Tag: ILTB podcast

Words hiding value

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Patrick O’Shaughnessy asks Gaurav Kapadia what makes a great business. It’s all the basic stuff, “but really when you go down to it, if you look at a lot of the great businesses, they’ve created niche monopoly things. No one likes to say it because you’re not allowed to say it.” Kapadia lists at least four monopolies: cable companies, software companies, aircraft engine manufacturers, and medical device companies – but the real insight is no one is allowed to say it.

Names mean competition. If something is unaddressed with words it’s less available as thought and underpriced in cost (the market mechanism).

Our new dictionary series highlights the opposite end of Kapadia’s point. New words new thoughts.

Later Kapadia talks about diversity and inclusion in the investing industry. “I don’t think anyone’s heart is in the wrong place, I think everyone’s heart is in the right place. So we have to stipulate that, people really care, but so many decisions are made by the network. And so the only way you can break down existing network effects is with data.”

For words like monopoly the network has agreed on one meaning, and it’s mispricing. For words like diversity, the network has agreed on one meaning, and again it is mispriced.

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The same week Mike Prada joined Wharton Moneyball and was asked a kind of ‘what’s next in basketball?’ question. One thing Prada pondered was what if Memphis is playing the next form of basketball? There’s no fast break or half court offense, only running. Types of offense thinking, like monopoly and diversity, hides value.

JTBD is iteration

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The 2012 job-to-be-done at Calm was meditation. But when engineers looked at the usage data they noticed something interesting, there was a lot of Calm usage at night. “When they started productizing around sleep,” explained Vinny Pujji, “that’s when it opened up from being just a meditation focus thing to what they are today, which is mental fitness.”

We’ve looked at a few JTBD ideas: does the bundle of good explain the transaction, as it does with free breakfast? Is there zombie revenue? Even Jazzercise was job-ercised.

With hindsight ‘jobs’ sound easy, but they are iterated solutions. David Packles of Peloton shared (October 2020) two instances where Peloton had to iterate on their first JTBD solution.

First, Packles and his team looked at the largest Peloton Facebook groups. Rather than build for the power users, a no-no, they looked for wider use cases, and thought peole wanted to see when their friends were working out.

“People hated it,” said Packles. While the camaraderie between instructors and peers was important to users, the now-ness was not. So they tinkered. There was almost always at least two people in the same workout at the same time. ‘Friends working out now’ became ‘here now’. This worked, forty percent of daily active users now use this feature.

A second instance was the location field. Rather than where, people used it for what. Packles himself is a ‘Peloton dad’. So Peloton added tags which per Packles, “exploded in popularity” and “became a means of expressing yourself rather than connecting with club.” Half of DAUs have some kind of tag. Rather than people near me, the Peloton users wanted people like me.

That’s interesting moments help us understand how other people see the world. Instagram once had a tool that fought spam by looking for accounts that posted a lot and deleted a lot. During one glance through the data, Mike System noticed that in Indonesia a person was doing that – but in an interesting way. Way back in 2013 she was uploading photos of her store’s products and when they sold she would remove the post. Interesting right?

JTBD feels like a spirit of philosophy as much as it feels like a technique or tactic. It’s a way of regularly reflecting on the world. JTBD isn’t an equation, it’s a long process with a lot of inquiry. But it’s worth the work.

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Two cool Peloton stats: they film thirty hours of content a day and their 18 month churn is 14%.

No bad habits, no gold stars

MIKE

We know nothing about venture capital!

“Correct, we have no bad habits. We were total outsiders. And, we weren’t kids that went to ivy league schools and worked at Goldman Sachs, so we weren’t accustomed to getting gold stars for painting in the lines. We were accustomed to doing things creatively outside the lines.” – David Fialkow, September 2021

People enter situations with a culture which can influence how they act. In society, and wearing a mask. In conversation, as debate structure. In politics, or anytime there is leadership.

People enter situations with incentives which can influence how they act. In music, ship platinum, receive gold. In football, three star recruits. In startups, what OKR? In horse racing, to race or to sell?

One of the tricky parts of life that covid revealed is the heterogeneity in life. Like, A LOT of variation. This same effect exists in the more mundane world of organizations. There’s no set of incentives or culture that always works. But there is a culture and there are incentives and each matter.

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Have a nice day.

The ‘Job’ of what is said

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“I thought hard about what other people are trying to accomplish and I tried to shape my language in a way they could hear it. That’s half of what I talk to founders about. It’s just that, how to build the API to the other person’s brain. It doesn’t matter what you say. It matters what they hear, and it matters how they feel.”

Sam Hinkie, ILTB

That expression has a real JTBD-ness to it. It’s not the how something is done but the what, and if it’s the right what.

Tracking Tom. After a monster of a game, Tom Brady is 162 yards ahead of pace, his largest difference of the year. If Brady plays the rest of the games he’ll likely hit the over and our speculation will be wrong but our reasoning continues to hold, though maybe less than we should have suspected. One question comes to mind:

Did we think about base rates wrong? The key to base rates is to choose the right reference class. Brady seems fanatical about his health, and maybe we should have taken a page from Morey and made a cross-class comparison to Lebron James.

There’s still more ‘zero’ outcomes than not. Tampa could clinch a playoff spot, or be eliminated. Brady could be injured or rest before the playoffs.

We speculated at the start of the season there were a lot more zero to 200-yard games (injury, rest, offense, etc.) than 400+-yard games. That’s held in the data, Brady’s median yards per game is 11 yards less than his average. It feels incredibly odds, but we’ll be wrong for the right reasons.

Sarah Tavel

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Sarah Tavel spoke with Patrick O’Shaughnessy and in their discussion included five good questions. Perspectives from differing industries make these questions especially helpful, a change in point-of-view is worth forty IQ.

What weaknesses accompany competitor’s strengths? Ebay is a behemoth. They sell everything. So Tavel points to Goat, “and one of the founders had ordered a pair of sneakers off of eBay, opened the box up, and they were counterfeit.” That was their founding insight, eBay has all the supply, which includes fake products.

What business serves too many people? New companies arise to serve new needs. One helpful framing is to read is books from the late-90s an early 00s about technology and the remarkable respect for Microsoft. Everyone worried about them but large size brings weaknesses too. Why does TikTok work in a YouTube world? Why does Snapchat when there’s Facebook? Why Zoom with Skype?

Does this exist elsewhere? Tavel said, “It doesn’t really make much sense if you’re a real estate broker to be on LinkedIn. It’s not your network.” What if there were a network where brokers could share leads then share commissions? Poker does this when one player stakes another. “Real estate brokers do share leads with each other and if one of them converts they get a share of the commission, but there is no formal system.” There’s no such thing as new problems.

What job—and this may be different from what customers say they want—do customers really want? At Pinterest the power users wanted to rearrange pins on their board. This was a difficult engineering challenge and only requested by .1% of users—but that was still a lot of people so the Pinterest team built the feature. “It was a symptom of something else not working in the product, which was an inability to search your boards,” Tavel explained. They didn’t know the JTBD.

What choices reinforce our advantages? “Anytime a user clicks or taps they are using energy and you want to direct that energy in a way that creates the most value for the system that you have. Usually there’s a core action in your system that is most correlated with a user retaining, and creates accruing benefit for your product.” Richard Rumelt’s Good Strategy Bad Strategy is summed up by a different phrasing of the same question; what collection of choices is the most synergistic?

 

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