acquisition Anonymous Amoeba

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There is a business. It sells things. From the outside it looks just like a business should.

But.

This business has something.

This business has potential.

Who notices the potential?

Maybe the current owner. Maybe she knows that some parts are humming along and some parts need some work. Maybe she’s up for it.

Maybe she’s not.

The gap between the business and the potential is the acquisition appeal. Another person sees this. Another person wants to buy the business from the owner and grow the business.

They want the business to reach its potential.

They have ideas.

Even better, they have cash.

Hopefully they have experience too.

Experience matters because some parts of the business are at their potential. “Do not change these things” the buyer’s silent voice says. “Just because you can doesn’t mean you should. Don’t just do something, sit there.”

“Look here” says the silent voice, “work on this.” The buyer looks. Over there the business has not reached its potential. Over there is the success gap. “Work there,” says the silent voice.

This post came about after listening to a lot of the Acquisitions Anonymous podcast. Businesses truly are unique opportunities and success seems to come from someone having the time, space, and skills to notice where a business can grow and where it cannot. Technology sometimes helps a lot and sometimes doesn’t (though behind the scenes it seems like it always helps). Hire sales and scale sometimes works, and sometimes doesn’t. E-commerce best practices sometimes help a lot, but sometimes a business is at its potential.

And sadly, my favorite brunch place no longer has the digital queue. Servers slinging names is the potential.

An hour wait at Disney

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You are at Disney. You planned ahead. You open Touring Plans (theme park visit optimizing software). Here’s how the creator thinks about what you see.

“Let’s say we were trying to predict what (wait time) Disney is posting for Rock ‘n’ Roller Coaster at Disney’s Hollywood Studios. We have to do two things. We have to predict the number Disney is going to show on the wait time sign in front of the ride, and then we have to predict the actual wait time. We have to predict both because if we showed only our expected wait time and you walk up to the ride and see the posted wait time is sixty minutes and we are predicting five minutes, then you won’t believe our number.” – Len Testa, Causal Inference, October 2021

Like weather reports or repair times, Testa and his team generate more value by being less accurate.

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In the fall of 2021 Disney released a similar feature to what Testa created: Genie. It will be an interesting TiVo problem .

Car sales and skin creams

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One prompt for a business is to ask: where are my customers and what do they see? The answer and application leads to the Customer Acquisition Cost. The best businesses find creative answers and the answers aren’t always obvious. Where are Gen Z customers? TikTok and Target. But a beauty brand cannot sell in Target.

The Target problem for a natural beauty brand has to do with the second half of the question. Gen-Z-beauty-LC may be at Target, but so are a bunch of other products, mostly at cheaper prices. The customers compare brands and framing on price is powerful.

A good business then, finds customers and frames their value relative to what the customer sees.

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In 1918 Ford’s market share was 50%. A dozen years later it was 25%. Oof. Competition. One innovation where Ford floundered was financing which Henry Ford considered reprehensible. But the innovation treadmill continues today. “There is so much competition,” in the auto market, said Carvana founder Ernie Garcia, “which leads to the need to be more creative to monetize the transaction.” Dealers don’t just make money selling cars.

Dealers began with: Where are your customers and what do they see? For auto dealers this happens on multiple levels. First regionally, dealerships have geographical footprints and internet homepages. At that level the customer communication has to be big and use framing (zero anything works well too).

Zoom in and the next level is the dealer lot. Here customers are captive, and unlike Gen-Z at Target, there’s no framing. Dealerships use financing, warranties, trade-in offers, and accessories to enhance their margin becuase it’s hard for customers to shop around. Amazingly it seems that even the medium of contracts affects sales.

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There are multiple JTBD for new cars and skin screams. One is utility. Another, like Aviation magazine, is appearing cool (and these status games are okay). When car dealers use fat margin products they can ‘offer’ sticker discounts or trade-in boosts as visible and easy-to-understand wins for the consumer. Getting a good deal and sharing the story is a job to be done too.

Business is hard. Innovation and its competition are never ending but this is a good challenge. One way to face it is to ask, where are my customers and what do they see?

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I did not follow my own advice – always buy two new cars – and bought a minivan. It wasn’t a blast. But I did sell my old car using Carvana and that was pretty good.

“Aviation porn”

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Jobs-to-be-done is one of our favorite topics because the examples are just so much fun. Here is another.

“What we are trying to do is what I call ‘aviation porn’. The reason people subscribe to Flying (magazine) is because of the beautiful photography, the long form evergreen articles, and the fact that when their friends and family come over they see the aviation publication. It takes a lot of work and effort to become a pilot and the people that are pilots are super dedicated to it and want to show their friends.”

Craig Fuller, Think Like an Owner podcast

Fuller explained that when he took over the magazine there was a push to go more digital, and he did that, but not without forgetting the JTBD of the print magazine.

Post-it note math

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It was October 2000 or thereabouts and Jacob Lund Fisker wanted to know if someone could live a sustainable and rich life.

“I did a little back of the envelope math. We physicist restrict ourselves to post it notes typically. I took the global GDP, divided it by the global population, and took our ecological footprint number and divided by it as well. If everyone did what I was setting out to do, the maximum each person could spend was six thousand dollars per person per year.” – Jacob Lund Fisker, Through Conversations, November 2021

He did it and Fisker retired early.

There’s a few things going on with FIRE. One is attention grabbing, everyone has a means to share their story and the atypical gets attention. Another is the financial conditions, it’s easier (though not easy) than ever to make a large amount of money, in a short amount of time, and invest in a mostly up market. The last and staying part of FIRE is the intentionality. It is impossible to FIRE without prioritizing one’s life.

Fisker’s philosophy is my favorite because he’s a system thinker. Early Retirement Extreme is a book that starts with systems and ends with personal finance. Saving half of one’s income is the act but you can’t do just one thing.

We’ve looked at spreadsheets for emergency funds, 401Ks, and how many touchdowns a quarterback will throw. Spreadsheets offer precision with numbers but don’t address our systems. Basic math is fine if the system is great but it doesn’t matter how great the math if the system is shit.

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My two favorite books about systems are Fisker’s book Early Retirement Extreme and The Systems Bible.

QR IQ

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This is part of the made up start up series.

My mother-in-law has a problem when she goes out to eat. The problem is a combination of information, imagination, and conceptualization. The problem is: my mother-in-law doesn’t know what to order.

But she’s 70 years old. She has solutions. Is it familiar? Is there a picture? Is it recommended? Everything she orders falls into those three buckets. And thanks to Covid19 all that can change.

Part of the (uneven) Covid19 strategy are QR menus. These codes mostly link to a pdf version of the old menu. Consequently, these menus mostly suck. PDF or HTML menus take all of the worst parts of ordering food and make them more difficult to see. But things don’t have to be this way. QR codes for menus are the perfect opportunity for this peripheral technology to become a main course.

Here’s the pitch: a startup that builds interactive menus.

This is a hard problem. Restaurants are hectic, restaurant retention is tough, and there’s not a lot of excess capital for investment, but QR code menus may be a wise pairing thanks to framing.

Restaurant menus are terrible at framing. A paper menu is static and the only form of framing is the relative price framing. I’m not buying the most expensive or cheapest so this middle item seems fine. A digital menu can be dynamic. The options for choice architecture are abundant.

  • Guests who liked this also liked this.
  • The chef recommends this with that.
  • Add in this appetizer for only $3 more.
  • This item has been ordered 1,000 times this month.

All this startup needs is a few salespeople, a copy of Cialdini’s Influence, and an AWS account!

Restaurants are hired for multiple jobs: food, atmosphere, social status, signaling, and so on. Restaurants are also hired to make things easier: I don’t have to cook, clean, plan, or shoulder the burden of honey-what-is-for-dinner-tonight? A well built menu can reduce the diner’s decision demand.

This startup isn’t obvious because customers won’t articulate why they had a nice time at Dariano’s Diner but they will have a nice time because it’s a better experience which begins with the menu.

Yes, there are many restaurants to sell to – but this startup is competing with non-consumption. This isn’t a better reservation system (though it could be) or a better procurement provider (it could be that too), it only has to be better than a PDF or webpage.

So join me in raising funds for some QR IQ, a business that will build on human psychology to create a better dining experience.

March 3, 2022 update: This works! At least for automotive. The full video is here but according to one ex-industry person the digital signing of documents can increase (via framing I’d wager!!) back-end profits by 25%.

Three origin narratives

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Maybe narratives are a sort of storage optimization solution. I can’t remember everything so a narrative is created to remember the thing.

Tom Brady hasn’t always been Tom Brady. “We’ve gone back and retrograded 2006 and 2007,” said Eric Eager, “and when we retrograded ’06, Peyton Manning was something like two standard deviations from anybody else. Tom Brady at the time was just kind of average. It was remarkable to see. We’ve grown accustomed to seeing Tom Brady as this great player and probably one of the best of all-time, and when we turned on the tape it wasn’t quite that way.”

Jack Bogle hasn’t always been Jack Bogle.

Lastly, Native deodorant per Sam Parr, hasn’t always been a mission driven company. Founder Moiz Ali was looking for a business to start and ended up on deodorant thanks to his pregnant sister and unit economics. He wanted a business with repeat purchases and minimal shipping costs. Mattresses didn’t fit the bill but deodorant did.

We are narrative creatures, and these narratives are true but they are not the full story. Maybe the way to think about origin stories is like a movie trailer: it’s a short way to communicate the gist.

Energy for change

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This post is part of our thinking about ease and its counterpart design.

Football in Florida in February

John List begins his book, The Voltage Effect, with the example of Nancy Reagan’s D.A.R.E. program. That program, failed, List notes because it was based on a false positive. “It was a pretty large scale study in Honolulu,” List said, “the problem was it was only one study, it was never replicated, and it was never the truth.” Part of the reason D.A.R.E. is a case of something is always happening is the social incentive. It felt good to have a solution. It felt good to align with Nancy Reagan or local law enforcement or your child’s school.

A modern parallel is Michelle Obama’s Let’s Move! program. My year of AmeriCorp was in this heyday and it felt good to align with a political party or athletes or your child’s school.

Contrast Obama’s and Reagan’s initiatives with what I witnessed the first week of February: Florida football. This park was swarming with kids. Every NFL team was represented (and what a rollercoaster the kids on the Bengals team went through) and the parents were into it.

There’s no lack of football in Florida. If the current First Lady wanted a win, she should create a program that further promoted football in Florida. And the reason why is the ease. There’s not friction for Florida football. The weather is good to great (though dangerously hot) all year long. The culture welcomes football. There’s lots of people already doing it, so doing more of it wouldn’t be too much. Contrast Florida football with ‘Just Say No!’ or ‘Let’s Move!’. All the things in favor of Florida football are missing for the former First Ladies.

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How to vaccinate the world: Hire the smartest, most attractive, and persuasive medical students (doctors and nurses) to go door-to-door across the country. Or along the football theme, get the best recruiters. Have them sit on the couch, look the person in the eye, and sell them on vaccination. That would work. But like ‘Just Say No!’ and ‘Let’s Move!’ it takes too much energy. But football in Florida? No energy needed.

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There’s a gap between things I would like this person to do and things this person does. Energy closes the gap. Wordle wonderfully demonstrates energy. It’s easy to learn, easy to share, easy to play, easy to habituate. But Wordle will fade because it struck kindling. Unlike football in Florida there’s not a lot of factors working in its favor like with Facebook or automotive culture or take-out-pizza.

Energy, ease, friction, design – they’re all ways to address the same idea, how to change.

WLR 001

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What I watched, listened, and read this week. Another experiment on note taking.

Business Breakdowns, Basic Fit. Through controlling costs (no pool, economies of scale for equipment, low payroll thanks to technology), Basic Fit serves the fitness JTBD. The company also has psychological advantages: not going to the gym is different than cancelling and some members don’t churn because the membership is like an ‘option’ to workout.

Tyler Cowen’s conversation with Chuck Klosterman. A visit to the ’90s. An answer to the question: Is the United States the best counter-cyclical asset? And, moving the goalposts after a lifetime of work.

The Science of Change: Netflix. In the DVD days customer satisfaction was driven bytaste and selection. Do you have what I want and how fast can I get it? Netflix addressed this two ways. One, create many distribution centers which reduced shipping times. Two, showcase (aka framing) DVD titles available at the nearby centers. Netflix’s internal question: Does this delight customers in hard to copy margin enhancing ways?

Wharton Moneyball 2/16/22. In a talk about transgender athlete the hosts note that at the extremes men and women are not competitive but on average they are. Another case of average ‘meanings‘.

Acquisitions Anonymous. Selling $9mm of golf clubs in year? DTC brands are best to begin, not buy.

The Indicator, How Hollywood changed the wine industry. Did the 2004 film Sideways lead to more Pinot production? Apparently yes, 75% more.

ILTB, Peter Chernin. Some businesses have more advantages than others and one way to notice them is merchandise. Another may be: will people stand in a line for this?

The making of Wordle, an interview with Josh Wardle on Spectacular Vernacular. Wardle, like the iPhone engineers, built a game prototype for his partner to play which led to the database of words. He also iterated with sharing and watched users. 🟩🟩🟩🟩🟩