Patrick O’Shaughnessy interviews John Fio

Link: https://www.joincolossus.com/episodes/86445795/fiorentino-creating-magic-for-consumers?tab=transcript

Patrick’s intro:

My guest today is John Fiorentino. John is a product inventor and entrepreneur who, in the space of a few years, has bootstrapped four products: Gravity Blanket, Moon Pod, Moon Pals and Birthdate Candles, which have collectively sold hundreds of millions of dollars of revenue.

Our conversation is quite different than normal. Alongside his successful brands, John has had a range of life experiences from starting as a Jazz musician to working for Justin Bieber that give him an original world view. I was especially interested in his points around product positioning, creating magic for consumers, not letting yourself become the product and how to build enduring brands. 

The following excerpts are notes I want to save. IT’s important to note that Fio’s insights are derived from his work in consumer brands and he makes no warranty of them applying universally. All emphasis are mine:

When marketing can’t be disentangled from the product

One of my favorite brand stories of all time. Sorry, if I’m butchering the story, but something like this happened, where Coca-Cola had hundreds of thousands of taste testers and they put the same Coca-Cola formula in a bunch of different bottles and cans and cups. And the thing that they realized was that when someone drank the same Coca-Cola formula from a white cup and then they drank that same Coca-Cola formula in a can that had the Coca-Cola logo on it, not only did different parts of their brain lit up, different parts of their brain that was triggered by taste buds lit up.

So positioning that product around, it literally changed the way that your brain experienced the taste. When people say that ideas are not valuable, the idea of getting to this place where you are just flicking someone’s brain 10% to make them imagine something different while they engage with the thing is a completely different product.
And that is competitive. You can compete on that. And if you own that positioning in the consumer’s mind, that is what I would like to call a real moat. Do not underestimate the power of the positioning and the ideas that come around how to position something the right way because, in my opinion, that is the product.

[Kris: Rory Sutherland explains a neurological theory for why this effect:  Prediction combined with Bayesian updating makes more sense as a data architecture than perceiving everything and then forging it into a whole. If this is true, it explains many oddities, like the fact that advertising changes the taste of a product.]

It’s no accident that Slow Productivity embedded is the chewy center of the woo

In history, I think if you look at these paradigm-shifting moments and ideas and creations, inventions and people, the through line is that there is a really fucking weird non-through line. You can’t get there by doing [their] morning routine, you got to go a little deeper than that. And if you look at Leonardo da Vinci, you read about how he used to spend his day, where I read his book, one of the craziest things that stood out to me was like he just spent six months taking notes on how the woodpecker’s tongue worked. I was like, “What? That is what got his attention?” And then the guy who invented Pokémon was just out collecting bugs. And James Cameron was just a truck driver that fell into taking over a movie that was about to fail. And then he just basically fucking invented Terminator. What are the things that are actually driving those people? It’s not some quantifiable thing. It is some undeniable spirit that they have this fearlessness where they are able and comfortable to just follow in a cheesy way. They’re following their heart. And they are so committed to that truth that it leads them down these windy insane paths that, that path actually ends up having these paradigmatic discoveries or inventions. What is the through line there? It is this unbelievable commitment, obsession, transcendent infatuation with, in my opinion, finding something that is true. And I think things that are true aren’t really quantifiable, which is why if you talk to most people and what they’re doing with their day, they’re trying to get money. They’re trying to make a lot of money. That doesn’t really stand the test of time. I don’t think money rules the world. I think this undeniable magic rules the world, and I think the people that are able to tap into that and shape that rule the world, and I think money follows that. Money is not the thing. Money is the measurement of the thing, and we’ve kind of forgotten about that. I call it money worship or number worship. We’ve become obsessed with this idea that truth is quantifiable. The point is not money. The point is to make incredible things for the world that then gets you money. That subtle difference is unbelievably important.

[Kris: This is reminiscent of so much of Cal Newport’s slow productivity ideas]

Products that are pulled not pushed

For 99% of consumer product businesses, if you need an investment, you don’t have a business because all of my businesses have been profitable on day one. On day one, there is enough of a demand for it, where if I show it to 1,000 people, 200 of them are buying it. If you don’t have that metric, you don’t have a business.

And if you can’t convince the consumer that the thing that you’re selling is so compelling that they should wait six months for you to deliver the thing that you are describing, you either don’t have a good product, you can’t describe it well enough or the market doesn’t give a shit. And I can tell that in 10 seconds. And that is something that makes people unbelievably uncomfortable and terrified because again, that’s scary. That is a path that you can’t tell me there is no step-by-step path to get you out of that

[Kris: again here’s Newport — If you feel like you have to rush to compete in something or race in some way, chances are you don’t have a great sustainable competitive advantage.]

The cardinal mistake — forgetting that your cult of personality serves the product not the other way around

Patrick: I want to dig a little bit more on this. Apparent fine line between genius, people able to create these elements of magic, let’s call — let’s stick with that word, and something opposite genius. I think five years ago, if you polled everyone is Kanye a genius, most people would probably say, yes. Now I think probably more people would say, he is a psychopath. He said awful and seems to deeply believe some really terrible things.

And then to invoke a name like P.T. Barnum, for example, who I’m sure was some form of a genius. But normally, if you hear that, it’s someone saying something negative about you, like you’re sort of a con artist. Even people like Elon, there just seems to be this fine line between these magic makers, having history write them one way or the other. Is Disney a con artist or a genius? In what ways is he different from P.T. Barnum, is he different from Elon?

There just seems to be this really delicate line. So maybe talk about that line.

John: There is a hierarchy and a formula that you spiritually have to stay within or you get crucified. My way of describing that is you need an idea, something bigger than yourself. And then you need to be the shepherd of that idea and then the way that you spread that message needs to have a product and then that product goes to an audience.

So this is a very real hierarchy in my mind where it makes a lot of sense where if you start to mess those things up, it either becomes extremely less valuable or it blows up. The cardinal sin where you can get really, really far really, really fast is if you turn yourself into the product, which then makes you the idea. And when you become your product and idea, you get crucified. It’s like a very causative effect formula for human psychology. You see the scapegoat thing. You see the story over and over and over again. The crowd turns against the hero and basically crucifies them, you see this. It’s the oldest story of all time.

You can really, really see that play out. And again, do these little tests. Around the world, do you think more people know Elon Musk or the word Tesla? There is a line where he’s crossing where it’s becoming Elon. That’s dangerous. Now you are the thing.

Look at what happened to Trump. If you break that order, you go quick. You can create insane momentum and you become this crazy passionate leader, but if you aren’t doing it for something bigger than yourself, you get sniffed out and you just get crushed. The audience is like, they don’t trust you and they throw you out. Trump got there really, really quick, unbelievably effectively, and then he’s done. Maybe that’s powers that be, maybe that’s the audience, maybe that’s people just got sick of him. My critique on someone that doesn’t get that formula right is like, remind me of the bigger thing. With Trump, it felt like he was for Trump. It didn’t really feel like he was ready to rebuild America and put heart and soul back into this country and unify us. It was like, no, no, no, I’m going to win. And you can see in his tweets, search query of how many times he says me or I or something, which by the way is a leading indicator of serious depression and suicide. If you start saying I and me, it is the highest leading indicator that you’re about to fall into depression.

You put yourself first, you go to hell. It’s just a law that I think exists where if you can use that as a guide of, like, it keeps everyone in check. No one wants to worship a guy. They want to worship a guy that is sacrificing himself for something bigger, and he is showing the world that it’s possible to commit himself to something bigger than yourself, which I think is a very human struggle. It’s a daily quest to find the ways in which to get outside of yourself and help someone else. For whatever reason, a lot of people are fearful of that. They don’t want to do it and they’re scared and it’s vulnerability or whatever, but when you do, you just automatically feel better. You don’t feel necessarily more powerful, which can be unbelievably addicting and intoxicating, but you definitely feel better.

Again, there’s a very real reason why our heart, brain and soul acts that way. And I think that when you tap into that and you understand that there is this real hierarchy of truth and value and you submit to that, now you can be trusted. And don’t get it wrong, consumers, people are unbelievably smart. Unbelievably smart. You cannot trick them.

So what is the role of the creator?

Patrick acknowledges “ it does seem like some of the most successful people have figured out that if the founder or the artist or something is a bit more a part of the story themselves, it’s like a force multiplier. Maybe say like if you’re advising, let’s say, your friends who are starting a company, how would you tell them to build and engage with an audience, if at all?

John: I think this is where we’re heading to a really interesting time, where it’s like the things that are going to be valuable are the things that you can’t really teach or copy. And that’s just going to be like, how do you teach someone how to be someone’s good, best friend that’s entertaining? I don’t know. Can you?

I would say, if you are an intelligent, personable, funny, charismatic person, that is an unbelievably unique asset that is more and more rare in the world that we are headed in, and you better figure out how to insert yourself into the organism of the company that you’re building because that can be a very valuable force multiplier to get you attention in very unique ways that did not really exist.

But I would say caution, because if you let that get out of whack, you’re going to get killed. I think it’s a very, very delicate balance. And I also think it’s going to be really obvious when people are doing this with the intention of coming up with a formula of how to maximize shareholder value. It’s so obvious when someone starts a podcast because they think it’s going to help them build their audience. It’s just so obvious.

You’re one of the only podcasts I listen to. Why? Because you’re the best interviewer ever. You have a very, very unique ability to interview and make me feel incredibly comfortable to explore these things in my head and ask these very, very poignant questions that’s super rare from an interviewer, which is why you have one of the best podcasts out there. If you try to teach me how to do that, you couldn’t do that.

But because you can do that, I would say, holy shit, quadruple down on that. That will give you — because no one else can do this, this will give you an advantage on being everyone’s best friend that’s the best person at asking questions to the most interesting people. And oh, by the way, I want to meet X, Y and Z. Now you’re in that top 150 range that I was talking about, and you’re going to get that deal flow. [John has an idea he calls Fio’s Number that is similar to Dunbar’s number where you want to be one of the first people think of when they think of X]

Notions of personality typing or a focus on one’s own identity as a unique thing to be cultivated and cherished in contrast to others

I think these archetypal frameworks are interesting to create. I don’t think that they’re interesting to try to put on yourself. I think this idea of self and identity and self-love is similar to practicing schizophrenia. It is not real. It is not healthy, and it does not help you become who you become. You become who you become through movement and motion and following a set of beliefs that puts you in motion. You don’t get to become great by saying, “I’m great. I identify as great.” That’s not for me to decide.

[Kris: McConaughey from an outstanding commencement speech: if we stay in the process, within ourselves, in the joy of the doing, we will never choke at the finish line. Why? Because we aren’t thinking of the finish line, we’re not looking at the clock, we’re not watching ourselves on the Jumbotron performing the very act we are in the middle of. No, we’re in the process, the APPROACH IS THE DESTINATION… and we are NEVER finished. Bo Jackson ran over the goal line, through the end zone and up the tunnel — the greatest snipers and marksmen in the world don’t aim at the target, they aim on the other side of it. We do our best when our destinations are beyond the “measurement,” when our reach continually exceeds our grasp, when we have immortal finish lines. When we do this, the race is never over. The journey has no port. The adventure never ends because we are always on our way. Do this, and let them tap us on the shoulder and say, “hey, you scored.” Let them tell you “You won.” Let them come tell you, “you can go home now.” Let them say “I love you too.” Let them say “thank you.” ]

All of this shit that I’m saying, we’ll look back on this in 20, 30 years, and it will be super clear if I am actually a creator or if I just was a fan boy.

And I won’t be able to convince you. We both will just know. It would just be so obvious. And to me, that is identity. These things that people try to put themselves into, to me, it’s so much pent-up energy in the wrong direction. Don’t look inwards. Look outwards. Serve something bigger than yourself. Do not try to make yourself happy. Try to make someone else happy. And paradoxically, that is what’s going to make you the happiest. [Kris: notice how self-effacing this is]

You’re not going to find love by figuring out what love language you are and who is going to give you that love language. It’s like, no, you find that by making a choice to love someone every single day. I spent the last 5 years or so, as I’m getting to this point in my life, spending tons and tons of time finding people like yourself who I really, really admire who, in my mind, have it all. They have the family, they have the wife, they have success and they’re on this path that doesn’t look like it’s going to end. And they all say very, very similar things. Every 75-year-old billionaire that has their family together just sounds like the exact same person. Which is a contrarian view that I have, which I design and create for is that we are all the exact same. Everyone is the exact same.

We’re all playing the same game. We’re all trying to find love. We’re all trying to eat, and we’re all trying to survive. And when those incentives are at the core of our daily life, everyone plays very, very similar games. Think about how different everyone could act. Everyone is doing the exact same thing. If you’re focusing on these differences, you’re splitting hairs that are just meaningless. And if you start to create, you try to work every day around the core assumption that we are way, way, way more similar, if not almost entirely identical than different, in my opinion, you’re going to have a lot more success.

[Kris: Some related quips about when therapy-talk bleeds into self-defeating snowflakism. 

• VGR’s take on the strong/weak meme cycle: a world talking itself to death where action would actually help
• An exchange between the main characters in Tomorrow, Tomorrow, and Tomorrow:
  Sam: “The knowledge and experience we have—it isn’t necessarily that helpful, in a way.”
  Sadie: “It’s so funny you should say this, because if you were one of my students, you’d be wearing your pain like a badge of honor. This generation doesn’t hide anything from anyone. My class talks a lot about their traumas. And how their traumas inform their games. They, honest to God, think their traumas are the most interesting thing about them. I sound like I’m making fun, and I am a little, but I don’t mean to be. They’re so different from us, really. Their standards are higher; they call bullshit on so much of the sexism and racism that I, at least, just lived with. But that’s also made them kind of, well, humorless.
  “If their traumas are the most interesting things about them, how do they get over any of it?” Sam asked. “I don’t think they do. Or maybe they don’t have to, I don’t know.”]

Fio continues:

You’re kind of breaking rule number one: don’t turn yourself into the product. You can’t craft yourself. You can submit to something and serve that, but you can’t craft yourself.

Being in the Hollywood world, there was a lot of these conversations where it was like, the product should be a blanket. When I would try to manage my artist, it was like, I don’t want to make you the product. This is weird. I don’t want to tell you how to do certain things. That’s a weird thing. Like you are becoming the product. And that’s a super, super dangerous thing. And what you’re talking about with these things is like you’re trying to craft yourself. And that is essentially what celebrities do. And just really pay attention to a celebrity. How many people go on these crazy runs where they are that thing for like a year? There’s 50, 60 new names that come up every year where you’re like, oh my God, and then they’re gone. It’s like what is that guy doing? Was that really worth it? Was that the game that he wanted to play? Was that the game he should have played? Or should he have tried to do something a little different, a little bigger?

All these artists that ride these fame waves, they all crash until they come out with a hit again. So if they lose sight of that, it really doesn’t matter what the personality game is they’re playing. If they make a hit, they’re back on top. So does it really matter what games? I think like Frank Ocean and Adele do this really well. They go into a hole for 10 years, and then they just emerge. They drop literally generational-defining music and then they disappear. [Kris: Slow productivity again — this is Newport’s description of Grisham]

It’s like, wow, that dude is a light maker. That dude is making magic. And he’s not the product. He’s cool. I want to hang out with him. I was in L.A. the other day and I had lunch next to him. There was not a bone in my body that would let me go up to him and be like, “Dude, can I get a picture?” Because he was not the thing. He did the honorable thing of making himself smaller to a larger thing he believed, which is the art. And when someone makes that humble decision, I trust them and I treat them like a real person. And if he’s sitting there crafting these archetypal things of what he’s going to do to make himself stand out as a personality, this and this and this, I don’t trust him.

He might get my attention for a year, but I’m not messing with that guy on a 10-year time line until he comes out with a generational-defining hit. And the second he’s capable of doing that, he’s going to realize that the other shit doesn’t matter at all.

A general thought I had when listening to this and many other interviews:

Business is heavily theorized but there seems to be little truth. So much competing information. In a way the things I’m sharing are revealing my bias more than uncovering truth. But I suspect it’s more important to have a point of view and just get to work than hand-wringing about your theories in a wicked domain. It’s a parallel idea to why investing feels like astrology — everything that makes sense gets overbid and the only place to find an edge is where at first it doesn’t appear to make sense. You do and if you can retrofit a why well that’s just a luxury.

Patrick O’Shaughnessey interviewed David Senra, the host of the outstanding Founders Podcast. I love David’s passion and storytelling. This interview was the best one I listened to this year. I listened to it several times and it was the first time I asked my son (now 9) to listen to an interview with me. It felt like one of those chats that could inspire an impressionable mind.

They discuss the premise, motivation, and lessons from David’s podcast. The premise of Founders is David studies famous entrepreneurs, scientists, artists or really any creatives that made a large impact and distills pitfalls and lessons from their stories. It doesn’t sound novel, except David’s personality and enthusiasm make you feel like you are hanging out listening to a friend tell a crazy about another friend (except that last “friend” is a historical figure)

The following notes are what stood out to me.

My son Zak also took notes (we made this an exercise because in 4th grade this year he’s learning to take notes). It was fascinating to discover where he wanted to pause the interview to jot something down that stood out to him. One of the reasons the episode might have been especially fun for him is we just finished watching The Men Who Made America series on the History Channel and Senra discusses many of the “captains of industry” or “robber barons” featured on the TV series.

Link: https://www.joincolossus.com/episodes/85503387/senra-passion-pain?tab=transcript

Books as mentors

Senra came from a challenged family. He wasn’t only the first male to graduate HS, he was the first to not go to jail! When he studied Warren Buffet, he recalled that Buffet said, “One of the best things ever happened to me is I picked the right heroes.” I think that is extremely important. So that is the role that books play for me.  I don’t have access to these people, I didn’t have mentors. I didn’t have anybody.

Senra’s career is the embodiment of what I described as The Engine Model

• There are four passions in my life, entrepreneurship, reading history and podcasts, so Founders sits in the middle of that.

• People say “Founders is podcast, Founders is business.” Yeah, but it’s an obsession first. It’s an obsession disguised as a podcast in a business.

• The reason I’m so obsessed with just studying people that got to the top of their profession is because one third of your life is going to be spent working. Half of your conscious life, half of the time you’re not asleep, is going to be spent working. For a certain personality type, to not excel at that, to not be really good at that means that life is not going to be an enjoyable experience for me. If I had to guess, which comes up a lot, I think there’s some kind of deep-rooted fight against a sense of inferiority that is underneath it.

• It’s interesting, this comes up a lot, there’s a line in the Francis Ford Coppola biography that I read, because I really love reading biographies of filmmakers, that’s the closest analogy to what I’m trying to do at podcasting. I read their words and I’m like, “That’s how I think about podcasting. That’s fascinating.” And there’s a line in the Francis Ford Coppola biography where, embedded in the story of the son is the story of the father. And his dad was this guy, he wanted to be a musician. He never made it, was super bitter. So he raised Francis Ford Coppola and they would just talk shit, his dad would just talk about anybody that was successful. And Francis is like, “Well, I don’t want to be the person criticizing the successful person, I want to be the successful person.”

• And I think a lot of that came from how we started the conversation, some people have to say, “Hey, I want to be like that guy.” Other people have, “I don’t want to be like that guy.” And those are equally powerful motivators.

[This reminds me of Ambition As An Anxiety Disorder]

Originality and ego

• To be an investor, to be an entrepreneur, it doesn’t work if you can’t trust your own judgment. So what kind of person who’s willing to take that risk? I know a ton of entrepreneurs that could even make more money, if they went to go work for Google or something like that. They’d rather make less money in their own business, than work for somebody else. But there is something bizarre that I don’t think you can explain. All you can do is notice it in other people, and then seek those people out like, “Oh, I’m not weird. There’s a ton of people just like me.”

• But Edwin Land said that there’s no such thing as group originality or group creativity. He goes, “I do believe wholeheartedly in the individual capacity for greatness.” And he says, “Originality are attributes of a single mind, not a group.”

• I actually don’t think that you build a great company without a giant ego. I don’t think that exists. Sam Walton has a good idea about that. He’s like, “Listen, your ego should use to drive you, but you should not be on public display.” And he’s like, “I hire people at Walmart with big egos, that know how to hide it, because there is some weird thing where it drives you.”

Confusing people liking the work for liking you

We talked a little bit about ego before we started recording, where it’s very prone to let your ego get the best of you. People admire you because the work. What happens is, you usually isolate yourself. You’ll work really hard. You’ll do a lot of work. That work draws the attention of other people because it adds value to their life. And then suddenly, over time, you confuse us. It’s like, “Oh, they don’t like the work. They like me. And then I could just show up without having to do the work and everything will be fine.”

[Reminds me of the Asimov line: Past glories are poor feeding]

On constant learning

The reason I say that Jordan’s biography changed my life is this idea of practice. How many people want to get to the NBA? A ton, millions. How many get? 400 maybe. How many people get to the Dream Team in Barcelona in ’92, which might be the greatest basketball team of all time? 15 people. A subset of a subset of a subset. Michael’s tired. He’d been playing nonstop, back-to-back. He’s like, “Man, I really want to take some time off. I don’t want to spend my summer for the Olympics, but I’m going to go.” He goes, “I want to see their practice habits. We’re all the best of the best, what am I doing that’s different than what they’re doing?” What happened was he goes, he watched the way they practiced compared to the way he practiced. The main theme of Jordan’s book is I believe in practice. I would rather miss a game than miss practice. That’s insane. He said something that gives me chills to this day. He goes, “I watched their practice habits,” and he goes, “they’re deceiving themself about what the game requires.”

Obsession and endurance

“If anything is worth doing, it’s worth doing to excess” – Edwin Land, Inventor

• On my phone, my lock screen, is a picture of Ernest Shackleton, the famous polar explorer, who looks like hell. He’s got a huge beard covered in ice. He looks like he’s about to die. And his family motto was, “By endurance, we conquer.” Which is why I told you earlier, I’m only interested in people who do things for a long time. Because at every single step, these people are presented with opportunities to quit and they don’t. So he’s like, I don’t have to be the smartest. I don’t have to be the best. I don’t have to be the talented. This is what I believe in myself. I don’t have to be the best. I don’t have be the smartest. I don’t to be the most talented…if you do something for three or four or five hours every day that most people don’t do, you’re going to develop a value for other people in the world, and that’s all a business is. The best description of a business I ever heard came from Richard Branson. He’s like, “All businesses, it’s an idea or service that make somebody else’s life better. If you make other people’s life better, you’ll capture that value in return.”
• I’m not a fan of moderation. I’m attracted to extremes. What do you want your life experience to be? Do you want to be exceptional? Do you want to push the boundaries of your capabilities? Do you want to walk around in a fog butting up against your potential but never actually realizing it? Then knock yourself out. Be moderate. I’m not interested in that. (Zak loved this!)

Understanding what you want — the soul of a business

I read this great book called Masters of Doom, which is obviously about the video game Doom. There’s John Romero and John Carmack, and John Carmack said something in what causes the rift of their partnership. He’s like, “Romero wants an empire. I just want to make great games.”

Senra relates to Carmack:

Founders is like a handmade product. And I was like, thank you because that’s what I think about. It’s a handmade product at scale because of the miracle of podcasting. I can do everything myself. I don’t have anybody helping me…role of the founder is the guardian of the company’s soul. There’s a cult around In-N-Out because the expression of the founder’s soul is manifest in the product. People have In-N-Out tattoos. Who are your entrepreneurial heroes? Everybody copies somebody, dude. You’re a human. I always have a maxim by saying in my podcast that the mind is a powerful place. What you feed it affects you in a powerful way.

The culture of a company as a reflection of the founder

The quote that comes to mind when I think of the founder as the guardian of the company’s soul is actually a quote about Steve Jobs. It’s in one of the books I read about him and he says he made and remade Apple in his own image. Apple is Steve Jobs with 10,000 lives. That gives me goosebumps because that’s exactly what a founder should be doing. It’s impossible to build a company, to spend all your life energy on it, and not have it imbibed with your personality, with your ethics. Everything that you think about your business and your life is going to seep into it. The good and the bad parts.

Patrick: It reminds me of a conversation I had with Tony Xu who started DoorDash. Tony’s a very mild-mannered, very humble, almost quiet person, which is why this quote from him stands out in my memory so strongly, which is I asked him something about culture.  How do you think about constructing the culture of a company? His answer is basically, “I think a culture of a company should be like 80 or 90% just the personality of the founder. That’s it. It should be the extreme characteristics of the personality of the founder. Because if you try to make it generic, nothing stands out and there’s no progress and inertia dominates.“

Process as art (and marketing)

Patrick: It sounds like a common theme in all these stories, is process as art by revealing the process behind the product, because they’re so obsessed with that. That is a common marketing story. Do you see that over and over?

There’s no such thing as a business that is boring. Listen, it’s boring to you because you do it every day. If you explain to the customer the process, they’ll find it interesting. If there’s any part of your product that seems banal or ordinary to you, I promise you, no one is thinking about your business as much as you. The favorite business of mine in the world, you think about it less than probably five minutes a week. Nobody is thinking about it. You have shit in your brain that is interesting to customers, and then you could package that up and use that as marketing to get more customers.

The most recurring theme in Founders stories

• We may or may not have talked about the most important, and that’s the best maxim in the history of entrepreneurship was said by the founder of Four Seasons, that “excellence is the capacity to take pain.”…Anybody that’s ever done anything difficult, whether it’s a company, anything, knows the euphoria and terror. It’s the entrepreneurial emotional rollercoaster. The reason that I think it’s so important to talk about is because it is supposed to be hard. There’s not a book you’re going to pick up where the guy or woman’s like, “Hey, I had this idea. I started it. Everything went great,” and the end of the book. It doesn’t happen.
• James Dyson. It’s hard to find, but if you can get a copy, order it. He says, “Listen, it’s easy for me to celebrate my doggedness now. I made $300 million last year, but I’d be lying to you if there wasn’t times where I went inside my house, had my wife look at me in the face like I’m a failure and I’d cry myself to sleep, and I got up and did it again anyways.” [Dyson made over 5,000 prototypes in 14 years before landing on the bagless vacuum that made him a household name]

Because excellence is the capacity to take pain:

• I apply this to like, “I don’t really feel like working out right now. I don’t feel like doing cardio.” I don’t give a shit, David, how you feel. How you feel is irrelevant. That’s an idea I got from Henry Ford. You read his autobiography, he goes, “I feel sorry for these soft and flabby men that can only do great work when they feel like it.” Essentially, Henry Ford is saying “fuck your feelings.” Henry Ford’s point was a business exists to serve other people. There are going to be days when you get out of bed and you cannot wait to get to work, and that’s great. There are going to be days when you don’t want to go to work, and that is irrelevant because the business is not about you. The business does not exist for your pleasure. The business exists to serve other people. [Kris: this is why you should probably care about the customers]

The kindest thing anyone has ever done for David

The kindest thing anybody’s ever done for me happened a few decades before I was born. My grandfather on my dad’s side was living in Cuba. He was just 38 years old. He had a wife and a newborn baby when the Cuban Revolution happened and Castro took power. He didn’t understand the language, had no money and no education, and yet took the gigantic risk … and the complete correct choice at that time in his life … to flee Cuba to go to America, to give his family a better chance and a better opportunity. That one decision changed the entire trajectory of my life. None of my interests that I happen to be naturally born into, the passions that chose me, that I did not choose, would make a lick of difference if I grew up in Castro’s Cuba as opposed to America. As somebody that studies dead people for a living, it really resonates how our decisions not only affect our loved ones now and our family now and our friends now, but they reverberate through the generations. If you think about it not in the context of what’s going to happen in your life this year or next year, but how the decisions you’re making will affect people that aren’t even born yet, you’ll make your decisions differently.

My 9-year-old Son’s Takeaways

• David only had books as a kid. NOTHING ELSE
• David’s extended family is all EVIL
• “Many people can run a company but not many can create one”
• In every one of Rockefeller’s biographies, J. Gould always pops up.
• Jordan joined the Dream Team just to see how other countries practice.
• ” I’m not a fan of moderation. I’m attracted to extremes. What do you want your life experience to be? Do you want to be exceptional? Do you want to push the boundaries of your capabilities? Do you want to walk around in a fog butting up against your potential but never actually realizing it? Then knock yourself out. Be moderate. I’m not interested in that.”
• “Nobody can think clearer than Steve Jobs”
•  “Hey, those are good ideas. Human nature doesn’t change. Let’s use them.”
• David reads his highlights 5 times.
• What I like about podcasting is it is completely permissionless.
• Dyson:  “Listen, it’s easy for me to celebrate my doggedness now. I made $300 million last year, but I’d be lying to you if there wasn’t times where I went inside my house, had my wife look at me in the face like I’m a failure and I’d cry myself to sleep, and I got up and did it again anyways.” Excellence is the capacity to take pain. I apply this to like, “I don’t really feel like working out right now. I don’t feel like doing cardio.” I don’t give a shit, David, how you feel. How you feel is irrelevant. That’s an idea I got from Henry Ford. You read his autobiography, he goes, “I feel sorry for these soft and flabby men that can only do great work when they feel like it.” Essentially, Henry Ford is saying “fuck your feelings.” Henry Ford’s point was a business exists to serve other people. There are going to be days when you get out of bed and you cannot wait to get to work, and that’s great. There are going to be days when you don’t want to go to work, and that is irrelevant because the business is not about you. The business does not exist for your pleasure. The business exists to serve other people.
• In every episode, Patrick asks “what is the kindest thing anyone has ever done for you?” [I told Zak that fact, I guess he thought it was worth writing down]

Link: http://investorfieldguide.com/epstein/

About David: Best-selling author of The Sports Gene and Range: Why Generalists Triumph in a Specialized World.  A former journalist at Sports Illustrated and ProPublica, David is also known for his talks on performance science and the proper use of data across many fields including sports, medicine and natural sciences.

Transcription: Otter.ai

Epstein’s Research Process

• 10 journal articles a day for 1 year; hire translators for foreign journals
• Consults with statistician 

A weaker  10,000 hours idea (Tiger vs Roger Problem)

• Contrary Research Favoring Breadth

Showed elite athletes did not require a head start in deliberate practice. More likely specialization was delayed. A long sampling period exposed them to many sports which allowed them to better match their abilities to the sport.  Evidence: Success of Olympic talent transfer programs in other countries

Why?

Lots of variation in how people respond to stimulus. True of medicine. True of training. You baseline ability is uncorrelated with your ability to improve with training, which makes extrapolating difficult. “So much to gain from fitting people into the right sport”

• Supporting research flaws
  • “Restriction of range” problem with the study of 30 violinists. When you squash the range of a variable that is correlated with the dependent variable you risk understating the correlation with the restricted variable. In this case, the sample was violinists who had already been accepted to a famous academy. We have squashed their innate talent even though it likely has a wide range. Likewise, if you studied the correlation of height to points scored in basketball for NBA players you find a jarring negative correlation but that is because you are selecting from a sample of abnormally tall players, to begin with. You’ve squashed the height variable, which would lead people to think that height has no impact on points scored. 
  • Inconsistent numerical data, no estimates of variances on variables, poor statistical inference

Learning

• When to be like Tiger?
  • Kind learning environment
    • Fast, accurate feedback
    • Discrete turns
    • Well defined rules
• When to be like Roger? 
  • Wicked learning environment
    • “Martian Tennis”: You see people out there playing, something’s going on, you don’t know the rules, it’s up to you to introduce them. And they could change at any moment without notice. And that’s the situation that we’re actually in for most of the things, the complex things that most of us care about.”
• Most surprising study in Range: air force study is a natural experiment. Professors who were the best at causing students to do well in their own class do well on the test, (ie overperforming compared to the baseline characteristics they came in with) systematically undermined those students “deep learning” (performance in the follow on courses).
  • Professors taught narrow performance to optimize for their own exam to their detriment for overall learning. They undermined the students “making connections” framework. Professors failed to learn themselves because the students who would feel rapid progress would rate them highly. “really wicked feedback”
  • Professors themselves are incentivized to maximize for short term evaluations which have impaired their ability to teach frameworks that students can apply in novel situations.
  • Professors who did not teach to the test taught broader concepts relying less on “using procedures” knowledge. This type of knowledge is most effective in kind learning environments where possible tasks and choices are restricted. 
• “Closed skills”: techniques that you can teach very quickly and see an advantage. these are temporary advantages as people with broader frameworks eventually catch up but have brought wider understanding as well.
• Around the world, we are performing better on “culturally reduced tests” (meaning tests that are not influenced by formal learning). Our collective performance should stay stable on this portion of tests but in fact, our performance is increasing. Known as the Flynn effect. Flynn speculates “we have moved to a world where we are used to classifying things to grouping things instead of being stuck with lots of concrete knowledge and, and factual knowledge.” Pre-modern people did not have much need for classification, but the modern world relies heavily on this ability since we’re constantly laterally translating knowledge to different areas we’ve never seen. This ability to have knowledge that we don’t have from hands-on exposure is really important.

(Me: Don’t be fooled by a sense of progress when the task you are excelling at is not varying. Being able to match abstract models to a correct strategy is a more valuable goal and benefits from practice in dealing with variation. )

• Learning hacks supported research but ignored by the media (3 out of 5)
  • Testing: Test people before they have a chance to study. It primes your brain and exploits the “hypercorrection” effect — our tendency to remember the correct answer to a question you tuned out to be wrong about
  • Spacing: Intervals between practice make learning stick longer. A useful technique is to learn several subjects at once. Switching provides natural breaks.

• • • “Difficulty isn’t a sign that you’re not learning but ease is”. To maximize stickiness you actually want to re-learn something just after you have forgotten it! Your steepest learning occurs when the task is difficult.
  • Interleaving: Mixing types of problems will extend the time it takes to learn one type but improves broader ability to match approach to the type.

Grit is Misunderstood

West Point study: the survey which measured grit was more predictive than the conventional metrics for predicting who would complete Beast Barracks (physically demanding module of training). This grit survey was applied to other domains like the Spelling Bee championship contenders. Grit appears to have a measurable, effect independent of other variables. 

• Problem with these studies is they suffer from the same “restriction of range” problem
• The measured effect is significant but small. Much smaller than what companies are interested in testing for. 
• Sample of people is dedicated to a short term task like winning a spelling bee or completing their training. Very difficult to generalize to a wider measure of this individuals’ determination when the task is less well-defined
• When zoomed out, we find that attrition is a poor proxy for ‘lack of grit’. Attrition is occurring in a time when people in these studies are going through periods of rapid self-discovery and personality change during their early 20s (this is the peak change period in our lives) and re-assessing as they search for “match quality”. The degree of fit between work, interests, and ability. 
• Grit is not necessarily stable. It seems to vary within the same individual depending on the context or task.
• In general, the study of grit is has been contained to very short term, narrow environments

Avoiding Premature Optimization

Paul Graham admonishes against working towards some projection of future self when you are young since what you can conceive is too limited because your experience is limited. Too risky to throw yourself on a path based on such a limited hunch. 

• Our personality is only .23 correlated between teen years and middle age
• We learn by doing then reflecting, rather than introspecting to form a theory about ourselves. Frequent trial and error is a better way to decide which direction to go.
• Harvard’s Darkhorse Project studies how people match careers. The students who matched best excelled in short term planning.
• Economist Robert Miller refers to the “2 arm bandit process”. Metaphor on a gambler pulling levers in a casino, getting feedback, before focusing on a game. He advocates jumping into high risk, high reward fields early because you learn the most from them. That informational signal is a faster input into your decision path. 

Opportunity to recombine

Information including specialized information is disseminated more widely and quickly than ever and at an increasing rate giving people greater opportunity to recombine from all the available information. 

• Parallel trenches: “everyone’s in their own trench and not usually standing up to look over at the next trench even though that might be where their answer is” (this is why he hires translators)
  • Gunpei Yokoi — Nintendo employee who used lateral thinking to recombine older, cheaper, “withered” technologies to create products including the GameBoy. The GameBoy competed with more advanced products on the basis of its ease and durability.
  • Yokoi viewed cutting edge technologies as zero-sum arm’s races fought by specialists. “Many more opportunities to take this stuff that was already well known that everyone was looking past and recombine them in new ways”
  • We are in an age where its feasible for a generalist to crowdsource specialists in novel ways which allow them to outperform specialists themselves (Kaggle has been able to solve problems that have stumped NASA)
  • Specialists perform better when the next steps are clear and the path is more obvious. The right mix of generalists and optimists depends on how well characterized the problem is. 
  • 3M has many interesting examples and lateral thinking is entrenched in their DNA. They maintain a “periodic table of technologies” so its teams can use their awareness to recombine. 
• Superman or Fantastic Four
  • Metric that best predicted a comic book creator’s potential to write a blockbuster was the range of genres they covered, not reps or experience. 
  • In addition, they found that a team of writers with combined experience in diverse genres outperformed a single writer unless the single writer was fluid in at least 4 genres. “Individual in some ways is the best unit for integrating information” although a diverse team is next best. 
• To a specialist with a hammer “everything looks like a nail”
  • Specialists continuing to administer procedure in face of evidence that it doesn’t work
    • Scandinavian meniscus placebos undermine the benefit of surgery 
    • Practices that make intuitive sense (“bioplausible”) but poorly supported by evidence
      • When outcomes are poor surrogates for health: stents for otherwise healthy people with a narrowed artery do not reduce their heart attack or mortality rates. A wider artery is not a perfect proxy for the desired outcome because “There’s a clogged artery, how could opening it up not work. It’s got to work except it turns out the body’s much more complicated than like a kitchen sink, and we didn’t design it. And it’s the disease is much more diffuse.” (Me: any counterintuitive but effective remedy that works by using a seemingly oblique strategy is at risk of confusing surrogate markers for the outcome. Hormetic processes, body’s use of iron, etc).
• A better way forward
  • Need generalists to work with the specialists for a more zoomed out view which better aligns practice with objectives. Medicine seems especially prone to the errors and resistance to reform that can result when an inordinate amount of specialists populate a “wicked” learning environment
  • Medicine and similar “wicked” environments are “devilishly” hard. It will take generational change as the entire approach to “how information is evaluated and how scientific thinking works”. Need to de-specialize a bit and increase breadth. Statistical understanding requires more than “hitting buttons on a statistical program”
  • Freeman Dyson has said we need more birds in medicine. “Frogs are down on the ground looking at like a very narrow area of the ground, the birds are up. They don’t have a good definition on the ground, but they see the bigger picture. And I think we need to make the medical ecosystem more friendly to some of these birds who are looking at the outcomes we actually care about, not just those surrogate markers or did I fix the meniscus?”

Link: http://investorfieldguide.com/andy/

About Andy: Partner at Benchmark Capital and CEO of Wealthfront

Benchmark Capital started in 1995 by 5 equal partners (including Bill Gurley)

Strategies 

• Turn your opponents biggest strengths to weaknesses
  • The biggest competitor at the time was Kleiner Perkins and ‘the best venture capitalist that ever lived’ John Doerr. Benchmark would woo portfolio companies using a team approach since not all Kleiner Perkins companies had access to Doerr.
  • The second strength of KP they flipped was the promise of doing business with other portfolio companies. Benchmark painted this advantage as an obligation they were free from if they joined Benchmark. Benchmark took a backseat to the portfolio companies management and did not demand to be the chairman of the board.

• The other interesting thing they did was not allow the partners to ‘suck up the economics’ in the room. As soon as partner’s felt it was time to relax they needed to step aside for the younger team to be able to step up.
• “Putting the gun in the other person’s hand”
  • Partner Bruce Dunlevie philosophy of trustfully dealing with people and if the person took advantage of him he would not work with them. This technique would usually engender trust and good faith in others

Product Market Fit

• Products that are ‘bought not sold’. Delighted customers demand the product.
• Running a business with such a product leaves lots of room for operational error and explains how a “25 year old can run a billion-dollar business”
• The first book on the topic was Steve Case’s “The Four Steps to the Epiphany” which his eventual student Eric Ries would update and improve with “The Lean Startup” These books used the scientific method to approach business
  • A ‘value’ hypothesis needs to be proven
  • A ‘growth’ hypothesis is validated if growth is exponential and organic (ie word of mouth).
    • Growth hacking via experiments and A/B testing.
  • Typical businesses focus on the who, where and what and iterate on the what. Great technology companies ramp a new technology by finding the ‘who’. This is often not obvious and leads to non-consensus outcomes. This is now commonly understood (Me: reminds me of ‘theory of demand aggregation’)

His role as operator vs investor

• Now as Wealthfront of CEO vs an investor a few points:
  • The skills aren’t necessarily transferrable
  • He speaks less on boards realizing how little perspective he has compared to management
• “Crossing the Chasm” by Geoffrey Moore first book that discussed product adoption cycle and diffusion of innovation

Wealthfront features that grabbed my attention

• Peer reviewed rules based strategies
  • Tax loss harvesting (added 1.8% pa). Automating it in software allows more consistent application of decades-old strategy (Me: Twitter discussions suggest this is highly overstated)
  • Tax loss harvesting within an index adds 25-50 bps pa. This includes selling index components that had losses and buy correlated names to maintain exposure
  • Portfolio line of credit leveraging risk-based margining. For accounts >100k this provides access to cheap loans
  • No hedge funds or expensive alts bc of the Grouch Marx “I don’t want to be a member of any club that will have me”. The best institutional investors are long term, not performance chasing (ie endowments and charitable foundations). The worst of the funds can’t access them so they would be the only ones open to listing on retail platforms. Classic adverse selection.

Business strategy not always best self strategy

• In business, amplifying what you excel at has a better payoff than improving weaknesses. He asserts that this is also professionally true at the career level since differentiating expertise is a large determinant of a person’s value-add. He mentions that this is not the same strategy one should employ in their personal life, where boosting your weaknesses as a person is very valuable. In professional life, learning from success can certainly be more important than learning from failure. “I’m not hiring you because of what you can’t do. [I’m hiring you] because you have learned some tricks!”
• Well-rounded people are interesting to talk to but not necessarily the best teammates in a business.

Link: http://investorfieldguide.com/brad/

About Brad: Performance coach and author of Peak Performance

Findings

• Studying brains we find that people can summon extreme abilities if they have core beliefs which override the fear responses in their brain (is lifting a car off of a person trapped underneath). The importance lies in having core beliefs or purpose.
• The Growth Equation: Stress + rest = growth
  • Need the right amount of stress/stimuli. Too much stress is overwhelming, too little leads to no adapting.
  • Just manageable challenges are those which are just outside your comfort zone. It’s self-defeating to onboard too many of these at once.
• Mechanics of creativity

1. 1. Immersion: this work is stress
   2. Incubation: stepping away (this is the rest)
   3. Creative insight…this tends to happen after a period of rest…end of a vacation, in the shower, taking a walk.

• Studies show deep work cycles are most effective in 45 to 90 min blocks followed by 15-20 min breaks.

Practical Tips

• Whether you perform better in the am or pm is largely biologically determined. Manage your energy not time. If you are better at focused work in the am, then reserve that time for that.
• Time in nature or outside is shown to improve stress, physical, cognitive markers.
• Study of air force cadet squadrons showed that group performance was more influenced by the lowest common denominator as opposed to the leading performer. The group has more to gain from eliminating bad attitudes than from enhancing leadership.
• Fatigue happens in the brain, not the body. Your central nervous system slows you down. How to overcome this? When interviewing peak performers you find that they are thinking about a larger purpose than what they are doing. So marathoner thinking of his family can override his brain’s fatigue signals.

Link: http://investorfieldguide.com/karp/

About Jason: Founder and CIO of Tourbillon Capital Partners

Growth of private markets

• Smaller supply of scalable opportunities and increased competition
  • Less companies going public and staying private for longer. 50% of listed companies compared to 20 years ago (mostly M&A and lack of IPOs as opposed to bankruptcy)
  • Unicorns able to get unprecedented amount of private funding
• Increasingly competitive public markets for short term performance.
  • Data from prime brokers shows that over 90% of flows driven by non-discretionary accounts (CTA, systematic, quant, passive).
    • He argues that this has caused large dislocation opportunities in past 5 years in valuations when historically values typically take no longer than 3-5 years to converge to fair valuations.
  • Short term pressures on advisors (quarterly performance, fee compression) incentivize move away from mark-to-market and costs of wooing performance-chasing allocators.
  • Information edges are gone or not scalable
    • Data points include the sheer number of funds and books referencing ‘value’ investing.
    • Growth of quant platforms like Quantopian.
    • The growth of data sets favors short term trading which is the domain of quants.
    • Ratio of sell side analysts to public stocks is at an all-time high
    • Reg FD neutralized many active managers’ edge b/c large commission paying funds could no longer get privileged info

How to compete in a competitive, expensive market

• Look for real business growth. If a company is growing faster than it’s implied multiple there is a margin of safety that can ensure an investment in the event of multiple contraction
• The deep value game is difficult since it’s a basket of adverse selection. A small minority will turnaround their distressed situation. It’s easier to look for ‘value’ names that are growing than it is to pick ‘deep’ value names to revert
• Align investors with long term horizon as a structural edge. The only way to profit from longer-term dislocations. The current environment has a historic high correlation of growth to momentum which is a trend that continues to pay off, in turn, reinforcing the exit of value flows and increase in quant/momentum flows setting up a historic relative value opportunity.
• Understand cyclicality and stickiness- He calibrates the riskiness of a business with the nature of its sales. Stickier businesses are less risky (ie high consumer daily engagement)
  • Fashion is unpredictable
  • Cyclical’s are dependent on GDP
  • Staples are more dependable