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On finding the next big thing
3 strategies for catching lightning in a bottle more than once
In a recent newsletter, I mentioned that when my father was a budding office supply salesman he failed to divine the future popularity of Post-it Notes. I also mentioned that I passed on chances to work with current successes like The Long Drink and Archer Roose. My father doesn’t feel bad about his whiff and I don’t feel bad about my misses.No one bats a thousand.
Accurately and consistently identifying the next big thing is impossible. Evaluating the potential of future brands or future employees takes skill and luck, but as Seth Godin points out luck is not a strategy.As such, what skills can help us avoid mistakes when assessing opportunities?
Curiosity: the best way to know if an opportunity is better than another begins with knowing all of the opportunities available.
The ability to appropriately weigh risk: if you want to catch lightning in a bottle more than once, you need to make sure you aren’t electrocuted the first time.
Humility: the ability to pick winners is greatly dependent on our capacity for seeing outside of our own preferences and biases. Radical self-awareness becomes more important with time because previous success tends to harden past mindsets. This is a problem in a world that is continually changing.
Assuming you’ve honed the skills listed above (no small feat), here are three strategies you can employ when scouting prospects.
Have a process and follow it
Lightning may be random, but where it strikes isn’t.
Having a process ensures your own consistency which is a prerequisite for untangling luck and skill so that you can focus on improving what’s within your control.
If you want to reach financial independence, you’re better off investing than buying lottery tickets. Why? Smart investing is a process and buying lottery tickets is gambling.The former relies on skill—not stock-picking so much as disciplined behavior—while the latter relies on luck.
Michael Mauboussin succinctly explains why having a process is important:
If you compete in a field where luck plays a role, you should focus more on the process of how you make decisions and rely less on the short-term outcomes. The reason is that luck breaks the direct link between skill and results—you can be skillful and have a poor outcome and unskillful and have a good outcome. Think of playing blackjack at a casino. Basic strategy says that you should stand— not ask for a hit—if you are dealt a 17. That’s the proper process, and ensures that you’ll do the best over the long haul. But if you ask for a hit and the dealer flips a 4, you’ll have won the hand despite a poor process. The point is that the outcome didn’t reveal the skill of the player, only the process did. So focus on process.
Whether you’re picking new brands to add to your portfolio or deciding on who to hire, you need a process.That process may be a checklist, a rubric, a questionnaire, or something else. Your process is something you should continue to refine over time.
When a process is sound, the rewards of using it consistently compound.
Walk around the field
Before Moneyball, there was Tony Lucadello, considered by many to be the greatest baseball scout of all time.
In “The Greatest Draft Pick Ever” Tyler Kepner details Lucadello’s methodology:
Lucadello would watch from the outfield or the baselines—even, sometimes, from a tree—to view prospects from various angles while keeping his distance from rival scouts.
Surveying the prospect—be it a baseball player or bottle of booze—from as many perspectives as possible is the preferred approach to viewing things from just one angle.
All too often portfolio managers hark on just one thing—taste, price, packaging, or story—when it comes to evaluating a wine or spirit. There are many reasons customers choose to purchase products; it’s best to try to be mindful of all of them. Get feedback from potential end-users since they’re more representative of the typical consumer than your colleagues at the office.
Because success has a way of compounding, it’s most important to stay in the game as long as possible. This means not strictly seeking out winners, but also doing one’s best to avoid the worst losers. Numbers-driven sorts might run a cost-benefit analysis, while human beings most readily frame this process as a question: is the juice worth the squeeze?
Of course, this is easier said than done. Human brains do not intuitively grasp probabilities, and thus aren’t well-equipped to assess the likelihood of their own future dissatisfaction.
Thus, the name of the game is regret minimization.
Ask yourself “In X years, will I regret not picking up this product?” or “In X years, will I regret not hiring this person?”
You’ll likely be surprised by some of the decisions arrived at simply by asking yourself this question.
I’ve found that I rarely regret my No’s that ended up going well—albeit in someone else’s portfolio—as much as my Yes’s that went awry in mine.
Any investment devoid of a process is also a gamble.
In assessing the potential of a spirit brand, I used a 20+ point assessment that I created. In hiring, I relied on the process outlined in Who: The A Method for Hiring by Geoff Smart and Randy Street.
“By 1980, the year [Mike] Schmidt carried the Phillies to their first World Series title, Lucadello had signed more major leaguers than all of the team’s other scouts combined,” writes Tyler Kepner.
Similarly, a potential employee is best assessed by speaking not only with their former boss(es) but also by their former reports and colleagues.