Hope you’re having a great weekend.

It’s been 2.5 years since I last wrote to you! My last edition was Don’t keep just your secrets hidden…, back in Apr 2024.

I fell off the wagon, but I’m back on now. I’ve missed writing, I’ve missed thinking through things on the page. But most of all, I’ve missed you all!

First things first 🥁🥁🥁, we have a new name - Sunday Reads is now The Long View.

Why? Well, for three reasons:

• It’s a new start, a new me, and a new you. A lot has happened in the last few years, let’s start afresh.

• As we suffer through an AI slopocalypse, I don’t want to add more slop. So I’ll write to you when I have something useful to say, not just because it’s Sunday.

• The most important reason - our lives and work are changing at breakneck speed. There’s no shortage of pundits screaming themselves hoarse about how this week’s AI release changes everything. To quote Bezos, I want to look at what doesn’t change, what endures. I want us, together, to take the Long View.

With that, let’s dive into today’s edition - the nature of ambition.

1. What is your ambition allowed to cost?

The winner of the AI boom

Every week, there’s a new winner in AI. First it was OpenAI, for the longest time. Then it was Anthropic, with Claude Code. Then OpenAI again. Then Google. Then Instinct Meta with Muse.

But all those predictions are wrong. The biggest winner of the AI boom is not OpenAI. It’s not Anthropic either. Nor Google. It’s none of these.

It’s Nvidia.

As Jensen Huang famously said, “The input is electrons, the output is tokens. In the middle is Nvidia.”

I recently finished reading “The Thinking Machine“. It tells the story of Nvidia - from the scribbled business plan at a nondescript Denny’s in San Jose, to the multi-trillion dollar company it is today.

And what a story it is! A story of one near-death experience after another, interspersed with short interludes of success. A story of slow-burning strategic bets paying off after decades. A story of a founder who just doesn’t relent.

The book is incredibly inspiring. But… it also has passages like this.

He [Jensen] would improvise all manner of delicious food. Yet even this was not always a respite; Horstmann recalled a family gathering around the time of the Fidelity cross-examination when Huang botched a complex dish he was preparing. Standing in his million-dollar kitchen, with his daughter who had trained at Le Cordon Bleu there to help, Huang exploded and began to scream at his inadequate equipment. “I think we all understood we had to get out of the kitchen,” Horstmann said. “It was just time for Jensen to yell at his stove.”

“It was just time for Jensen to yell at his stove.”

The book contains several accounts of Jensen bringing employees in front of a hundred people, and shouting at them for an hour.

But this post is not about whether Jensen has an anger problem. It’s about the nature of his ambition. In fact, of ambition in general.

Dwight Diercks recalled no parties, no champagne, no sense of relief, not even congratulations from the boss. He shared with me an email he had saved from Huang. “The TNT2 team needs to do whatever it takes to get over the finish line,” Huang had written. The email continued in a tone of panicked desperation, with Huang complaining about missed deadlines and fretting over ascendant competitors.

…

Diercks shook his head in amazement. “He wrote that the day after the IPO,” he said.

There was no finish line. No moment to rest. No moment to look back, and appreciate the journey.

It is possible that Jensen too realized what his ambition cost him.

Former employee Tim Little recalled receiving an email with the subject heading “Drag Your Sorry Ass Across The Finish Line.” Little had been traveling for weeks, away from his family, working late nights at the circuit simulator; feeling he had nothing more to give, he responded to the email by submitting his resignation.

A few nights later, at around two in the morning, as Little was finishing one of his last shifts, Huang arrived and sat down at the simulator beside him. The glow from the monitor illuminating his exhausted face, Huang recalled his own career, the sacrifices he’d made, the many late nights he’d spent away from his family, often working the circuit simulator himself. He expressed, frankly, that he wasn’t sure it was all worth it. He offered Little his job back if he wanted it; when Little declined, Huang thanked him for his service to the company and left. “That was absolutely the high point of my employment there,” Little said.

There is a lesson here.

Every ambition has a sacrifice budget.

Let’s say you’re evaluating a company for investment. Would you look at just its revenue growth, to decide whether it’s a healthy company? No, that would be silly. You’d need to look at the costs too.

Ambition is multi-dimensional, in much the same way. What do you achieve, and at what cost?

Working constant eighty-hour weeks, Huang had missed out on much of Spencer and Madison’s childhood. “If I’m being honest, Lori did ninety percent of the parenting,” he said. Typically, Huang spent one weekend day a week with his children, but even here he was often preoccupied. (Horstmann recalled visiting an amusement park with Huang, where he repeatedly sent his kids on the roller coaster so the two could discuss technical problems.)

Horstmann also observed that neither Huang’s nor his own kids had initially gone into technical fields. “I think they tried to get out of this crazy work environment,” he said. “I think they looked at us, and said, ‘There’s got to be more to life than this.’”

Now, I am not saying that Jensen chose wrong. All I am saying is that Jensen chose.

Focus always has tradeoffs. When you focus all your attention on one thing, others will fall by the wayside. Whether it’s family, health, or friendships. You are making choices, whether you know it or not.

And just like a company P&L, the costs of ambition belong inside the definition of success.

Only you can judge whether those costs are worth paying.

Speaking of the costs of ambition…

“Graspingness is not causative to greatness”

I loved this line from a memorable article about Jerry Seinfeld, “Grip Strength”.

Read the whole article (it isn’t very long), but here’s the money passage:

There are many areas of my life where I am Orny [Adams] and not Seinfeld. Where my actions are dictated by an outcome I am owed…

I know I am rehashing this point over and over, but I think it is something of a fucking miracle that graspingness is not causative to greatness… Orny Adams spent a life trying incredibly hard, grasping to something he was owed with all his might, got pretty good but not great, and ended up with nothing but misery and empty pockets.

Meanwhile, the only thing Jerry’s ever held with a tight grip is the wheel of his 911 as he races around Manhattan.

For every successful Jensen, there are a thousand founders who sacrificed everything at the altar of their ambitions. And then failed anyway.

Just because you want something very hard, and are willing to destroy your life for it, doesn’t mean you’ll get it.

And the reverse is also true - you can often get what you want without grasping so strongly for it.

Clenching is neither necessary nor sufficient for success.

This doesn’t mean success is easy. In Elon’s words, you’ll have to “eat glass”. But the difficulty belongs to the work. The extra suffering comes from clinging tightly to some outcome “you are owed”. That cost - the cost of suffering - is one you don’t have to pay.

I think this is real in smaller things too.

My attitude to work has changed quite a bit in recent years. I still work hard, but I don’t clench as much. I’m not dreaming of the outcome, and worrying whether I’ll get it or not. I’m just doing the work.

Now, I don’t mind when people interrupt me at work - I’m not worrying about my schedule being thrown off completely. I’m just happy to be helpful.

I’m still doing my best, but my happiness is no longer as tightly linked to the outcome. And that has changed my relationship with work. I’m enjoying the ride, while being far more productive than I ever was.

So yes, ambition has costs. And you should recognize them, and decide whether they’re worth paying. But also, don’t assume that the costs are exorbitant.

Ambition and happiness can go together.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every once in a while, I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,600+ others who read my newsletter (its free!) 👇

Subscribe now

2. Golden Nugget of the Week

While we speak about ambition, an important reminder - you don’t need a grand justification for your ambition.

In Top Performers are Pathologically Ambitious, Matt Beard says that he thinks Jiro Dreams of Sushi is a sad story.

But I disagree. To me, the story of a 100-year old man who’s devoted his whole life to perfecting the art of sushi, is anything but sad. Sometimes, I wish I could be as devoted to something.

I’m similarly envious of Robert Caro - who’s devoted most of his adult life to writing a biography of Lyndon Johnson. He published the first volume in 1982, and as of Sep 2026, he was still writing the fifth and last volume. He’s 90, and might not finish it.

Or of Justo Gallego, who spent 60 years building a cathedral by himself on the outskirts of Madrid. He died in 2021 at age 96, with the cathedral still unfinished.

Whether it’s Jiro Ono, or Robert Caro, or Justo Gallego, this was, literally, their lives’ work. How many of us can claim such a thing?

Next time someone questions your goals, send them this Calvin & Hobbes comic:

Obey the inscrutable exhortations of your soul. Do what makes your heart sing.

3. This made me laugh out loud

Given the topic of today’s newsletter, I would be remiss if I didn’t share this absolute banger from Zach Weinersmith:

That’s it for this week. Hope you liked it.

As always, stay safe, healthy and sane, wherever you are.

(It’s good to be back!).

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

If you missed my last newsletter, here it is: Prompt engineering... for humans? (How to give feedback to your teams).

This week, let’s look at something different. We’ve heard (and said) quite often, “You don’t need to be secretive about your business idea. Ideas are worthless. Execution is key.”

Let’s examine that.

1. Just how paranoid should you be?

I was reviewing my highlights from Narrowcast, Blume's excellent podcast compilation. And I came across this quote from an interview with Abhiraj Bhal, Co-founder of Urban Company:

Every MIS that I send out to my investors every month, my entire company is marked. Again, I’ve been asked this question by some of the fellow founders that what if it gets leaked.

If it gets leaked, it gets leaked. And what’s the big deal? This is not the competitive advantage. That sheet, or that MIS is not the source of competitive advantage for our business.

At a certain level, this makes sense. As we like to say, ideas are dime a dozen. It's the execution that counts.

Alex Tabarrok points out something similar:

Thomas Keller wrote a literal recipe book for the dishes he served at his world famous French Laundry restaurant and yet, the French Laundry did not go out of business.

Ideas are in heads and if you don’t move the heads, often the ideas don’t move either.

But the key lesson from this quote is not that ideas are worthless.

Rather, it's the last part of Abhiraj's comment:

This is not the competitive advantage. That sheet, or that MIS is not the source of competitive advantage for our business.

So what's the lesson?

Find out what your secret sauce is. Guard that with your life. You don't have to keep anything else secret.

But is that good advice?

Which secrets do you hold close?

There's a line in The Man Who Solved the Market, on Jim Simons' extreme paranoia about competition:

By the end of 1993, Medallion managed $280 million, and Simons worried profits might suffer if the fund got too big and its trades started pushing prices higher when it bought, or lower when it sold. Simons decided not to let any more clients into the fund.

Simons’s team turned more secretive, telling clients to dial a Manhattan phone number for a recording of recent results and to speak with Renaissance’s lawyers if they needed detailed updates. The additional steps were to keep rivals from learning about the fund’s activities.

“Our very good results have made us well known, and this may be our most serious challenge,” Simons wrote in a letter to clients. “Visibility invites competition, and, with all due respect to the principles of free enterprise—the less the better.”

Was the paranoia justified? We won't ever know. Because Simons' Renaissance Technologies became only the most successful hedge fund ever.

There's a key lesson here though:

Hold a secret close when (a) it's the source of your competitive advantage, and (b) others don't know about it yet.

The canonical example of this is, of course, Amazon's AWS.

As I wrote in How Microsoft became a multi-trillion dollar company:

Lesson 3: Guard your secret.

The story of Microsoft reminds me of how secretive Amazon was about AWS, for the first several years. And how important that secrecy was, in retrospect.

From Brad Stone's Amazon Unbound (via Cedric Chin's 7 Powers in Practice):

… both (Bezos) and Jassy lobbied to conceal the division’s financial details from public view, even amid the widespread skepticism that throttled the company and its stock price in 2014.

But in 2015, Amazon’s finance department argued that the division’s revenue was approaching 10 percent of Amazon’s overall sales and would eventually trigger reporting requirements under federal law.

“I was not excited about breaking our financials out because they contained useful competitive information,” Jassy admitted.

Nevertheless, that January, Amazon signaled that it would report AWS’s financial results in its quarterly report for the first time, and investors girded in anticipation.

Many analysts predicted that AWS would be revealed as just another Amazon “science project”—a lousy, low-margin business that was sapping energy from the company’s more advanced efforts in retail.

In reality, the opposite was true. That year, AWS had a 70 percent growth rate and 19.2 percent operating margin, compared to the North American retail group’s 25 percent growth rate and 2.2 percent operating margin. AWS was gushing cash, even as it rapidly consumed most of it to build even more computing capacity and keep up with the fast-growing internet companies like Snapchat that were piling onto its servers.

This reporting was a huge surprise for the analysts and investors who monitored and scrutinized Amazon, and likely even a bigger one for Microsoft, Google, and the rest of the enterprise computing world.

Bezos and Jassy knew instinctively that the moment others found out how lucrative cloud services was, they would come rushing in.

For what it’s worth, Bezos and Jassy were spot-on. Microsoft did rush in, and the result was:

So it's not just about keeping your competitive advantage hidden. It's about keeping your success hidden too!

Ergo...

Don’t guard just your secrets. Guard everything.

I’ve written before about Moiz Ali and his deodorant brand, Native:

I enjoyed listening to Shaan Puri's conversation with Moiz Ali on the My First Million podcast.

Moiz Ali is the founder of Native, a clean deodorant brand. He sold Native to P&G in 2017 for $100M.

Lots of lessons from the podcast, but one stood out to me:

Guard your secrets!

Before selling to P&G, Moiz and his team did zero PR for Native. No fawning TechCrunch pieces, no branded sweatshirts, nothing.

Heads down, silently scaling their business.

Once P&G acquired Native for 100 million, everyone realized how lucrative the space was.

And within 12 months, there were tons of "Clean" / "Parabens-free" deodorants on the market.

Contrast this with the story of Xerox PARC.

Back in the '70s, Xerox PARC kickstarted the personal computing revolution. The Graphical User Interface (GUI), the mouse, even text editors like Word - they were all invented at Xerox PARC.

Yet, you likely haven't heard of it.

Why?

Because it made no attempt to keep secrets. And Apple and Microsoft didn't need to be invited twice.

The rest is history.

Aside: This led to a hilarious altercation between Steve Jobs and Bill Gates in the ‘80s.

Hearing that Microsoft was working on a GUI for MS-DOS (which would later become Windows), Jobs was furious!

He summoned Gates to his office (Microsoft was a vendor to Apple at the time), and ripped into him, "I trusted you, and now you're stealing from us!".

Gates calmly responded, "Well, Steve, I think there's more than one way of looking at it. I think it's more like we both had this rich neighbor named Xerox and I broke into his house to steal the TV set and found out that you had already stolen it."

Coming back to secrets: In Startups and Uncertainty, Jerry Neumann talks about uncertainty as a moat. He begins:

Uncertainty can be seen everywhere in the startup process: in the people, in the technology, in the product, and in the market. This analysis shows something more interesting though: uncertainty is not just a nuisance startup founders can’t avoid, it is an integral part of what allows startups to be successful.

Startups that aim to create value can’t have a moat when they begin, uncertainty is what protects them from competition until a proper moat can be built. Uncertainty becomes their moat.

As a startup, you don't know what your moat is / will be. And if you don't know, neither will potential competitors.

This uncertainty... IS the moat.

Therefore, don't just guard what you think is your moat. Guard everything. Keep your success hidden for as long as you can. Let your competitors underestimate you.

As a wise man once said, "Only the paranoid survive".

Coda: On the other hand...

Now, you may point out: There will come a time (or so we hope) when your success can no longer remain hidden. The uncertainty will no longer exist.

If the uncertainty was your moat, what do you fall back on?

There are only two sustainable moats:

A. Work real hard. Harder than you thought possible.

Or as I say in The great thing about hard things, “run upstairs”.

B. Move real fast. Faster than you thought possible.

Or as I say in If you want to build a new habit this year…, speed is a competitive advantage. Maybe THE competitive advantage.

If you want to win, start running. And don’t ever stop.

As Po's father would say in Kung Fu Panda:

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,600+ others who read my newsletter every week (its free!) 👇

Subscribe now

2. Golden Nugget of the Week.

So many of our problems are of our own making. Don't handicap yourself.

3. Another week, another AI advancement that blew my mind. 🤯

The latest app to take the Internet by storm is Suno.

Describe a song you want, and AI will generate it for you.

Here, for instance, is a melancholy ballad about the MIT commercial license:

Sorry, I couldn't resist making one about Sunday Reads. (The chorus is quite peppy, even if I say so myself.)

4. The true meaning of "AI". 🤣

I read this news about Amazon last week:

Amazon is reportedly phasing out its checkout-less grocery stores with “Just Walk Out” technology, according to The Information Tuesday. The company’s senior vice president of grocery stores says they’re moving away from Just Walk Out, which relied on cameras and sensors to track what people were leaving the store with.

Just over half of Amazon Fresh stores are equipped with Just Walk Out. The technology allows customers to skip checkout altogether by scanning a QR code when they enter the store. Though it seemed completely automated, Just Walk Out relied on more than 1,000 people in India watching and labeling videos to ensure accurate checkouts. The cashiers were simply moved off-site, and they watched you as you shopped…

Just Walk Out was first introduced in 2016, presenting Amazon’s biggest and boldest innovation in grocery shopping. The technology seemed incredible, but there were some stumbles. It often took hours for customers to receive receipts after leaving the store, largely because offshore cashiers were rewatching videos and assigning items to different customers. The system of scanners and video cameras in each store is also incredibly expensive.

Guess some of us didn't receive the memo earlier.

AI = Anonymous Indians.

PS. These guys called it years ago 👏👏👏.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

If you missed my last newsletter, here it is: The Ultimate Guide to using ChatGPT.

In that article, I wrote about better prompting for chatbots. This week, let’s look at prompting… for humans?

1. Prompt Engineering… but for humans.

Last week, I wrote about how "prompt engineer" is one of the shortest-lived job titles:

My Twitter feed is full of AI "experts" talking about a crazy new phrase that will 10x your prompting game.

• Tell the AI "Try harder. You can do it.".

• Tell the AI you'll tip 200 dollars for a perfect answer.

• Ask it to "Take a deep breath".

• Order it like a military general, rather than as a boss terrified of his Gen Z intern quitting.

• Promise it tickets to the Taylor Swift concert in Singapore ¯\_(ツ)_/¯

But here’s the thing:

This magical intonation is not the answer. Neither in the long term, nor in the short term.

In the long-term, well... If you believe AI is on an accelerating tear - which all prompt engineers do - then you must also believe that very soon, AI will understand what you're asking. Even if you ask badly.

When I tweeted this, Mike Taylor (whose Five Pillars of Prompting I shared in the article) retorted in reply:

This is true!

With the right "prompt", you can indeed 10x the effectiveness of your teams.

I wrote about this in The right question is a force multiplier:

The right question is a force multiplier. It creates immense leverage for you as a manager. Ask the right question at the right moment, and you can move mountains.

Ten seconds is all it takes.

Way back in July 2020, I had written about the incredible power of asking the right question:

Questions are far more powerful than answers.

They frame the conversation. You can only answer questions that are asked.

The right question takes you right to the essence of a problem, and helps you solve it.

For example, asking a startup what their defensibility is, is far more useful than asking them about the addressable market size.

And the wrong question can waste years.

“What cool feature should we build next?” is the wrong question, when your onboarding funnel itself is leaky.

You can only answer questions that are asked. Therefore, ask the right questions.

In the article, I also shared my favorite managerial question of all time:

"This person you're complaining about - have you tried talking to them?"

A variation of this is the best managerial question of all (and a question I LOVE to ask):

The article itself has more (and here’s the TL:DR).

In the same vein of better prompting for humans, I loved this article from Wes Kao: Super Specific Feedback: How to give actionable feedback on work output.

Why is feedback important? Because:

Training is the highest leverage activity a manager can do!

Wes quotes Andy Grove in her article:

"Ninety minutes of your time can enhance the quality of your subordinate's work for two weeks, or for some eighty-plus hours."

This quote is directionally correct. But only directionally. Because it understates - hugely - the importance of feedback and training.

I wrote about this in Effective Team Management (even while working remote), again heavily inspired by Andy Grove:

Principle 2: Train your team (all the time!), and give better feedback.

Training and giving feedback are very high leverage activities. In fact, they’re the highest leverage things you can do as a manager.

Why is that?

Let’s say a person in your team is struggling with modelling the financials for a new initiative. You spend 4 hours today walking through that with her. 4 hours = 10% of one work week.

If this improves her performance by even 1% every day, you keep reaping the benefit all year.

And like bank interest, this compounds too.

• Learning how to do one task often unlocks a new insight in another related task. Now that she knows how to model financials, she also does cost-benefit analyses better.

• She’ll also train her teams and stakeholders tomorrow, in the same way you have.

And all the benefit comes back to you! Remember the Manager’s Equation.

Training is a gift that keeps on giving. It’s like Amway, except it’s not a ponzi scheme.

Every conversation is an opportunity to train. Every decision is an opportunity to train.

So, coach your team. Coach them daily.

Going back to Wes' article, some of the key points I liked:

A. Be more specific than you think you need to be.

I often like to say, "Specificity is a superpower". (Note to myself: should write more about this in the coming weeks).

This applies to giving feedback too. When you make an effort to be clear, it pays incredible downstream dividends.

From Wes' article:

Regular feedback tends to be general, abstract, and mainly about behavior.

Super Specific Feedback is extremely concrete feedback primarily on work output, such as writing, product flows, marketing assets, and design. The goal is to strengthen the work product to get it closer to ship ready, and to help the feedback recipient improve their craft and judgment over time.

As she says later in the article:

Aim to be tactical, actionable, concrete, and specific.

Tactical: “This isn’t a generic, hand-wavy theory.”

Actionable: “I can put this into practice right now and apply it to my future work.”

Concrete: “This can be observed and measured.”

Specific: “This is precise advice for a particular situation.”

Some things that have worked for me:

• Always edit in track changes. Microsoft Word and Google Docs make this easy. But even when it's an email draft, I use a red font and strikethroughs to show what I'm editing. And I add comments to explain my reasoning.

• Use Loom. Loom is a game-changer for me. It takes a lot of effort to put down structured feedback in an email. And if you want to do it over a call / in-person instead, then you have to schedule the meeting. Instead, record your screen and talk through your changes. 10 min, and you're done!

In fact, because giving feedback becomes easier, you tend to do it more often. And your team (and you, as a result) benefit immensely.

I cannot advocate this enough - if you do knowledge work and manage a team, take a Loom paid subscription. Few things are higher ROI than this.

B. Explain the Why.

It's not enough to say what you want. It's also important to explain why.

Why is this important?

Going back to my Effective Team Management (even while working remote):

Principle 1: Don’t make 100 decisions when one will do.

…

I head business development for a retailer of beauty products. Most days, my team is negotiating with brands that we carry, or brands that we want to carry.

Most negotiation impasses are standard. If the economics aren’t working, it’s due to 3-4 reasons. If the brand doesn’t agree on our purchase targets, there are again 2-3 ways to get on the same page.

When a new team member encounters such problems, I don’t just share the solution. I also make sure to talk through the logic while doing so.

• How to identify the underlying problem causing this impasse.

• How to resolve that specific type of problem.

• How to problem-solve together with the brand.

After a couple of turns through this process, they get it. The next time such a problem occurs, I only find out after it’s solved. Success!

To build leverage, always solve problems at the level of principle.

Remember: Decisions are an opportunity for managers to guide their teams on the right way to do things.

Make the effort to explain context to your team members. Even though you want to feel like Yoda and deal in one-liners.

You might disagree with me. You might say, sorry Jitha, I don’t have time. I’m busy fighting fires right now.

No. You ALWAYS have time to build leverage.

That’s how you prevent the next fire.

C. Tell them what they did well.

Feedback isn't only about what can be better. In fact, "areas of improvement" should be a minority of the feedback.

Instead, focus more on what they did well.

As Wes says:

The ultimate goal for feedback is behavior change. You want to give positive feedback because you want them to continue doing what’s working. Otherwise, your direct report might accidentally stop doing something because they didn’t realize it was effective.

I agree!

I wrote about this in What I learnt from 6 hours with a World Cup winning coach:

Focus on strengths over weaknesses.

Paddy gave an example of his work with a marathoner.

Let's call this runner A.

A always used to come second to another runner B, because B had the ability to get a "second wind" in the last lap of the race. Runner A would lead for most of the race, but then in the last mile, out of nowhere, B would sprint and come first.

So A's coach trained him for a full season, on getting that kick at the end. Result - he did manage to get the last-minute surge. But because he didn't focus on the first 25 miles in training, he came far behind anyway.

When Paddy started working with runner A, he doubled down on his strength. He focused on making what he was already good at - the first 25 miles of the race - 10% better.

The result:

A was able to put so much distance between him and B in the first 25 miles, that B couldn't catch up even with a second wind at the end.

Focus on maximizing your team's strengths, vs. filling the weaknesses.

TL:DR

• Training is the highest leverage activity a manager can do. Coach your team. All the time.

• Be more specific than you think you need to be. Specificity is a superpower.

• Explain the why. Remember: Decisions are an opportunity to guide your team on the right way to do things.

• Focus on strengths over weaknesses. First, tell them what they did well.

Link Love:

This is a tweet-sized masterclass in coaching (click here or on the image to see the video on Twitter).

And Kim Scott's Radical Candor 2x2 is a good framework to remember, next time you feel awful about giving direct feedback. (More on it here on First Round Review).

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,600+ others who read my newsletter every week (its free!) 👇

Subscribe now

2. Golden Nugget of the week.

Saw this chart on the effect of different activities on depression (the more negative on the chart the better).

Not only does exercise beat SSRIs and other meds, but look at Dance!

TIL: We should all dance more! 🕺💃

3. Narrative Violation of the week.

I came across this BBC article recently: New York medical school eliminates tuition after $1bn gift:

A New York City medical school will offer students free tuition following a $1bn donation from the 93-year-old widow of a major Wall Street investor.

The gift to Albert Einstein College of Medicine came from Dr Ruth Gottesman, a former professor at the Bronx school…

In a statement, university dean Dr Yaron Yomer said that the "transformational" gift "radically revolutionizes our ability to continue attracting students who are committed to our mission, not just those who can afford it".

A noble gift 💯. But my first reaction was: Hmm, is that all? 🤔

A whole billion dollars, and all you can do is eliminate school fees? At ONE medical school?

Money - even billions of it - does a lot less than you think, once you scale to a whole population.

Disagree?

OK then, let's do a pop quiz. Quickly, without googling:

If Elon Musk's entire wealth was used to fund the US government's fiscal spend, how many years could it fund?

...

...

...

If you answered with anything higher than 0.03 years (~10 days), you're wrong.

That's right. The entire wealth of the world's richest man would fund only 10 days of the US government's fiscal spend.

[PS. If you want to quibble, ok fine. Bernard Arnault is the world's richest man, and his wealth would last 13 days. Congratulations.]

4. Neuralink!

I saw this video on twitter last week (it's 9 min long, but you can skip through it quite fast):

In the video, the first Neuralink patient (paralyzed from the shoulders down) shows how he's using his Neuralink chip to control his computer... with his mind!

He's moving pieces in an online chess game, by just thinking about it!

A brain-computer interface might sound very "cyborg" to us, but it'll change so many lives.

What's next?

Elon says that Neuralink's next big project will be to help blind people see.

No big deal. Move along, nothing to see here.

5. This is the best opening line of a book I've ever read. 👏👏👏

And it's a book on statistical mechanics, if you'd believe it! Whoever said physicists don’t have a sense of humor…

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

I’ve been a little irregular writing to you. Work, travels, etc. But glad to be back!

If you missed my last newsletter, here it is: If you want to build a new habit this year, make it "speed".

This week, I’ll write about the state of the art on using ChatGPT. What’s the best way to get what you want out of your friendly neighborhood chatbot?

1. How I use ChatGPT.

It's been more than a year since I wrote about ChatGPT and how to use it well.

So I thought I'll do a review - how the state of the art has changed.

But before we go there, let's bust a myth.

"Prompt engineering" is not a thing.

Back in the Stone Age of AI (i.e., a few months ago) "prompt engineering" was all the rage.

JP Morgan was hiring prompt engineers. Media companies were hiring prompt engineers. Law firms were hiring prompt engineers.

"Engineer" feels like you're doing some complex tinkering under the hood, and viola, everything works!

And that's what we all thought we needed.

Use arcane secret language to craft the perfect prompt, and a magic vista of ChatGPT brilliance would unfold before you.

This notion has only gotten stronger.

My Twitter feed is full of AI "experts" talking about a crazy new phrase that will 10x your prompting game.

• Tell the AI "Try harder. You can do it.".

• Tell the AI you'll tip 200 dollars for a perfect answer.

• Ask it to "Take a deep breath".

• Order it like a military general, rather than as a boss terrified of his Gen Z intern quitting.

• Promise it tickets to the Taylor Swift concert in Singapore ¯\_(ツ)_/¯

But here’s the thing:

This complex magical intonation is not the answer. Neither in the long term, nor in the short term.

In the long-term, well... If you believe AI is on an accelerating tear - which all prompt engineers do - then you must also believe that very soon, AI will understand what you're asking. Even if you ask badly.

In the short-term, these phrases work, but not consistently. In fact, depending on the context, the magical phrase is different.

As Ethan Mollick says in Captain's log: the irreducible weirdness of prompting AIs:

There is no single magic word or phrase that works all the time, at least not yet.

You may have heard about studies that suggest better outcomes from promising to tip the AI or telling it to take a deep breath or appealing to its “emotions” or being moderately polite but not groveling.

And these approaches seem to help, but only occasionally, and only for some AIs.

Max Woolf conducted an epic informal study where he looked at the effects of various threats (from the AI getting fines to telling the AI it will get COVID) and rewards (tips, Taylor Swift tickets, world peace, and more) on GPT-4 performance.

The results were inconclusive and dependent on the particular situation. This stuff does work, but not all the time, and in ways that are hard to anticipate. Sometimes it backfires. You probably don’t need to use magic words frequently.

In a more formal study, Rick Battle and Teja Gollapudi found that eccentric prompts work. But here's the problem - you just can't predict what will work in a particular context.

For instance, if you want the LLM to answer a 50-question list of math problems correctly, this is the best prompt:

System Message:

Command, we need you to plot a course through this turbulence and locate the source of the anomaly. Use all available data and your expertise to guide us through this challenging situation.

Answer Prefix:

Captain’s Log, Stardate [insert date here]: We have successfully plotted a course through the turbulence and are now approaching the source of the anomaly.

You might say, “Hmm, that's strange. But now that I know ChatGPT likes Star Trek, watch me rock my AI game. I will boldly go where no man has gone before! (except these two researchers).”

But, but, but... this prompt no longer works so well, if you have 100 math problems instead of 50!

In that situation, you need to pretend you're in a political thriller.

System Message:

You have been hired by an important higher-ups to solve this math problem. The life of a president's advisor hangs in the balance. You must now concentrate your brain at all costs and use all of your mathematical genius to ...

Answer Prefix:

With great urgency,

Any guesses what unique magical phrase will work for the question YOU want to ask?

I want to be clear about one thing: Prompting is still important. Whether for chatbots or for humans.

But you don't need to "engineer" the perfect prompt.

When you give instructions to your (human) teams to improve performance, you don't call it "human engineering". You call it "instructions".

More to the point, as I wrote in Ghost in the Shell - How to truly harness AI in the ChatGPT era, this is a chat-bot. Ergo, you can chat with it.

The "penny drop" moment for me was realizing - it's "chat" GPT.

i.e., I can chat with it. Respond to its answers. Give it feedback. Ask it to clarify or refine its response. And it will do all of that, while remembering the previous conversation.

Once you realize this, it becomes a true copilot.

With that myth out of the way, let's now talk about how to better prompt your pet AI chatbot.

The 80:20 of good Chatbot prompting.

If you don't take anything else away from this article, make sure to get this basic template right. With that, you’re 80% of the way there.

For instance, I travelled to Uzbekistan on holiday last year. This is the prompt I used, to learn about every new place I visited:

You're an expert historian, specialising in Central Asian and Uzbekistan history.

I'm visiting Uzbekistan and I'm now in the city of Samarkand.

Can you tell me about the history of the city? Give me a brief, information dense overview (500 words) and then offer me five questions to explore further. Label them Q1, Q2, Q3, and so on so I can easily tell you which questions to explore. Put each question on a new line.

End each answer with five further questions to explore.

With just 15 min of focused chatting and diving down rabbit-holes, I knew what I needed to know. Much faster than reading a history book or a Wikipedia page.

In the same chat thread, I would sometimes upload a photo of what I was looking at. And ChatGPT would explain what I was seeing!

Why does this work?

There are five key principles of a good prompt. Mike Taylor calls them the Five Pillars of Prompting:

Pillar 1: Give direction.

Describe the desired style in detail, or reference a relevant person.

Phrases I like to use, depending on what I'm asking:

• "You're an expert media analyst, like Benedict Evans"

• "Explain it to me like I'm a 5 year old"

• "You are a marketer writing copy for an ad"

When you do this, you point the LLM to the desired probability space in its training data.

When you say "expert historian", you're hinting to it that you're looking for a response similar to all the history textbooks it has consumed.

Pillar 2: Specify format.

Do you want the chatbot to reply in bullets? In a table?

Ask for what you want, and you will get it.

People sometimes complain that chatbots are too verbose. “They just go on talking!”.

Guess what? You can impose a word limit too - "answer in no more than 100 words".

See what I did in my Uzbekistan prompt above:

Give me a brief, information dense overview (500 words) and then offer me five questions to explore further. Label them Q1, Q2, Q3, and so on so I can easily tell you which questions to explore. Put each question on a new line.

End each answer with five further questions to explore.

That’s an example of asking for a format.

Pillar 3: Provide examples.

This one was a surprise to me. I thought you never need to give examples. After all, the chatbot has already ingested the whole of the Internet.

But it turns out, even one example can increase accuracy by upto 50%!

Pillar 4: Chain of Thought - Split tasks into steps.

This is another prompting superpower.

Splitting a task into steps works wonders.

In fact, you don't have to break it down yourself. If you tell the chatbot to list the steps before starting, that works too!

This is so powerful, I'll give you three examples:

See the before and after of this prompt, from Ethan Mollick:

Base Prompt:

Generate new product ideas with the following requirements: The product will target college students in the United States. It should be a physical good, not a service or software. I'd like a product that could be sold at a retail price of less than about USD 50. The ideas are just ideas. The product need not yet exist, nor may it necessarily be clearly feasible. Number all ideas and give them a name. The name and idea are separated by a colon. Please generate 100 ideas as 100 separate paragraphs. The idea should be expressed as a paragraph of 40-80 words.

Chain of Thought Prompt:

Generate new product ideas with the following requirements: The product will target college students in the United States. It should be a physical good, not a service or software. I'd like a product that could be sold at a retail price of less than about USD 50. The ideas are just ideas. The product need not yet exist, nor may it necessarily be clearly feasible.

Follow these steps. Do each step, even if you think you do not need to.

First generate a list of 100 ideas (short title only)

Second, go through the list and determine whether the ideas are different and bold, modify the ideas as needed to make them bolder and more different. No two ideas should be the same. This is important!

Next, give the ideas a name and combine it with a product description. The name and idea are separated by a colon and followed by a description. The idea should be expressed as a paragraph of 40-80 words.

Do this step by step!

An example for coding:

And this is one I used yesterday, to compile some book notes:

Hi. I need your help with transcribing and pulling out lessons from a book I've read. Here's what I want you to do, step by step:

Step 1: Whenever you're ready, tell me to start by telling you the name of the book, and start dictating my notes.

Step 2: Accept my dictated notes as input. I will use my laptop's dictation software to do this.

Step 3: Clean up my dictated notes and share. Make sure to correct words that have likely been transcribed wrong by the dictation software. Once done, prompt me and ask if I'm ready for the next step.

Step 4: Pull out the key takeaways / lessons from the transcribed notes. Put the lessons as headers, with the relevant transcribed notes underneath. Once done, prompt me and ask if I'm ready for the next step.

Step 5: Pull out actionable next steps / habits / things to put into practice for me, based on the takeaways and lessons in Step 4.

Pillar 5: Track Quality.

This one is a little hardcore - I don't do this yet. But I can see the value of it.

As Mike says:

For most requirements, it will be enough for you to give direction, specify the format, and provide examples. You can usually stop there.

However, many of the clients I work with plan to put their prompts into production, either as a regularly used template for their team or as part of a product that their customers will run thousands of times.

When you’re operating a prompt at scale, you’ll need to know how it’s going to perform across multiple edge cases. What if ChatGPT hallucinates one in every 10 times and includes a made-up fact in your blog post? It will be important to have a system to identify and track these cases.

…it can be as simple as copying and pasting responses into Google Sheets and counting how often it went wrong.

When all else fails...

You can ask ChatGPT itself to help you define a good prompt! Just list down the five pillars, and leave it to the chatbot!

Here's a useful mother prompt that Ethan Mollick has written:

Help me craft a really good prompt for ChatGPT.

First, ask me what I want to do. Pause and wait for my answer. Ask questions to clarify as needed.

Second, once you have the information suggest a prompt that include context, examples, and chain of thought prompting where the prompt goes step by step through the problem.

Third, show what your response as ChatGPT would be to the prompt.

Fourth, ask if the user has any suggestions and help them revise the prompt.

You’re welcome. 😊

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,600+ others who read my newsletter every week (its free!) 👇

Subscribe now

2. Golden Nugget of the week.

I keep thinking about this little nugget from Sam Harris:

Problems are a feature, not a bug.

Don't wait until your problems are over, to live your life.

Your life... is the problems. They'll never stop coming at you, so you might as well enjoy them.

I read this line somewhere else, and it has really stuck with me:

3. Chart of the week.

Quick Pop Quiz: Which AI app has the highest number of sessions per user per month?

You're wrong.

If you're scratching your head as to how Character.ai has its users opening the app 10 times a day, well, wonder no more.

TIL: There are 31M people chatting with "Murderer Boyfriend". Hope I don't meet any of them (or this boyfriend, obv) in real life.

[PS. I searched for "girlfriend" too, but those have far fewer chats. Go figure 🤷‍♂️].

4. Quora: Destroying Google results since 1748.

OK, I know Quora answers are ridiculous. But this one is objectively hilarious.

For a more serious discussion of how Quora's SEO game has destroyed the Internet, read Slate's How Quora Died. Pair it with my Lemon markets, dark forests, and a firehose of malicious garbage.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ve been quite irregular these last few months, with work, travel, etc. getting in the way of my reading and writing. Slowly getting back on the wagon 🙏.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

If you missed last week’s newsletter, here it is: There are no gatekeepers (except yourself, that is).

This week, let’s talk about speed.

1. Clock Speed.

I've been thinking about this short blog post from Sriram Krishnan:

The biggest determinant for success in a technology company is the speed at which it operates and learns – the “clock speed” to use a CPU analogy. The easiest external measure for this is how fast you ship product. However, I’ve come to realize that is often hard to measure or hard to accomplish. You can’t ship hardware every week or make research breakthroughs every day.

I have come to realize there is often a simpler cultural test that one can apply which is the following.

When someone says “Let’s have a follow up conversation”, what is the implicit unspoken understanding of when that should happen?

What will be considered early, appropriate and late in a way that violates cultural norms?

In companies I’ve been at, that has ranged from a few hours to the next day to the next week to …perhaps never. This little test usually tells me a lot about how fast your organization / company works.

P.S I’m deliberately not being prescriptive of what the right clock speed is but if it’s over a week, you are definitely in trouble.

I had three broad reflections.

#1: Speed is, indeed, a competitive advantage.

As long time readers of this newsletter know, I talk about speed A LOT.

I first wrote about it in 2020's Speed as a competitive advantage:

You can generate a moat out of thin air, by simply being fast. By hustling.

Yes, speed can be a lasting competitive advantage.

In fact, as per Elon Musk, it may be THE lasting competitive advantage.

Says the man who’s started four multi-billion dollar companies:

The most important sustainable competitive advantage is fostering an organizational culture that supports a higher pace of innovation.

And if you want something more tweetable:

The fastest company in any market will win. That’s why companies need to make speed a habit.

Sometimes, you think it’s impossible for you to go any faster than you already are. If you go any faster, you’re sure things will break.

At such times, check out Patrick Collison’s list of examples of unbelievable speed. It’s called… Fast.

Some excerpts:

The Eiffel Tower was built in 2 years and 2 months; that is, in 793 days.

On August 9 1968, NASA decided that Apollo 8 should go to the moon. It launched on December 21 1968, 134 days later.

Brendan Eich implemented the first prototype for JavaScript in 10 days, in May 1995. It shipped in beta in September of that year.

Tony Fadell was hired to create the iPod in late January 2001. Steve Jobs greenlit the project in March 2001. They hired a contract manufacturer in April 2001, announced the product in October 2001, and shipped the first production iPod to customers in November 2001, around 290 days after getting started.

Amazon started to implement the first version of Amazon Prime in late 2004 and announced it on February 2 2005, six weeks later.

On January 10 2020, the SARS-CoV-2 genome was published. 3 days later, Moderna finalized the sequence for mRNA-1273, its mRNA vaccine candidate; the first batch was manufactured on February 7 [i.e., in less than a month].

You can always go faster.

In fact, this was one of my big reflections of 2021 as well, as I wrote in Step by step, ferociously (direct link here):

Speed is a competitive advantage. Maybe THE competitive advantage.

Learning from Frank Slootman, who has built two $100Bn companies (and one puny unicorn).

What's his secret to repeatable, gigantic success?

“You beat the slack out of the system.”

How do you do that?

Three (not) easy pieces.

1. Increase velocity: Push your org to move faster.

Set the organization's default speed to "Faster than we thought possible".

As Slootman says, when speed is all-important, people don't work faster. They do things differently. It becomes a "get shit done" culture.

2. Raise standards.

Move fast ≠ break things.

When stepping up the pace, inevitably excuses are made about quality. We can’t possibly move this fast, and maintain quality?

We would agree, because we are going to move faster and raise quality.

It has a compound effect on productivity. It’s not defying gravity, it’s beating reams of slack out of the system. Until the pressure is on, we don’t even know how much better and faster we can be.

3. Narrow Focus.

Most teams are not focused enough. I rarely encountered a team that employed too narrow an aperture. It goes against our human grain. People like to boil oceans. Just knowing that can be to your advantage.

At the company level and as a CEO, I worked to create blinding clarity and singularity of purpose.

Further Reading on Frank Slootman and his business philosophy: How this guy built two $100Bn+ businesses in 10 years.

She's right. Whatever you're doing, do it faster.

Speed is a force.

#2: "Feels like going fast" ≠ actually going fast.

John Cutler has a great graphic on busy-ness:

I need to re-learn this literally every day.

• What gives you a dopamine hit ≠ progress.

• Ticking off a todo ≠ progress.

• Sending 10 emails in 15 min ≠ progress

Facing a difficult and important task, you end up doing many smaller unimportant tasks instead. Because it gives you a feeling of progress.

But as Ashley Whillans of Harvard points out, this is like saying, “Wow, I feel fat! Time to have another burger.”

#3: It's not just about speed. It's about the right kind of speed.

Latency >> Speed.

I wrote about this in How Amazon, Zoom and InMobi became antifragile, talking about a Twitter Space I had done the previous day:

As a startup, just saying “I’ll move fast” is not enough. It’s hardest to change direction when your car is hurtling down the highway.

Instead, run quick experiments. Learn, iterate, and move to the next one.

Speed is not what’s important. What’s important is frequency. Frequency of feedback.

As Shravan said in the Space, a system which has high frequency of feedback thrives. A system with bad feedback loops dies.

As Ravi said yesterday, the schools that adapted to the lockdown best were the ones that empowered their teachers to try different things. Some teachers tried teaching on Zoom. Some created interactive exercises. Some made students do puzzles.

And when something worked, the entire school was able to double down. While all the other schools were trying to figure out how to get kids to sit put while the teachers droned on on Zoom.

I usually don’t like sports analogies, but this one translates well:

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,600+ others who read my newsletter every week (its free!) 👇

Subscribe now

2. Authenticity is the new branding.

Unless you've been living under a rock, you know about Apple's new VR headset. Apple released the Vision Pro (at an eye-watering price of $3499) a few days ago.

I've only read a few reviews so far, but one has stuck with me. It's a review by... Mark Zuckerberg (click on the image to watch the video on Instagram).

And no surprises, he says that Meta's Quest is a better product.

Now, you might say:

"Oh, it looks so authentic!"

"Wow! He shot this video on a Quest!"

It's so easy to forget that this is, at the end of the day, just marketing for his own product.

In a world of sensory overload and fake news, we crave authenticity.

Authenticity is the new branding.

3. AI meeting notes... might not be the killer use-case we think it is. 🤣

Jeff Weinstein had a very productive meeting. Luckily, an AI bot transcribed it for the rest of us.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’m traveling over the next few days, so I might not send an edition of the newsletter next week. See you the week after!

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

If you missed last week’s newsletter, here it is: What matters isn’t how often you’re right (it’s what you do when you’re right).

Shorter Sunday Reads this week.

Over the last few weeks, I have been thinking a lot about one particular personality trait: High Agency. Let’s talk about that.

1. There are no gatekeepers.

What is High Agency?

It's best summed up by this image:

And this tweet:

As Shreyas Doshi says:

High Agency is about finding a way to get what you want, without waiting for conditions to be perfect or otherwise blaming the circumstances.

High Agency People either push through in the face of adverse conditions or manage to reverse the adverse conditions to achieve goals.

A couple of reads on how to foster High Agency:

How to Be More Agentic by Cate Hall.

Why listen to Cate? Because she has high agency.

I’ve done a bunch of cool stuff in different domains: I was a Supreme Court advocate and the number one female poker player in the world; started art and perfume companies; and led operations at Alvea, a pandemic medicine company I co-founded, when it set the record for the fastest startup to take a drug to clinical trials.

All of these things I did in my 30s.

In her article, she shares some of the ways in which we all can be more agentic. By leaning in to difficult things where others might give up.

I also liked Shreyas Doshi's thread on cultivating high agency.

Further Reading:

Sometimes, asking the right question can push people towards more powerful, agentic behaviors.

I talk about that in The right question is a force multiplier.

A large part of low agency is a feeling of being constrained. "I can't do this, because <situation or person x> won't allow me to."

Far too often, these constraints are not real. They are just beliefs. Limiting beliefs. I wrote about that in Stop trying to hit me, and hit me!.

This article was in the context of venture capital, but it applies more broadly too. An excerpt:

There’s an amazing scene in Game of Thrones’ first season where a mercenary named Bronn fights a knight named Ser Vardis in a “trial by combat”.

...the contrast between their fighting styles is stark. Ser Vardis fights, well… very knightly and proper, while Bronn scraps-and-brawls his way to survival.

In the end, Bronn skewers Ser Vardis and tosses him out of the conveniently located floating-castle-garbage-disposal.

... [Lysa Arryn] scolds Bronn for his fighting style and sets him up for one of the series’ great one-liners:

Lysa Arryn: You don’t fight with honor!

Bronn: No, but he did.

Don't try to win. Win.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,600+ others who read my newsletter every week (its free!) 👇

Subscribe now

2. Chart of the Week.

I've seen this chart everywhere on the Internet this week.

As per Paul Graham, this trend has a boringly obvious explanation:

Boys and girls used to hang out together more. The girls made the boys more liberal and the boys made the girls more conservative. But now the boys are at home playing shooter games, and the girls are at home posting on Instagram.

But Alice Evans' explanation feels most complete:

Across much of the world, men and women think alike.

However, in countries that are economically developed and culturally liberal, young men and women are polarising. As chronicled by John Burn-Murdoch, young women are increasingly likely to identify as ‘progressives’ and vote for leftists, while young men remain more conservative. What explains this global heterogeneity?

I suggest,

Men and women tend to think alike in societies where there is:

1. Close-knit interdependence, religosity and authoritarianism, or

2. Shared cultural production and mixed gendered offline socialising.

Gendered ideological polarisation appears encouraged by:

1. Feminised public culture

2. Economic resentment

3. Social media filter bubbles

4. Cultural entrepreneurs.

3. Fortune at the Top of the Pyramid.

I read this on twitter last week:

Mercedes sells about 2M vehicles each year, about the same as Maruti Suzuki.

But Mercedes makes $160Bn of revenue, 10x of Maruti Suzuki which makes $15Bn.

Quite incredible how selling to the top of the global pyramid is disproportionately more lucrative versus the middle.

My boss likes to say, "the luxury business is the best business". One can see why.

If you play it right, the pricing power of a luxury product never reduces. It often becomes stronger as the decades roll by.

And what do I mean by "Play it right"?

Simple. Just create and maintain exclusivity.

4. Innovation is alive and well - Part 2.

A couple of weeks ago, I wrote about an amazing trailblazer of 21st century innovation. I'm speaking, of course, of Doritos.

I'm glad that AI has helped companies do more for consumers.

For example, how else would we get... Doritos Crunch Cancellation Software?

While PepsiCo’s Doritos chips are popular with gamers, the loud crunch they make has long been a source of frustration.

The beverage and snacking giant estimated that 85% percent of U.S. gamers have consumed Doritos in the past three months. But at the same time, nearly a third of individuals reported that other people’s crunching distracts them from playing well and impacts their performance.

To “help gamers keep the crunch to themselves,” Doritos is debuting what it calls “Doritos Silent.” Gamers download Doritos Crunch Cancellation software and when the technology is turned on, the software detects the crunching sounds and silences it while keeping the gamer’s voice intact.

The software, which took six months to develop, used artificial intelligence and machine learning to analyze more than 5,000 different crunch sounds.

Well, looks like Doritos is at it again! With liquor this time.

Nacho Cheese Doritos have been a staple of the snack food aisle for nearly half a century. Now, they’re headed to the liquor shelf.

In a most unconventional crossover, the iconic tortilla chip brand has partnered with Empirical Spirits to release an 84-proof clear liquor that actually smells and tastes like the real thing, minus the signature crunch — thankfully. Which is to say, it’s unlike any alcohol you’ve ever smelled or tasted before. And we don’t mean that in a bad way.

Finally, we all can have nice things 🌮🍾.

5. This is a good tweet 🤣.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

If you missed last week’s newsletter, here it is: How Microsoft became the world's most valuable company.

This week, let’s talk about inflection points. As an entrepreneur or CEO, what should you do when you see the world around you changing?

1. When you see a turning point, turn hard.

I was reading about industry inflection points, in Liberty's excellent newsletter:

Consider one of my favorite industries, cable.

In the 1990s and 2000s, cable was mainly used to deliver video. Cable was a “meh” (though stable!) business; most of your revenue got eaten up by your suppliers (the ESPNs and ABCs of the world). And in a lot of markets you competed with satellite TV, who actually had a cost advantage as their larger (nationwide) scale let them negotiate better prices with suppliers...

That started to change in the late 2000s and early 2010s. Suddenly, cable was used more to provide broadband. Broadband is a much higher margin business than video...

In video, ESPN and ABC get a huge cut of every dollar, and there are no corresponding costs in broadband (the gross margin of providing broadband is ~95%; once the system is in place, you basically just need to pay for some electricity to deliver light down some fiber cables). Margins went way up!

Broadband is also a much “moat-ier” business than video; satellite had some real advantages when it came to video, but they were drawing dead to the superior infrastructure of cable when it came to the ever rising need for speed / capacity that broadband presented.

So you had a sudden change where cable’s margins went up substantially and the business got better as they suddenly leapfrogged a competitor…. and that’s not to mention that the video business didn’t just go away, so the broadband business didn’t just increase margins but it also accelerated growth.

So here you have a change that increases growth, increases free cash flow, and decreases competition intensity. That’s quite an inflection!

He then talked about John Malone, who started a new cable company focused on broadband, to take advantage of this exact inflection point.

And I was like, wait a second!

Isn't John Malone the guy who built a massive cable company in the 1980s, by taking advantage of tax loopholes?

Find a juicy pitch, and swing big.

The Outsiders is an excellent book about the skill of capital allocation. It's a must-read for anyone interested in business-building.

The author talks about the same John Malone, and his cable company TCI.

The details are beyond the scope of this article, but to summarize:

In the 1970s, John Malone realized three things about the cable business:

1: You can roll up cable operators and set up a flywheel of growth.

2: Cable is a high capex business. You need to build cable infrastructure as you expand. And you can use debt to fund this capex.

3: You can avoid paying taxes on your income, by taking debt and investing in capex.

The depreciation on this capex will reduce your profits, cutting your tax bill. But because depreciation isn’t really a cash expense, it will not affect your cash flows.

I had read about "depreciation tax shields" and "interest tax shields" in business school. But I'd never actually seen them employed with such brute force (and finesse)!

Malone exploited these three insights TO THE HILT.

• He acquired 482 cable companies in 16 years, building a massive scaled powerhouse.

• He invested hugely in capex, all funded through debt. In 1973, TCI's debt was 17x revenue.

• He optimized completely to minimize taxes. A key source of capital at TCI was "Taxes not paid".

The result:

With all the depreciation and interest costs, his P&L showed losses for several continuous years. But his cash flow? It just kept growing and growing.

And as for his stock price...

Why am I telling you all this?

Because understanding an inflection point is one thing. But it's far more important to act decisively when you see it.

Let's talk about that, channeling Charlie Munger's wisdom along the way.

Mungerism #1 : Be fearful when others are greedy...

I wrote about Paytm in How much would you pay for a box that beeps?:

You all know the origin story of the success of Paytm, one of India’s leading payments providers.

When India did its demonetization back in 2016, Paytm swung. And swung big.

Front page ads in the country's premier newspapers welcoming the new digital economy. Thousands of foot soldiers recruiting retailers into the Paytm fold. The QR code at every store, stall, and hawker's cart.

Paytm saw a once-in-decades moment. A billion people being forced to move from cash to digital payments. And it swung for the fences.

I elaborated further in When the ball is in the zone, swing big. Using LVMH as an example:

LVMH is the world's biggest luxury company.

And the founder Bernard Arnault is the second-richest man in the world. Yes, richer than Bezos! With a net worth of over USD 150 Bn.

It all started with buying a bankrupt company for a single franc.

Mario Gabriele tells the story in LVMH: The Civil Savage:

Maison Dior had fallen on hard times. Founded in 1947, the couturier’s parent company slumped into the 1980s. That was less to do with the performance of Dior than the other businesses weighing down “Groupe Boussac,” including a flagging textile business and disposable diaper brand.

After declaring bankruptcy in 1984, the French government stepped in to find Boussac a buyer.

Arnault couldn’t believe it. One of the country’s most beloved and prestigious brands was for sale and at a discount! But even in its distressed state, buying Boussac looked beyond Arnault’s means. After all, the French government wanted someone who could commit to investing in the business. Though Ferinel (Arnault's family business) did well, the $15 million in annual revenue it brought in was still a far cry from the capital needed.

But Arnault was not to be deterred; he would get the money, one way or another.

His salvation came in the form of Antoine Bernheim, an investment banker at Lazard Frères...

In 1984, Arnault acquired Boussac for a token franc. The actual cost of the deal was $80 million, with Lazard financing over 80% of it. The rest came from the coffers of Ferinel.

Now, Arnault didn't just swing big in buying the acclaimed Maison Dior. He then slashed costs hard.

Mario continues:

He wasted little time in conforming Boussac to his vision. Despite promising to keep jobs and maintain the group’s structure, Arnault slashed aggressively, selling off unprofitable divisions and re-centering the business around Dior. With that streamlining went 9,000 jobs. The name changed, too, this time to Financiere Agache. 

Whatever one thinks of Arnault’s gutting of Boussac, financially, it proved the right call. Over the following few years, Agache stabilized, then flourished. By 1987, the company earned $1.9 billion in revenue a year and netted $112 million.

Arnault could have stopped here. With a single franc, he had gotten himself an annual dividend of $112 million.

But he didn't stop.

He continued swinging big whenever he saw the opportunity. He saw a chance to own LVMH by playing both sides in a boardroom tussle, and he did it. More in Mario's article.

The rest of Arnault's story is more straightforward. A snowball inexorably transforming into an avalanche.

What did both these companies do?

Where others were fearful, they were decisive.

Mungerism #2 : Opportunity meeting the prepared mind.

Some of us have diamond hands, and ice-cold titanium flowing through our veins. Able to bet big, without worrying about the downside

The rest of us though? We need to train ourselves to see the opportunity when it arises. To see when the ball is in the zone, and get ready to swing.

I love this anecdote from The Power Law, about Bill Gurley and his investment in Uber:

Gurley’s investment in Uber was the perfect model of an intelligent Series A bet. Before joining Benchmark, he had been struck by the writings of Brian Arthur, a Stanford professor who studied network businesses. Companies that enjoyed network effects inverted a basic microeconomic law: rather than facing diminishing marginal returns, they faced increasing ones.

In most normal sectors, producers that supplied more of something would see prices fall: abundance meant cheapness. In network businesses, contrariwise, the consumer experience improved as the network expanded, so producers could charge extra for their products. Moreover, the improving consumer experience was matched by falling production costs because of the economies of scale in building a network.

As Benchmark had discovered when it had backed eBay, the rewards could be enormous...

After signing on with Benchmark, Gurley extended the eBay concept from products to services. His first hit was a startup called OpenTable, which connected diners to restaurants... What excited Gurley about OpenTable was that the network effects proved every bit as powerful as theory predicted: as more restaurants signed on, more diners visited the site, which in turn attracted more restaurants.

As Gurley and his partners pondered other sectors that might be ripe for similar treatment, they alighted on taxi and black-car services. There was so much inefficiency in pairing riders with drivers; surely better matching should be possible?…

In 2009, Gurley heard of Uber, which was looking for angel backers. To his delight, Uber’s strategy was to target unregulated black cars. “We’ve got to meet with these people immediately,” Gurley recalls thinking...

...Benchmark presented a term sheet to Kalanick, and after a bit of back-and-forth the partners led Uber’s Series A round, paying $12 million for one-fifth of the equity. Gurley had landed his OpenTable for black cars.

His ambition for the startup was that it might match OpenTable in its results, going public in due course at a valuation of perhaps $2 billion.

“Perhaps $2 billion”. Indeed. Even Gurley, with his prepared mind, didn’t realize how juicy this pitch was. But he seized it.

Which brings us to the last Mungerism.

Mungerism #3 : Opportunity doesn't come often, so seize it when it does.

I love this anecdote about George Soros and Stanley Druckenmiller from The Man Who Solved the Market:

Druckenmiller walked into Soros’s expansive midtown office to share his next big move: slowly expanding an existing wager against the British pound.

Druckenmiller told Soros that authorities in the country were bound to break from the European Exchange Rate Mechanism and allow the pound to fall in value, helping Britain emerge from recession. His stance was unpopular, Druckenmiller acknowledged, but he professed confidence the scenario would unfold.

Complete silence from Soros. Then, an expression of bewilderment.

Soros gave a look “like I was a moron,” Druckenmiller recalls. “That doesn’t make sense,” Soros told him.

Before Druckenmiller had a chance to defend his thesis, Soros cut him off.

“Trades like this only happen every twenty years or so,” Soros said.

He was imploring Druckenmiller to expand his bet.

The Quantum Fund sold short about $10 billion of the British currency. Rivals, learning what was happening or arriving at similar conclusions, were soon doing the same, pushing the pound lower while exerting pressure on British authorities.

On September 16, 1992, the government abandoned its efforts to prop up the pound, devaluing the currency by 20 percent, earning Druckenmiller and Soros more than $1 billion in just twenty-four hours.

Life-changing opportunities don’t show up often. When they do, you MUST swing big.

But the master of decisive action is a person you've likely never heard of: Henry Singleton.

Warren Buffett once said:

If you take the top 100 business school graduates and make a composite of their performance, their record will still not be as good as that of Singleton.

Lofty words from the Oracle of Omaha. Why did he say that?

Singleton was the CEO of Teledyne, a public conglomerate of the 1960s and 1970s. He saw two major inflection points, and he seized them like no one else did.

Inflection point #1: The Conglomerate Boom (1960s).

In the 60s, stock market investors loved conglomerates.

Conglomerates had higher Price to Earnings ratios than smaller companies. So they could just buy up companies, absorb their revenue, and command a higher stock price.

There was also less M&A competition, as private equity was still not a thing.

Singleton used his expensive stock (trading at P/E ratios of ~50) to buy smaller companies. Often at single digit P/E ratios.

And he didn't make 2-3 or even 20 acquisitions. He made 130 acquisitions during the boom. Profitable and growing companies. At dirt-cheap prices.

And then the market turned.

Inflection point #2: The Conglomerate Bust (1970s).

Starting in 1969, the public fell out of love with conglomerates. The P/E ratios started falling.

What did Singleton do? After a decade of breakneck M&A-driven growth, he abruptly threw the entire machine into reverse!

First, he immediately fired his entire M&A team. No more acquisitions.

Second, seeing how cheaply the public market was valuing his stock, he starting buying it back.

And he kept buying. Even as the P/E ratios kept crashing - and his stock kept getting cheaper - he kept buying it back.

By the end of it, he had bought back nearly 90% of the company's stock! i.e., he reduced the outstanding shares to 1/10th.

Which meant the Earnings per Share on outstanding shares skyrocketed.

The result: Through the boom and bust, Teledyne outperformed its peers nine-fold!

I started this article with Peter Thiel. Let me end with another Peter.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,600+ others who read my newsletter every week (its free!) 👇

Subscribe now

2. Fun Fact of the Week

I'm going for a concert this evening (Coldplay is in Singapore!). So let me share an interesting factoid about the music industry (from Trung Phan):

The Weeknd’s “Blinding Lights” is the most streamed song on Spotify ever.

Assuming the payout is $0.005 a stream, that song has paid out less ($18.2m) than the deal Harry and Meghan got paid to make 12 podcast episodes ($20m).

A little bit of a head-scratcher, isn't it?

How can the most streamed song EVER make less money than... a 12-episode podcast that only a fraction will tune in to?

The simple reason: They sit in different places on the P&L.

The difference between COGS and CAC.

Tren Griffin tweeted an interesting chart last week:

Highly rated shows are a small minority across video platforms. The bulk of shows are quite average / bad.

As he said, Content is part CAC and part COGS.

You may subscribe to Netflix because of Stranger Things, but what do you watch the most? FUBAR, evidently.

In the same way:

The objective of the Harry-Meghan podcast is to bring new users to the platform.

It's a cost of acquiring new customers, or CAC.

If the podcast brings even 500K new listeners (and it will likely do more), then the cost per new user is $40.

Not that high, considering that many of these will convert to Spotify Pro at $10 per month.

It's a strategic investment, rather than an ongoing cost.

Whereas, payout to music artists is not bringing new listeners to the platform.

It's a variable cost that Spotify pays per listen. In that sense, it's Cost of Goods Sold, or COGS.

It needs to be a fraction of what Spotify makes from consumers on an ongoing basis. Much smaller.

Moral of the Story:

It doesn't matter what you're selling. It matters what your customer (Spotify in this case) is buying.

What job are they hiring you for?

Because remember:

3. "Daytime makes the infinity of the Universe go away" 😰.

This comic from xkcd is haunting.

Follow-up: Read Isaac Asimov's Nightfall (1941). It's a short novella, but one of his best works.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

If you missed last week’s newsletter, here it is: Do you know whom you're marketing to? Do you, really?.

This week, let’s talk about Microsoft. Once had the world at its feet. Then it was written off. Many times. And now it’s the world’s most valuable company.

1. Who said elephants can’t dance?

This week, Microsoft crossed Apple to become the most valuable company in the world.

Time to share this chart from May 2023:

Lesson: If you want to make Google's spectacular growth look like a flat line, add Microsoft to the graph.

Folks wrote so many obituaries of Microsoft during the 15+ years it took to retrace its 2000 peak.

And no one - absolutely no one - could have predicted the last few years of blistering growth.

Microsoft's secret is a simple (oh, but not easy at all!) two-step playbook:

Step 1: Create a proprietary platform for others to build on.

A lot of companies throw around the word "Platform".

"We are building a platform for D2C brands". "We are building the next-gen platform for apps to reach consumers". Etc.

As Bill Gates would say, "that's a crock of shit". Ben Thompson wrote about this in The Bill Gates Line, citing an interview with Chamath Palihapitiya:

Semil Shah: Do you see any similarities from your time at Facebook with Facebook platform and connect, and how Uber may supercharge their platform?

Chamath: Neither of them are platforms. They’re both kind of like these comical endeavors that do you as an Nth priority. I was in charge of Facebook Platform. We trumpeted it out like it was some hot shit big deal. And I remember when we raised money from Bill Gates, 3 or 4 months after — like our funding history was $5M, $83 M, $500M, and then $15B.

When that 15B happened a few months after Facebook Platform and Gates said something along the lines of:

“That’s a crock of shit. This isn’t a platform. A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it. Then it’s a platform.”

Read that again:

A platform is when the economic value of everybody that uses it, exceeds the value of the company that creates it. Then it’s a platform.”

With this definition of "Platform", you can see how few companies make the cut.

Facebook: Not a platform.

Google: Not a platform. It's just an aggregator.

Apple App Store: Not a platform. The cut it takes is TOO high.

But Windows? Well , that was well and truly a platform.

And by creating an environment for developers to succeed, Microsoft charted its initial success.

I wrote about this in What sweaty Steve Ballmer knows about startups that you don't:

Why does the gorilla win?

The gorilla wins because over time, it starts to define the industry standards. It becomes a platform that others build on top of.

A gorilla creates a network effect where none exists.

• Developers build apps for Windows, or plugins for Shopify.

• Entire consulting firms exist only to help companies install Salesforce.

• System Integrators help companies set up Cisco networking infra.

Once you've embedded yourself into an ecosystem, it becomes impossible for a competitor to dislodge you.

And the more you sell to that ecosystem, the better (and lower cost) your products become. Your competitors fall further and further behind.

And because you're the de facto standard now, all competitors are measured against you. And they fall short.

And then you win.

Next time someone tells you they're building a "platform", ask them for their version of the Ballmer "Developers, Developers" chant:

Now, what do you do after this initial success?

Answer: You start expanding.

Step 2: Kickstart the Product to Distribution flywheel.

Once you've done the hard part of firmly lodging yourself into your customers' world, then you start reaping the dividends.

How? By selling them more products.

By plonking more products down the distribution funnel you've so painstakingly built.

I wrote about this in How Microsoft became a multi-trillion dollar company:

We've all seen this graph of the meteoric rise of Microsoft Teams.

And we've all dismissed it with disdain. "Yeah, they're dumping a Teams account on every Office user without their knowledge."

But what if I told you this is not one-off? That this is not a flash in the pan? That Microsoft keeps doing this?

Microsoft Azure is a great example. Amazon’s AWS was the fastest company to USD 10B in revenue. And Azure grew faster than that. Faster than Amazon!

What, is Microsoft now bundling free servers with Office??

No, it isn't. It has another trick up its sleeve. Well, it's a trick, but it's not exactly a secret. It's been the standard strategy of big companies over the last several decades.

The "Product to Distribution" Playbook.

In a 2018 interview, Marc Andreessen explained the playbook for big tech companies (BigCos):

The general model for successful tech companies, contrary to myth and legend, is that they become distribution-centric rather than product-centric.

They become a distribution channel, so they can get to the world. And then they put many new products through that distribution channel.

…

See this "Product to Distribution" approach once, and you start seeing it everywhere.

Microsoft is the OG of this approach, of course. Word, PowerPoint, Excel, Internet Explorer, ... It keeps building / buying new products, and dropping them down the giant Windows distribution chute.

And this approach has increasing returns over time, if MSFT’s market cap is any indication.

With Microsoft's unique and deep inroads into companies, its B2B distribution is unbeatable. Expect it to win big with AI in the workplace as well.

Further reading on Microsoft:

Microsoft's moves in AI have been a masterclass in strategy. I wrote about it in An epic dance-off between two trillion dollar companies.

Microsoft may be a multi-trillion dollar elephant, but it sure can dance!

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,600+ others who read my newsletter every week (its free!) 👇

Subscribe now

2. Golden Nugget of the Week.

Seth Godin has a wonderful post, Working with Problems:

First, is it a problem or a situation? Problems, by definition, have solutions. You might not like the cost of the solution, the trade-offs it leads to, or the time and effort it takes, but problems have solutions.

On the other hand, situations don’t. Situations are simply things we need to live with.

Once we realize that a problem we have isn’t a problem at all, but actually a situation, it’s easier to do our best to move on and thrive. Focusing on a situation is usually a source of stress, not a way forward.

Second, has anyone else ever solved a problem like this one in a useful way? If not, it might be a situation. See question one.

Third, if the problem has been around for a while, it might not be an *easy* problem. Those tend to get solved right away. It’s probably a problem that involves more effort or trade-offs than you were hoping for. Resetting our expectations for what it might take to solve gives us the chance to recalibrate it as a situation we’re willing to live with, simply because the cost of the solution is too high.

And finally, some problems get better if we’re willing to talk about them. Some situations, on the other hand, simply get worse when we focus our energy and community on them.

It's a good question to ask: Is this a problem, or a situation? Can I solve it, or do I need to adapt to it?

Reminds me of what Shaan Puri said when he lost $500K on crypto in 2021:

Is this a crisis, or an event?

3. Lemons, lemons, everywhere.

I read this angry rant on Hacker News the other day.

The Internet is full of AI Dogshit:

The Internet used to be so simple to use that people collectively coined the term “let me Google that for you” to make fun of people who had the audacity of asking other people questions online. In the future I fear that people will have no other choice but to ask people for information from the Internet, because right now it’s all full of AI dogshit.

In September of this year, Google users discovered that the search engine was incorrectly telling people that eggs can melt. Why? Because instead of surfacing websites, Google now grabs snapshots of pages in a drop down menu, allowing users to read search results without clicking on anything. This practice often grabs incorrect information, like an AI-generated answer from Quora that insisted that eggs can melt when they definitely cannot.

The internet has been broken in a fundamental way. It is no longer a repository of people communicating with people; increasingly, it is just a series of machines communicating with machines.

As I wrote in Lemon markets, dark forests, and a firehose of malicious garbage:

One thing I’ve been saying often is: when it's 10x easier to fake it than to make it, fakes will always outnumber the truth.

We saw it in the crypto summer of 2021, when all you needed was to create a token and you'd get mass adoption. A paper found that 98% of tokens launched on Uniswap were scams.

The general principle is:

When it's easy to showcase a veneer of "work" without doing the work itself, then 99% of the work you see will not be real.

When it's easy to generate content without writing it yourself, then 99% of content will be AI-generated.

And if 99% of content is AI-generated, you're better off assuming that 100% is AI-generated.

When you see any content online, the default assumption will be: this has been written by an AI.

This won’t happen tomorrow. It might not happen for the next three years. But inevitably, it will happen.

The Internet will become "a market for lemons".

…

As instant "fake content" becomes more and more like "real content" that takes hours to painstakingly produce, the outcome is clear:

The Internet will become, slowly and then suddenly, completely fake.

Guess I was wrong about the “slowly” part. This is already happening!🤦‍♂️

4. Moral dilemmas without the dilemma are my new favorite thing 🤣.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

It's been a while since I wrote to you. I've missed you all!

Been quite busy these last few months, so wasn't able to commit enough time to write something good.

Busy with what? Well, work, life, and... one more thing.

🥁🥁🥁

I'm starting a fund!

It's a seed fund, investing in amazing early-stage startups and founders.

Drop me a note (just hit reply) if you want to learn more about how you can participate in the fund.

And please refer me amazing founders you know, even if they are between ventures (feel free to refer yourself!).

My philosophy on seed-stage investing is here.

With that update out of the way, let's get into it - the first Sunday Reads of 2024!

To refresh (for myself as well as for you), this is what we do here at Sunday Reads, every week:

We look for cheat codes to life, business, and careers (sometimes we even find them!).

Here’s the last edition of my newsletter: Don't get your ideas from customers (sometimes, listening to your customers can kill your company).

Today, we talk about a simple - deceptively simple - diagram.

1. The Buyer's Pyramid - Do you know whom you’re marketing to?

I saw this diagram a few weeks ago, and I'm still thinking about it. (source). It explains so much about the difficulties of my startup journey.

Why am I still thinking about this simple diagram? Isn’t it an obvious fact?

Yes, but it's one of those rare insights that seem obvious... only in retrospect.

It has three important lessons for entrepreneurs and executives:

Lesson 1: Qualify, qualify, qualify.

I've written before about this famous anecdote from Gary Halbert, the most successful direct marketer ever:

One of the questions I like to ask my students is, "If you and I both owned a hamburger stand and we were in a contest to see who would sell the most hamburgers, what advantages would you most like to have on your side?"

The answers vary. Some people say they would like to have the advantage of having superior meat from which to make their hamburgers. Others say they want sesame seed buns. Others mention location. Someone usually wants to be able to offer the lowest prices.

And so on.

Anyway, after my students are finished telling what advantages they would most like to have, I say to them: "OK, I'll give you every single advantage you asked for. I, myself, only want one advantage and, if you will give it to me, I will whip the pants off of all of you when it comes to selling burgers!"

"What advantage do you want?", they ask.

"The only advantage I want, " I reply, "is a STARVING CROWD!"

The no. 1 principle of Direct Marketing is: Qualify the funnel. Find the starving crowd.

Find the 3% who are ready to buy NOW.

Mark Cranney of Andreessen Horowitz says the same thing, in If SaaS products sell themselves, why do we need sales?.

Sales is not about selling. Sales is about qualifying the buyer.

Find the right buyer, and your product will sell itself.

Lesson 2: If you're a baby, don't copy a teenager.

I first realized this back in Sep 2021. As I wrote in Why Warren Buffett's investing principles won't work for you:

When you've just started your company - when you're looking for Product-Market Fit - your job is not to market to the whole addressable market.

No, your job is to qualify, qualify, qualify.

Find the 3% who are ready to buy NOW. So you can see if your product actually works.

Trying to sell to EVERYONE from Day 1 won't work. It's like playing a video game for the first time, and immediately having to kill the Final Boss.

It's not gonna happen. The Final Boss is not ready to die by your hand. Not yet.

Aside: This framework explains the amount of rejection startup founders face.

We see this so often in origin stories. Having to knock on a hundred doors to get the first "Yes" (and the rest is history). I also still remember - like it was yesterday - the number of NOs I got.

The Buyer's Pyramid tells us why.

You, the founder, might not know it at that time. But what you're doing is not "selling" (trying to convince people to buy).

What you're doing is "qualifying" (finding that first customer who's already 80% convinced).

You're trying to find that 3%.

Once you get to PMF and you're looking to find the next set of buyers, then you can look at the other parts of the pyramid.

Which brings us to lesson 3...

Lesson 3: What job is your marketing doing?

With the framing of the Buyer's Pyramid, you can define the job of marketing a lot better:

You're not trying to get people to buy. You're just trying to move them up the pyramid.

You cannot talk to your entire addressable market in the same way. Depending on where the customer is in the pyramid, you have to talk to them differently.

Marketing is not about closing the sale. It's about getting people one step closer to buying.

I see this at work all the time.

I don't expect to close a new partner in my first, second, or even my fifth conversation. Some of my sales cycles are 2-3 years long! (why this works, btw, is because our customer relationships tend to run for decades).

When you take this perspective - moving people one step closer to buying - then the job of marketing... is different at every stage!

Bottom 30% - filter them out.

Middle 60% - catch their attention. And then educate them.

Like a street performer - your marketing must be eye-catching and thought-provoking. Like a good first tweet, it should "stop the scroll". Pique their interest.

At this stage, you're building demand that you can harvest in the future. It's not about this month's (or sometimes even this year's) sales target.

7% open to consideration - nurture them.

Send them case studies. Show them how this can generate value right away.

Move them up the pyramid.

3% ready to buy - give them offers to close.

Flash discounts, one-time only offers, the works. Make it easy to say yes.

TL:DR:

• Sales is not about selling. Sales is about qualifying. Sales is about finding the Starving Crowd.

• As an early-stage startup, your job is not to sell. Your job is to find the one customer (or three) that get you to PMF. Don't follow the marketing playbook of a large company.

• The job of marketing is not closing a sale. The job of marketing is to move customers one step closer to buying. And how you market at each step, will be different.

In Bruce Springsteen's famous words:

Can't start a fire...

Can't start a fire without a spark.

Find the spark first. Then light the fire.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,600+ others who read my newsletter every week (its free!) 👇

Subscribe now

2. Golden Nugget of the week.

Saw this on Instagram a few days ago.

Ironic, I know, that I saw this on Instagram of all places.

Nevertheless, it's a good reminder:

What you pay attention to - expands.

In the new year, let's be more mindful of what we pay attention to.

3. What exactly are AI Large Language Models? How do they work?

2023 was the year of ChatGPT, Large Language Models, and Artificial Intelligence.

This YouTube video from Andrej Karpathy of OpenAI is a great primer into how these AI models work. And why they're such an important breakthrough.

4. Good to know that innovation is alive and well 😂

I'm glad that AI has helped companies do more for consumers.

For example, how else would we get... Doritos Crunch Cancellation Software?

While PepsiCo’s Doritos chips are popular with gamers, the loud crunch they make has long been a source of frustration.

The beverage and snacking giant estimated that 85% percent of U.S. gamers have consumed Doritos in the past three months. But at the same time, nearly a third of individuals reported that other people’s crunching distracts them from playing well and impacts their performance.

To “help gamers keep the crunch to themselves,” Doritos is debuting what it calls “Doritos Silent.” Gamers download Doritos Crunch Cancellation software and when the technology is turned on, the software detects the crunching sounds and silences it while keeping the gamer’s voice intact.

The software, which took six months to develop, used artificial intelligence and machine learning to analyze more than 5,000 different crunch sounds.

At times like these, I have to say: Don't you love capitalism! 🙃

That’s it for this week. Hope you enjoyed it.

Wish you a happy, healthy, productive… and more mindful year ahead.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Hope you’re having a great weekend.

If you missed last week’s newsletter, here it is: What Roger Federer (the businessman) can teach us about pricing and value.

This week, let’s talk about the timeless Lean Startup advice - “Build what your customers want”. And let’s see why the real world is not so simple.

1. “If you ask people what they want, they'll say faster horses.”

I saw this on Twitter the other day.

I laughed out loud when I saw this. Steve Jobs would turn in his grave if the iPhone turned out like this!

But at the same time, it made me a little uneasy. After all, who hasn't done this?

As Aravind Srinivas added on Twitter, this actually happened to Evernote! Remember Evernote?

This actually happened to Evernote. They took the advice of “keep talking to your customers and ship whatever they want” as the only guiding principle for product development. And what ended up happening was paying users liked it, but the product become unintuitive and feature overload for the new user. To the extent that they had to rebuild a version for the new user.

Users don’t always know if they really want something. It’s your job to take the extra step to think on their behalf: whether they really need this. Or can what they ask be done through something much simpler. Or can you solve multiple problems of different users with one new redesign rather than a bunch of changes. The right principle is: “Keep talking and listening to your users, spend the additional time thinking on their behalf what they actually want, and ship that”.

Evernote listened to customers, and built a bloaty piece of software.

Why does this happen? Because:

Don't get your ideas from customers.

Lenny Rachitsky has an interesting chart, on the origin stories of the biggest B2C startups.

Notice what's missing?

Talking to customers.

In fact, in his entire analysis, only one company came up with its idea by talking to customers - Doordash. (Aside: I wrote about the origin story of Doordash in 2020's Need for Speed).

This reminds me of one of my lessons from James Dyson's memoir. I wrote about this in What James Dyson learnt from making 5127 prototypes:

Priced at US$150, the compact silver and blue Walkman wasn’t cheap, while within Sony itself it was controversial and brave because it was unable to record, and no one had made a ‘tape recorder’ that wouldn’t do so before. Nevertheless, Sony’s Masura Ibuka − one of the Japanese company’s founders − hoped to sell 5,000 Walkmans a month. He sold 50,000 in the first two months. By the time production ended in Japan in 2010, more than 400 million had been sold worldwide.

With lightweight foam headphones and no function other than playback, the Walkman emerged. The press lampooned it. Even the name was ridiculous. The Japanese press was wrong, although the market hadn’t known it wanted a tiny personal stereo. When it saw the attractive little device and heard it in action, it fell in love with it. By the mid-1980s, the word had entered the Oxford English Dictionary.

…

I was also told that no one would want to see dust sucked up by a cleaner inside a transparent container. Simple market research confirmed this.

However, Pete, Simeon and I enjoyed seeing the dirt we had extracted in all its gory detail, so we ignored the market research. Curiously, and aside from the fact that the new cleaner was clearly powerful and with constant suction, this is exactly what customers did like to see. They were fascinated by the sight of just how much dirt they had successfully cleaned up.

So is talking to customers useless?

No it's not. But we often get it backwards.

The key lesson of talking to customers is not "Listen to what your customers want".

It's "Show your product to customers and listen to what they think".

As Steve Blank says in this video about his Lean Approach, yes - you need to get out of the building. But it's critical to have a hypothesis first.

As Dyson learned, sometimes even describing your product isn't enough. You need to show customers the actual product. Let them touch it, feel it, try it out.

And then observe how they use it. Where do they get stuck? Which features are magical? Lean in on them.

That's how you get to the "Aha!". Trial and error, and watching what clicks with your customers.

PayPal’s story is a great example of this.

Max Levchin was convinced about the company's hero product. it would be a Palm Pilot add-on, that let users "beam money" to each other. So that's what PayPal engineering focused on, investing millions of dollars.

But when they saw customers use their products, people weren't interested in that!

Instead, far more people were using the simpler "send money over email" feature.

So they decided to focus on that instead. The rest is history.

In a way, this is really how you get to Product-market fit:

• Tinker with your product, to see what matches your target market.

• See which customers are obsessed with your product, and which features they are obsessed with. Lean in.

It's like Customer Obsession™, but in the opposite direction.

Drive your clown car towards the most laughs, and you might fall into a gold mine.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join nearly 1,600 others who read my newsletter every week (its free!) 👇

Subscribe now

2. Golden Nugget of the week.

I liked this section from Morgan Housel's How People Think.

The best story wins.

Not the best idea. Not the right answer. Just whoever tells a story that catches people’s attention and gets them to nod their heads.

Sherlock Holmes put it: “What you do in this world is a matter of no consequence. The question is what can you make people believe you have done.”

Charles Darwin didn’t discover evolution, he just wrote the first and most compelling book about it. Andrew Carnegie said he was as proud of his charm and ability to befriend people as he was his business acumen. Elon Musk is as skilled at getting investors to believe a vision as he is at engineering. Rory Sutherland recently put it: “No one would have heard of Jesus if it wasn’t for Saint Paul.”

The most durable narratives are not the ones that stand up best to fact-checking. They’re the ones that address our deepest needs and desires.

This drives you crazy if you assume the world is swayed by facts and objectivity – if you assume the best idea wins. But it’s how people think. And it’s actually optimistic, because when you realize you can change the world by explaining an old thing in a new way vs. creating something new, you start to see so much potential.

3. Chart of the week.

AI-generated images have already reached 15 billion, in 1.5 years.

Human-generated photographs took 149 years to get there.

In Jan 2023's Lemon markets, dark forests, and a firehose of malicious garbage, I had written about the lemons problem of AI-generated content.

When it's easy to showcase a veneer of "work" without doing the work itself, then 99% of the work you see will not be real.

When it's easy to generate content without writing it yourself, then 99% of content will be AI-generated.

And if 99% of content is AI-generated, you're better off assuming that 100% is AI-generated.

When you see any content online, the default assumption will be: this has been written by an AI.

This won’t happen tomorrow. It might not happen for the next three years. But inevitably, it will happen.

The Internet will become "a market for lemons".

We're not there yet (thankfully). But you can sort of see it on the horizon.

4. An Associate Consultant would have been fired for this rubbish.

This is the greatest (and absolute worst) 2x2 matrix ever.

This is the chart that Steve Jobs used, when he announced the first iPhone on Jan 9, 2007.

In a way, this simple, atrocious chart created Jobs' reality distortion field. This irrationally brash and confident map reached out into the world, and made the iPhone the greatest consumer product ever.

But I still maintain:

If I made this chart when I was a consultant... I would not have been a consultant much longer.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

If you missed last week’s newsletter, here it is: The right framing can bend reality.

This week, let’s talk about the relationship between price and value. We start with a little anecdote about Roger Federer, the businessman.

1. What Roger Federer can teach us about pricing and value.

This week, I re-read this excellent anecdote about Roger Federer from Ankesh Kothari: Roger Federer - The Business of Tennis.

Ankesh talks about Federer's unique deal with Uniqlo.

Federer was 36 years old when he broke off with Nike. After 10 years with them, he didn’t renew his contract and decided to walk off. Because he found a deal Nike could not match.

Nike may have increased their sponsorship to $15 million. But Federer got Uniqlo to offer $30 million per year, for a period of 10 years. Tripled the old Nike deal. (And what’s more, Uniqlo would pay him even if he retired from playing tennis the next day!)

Nike was the biggest athletics wear company in the world. They dwarfed Uniqlo’s sales figures by 5 times! So then why could Nike not match Uniqlo’s offer and retain Federer? Because Nike was already sponsoring a roster of other top tennis players: Serena Williams to Rafael Nadal to Maria Sharapova. Their budget didn’t have space.

Whereas, Uniqlo had no top players. They are not even known for athletic wear. But they wanted to grow beyond Japan. It made sense for them to go with an icon: someone everyone in the world recognized.

Read that again - Uniqlo was ready to pay him $30 million per year for 10 years. Even if he retired the next day!

Federer's story highlights two general principles about the nature of price and value.

Principle 1: Value lies in the eyes of the beholder.

As Federer's story shows, you're not selling a product. The customer is "hiring your product to do a job".

In Nike's case, the job was "Consumers should see Nike in every sports match they watch".

In Uniqlo's case, the job was "Consumers should see Uniqlo on at least one major sports icon".

That's why Nike wasn't ready to pay the big bucks. If Federer didn't renew, they still had other major players. And he was about to retire anyway.

But in Uniqlo's shoes, the cost-benefit analysis looked very different. Without Federer, Uniqlo had no major icons in its roster. Without Federer, Uniqlo wasn't even a sports brand.

You're not selling quarter inch drills, you're selling quarter inch holes.

I wrote about this in How much would you pay for a box that beeps? (which I referenced in last week's newsletter too).

Price is not about cost.

One of the things I talk about a lot is: Price is not about cost. Price is about value.

How much would you pay for:

• A small buzzer (the kind you use when you play Taboo): maybe INR 25 (USD 0.30). You can buy a pack of 5 at the dollar store.

• A doll that plays music, for your 2 year old: INR 100 if you don't care about the brand.

• A device that makes a sound each time you get paid: INR 300 setup and a monthly fee of INR 125 AND silently thanking the provider each time it beeps. Kaching!

In a way, you're paying for almost the same thing in all three cases. A speaker that takes some input and makes a single sound.

In another way though, these are entirely different products!

As I continued there:

It's not about what you're selling. It's never about what you're selling.

It's about what problem the buyer is solving. It's about what the buyer is "hiring" your product to do.

Focus on the "job to be done", not the product itself.

Don't promote your product. Promote the happy ending that the customer will enjoy.

I’d written about this before too, in The Job to be Done Framework:

Every customer “hires” your product for a “job to be done”. The customer wants a hole in the wall. So she buys a drill. And when you buy a Rolex, it’s not because you want to tell the time.

And why do you think people buy a milkshake every morning en route to work? As McDonald’s found out, it’s not for the taste. It’s to make their boring work commutes more interesting.

Stewart Butterfield (Founder, Slack) captures the essence of this in his 2013 memo to his team – “We don’t sell saddles here”. You’re not selling a feature. You’re delivering a benefit to the customer.

Remember: The value is in the eye of the beholder.

Or, to put it another way:

Don't sell saddles. Sell a better way to ride.

Don't forget who the customer is.

In How much would you pay for a box that beeps?, I also wrote about my recent visit to a pet store.

I was browsing through a pet store last weekend, and I found the most stupefying products on display.

Anti-wrinkle balms and "snout soothers" for dogs.

Slices of goat lung, "air-dried to perfection for dogs".

Stuffed lions, hippos, and panthers (!).

It struck me then: they're not selling to pets!

They're selling to pet owners. Who cares whether these are useful to pets!

Reminded me of this (likely made-up) anecdote from Charlie Munger:

[One day at the beach] I saw the guy who sold fishing tackle. I asked him, "My God, they're purple and green. Do fish really take these lures?" And he said, "Mister, I don't sell to fish."

Principle 2: What is scarce, sells.

This is another timeless lesson from Federer's story.

From Uniqlo's perspective, a sports icon wearing their label was scarce. No wonder they were ready to part with their CEO's kidney to sign Federer!

The entire luxury industry stands on this exact principle.

And the reverse happens too. When supply overflows, prices crater.

The diamond industry illustrates both these countervailing forces:

At the turn of the 20th century:

Diamonds weren't a scarce commodity at all!

De Beers changed that. They bought a majority of the diamond mines, and constricted supply. They made diamonds artificially scarce.

The result: "Diamonds are a girl's best friend".

Today:

The equation has flipped completely.

Lab-grown diamonds have flooded the market. They are available at 20%-60% of the price of natural diamonds. And they are perfect, because they look exactly like natural diamonds.

De Beers is doing its best to differentiate lab-grown and mined diamonds. But it won’t work... because they are actually the same thing.

The result?

• Diamond prices have fallen 18% from their peak in 2022. The most expensive rough diamonds have fallen by more than 40%.

• Lab-grown diamonds are already 9.3% of diamond sales (nearly 4x vs. 2020).

• If recent numbers from India (the global hub for diamond cutting and polishing) are any indication, this will accelerate. The share of lab-grown diamond exports has 9x-ed (!) in the last 5 years.

Create artificial scarcity.

Packy McCormick gives another great example, in his 2020 article, Wackos and Zoomgluts. He talks about a plot from an episode of Hey Arnold:

In the classic 1997 episode “The High Life,” Arnold’s best friend, Gerald, desperately wants to buy the new B.O.M.B. Rollerblades, but he doesn’t have any money. Instead of mowing lawns or waiting tables like most ambitious 9-year-olds, he responds to an ad promising big bucks for selling Wacko watches.

When he sells his first box out in minutes, Mr. Wacko invites him into the Golden Circle, reserved for the “best salesman.” The Golden Circle entitles Gerald to weekly shipments of boxes that he can then sell at a profit to customers. 

Life is good. Gerald is selling watches to everyone and making good money. He gives his sister a dollar because he likes her face, sets up two phone lines in his room, orders business cards, and tells his friends to buy whatever they want from the ice cream truck, on him. 

That, though, is when things start to sour. Gerald has already sold watches to everyone in town. His dad has two of them. He even sold a watch to a baby. All of a sudden, he’s stuck with a neverending supply of boxes that keep coming, and no one left to buy them. 

Fueled by his own success, he finds himself in the middle of a Wacko watch supply glut. Unsure what to do, he invites his friend Arnold to his house to problem solve.

…

Luckily for Gerald, though, his friend Arnold understands people and behavioral economics, and he came up with a plan. 

Gerald marched confidently into Mr. Wacko’s office and asked him for more watches. He told him that he couldn’t fill all of the demand he was seeing, that he was selling watches for three times the list price, and that he needed to get more any way he could. He made Mr. Wacko think that there weren’t enough watches to meet all of the demand. 

Gerald created the perception of scarcity. 

And Mr. Wacko fell for it. Desperate to get his hands on more watches, he bought all of Gerald’s back at double the price, saving the 9-year-old entrepreneur from financial ruin before his 10th birthday.

Packy talks about how Clubhouse did the same thing:

Clubhouse’s founder Paul Davison carefully curated the first group of users from among the most Twitter-famous people in tech and VC. These are not only people he knew others would want to hang out with, but people he knew would signal their involvement to millions, creating a strong sense of FOMO…

While everyone else is begging “please!” Clubhouse is telling them “no.” It’s the one velvet rope in a world of two-for-one happy hours hawked by overeager promoters…

[JT Note: Now that Clubhouse has crashed and burned, you can look back and marvel. They created incredible hype and buzz, with such a simple tool: artificial scarcity.]

A year before Clubhouse, there was Superhuman, a luxury e-mail service that used a long waitlist to create scarcity and build demand.

Fifteen years before Superhuman, Google launched Gmail with a limited beta to only 1,000 users, creating a frenzy for invites.

And 44 years before Gmail, in response to increasingly abundant oil, OPEC formed in Baghdad to increase the price of oil by limiting supply.

Sometimes, price itself is an indicator of value.

Sometimes, high price itself signifies better quality.

That's why retailers love tourists. At the start of every tourist season, they hike up the prices of leftover goods from the previous year.

When the unsuspecting tourist sees a discolored trinket for $50, they think it's a steal! And if that doesn't work, the shop-owner would then put a sticker on it - "$30 - discounted from $50 only for 24 hours!"

TL:DR

Whatever you think your price should be, add a zero.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join nearly 1,600 others who read my newsletter every week (its free!) 👇

Subscribe now

2. Golden Nugget of the week.

I read this BBC article recently, Why short-sightedness is on the rise.

In the United States, about 40% of adults are short-sighted, up from 25% in 1971. Rates have similarly soared in the UK. But their situation pales in comparison with that of teens and young adults in South Korea, Taiwan and mainland China, whose prevalence rates are between 84% and 97%. If current trends continue, half the world's population will be short-sighted by 2050. And the problem seems to be spreading at a faster rate than ever.

To make matters worse, while the typical age for a child to develop myopia is between eight and 12 years old, children are becoming myopic at a younger age.

Why is this happening? In a nutshell?

"Education has been shown to cause short-sightedness," says Ghorbani-Mojarrad, referring to education as measured by school years. "We don't know what it is about education – we suspect it is reading and spending more time indoors. Every year of education completed increases the expected amount of short-sightedness."

In a way, myopia is a hallmark of the progress of civilization. The more we invest in children's education, the higher the incidence of short-sightedness.

In a way, be grateful we have first-world problems.

3. Vox Populi, Vox Dei.

This is such a telling chart!

As Sam Bowman said on Twitter:

I love how the rankings are

- fashion company

- weight loss company

- company making the most important and technically sophisticated industrial machines on the planet, utterly vital to the existence of modern technology

- make-up company

- handbag company

The people have spoken 🤷‍♂️.

4. Stop the press! Crypto has a use case!

It's been skeptic season on crypto these last several months. All the while, it has been silently building a massive use case - Stablecoins.

From a Brevan Howard report:

1. In 2022, stablecoins settled over $11tn onchain, dwarfing the volumes processed by PayPal ($1.4tn), almost surpassing the payment volume of Visa ($11.6tn), and reaching 14% of the volume settled by ACH and over 1% the volume settled by Fedwire. It is remarkable that in just a few years, a new global money movement rail can be compared with some of the world’s largest and most important payment systems.

3. Approximately 5mm blockchain addresses send stablecoins each week. This number provides a very rough proxy for global users regularly interacting with stablecoins. These ~5mm weekly active addresses send ~38mm stablecoin transactions each week, representing an average of over 7 weekly transactions per active address.

5. Of the ~5mm weekly active stablecoin addresses, ~75% transact less than $1k per week, indicating that small/retail users likely represent the majority of stablecoin users.

6. The outstanding supply of stablecoins has grown from less than $3bn five years ago to over $125bn today (after peaking at over $160bn) and has shown resilience to the market downturn with the market cap of stablecoins currently down ~24% from its peak, compared with a ~57% decline for the overall crypto market cap.

Has crypto found its first killer use case?

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

If you missed last week’s newsletter, here it is: The right question is a force multiplier.

One of the things we touched on last week, was the power of questions to change the frame.

This week, let’s go a little broader (and deeper). Let’s talk about how changing the frame is itself a superpower. A superpower you can trigger, like a wizard’s spell, with just the right words.

1. Say the magic words, and the door will open.

I feel this way about the power of words. The power of framing. About how with the right words, you can bend reality.

As I like to say:

A man who smokes while he prays is a scoundrel.

But a man who prays even while he smokes is a pious, devout soul.

Another example:

Let's say you're considering an important but risky operation, and the doctor says this:

"Of 100 who completed this operation, 95 were alive after five years."

What's the likelihood of you saying yes to the operation? Write it down.

Now, what if the doctor says this instead:

"Of 100 who underwent this surgery, 5 were dead after five years."

What's the likelihood now?

Framing is less about words alone, and more about setting the context.

I read this golden nugget from Rory Sutherland (via George Mack) the other day:

As I like to say, "The context is 90% of the sale."

Choose the right context, and you don't have to sell much. The customers will sell themselves!

Let's look at some more examples of framing in action: How do we use it to our advantage? And almost as important, how do we protect ourselves from "black-hat" framing tricks?

Framing in Action.

In Pricing.

What works for Rolls-Royce works for SaaS too.

This is another great example of context driving a sale, from Khadim Batti of Whatfix:

Frame your offer in the right context, and you can price up 10x. Just like that. Skadoosh.

But my absolute favorite example of the power of framing is Paytm's Soundbox. I wrote about it in How much would you pay for a box that beeps?:

How much would you pay for:

• A small buzzer (the kind you use when you play Taboo): maybe INR 25 (USD 0.30). You can buy a pack of 5 at the dollar store.

• A doll that plays music, for your 2 year old: INR 100 if you don't care about the brand.

• A device that makes a sound each time you get paid: INR 300 setup and a monthly fee of INR 125 AND silently thanking the provider each time it beeps. Kaching!

In a way, you're paying for almost the same thing in all three cases. A speaker that takes some input and makes a single sound.

In another way though, these are entirely different products!

…

Whenever a customer makes a payment, this box makes a loud sound. You might find it annoying. But for the retailer, it's the beautiful and definitive clink of money coming in.

Three million merchants use Soundbox today.

Paytm makes an annual revenue of INR 400 cr. (USD 70M+), from this small box that makes a sound every time you receive a payment.

Remember: The right framing can bend reality.

❌ "We charge 10K / month, because that's our server cost + margins."

✅ "We charge 100K / month, because you'll save 300K."

In The #1 mistake we're all making, I wrote about how Segment.io (acquired by Twilio for USD 3.2Bn earlier this year) went through this exact journey. A fascinating example of how the right framing can 2000x your pricing (not a typo).

In Negotiation.

There's a saying among negotiators: If I set the terms and you set the price, I win.

Weak negotiator: "I must be reasonable. What if they walk away!?"

Strong negotiator: "What do I want? And how do I make that look reasonable?"

Every negotiation has 20 different sub-negotiations going on. An M&A deal is a negotiation on price, integration, roles of people, skin in the game, and even some ego massaging.

Let's say you're the buyer. On each one of these, you can change the frame to make your ask reasonable.

• Price: Use the right benchmarks that show why this is a great price.

• Skin in the Game: Sell them the upside. The hundreds of millions they'll make.

• Massage the Ego: So, would you prefer to be on the cover of TIME this month or next month?

What if nothing works? What if your interlocutor isn't budging at all, refusing to see reason, or being plain stubborn?

If all else fails, re-frame the overall goal itself. Ask a simple question:

"Imagine a situation in which you're able to say 'yes'. What would that world look like?"

PS. Never Split the Difference is a GREAT book on negotiation, and it goes into tremendous detail on this question of framing. I’ve published my notes on Notion here, but also check out the book!

Managing your mental state.

As I wrote in last week’s The right question is a force multiplier, asking the right question can directly change your mental state.

The right question is like a password to get into the innards of your brain, and tweak your feelings directly.

Why does this work? Because it changes the frame!

Moving further back, every difficult situation is an opportunity to reframe.

Here's another example from Jim Simons, the founder of Renaissance Technologies, the most successful hedge fund ever.

As a teenager looking to earn some bucks, Jim had joined a local retail store. The owners asked Jim to walk the store’s narrow aisles and sweep its hardwood floors. A mindless and repetitive task.

But to Jimmy:

The demotion felt like a stroke of luck.

Finally, he was left alone to ponder what mattered most in his life. Math. Girls. The future.

"They’re paying me to think!"

One of the most powerful reframes I've found is this old Marcus Aurelius saying, "The obstacle is the way".

Whenever you're facing a particularly hard time, remember:

It's an opportunity to show that you're not messing around. You will push through and get it done.

You're like that badass in the gym who, when the reps get tough and your muscles start to burn, you go even slower. Your form becomes even more perfect. You savor the pain.

Where others see a wall and think, "It's too high, I can't climb," you smirk and think, "Challenge accepted."

When the world screams at you to stop, to give up, to relent, you roar back with unyielding determination, "This might break others, but it won't break me." You don't just push through; you bulldoze your way forward.

Let me pause and ask you a question: How did reading that make you feel?

Why did it make you feel that way?

Beware of being framed!

What I've written so far is about using framing to win. But remember, other people are going to use it too! And there are plenty of "black-hat" tactics. How do you not fall prey to them?

Hold that question.

Before I answer, let me go into one particularly nefarious tactic:

Russell Conjugation.

I wrote about this in The real story of Chernobyl OR The power and peril of pretty ideas:

There's a term in the debating world, called "Russell's Conjugation". It shows how you can use words to generate emotions, independent of the meaning of the words themselves.

In simpler terms, you can use loaded words to persuade the listener in the direction you want.

Some examples from Bertrand Russell, after whom it is named (via Wikipedia):

I am firm, you are obstinate, he is a pig-headed fool.

I am righteously indignant, you are annoyed, he is making a fuss over nothing.

I have reconsidered the matter, you have changed your mind, he has gone back on his word.

Eric Weinstein gives a few more examples in Edge.org:

The very same person will oppose a “death tax” while having supported an “estate tax” seconds earlier, even though these taxes are two descriptions of the exact same underlying object.

... such is the power of emotive conjugation that we are generally not even aware that we hold such contradictory opinions.

Thus “illegal aliens” and “undocumented immigrants” may be the same people, but the former label leads to calls for deportation while the latter one instantly causes many of us to consider amnesty programs and paths to citizenship.

The key learning here is:

Words don't just have meanings.

Words don't just have meanings. They also have emotions attached to them. And by choosing the right "synonym", you can incept a different idea in the listener's mind.

How was this relevant to Chernobyl? Back to that article:

"Nuclear meltdown" is a compelling visual metaphor. You think of a building dissolving into lava, making a town uninhabitable forever.

The reality, however, is far more humdrum.

But that's the point: once you have a simple, powerful idea, that's what spreads.

That's what journalists report, as they try to sensationalize with colorful language.

That's what you remember, as the image of a melting building plonks itself in your head. Soon, no one can dislodge it.

Facts cannot defeat a powerful, viral story.

Let me paint you another picture:

We're all gathered around a fire, and a raconteur is narrating a tale of epic adventure.

Halfway through, there's a scene where a wise old man sends his son into battle. He says, "My boy, take this. Go to battle now, with the sword of destiny."

What happens next? Take 5 seconds to guess.

.

.

.

.

.

Well, this is what happens next.

Is it a narrative violation? Or a clever choice of words?

And the most dangerous way to use words is... to use analogies.

Analogies: The Trojan Horses of Persuasion.

I wrote about this too, in my article on Chernobyl:

Analogies are especially powerful. They can completely change your frame of reference.

Scott Adams had a great 2016 article on this (before he went off the rails), called Bumper Sticker Thinking.

From the article:

People see patterns where there are none.

… Analogies are not a useful component of reason in the way most people believe they are. Just because something reminds you of something does not mean there is causation. Analogies are not about causation.

Analogies are great tools for explaining new things for the first time, and that is about all they are good for. For example, the game laser tag is like a real gunfight except with toy guns that have harmless lasers instead of bullets. That analogy saved me a lot of time explaining something new. But that is ALL it did.

The gunfight analogy has no predictive power beyond that. I can’t, for example, assume people will die playing laser tag because they die during real gun fights.

Analogies are for explaining, not predicting. Analogies are not part of logic or reason.

Analogies seem so persuasive.

And yet, they're - by definition! - not talking about the same thing at all.

Take the current discourse on AI and x-risk for example.

Now, there are some VERY smart people on both sides of this critical question. But for the rest of us - any opinion we have - was likely planted in our head by an analogy.

• If you think of The Matrix, then it brings to mind robot armies marching against humans. AI is a diabolical adversary, whom we have to fight. It's a life or death battle.

• But if you read a lot of optimistic sci fi (like the Culture series of Iain M. Banks), then AI is a tool to help us win. AI is a tool to create a glorious future for ourselves.

OK, back to the question: How do you protect yourself from this?

In ancient, more magical times, there was a saying: If you call an evil spirit by its name, its spell will be broken.

So it is with modern magic as well. To inoculate yourself against a mind-virus, you must learn to recognize it.

I tweeted this last week, only half in jest:

Telemarketer: "Sir, we have this exciting webinar on artificial..."

Me (cutting them off): "Sorry, I don't have time for a webinar."

Them: "Ah I understand. Never Mind. We also have an Online Bootcamp running next month..."

Me: "Sign me up!"

Only half in jest. The other half was to train myself to see when someone is doing this to me.

So learn to ask yourself these questions often:

• "Hmm, why did this person use these specific powerful words?"

• "Wow, that's a great analogy! But wait a minute... am I drawing a conclusion from the analogy, rather than the issue itself?"

Name the trick, and dispel the enchantment.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join nearly 1,600 others who read my newsletter every week (its free!) 👇

Subscribe now

2. Chart of the Week.

The AI Singularity might not be here yet, but it's not far!

“Well,” I thought to myself as I read this chart, “If AI takes away all our jobs, will we be doing captchas all day?”

Nope, spoke too soon!

Turns out AI bots are now much better than humans at solving captchas too!

AI bots are better than humans at deciphering CAPTCHAs, the security tests used to differentiate humans from machines on websites.

According to a study conducted by researchers from the University of California, Microsoft, and others, AI bots have an accuracy rate of 85-100% in solving CAPTCHAs, significantly outpacing human accuracy which ranges between 50-85%.

3. Golden Nugget of the week.

I read this article from Jim Nielsen a couple of weeks ago, and I can't stop thinking about it:

“We’re All Just Temporarily Abled”.

1 in 5 people currently have a disability. 100% of people will have some form of disability in their lifetime.

Good reminder to be thankful for the time we have, and for our good health. As long as we have it.

4. I’m still laughing at this 🤣

How it feels to listen to podcasts:

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

It's been a few weeks since I wrote to you. I expected summer to be a little more relaxed, but it's been a blur! Couldn't find much time to read (or write).

But I did manage to take two weeks off, to travel around Mongolia (It's breath-takingly beautiful!).

This week, let's talk about Questions. As a leader and manager, questions are the most powerful asset in your toolbox. Ask the right question, and you can instantly shift frames. You can bend reality.

As I like to say:

1. The right question is a force multiplier.

I read a great thread from Patrick Campbell earlier this week:

The entire thread is great, but I love question 2️⃣:

"This person you're complaining about - have you tried talking to them?"

A variation of this is the best managerial question of all (and a question I LOVE to ask):

Why does this work?

It works because you're giving your team the responsibility to manage their own experience. You're empowering them (in fact, reminding them) that they can solve their own problems.

It does an immediate frame-shift from complaining to action.

The right question is a force multiplier. It creates immense leverage for you as a manager. Ask the right question at the right moment, and you can move mountains.

Ten seconds is all it takes.

Way back in July 2020, I had written about the incredible power of asking the right question:

Questions are far more powerful than answers.

They frame the conversation. You can only answer questions that are asked.

The right question takes you right to the essence of a problem, and helps you solve it.

For example, asking a startup what their defensibility is, is far more useful than asking them about the addressable market size.

And the wrong question can waste years.

“What cool feature should we build next?” is the wrong question, when your onboarding funnel itself is leaky.

You can only answer questions that are asked. Therefore, ask the right questions.

A few other questions that I've found to be surprisingly powerful:

"What's my real objective here?"

As we go through our days, it's very easy to get into reactive mode.

You start by shooting the 8-ball where you want it to go. But soon, you're frantic and agitated, chasing it as it bounces around.

This is a high-leverage moment. Step back, and remind yourself of the end-goal:

• What am I really trying to achieve?

• What would I do if I really wanted to achieve this?

"What did we do well?"

We fixate too much on things we fail at. Weaknesses, or in corporate-speak, "areas of improvement".

But the opposite is FAR more powerful. As I wrote in What I learnt from 6 hours with a World Cup winning coach:

In Paddy's view, 80% of the focus in planning should be on things that we did successfully.

The question to ask is: "What did we do well?"

Why does this work?

It works because most of our jobs are not rocket science. Yes, skill or aptitude do matter. But attitude matters far, far more.

And celebrating successes, however small, boosts self-esteem and motivation.

Now, what if there's nothing to celebrate? What if we lost the deal? What if this month's P&L was a loss?

Well, then, celebrate the process - the tiny things you did well. Celebrate the inputs, if the outputs didn't go your way.

For example, in cricket team meetings, Paddy would appreciate players for comforting their teammates after a drop-catch. Or for backing up to prevent overthrows even on inconsequential runs.

Celebrate the process of preparing for the goal, rather than just the goal itself.

But there's a deeper reason too. When you focus on strengths over weaknesses, you have a much greater impact on performance.

Paddy gave an example of his work with a marathoner to illustrate this.

Let's call this runner A.

A always used to come second to another runner B, because B had the ability to get a "second wind" in the last lap of the race. Runner A would lead for most of the race, but then in the last mile, out of nowhere, B would sprint and come first.

So A's coach trained him for a full season, on getting that kick at the end. Result - he did manage to get the last-minute surge. But because he didn't focus on the first 25 miles in training, he came far behind anyway.

When Paddy started working with runner A, he doubled down on his strength. He focused on making what he was already good at - the first 25 miles of the race - 10% better.

The result:

A was able to put so much distance between him and B in the first 25 miles, that B couldn't catch up even with a second wind at the end.

I've written about this before, in my Effective Team Management blog post:

Rule 3: Focus on the right (few) areas in giving feedback.

Focus on a few major areas, where superior performance can lead to outstanding results.

A good heuristic for this is: focus on strength development, not on removing weaknesses. Whereas our instinct is to focus on weaknesses instead.

It's clear that the greatest scope for improvement is when you strengthen what someone is already doing well, so they can do it better.

Instead of asking, "What is she bad at?", ask "what does she do well but can do better? What does she need to learn to excel at this?".

Moving to the next powerful question I often ask myself:

"What can I do that's hard?"

I wrote about this in The great thing about hard things, quoting Paul Graham:

Use difficulty as a guide not just in selecting the overall aim of your company, but also at decision points along the way. At Viaweb one of our rules of thumb was "run upstairs". 

Suppose you are a little, nimble guy being chased by a big, fat, bully. You open a door and find yourself in a staircase. Do you go up or down? I say up. The bully can probably run downstairs as fast as you can. Going upstairs his bulk will be more of a disadvantage. Running upstairs is hard for you but even harder for him.

What this meant in practice was that we deliberately sought hard problems. If there were two features we could add to our software, both equally valuable in proportion to their difficulty, we'd always take the harder one. Not just because it was more valuable, but because it was harder. We delighted in forcing bigger, slower competitors to follow us over difficult ground.

Like guerillas, startups prefer the difficult terrain of the mountains, where the troops of the central government can't follow. I can remember times when we were just exhausted after wrestling all day with some horrible technical problem. And I'd be delighted, because something that was hard for us would be impossible for our competitors.

Everyone's favorite stock-picker Scott Galloway says something similar, in The Fourth Great Unlock:

Great strategy cuts a swath between market conditions and a firm’s assets. Put more simply, strategy is a firm’s answer to the following question:

What can we do that is really hard?

As I said in that article:

If you're split between two equally attractive strategic choices and don't know which one to pick: pick the one that's harder.

Run upstairs.

"What can I do that's easy?"

Sometimes, inverting the question helps.

Very often, we let the perfect become the enemy of the good.

In fact, very often this quest for perfection is just procrastination in disguise. It's far more comfortable to plan to do the work, than to do the work itself.

But why do we procrastinate? Because we're anxious. Because we're scared of failure. Because the endeavor seems hopelessly complex, and we don't know where to start.

So, it's helpful to ask: What can I do that's easy? What's one simple step I can take? What's an MVP I can create tomorrow?

Make action the default.

Is it dangerous, or is it scary?

This is another question I love. As I wrote back in Oct 2021:

Dangerous ≠ Scary

Some things are scary, but actually not dangerous at all. And some very dangerous things are not scary at all.

For example:

• Rappelling down a cliff is scary, but not dangerous (I've done it a few times).

• Walking down a snow-capped mountain feels pretty OK, but is dangerous as hell (done this a few times too, and almost broke my leg once!)

Same thing in life:

• Quitting your job and starting up can feel scary. Very scary. But is it dangerous? Not at all.

• Putting yourself out there can feel scary too. But again, what's the worst that can happen?

These are scary. But they aren’t dangerous. Driving your car around the block might be more dangerous.

Or, as Guy Raz says,

Failing is scary. Wasting your life is dangerous.

"Is this a crisis or an event?"

Got this one from Shaan Puri.

Questions are a great way to manage your mental state. The right question is like a password to get into the innards of your brain, and tweak your feelings directly.

And this question is an excellent addition to your toolbox. It frees you from the grip of your fight-flight-or-freeze panic, and brings you back to reality.

"It's OK! There's no lion in the bushes, waiting to spring on me."

TL:DR

Listing down my force multiplier questions here for easy reference:

• "This person you're complaining about - what did they say when you told them this?"

• "What's my real objective here? What would I do if i really wanted to achieve this?"

• "What did we do well?"

• "What can I do that's hard?"

• "What can I do that's easy?"

• "Is it dangerous, or is it scary?"

• "Is this a crisis or an event?"

Further Reading (bookmark these!):

• I keep going back to this article from Tim Ferriss: Testing The “Impossible”: 17 Questions That Changed My Life (#206).

• This is a great list of extreme questions to trigger new, better ideas in business.

• This is an amazing list of questions you can ask people to get them to take action. Questions that take 10 seconds to ask, but produce insanely outsized effects.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join nearly 1,600 others who read my newsletter every week (its free!) 👇

Subscribe now

2. Chart of the Week: Amazon's dominance. Or lack thereof.

Wow! Surprising that despite its gigantic scale (and mindshare), Amazon still accounts for less than 50% of US ecommerce. And a much smaller share of retail.

A reminder of just how large US retail is.

As I was telling a friend running a consumer brand the other day: When you expand globally, you only need to win one market: The US.

Nothing else even comes close.

3. This made me proud!

In an achievement that warmed the hearts of a billion Indians, India's Chandrayaan-3 mission soft-landed at the South Pole of the moon earlier this week.

The total cost of the mission was USD 75 million, a fraction of other similar missions.

For instance, Russia's failed mission to the same destination, which crashed just 3 days before, cost USD 200 million. NASA's planned VIPER rover is expected to cost double that, at USD 433 million.

And don't forget NASA's Perseverance rover to Mars, which cost USD 2.7 billion!

This is not the first time India’s done this.

Remember India's Mars orbiter, Mangalyaan? It reached Mars in 2014. The cost of that mission too was USD 75 million. Less than 11% of the cost of NASA's MAVEN Mars orbiter, which had a total mission cost of nearly USD 700 million!

How much really is USD 75 million?

Not much at all!

As the denizens of Twitter X were quick to point out, the budget for the movie Interstellar was USD 165M. More than 2x! Kinda bonkers, if you think about it.

Even a video game can cost a LOT more. The development of Grand Theft Auto V cost USD 265M, nearly 4x as much as India’s moon (and Mars) mission.

But if you want a real contrast, check this:

The New York MTA is spending USD 100 million to install platform barriers in 3 New York subway stations. Platform barriers! In three subway stations!

We keep talking about India's jugaad entrepreneurs, who push every rupee to its limit.

But the true jugaad story coming out of India might be out of this world. A lonely little rover at a desolate corner of the moon.

4. This made me laugh!

Inflation has solved at least one problem.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

Sorry I didn’t send a newsletter the last couple of weeks - couldn’t read or write much, as I was traveling a lot!

In case you missed my last newsletter (my learnings from a workshop with Paddy Upton, the World Cup winning cricket coach), you can find it here: What I learnt from 6 hours with a World Cup winning coach.

This week, let’s talk about network effects. Actually, a specific kind of network effect.

1. “If you want to start a tech company, go to Silicon Valley”.

I saw this chart recently, and I've been thinking about it a lot.

The US has such a disproportionate share of the ultra rich!

Why is it that success seems to cluster so remarkably? What can we do about it? Is there some way to harness this to our advantage?

With these questions swirling in my head, I went down the rabbit hole this week.

My first lesson was:

A. Geographical Network Effects are Real!

No surprises on this one.

You see geographical clustering across countries.

The net worth distribution up top is a great example.

The US has 53% of the world's ultra-high net worth individuals. Despite only having ~4% of the world's population.

You see it in the luxury industry.

(the blue circles are French companies).

You see it in innovation and tech.

As Ethan Mollick says on Twitter,

54% of ALL migrant inventors in the world have historically come to the US.

For the best technical talent from India, that number is 65%.

You see it in football! (will be obvious to most fans).

As Maia Mindel wrote in Why Nations Win (World Cups), after last year's crazy final:

[Some countries are extremely dominant in football. There seems to be a clustering of football world cup victories.]

... of the past 7 World Cup finals, France has made 4 (1998, 2006, 2018, and 2022) and of the past nine, Argentina has made three (1990, 2014, and 2022).

Since 1970, only two teams that aren’t Argentina, Brazil, Germany, France, Italy or the Netherlands have made a final: Spain (2010) and Croatia (2018). And only two other teams (England and Uruguay) have *ever* won the Cup.

Zoom in, and you see clustering across cities too, within countries.

From Elad Gil's Industry Towns:

If you were going into the movie business, you would be encouraged to move to Hollywood, Lagos, or Mumbai. If you wanted to go into finance, New York, London, and Hong Kong would be amongst the primary places to move. Industry towns exist for most major industries, including energy, finance, movies and entertainment and other areas.

And you see this in tech as well.

In every market one city takes most of the market cap. For example, London is 66% of the private unicorn market cap in the UK, Silicon Valley is 57% of US market cap, and Berlin is about half of Germany's.

India is unique in having two cities of roughly equal unicorn market cap with 6 unicorns in Bengaluru and 8 in New Delhi together making up 78% of Indian unicorn market cap.

Zoom in some more, and you see clustering within cities!

As Marco Leonardi and Enrico Moretti say in a new AER Insights piece:

We estimate agglomeration externalities in Milan’s restaurant sector using the abolition of a unique regulation that restricted where restaurants could locate. In 2005, Milan abolished a minimum distance requirement that had kept the number of establishments artificially constant across neighborhoods. We find that after 2005, the geographical concentration of restaurants increased sharply and at an accelerating rate.

Consistent with the existence of strong and self-sustaining agglomeration externalities, restaurants agglomerated in some neighborhoods and deserted others, leading to a growing divergence in local amenities across neighborhoods. Restaurants located in neighborhoods that experienced large increases in agglomeration reacted by increasing product differentiation.

It really is clusters all the way down.

OK, so geographical network effects are real. Which leads to the next question:

B. Why does such clustering happen?

From Elad's article:

Industry towns self-perpetuate as you have a critical mass of talent, suppliers, customers, investors, and know-how in a single geographic area. A cluster, once it exists is self perpetuating and attracts more of the same.

So why are industry towns so powerful?

1\. Talent base.

2\. Early customers

3\. Unique insights and know-how.

4\. Smart investors.

5\. Service providers.

6\. Living and breathing a craft.

It's the classic Network Effect loop. Each new member that joins the cluster makes it more valuable for existing members of the cluster.

And of course, if you're large enough, you can create a cluster yourself. Seattle is a tech hub because Bill Gates decided to set up Microsoft HQ there.

Which leaves the most important question of all:

C. What can you do about it?

I read a book several years ago called How to Get Lucky. (Aside: Amazon says I bought it a day before my birthday in 2015, so I dunno what I was expecting).

One of the secrets to harnessing luck that the author mentions is, "Go where the fast flow is". Open yourself to luck by going where more things happen.

Incidentally, that's one of the reasons why immigrants to the US tend to do better than locals.

From Tyler Cowen:

According to Boustan and Abramitzky, the secret weapon deployed by immigrant parents wasn’t education. It wasn’t a demanding parenting style like the one described in Amy Chua’s “Battle Hymn of the Tiger Mother,” either.

It was geographic mobility. Immigrant kids tended to outperform their peers from similar economic backgrounds because, unencumbered by deep hometown roots, their parents were willing to move to where the jobs were. If you compare immigrants to similar native kids born in the same place, they succeed at similar rates. It’s just that immigrant kids are much more likely to have grown up in one of those high-opportunity places.

“Immigrants are living in locations that provide upward mobility for everyone,” Boustan said.

This doesn't mean you can't succeed anywhere else.

Thankfully, you can still build a great business out of Bhopal or Raipur or anywhere with good Internet access. But it will be more challenging.

From Elad's article:

If you want to go into the movie business and someone told you to go to San Francisco instead of Hollywood, you would think they are nuts. It does not mean that you could not have a movie career in San Francisco - but it would be more challenging.

Movies are written by authors who could live anywhere, are filmed onsite around the world, and could be digitally edited from anywhere. Actors could fly to any site in the world to act. But for the Western markets most of the critical mass of the industry still happens in Hollywood.

This exchange on twitter is also instructive.

So if you can, don't handicap yourself.

Go where the fast flow is.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join over 1,500 others who read my newsletter every week (its free!) 👇

Subscribe now

2. Golden Nugget of the week.

In my last newsletter, I shared some leadership lessons I learnt from 6 hours with Paddy Upton, a World Cup winning coach.

There was one other golden nugget from the workshop.

Paddy said:

There are two main obstacles to performance and life - Pressure and Fear.

You feel pressure because you place extraordinary importance on success. You need to WIN!

You feel fear because you need to not fail.

How do you overcome these two obstacles?

By separating your personal identity from results.

Anindya Dutta, who was co-hosting the workshop with Paddy Upton, recounted another anecdote from his banking days.

At the end of a very profitable quarter, Anindya had a disastrous trading day. Everything went wrong. He kept doubling down on his bets, and before he knew it, he had blown his full quarter's profits. In 2 hours.

As he was screaming at himself, his boss quietly told him, "Anindya, no one has died. It's OK".

And that's an important thing to remember:

Most of us are lucky enough that our mistakes won't matter much in the larger scheme of things.

So let's not worry about failing, and just do our best.

They're the same picture.

3. Chart of the Week.

I saw this chart from Aviral Bhatnagar on Twitter:

As Aviral points out, it's not surprising that players like Tiger Global and Softbank rank at the top. When you're investing $100M-$200M, you can make a company a unicorn just by investing.

But it's incredible that Y-Combinator makes this list. They invest SO EARLY!

No wonder Paul Graham keeps tweeting about how easy it is to identify successful startups. It is easy! For him!

4. I predicted this! But didn't expect it to happen so soon 🙃.

At the start of the year, I tweeted this:

What we hope for: AGI will give us boundless free time to do whatever makes our hearts sing, in a post-scarcity world.

What will actually happen: We will have to do captchas all day.

Well, looks like the all-day captchas have already arrived. Several years ahead of schedule. 😰

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend.

In case you missed last week's newsletter (my learnings from James Dyson’s memoir), you can find it here: What James Dyson learnt from making 5127 prototypes.

This week, let's talk about leadership, from the vantage point of sport.

1. What I learnt from 6 hours with a World Cup winning coach.

In 2008, the Indian cricket team appointed a new coaching team. Gary Kirsten as Head Coach, and Paddy Upton as Mental Conditioning Coach.

Neither of them had any major coaching experience to speak of, as they assumed the mantle at one of the world's biggest sports teams.

Over the next 3 years, the Indian team reached the pinnacle of the sport.

• Became the #1 Test team in the world

• Won the World Cup in 2011, the first time in 28 years

And this wasn’t a flash in the pan for Paddy Upton. He repeated this with the South African cricket team. During his stint, the team become the first to simultaneously hold the World #1 ranking in all three formats of international cricket.

And he did it again in the Indian domestic T20 league! In his very first year, he took bottom-of-the-table laggards Rajasthan Royals to the semi-finals. And to the finals of the Champions League!

Hmm, seems like he knows what he's doing...

So when I heard that he was doing a leadership masterclass in Singapore, I signed up immediately.

And he didn't disappoint. I took away 5 key lessons:

#1. Treat your team as "fully formed adults".

One of the first things Paddy said in the workshop was, "As adults, let's manage our own experience."

"If you have a question, ask. If you don't like something, say it. If you want to step out for a bit, do so. Don't wait for me to prompt you."

There’s a timeless lesson here in empowering your teams.

Treat them as "fully formed adults". Give them the responsibility and power to manage their own experience.

Ask your team what works and what doesn't work for them.

For example, Paddy would ask each cricketer under his care two questions:

1. When they're under pressure, what outward signs would they exhibit?

2. When they're under pressure, what would they want him to say / do, to calm them down?

And then, whenever he saw that they were under the pump, he'd know exactly what to say!

Empower your team to manage their own experience.

Give them the permission to come to you with feedback, even when you don't ask explicitly. Especially when you don't ask explicitly.

This reminds me of something I'd shared almost a year ago: The right question is a force multiplier.

I love Patti McCord's question!

Next time someone complains to you about something (or you complain), ask: "What happened when you tried to solve this problem?".

Make action the default.

#2. Harness your team's "collective intelligence".

Another point Paddy made, that seems obvious in retrospect:

Your team holds a vast amount of intelligence about your business. You can multiply the leverage you get as a manager, by learning how to tap into this vast store of knowledge.

As he says: View your team as a "brain trust" and harness their knowledge and intelligence.

How do you do that?

Ask more questions.

You don't need to always know the answer. You just need to ask the right questions.

The right question is FAR more powerful than the right answer. It can empower your team to solve problems, vs. waiting for you to guide them on what to do.

Ask a question and hold the silence. Allow the answers to emerge and give space for collective intelligence to flourish. Don't rush to give your point of view.

Ask one more question.

I wrote about this in 2020, in my article on Effective team management:

Rule 5: “Ask one more question”.

You know the feeling. The call with your teammate is about to end, and it’s gone well. You feel like you’ve gotten through, and he has everything he needs to complete the task. There’s one tiny doubt that’s nibbling at the edge of your mind, but you let that pass.

No. Notice your confusion, and ask that one more question to clarify that.

You often learn that a simple question, which you almost didn’t ask, is the difference between flawless, on-time completion, and a week wasted on a wild goose chase.

This is particularly relevant when you’re working remote, and cannot catch non-verbal cues. As a friend told me, “The body language feedback of physical meetings is totally gone. And an over imaginative mind goes to town in its absence, dreaming up issues that might not exist.“

So ask that last question. It may be banal, but ask it anyway.

If you aren’t sure that the next steps are clear, ask, “Can you just play back the next steps, so I can remember them?” Or, “which of these pieces will you need my help on?”.

If you feel motivation is flagging, ask “how are you feeling?”. Or, “what’s the hardest part of this situation for you?”.

Be more aware of the energy in the room, and don't be afraid to ask if something doesn't make sense.

Delegate better.

I've written before about Shreyas Doshi's Radical Delegation framework, in You've tried all the productivity hacks:

Delegating well:

(a) allows you to tap into your team's collective intelligence;

(b) empowers your team; and

(c) is a superpower.

What's not to like!

#3. Get more out of your Average Performers.

This is an interesting point that I'm still mulling over.

As Paddy says, once your organization gets beyond a certain size, it will invariably have a lot of "average" performers. (And I don't mean this just from a mathematical standpoint).

Getting more out of these average performers can afford you immense leverage.

"Can you get a 50 percenter to 60% effectiveness?"

And honestly, this is not hard (but it's not easy either). Just follow the five key principles of effective team management:

1. Don’t make 100 decisions when one will do.

2. Train your team, and give better feedback. Even when you don’t have the time. Especially when you don’t have the time.

3. Delegate better.

4. Fix things early. Run to fires before they start. And then prevent the next fire.

5. Do better meetings (this one’s harder than it sounds).

#4. Make your Review and Planning process work for you.

Theoretically, this is how an organization gets better over time:

In reality though, Review and Planning are divorced from Training and Execution. In most companies, at least.

Leaders often concentrate solely on execution.

Even where Review and Planning (the "thinking") happens, it's done by different people. The Thinkers are different from the Doers. And that doesn't help.

"You’re just a consultant. What do you know about running a business?"

"When the shit hits the fan, none of what you're saying will work."

Paddy shared what is, in his view, the "Minimum Effective Dose" of a good review process:

Focus on only two things (and only one question on each):

A. Success (80% of focus):

In Paddy's view, 80% of the focus in planning should be on things that we did successfully.

The question to ask is: "What did we do well?"

Why does this work?

It works because most of our jobs are not rocket science. Yes, skill or aptitude do matter. But attitude matters far, far more.

And celebrating successes, however small, boosts self-esteem and motivation.

Now, what if there's nothing to celebrate? What if we lost the deal? What if this month's P&L was a loss?

Well, then, celebrate the process - the tiny things you did well. Celebrate the inputs, if the outputs didn't go your way.

For example, in cricket team meetings, Paddy would appreciate players for comforting their teammates after a drop-catch. Or for backing up to prevent overthrows even on inconsequential runs.

Celebrate the process of preparing for the goal, rather than the goal itself.

Now, this doesn't mean we have to turn our team meetings upside down. We don't have to be all fluff and cotton candy. No.

One simple change - "How can we celebrate success 5% more than we already are?".

More on this in a bit.

B. Failure (20% of focus):

Addressing failures is tricky. You risk becoming defensive.

"What did you do wrong?" is not a question that you can answer with honesty. The very phrasing makes you resist.

As Paddy said, using a past orientation ("What went wrong?") makes you maximally ineffective. Because it wakes up your ego. It makes you and your teams defensive and resistant to learning.

How do you learn from the mistake instead? By asking a different question:

"If you had this situation again, what would you do differently next time?"

This is a powerful re-frame. Mistakes are no longer things to get flushed and embarrassed about, and to shove under the carpet. Instead, they become stepping stones to future success.

#5. Focus on strengths over weaknesses.

Paddy gave an example of his work with a marathoner.

Let's call this runner A.

A always used to come second to another runner B, because B had the ability to get a "second wind" in the last lap of the race. Runner A would lead for most of the race, but then in the last mile, out of nowhere, B would sprint and come first.

So A's coach trained him for a full season, on getting that kick at the end. Result - he did manage to get the last-minute surge. But because he didn't focus on the first 25 miles in training, he came far behind anyway.

When Paddy started working with runner A, he doubled down on his strength. He focused on making what he was already good at - the first 25 miles of the race - 10% better.

The result:

A was able to put so much distance between him and B in the first 25 miles, that B couldn't catch up even with a second wind at the end.

Focus on maximizing your team's strengths, vs. filling the weaknesses.

I've written about this before, in my Effective Team Management blog post:

Rule 3: Focus on the right (few) areas in giving feedback.

Focus on a few major areas, where superior performance can lead to outstanding results.

A good heuristic for this is: focus on strength development, not on removing weaknesses. Whereas our instinct is to focus on weaknesses instead.

It’s clear that the greatest scope for improvement is when you strengthen what someone is already doing well, so they can do it better.

Instead of asking, “What is she bad at?”, ask “what does she do well but can do better? What does she need to learn to excel at this?”.

This works because, first, it improves performance exponentially. Any productivity gains compound. A 1% improvement in something you do once every week is a 70% improvement in your effectiveness over a year.

But almost as important, it increases your team's engagement and motivation. Because everyone likes playing to their strengths.

[Let me know what you think of Paddy Upton’s lessons. And for further reading, check out my How to manage your team LIKE A BOSS (even while working remote). The minimum effective dose of team management is just five key principles. The essay talks about each of these.]

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,500 others who read my newsletter every week (its free!) 👇

Subscribe now

2. Golden Nugget of the Week: The Treadmill of Progress.

I read this comment from Steven Pinker the other day:

It’s in the nature of progress that it erases its tracks, and its champions fixate on the remaining injustices and forget how far we have come.

It reminded me of a chart I'd seen from Our World in Data a few years ago, on Infant Mortality:

And it's true! There is a lot still to be done! In most areas of our life!

But to remain optimistic in our quest, it helps to sometimes pause and see how far we've already come.

PS. The story of the war against cancer is also the same. So much done, and yet so much more to be done. Godspeed to us.

3. This lawyer did WHAT!

In the funniest ChatGPT story I've heard yet:

A lawyer used ChatGPT to prepare a brief for their case, citing several similar cases as precedents for their argument. There was only one problem...

None of those cases were real!

They were all fabricated - no, hallucinated - by ChatGPT.

Here's what happened:

• The plaintiff in a case submitted a brief to the court, citing several cases as precedents. All from ChatGPT.

• The opposite side's (defendant's) lawyers couldn't find these cases (understandable, as they didn't exist!). So the judge asked the plaintiff to submit copies of those cases.

• The plaintiff promptly asked ChatGPT to help. Which was happy to oblige, with full intricate details of completely fictitious cases.

• Of course, the defendant's lawyers couldn't find these cases again! As they told the judge in lawyer-speak: "Defendant respectfully submits that the authenticity of many of these cases is questionable".

• So naturally the plaintiff's lawyers asked ChatGPT, "Hey, those cases you gave me details of... they're not fake, right?". And ChatGPT said "Yes they do indeed exist". And the lawyer - naturally - submitted this to the court as evidence.

• The judge is livid! 😡😡

Not making this up! 🤣.

4. Looking up at the night sky 😳.

In not big news at all, astronomers discovered a million new galaxies in a little over 12 days.

In under 300 hours, the world-renowned CSIRO telescope in Australia surveyed the whole southern sky in amazing detail and record time, discovering 3 million previously unseen galaxies.

According to the researchers, as many as 1 million of these distant galaxies may be previously unknown to astronomy, and this is likely just the beginning. Because of the success of this first study, CSIRO scientists are already planning additional in-depth observations in the future years.

Reminds me of this comic from xkcd.

Keep calm and marvel at the enormity of the universe.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’re having a great weekend!

This week, back to the world of atoms.

1. What James Dyson learnt from a life of invention.

I recently read James Dyson's new memoir, Invention: A Life.

I'd been learning a lot about the origin story of Dyson. Especially the famed 5127 prototypes, before he finally created the Dyson vacuum cleaner. So I was quite interested in learning more.

The book is quite good (8/10 for me). While some parts of it seem to be in "rosy retrospection" mode, the stories are instructive. (I also skipped over the parts where he speaks about UK politics, as that's not my area of interest).

Some of the key lessons I took away:

1. If you ask people what they want, they'll say they want faster horses.

Dyson’s story is a story of engineering-led innovation. Start with interesting technologies and an intuition of what consumers want, rather than asking them first.

If you have the right intuition (which Dyson did), and if you’re lucky, you’ll make it.

Dyson calls this out as one of his key reflections from the launch of Sony's Walkman:

Priced at US$150, the compact silver and blue Walkman wasn’t cheap, while within Sony itself it was controversial and brave because it was unable to record, and no one had made a ‘tape recorder’ that wouldn’t do so before. Nevertheless, Sony’s Masura Ibuka − one of the Japanese company’s founders − hoped to sell 5,000 Walkmans a month. He sold 50,000 in the first two months. By the time production ended in Japan in 2010, more than 400 million had been sold worldwide.

With lightweight foam headphones and no function other than playback, the Walkman emerged. The press lampooned it. Even the name was ridiculous. The Japanese press was wrong, although the market hadn’t known it wanted a tiny personal stereo. When it saw the attractive little device and heard it in action, it fell in love with it. By the mid-1980s, the word had entered the Oxford English Dictionary.

And from the launch of the Dyson vacuum cleaner itself:

I was also told that no one would want to see dust sucked up by a cleaner inside a transparent container. Simple market research confirmed this.

However, Pete, Simeon and I enjoyed seeing the dirt we had extracted in all its gory detail, so we ignored the market research. Curiously, and aside from the fact that the new cleaner was clearly powerful and with constant suction, this is exactly what customers did like to see. They were fascinated by the sight of just how much dirt they had successfully cleaned up.

2. Raise Prices.

Quoting from the book:

I had been warned that at £200, or at least three times as expensive as most other vacuum cleaners, the DC01 would prove to be too expensive.

It sold really well.

The sheer cost of producing it, and as a result the high price tag, was mitigated by the fact that those choosing it recognized its technological advantage over existing designs.

This reminded me of something I've said before: With the right framing, you can bend reality. You can price as high as you want.

Re-sharing the anecdote from Khadim Batti (CEO of Whatfix) that I had touched on in The Indian century begins.

And of course, who can forget Paytm - generating INR 400 crore (USD 50M) from a box that beeps.

3. You need to keep innovating. Stasis is death.

From the book:

Famously, Citroën took 12,000 orders for the DS on the day it was unveiled at the 1955 Paris Motor Show. Even so, Citroën was to make a key commercial mistake.

Between 1955 and 1970, the company launched no new models. It had been resting on its laurels. And then, realizing that the car-buying public was looking for something new, it appeared to panic, investing in and launching a host of new cars. The expense bankrupted the company. Taken over by Peugeot in 1974, it was never the same again, making money yet losing its character and its drive for innovative design, engineering and styling.

There is a lesson here. Rather like the way some sharks have to keep moving to stay alive, innovative engineering-led manufacturers need continuous innovation to stay competitive. Striving for new and better products is often what defines such companies.

At Dyson, we never stand still. In a quarter of a century, we have gone from making a revolutionary vacuum cleaner to prototypes of a radical electric car. Invention tends to compound invention and companies need to be set up for this. They can have a DS moment − a prolonged one in the case of the car that in Roland Barthes’ words ‘had fallen from the sky’ − and still fail.

This reminded me of Jeff Bezos’ constant refrain: “It’s always Day 1.” Because, the alternative is death. As he said:

Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.

Or as I said a few weeks ago about the current AI race, Blessed are the paranoid, for they shall win.

4. Biggest market wins.

Before the vacuum cleaner, James Dyson’s big invention was the “ballbarrow”. A wheelbarrow with ball bearings in place of wheels so it could move in all directions.

It succeeded… but it also failed.

The business grew to an annual turnover of £600,000. It captured more than half the UK garden wheelbarrow market, but even so we didn’t make money from it.

Reminds me of something that Warren Buffett said:

When bad product meets good market, market wins.

When good product meets bad market, market wins.

5. Big companies are often slaves to their history. You can counter-position against them and win.

Why did the leaders in the vacuum cleaner category not react immediately to Dyson? Why did they not launch their own bag-less vacuums?

From the book:

At this stage, anyone watching me at work might reasonably have wondered why Electrolux and Hoover weren’t making and selling a vacuum cleaner like mine. With all their resources, surely they could have leaped ahead of me − one man and his dog, as it were, in a rural coach house − and cornered the market between them.

There were, though, at least three good reasons why they didn’t even think of pursuing a similar path to me.

One, which went without saying, was that the ‘No Loss of Suction’ vacuum cleaner had yet to be invented.

The second was that the vacuum cleaner bag replacement business was highly profitable.

And the third, rather to my surprise, was that well-established electrical goods companies seemed remarkably uninterested in new technology. With no outside challenges, they could afford to rest on their laurels. For the moment at least.

“Counter-positioning” is of course a reference to Hamilton Helmer’s 7 Powers (excellent, 5/5 book).

I’ve written more about this in 2022’s Lesson for startups: Exploit big companies' path dependence.

More recently, I wrote about how Microsoft has counter-positioned vs. Google in the AI war.

6. Niche to win.

James Dyson calls this “The Zulu Principle”.

I read Jim Slater’s book The Zulu Principle (1978). Slater was a British accountant and investor who rode the waves of investment finance with a number of great successes, although he had his downs as well as ups. His approach to winning investment, he wrote, was to become a leading authority on a ‘clearly defined and narrow area of knowledge’. Following the Zulu Principle, this can be achieved remarkably quickly.

Slater had been intrigued when, after reading a single article on the Zulu people in a copy of Reader’s Digest, his wife’s knowledge of Zulus far exceeded his own. If, he reckoned, she read all the books she could find on the subject and made a quick trip to South Africa to meet Zulu people, she would soon be considered a leading authority.

I suppose I did this in a way with the cyclonic technology.

Over a period of four years, I had probably built and tested more cyclone dust separators than most cyclone experts. My quest was to increase the ability of the cyclone to trap ever smaller microscopic particles. During the process of testing the 5,000-plus prototypes of the cyclone, I determined the correct angle of the conical section, the best diameter of the cyclone, the best inlet and outlet diameter, the ideal entry-duct shape and the best length of cyclone outlet.

This reminds me of the Helsinki Bus Station metaphor from Arno Rafael Minkinnen.

You build differentiation by going deep in a narrow niche. By niching down, you are harnessing path dependence. You are forcing competitors to traverse the same path you did.

Except that you're already far, far ahead.

[PS. I'm sharing book notes in this manner for the first time. Let me know if you like this format!]

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join 1,500 others who read my newsletter every week (its free!) 👇

Subscribe now

2. Golden Nugget of the Week.

In the last few weeks, I've realized I'm addicted to working out (which is a good thing to be addicted to, admittedly!).

Reading Anthony Bourdain's pseudonymous Reddit comments about Brazilian Jiu Jitsu crystallized it for me. This is what I feel! With fewer broken bones and torn muscles though.

58 years old and getting so gassed during warm ups, that when we start to roll, I end up sticking my own head into an obvious guillotine — just to take a break. An utterly humiliating class yesterday, yet showed up for a private today with 250 lbs of muscle and bone so I could get pounded like a chicken fried steak. Why am I doing this? I don’t know. I’m like a dope fiend at this point. If I can’t train I start going into withdrawal. Wander around, twitching, restless and pissed off. At least with dope, you feel GOOD afterwards. After training, I feel like a rented and unloved mule. All the other (much, much younger) white belts all seem to be coming back from long breaks because of injury. Strangely enough, so far so good for me. I may feel like a fragile box of stale breadsticks but I’ve managed to avoid injury (if not discomfort). I have never enjoyed pain. I don’t care if it’s Gisele Bunchen coming at me in thigh boots wielding a riding crop, I’m not interested. Yet I insist on getting squashed on the mats every day and feel bereft if I can’t. This is not normal. When I talk about BJJ, Old friends look at me like I have an arm growing out of my forehead. But I Won’t stop. Can’t stop.

He didn’t stop:

Conventional wisdom is that I should allow myself recovery time. That training every day is not wise. I say fuck that. The clock is ticking. Im not getting any faster, more flexible or more durable. Gotta get in what training I can — learn as much as I can, get as good as I can before I leave this life like I began it: diapered and screaming.

And he LOVED it, in a masochistic kind of way:

I love all of it. The soreness, the carrot fingers, mat burn, the ego-destroying ass kickings, just when you think you’re getting somewhere. I’m hooked. I know I will never be young again. I am well aware that I’m only getting slower, more fragile over time. That I will probably never live to see black belt or win any competitions. But I’m pretty sure I will suck a little bit less every month. That while I will never master this skill, will at least, hopefully, get better and better at it. And every once in a great while, I will sweep some young upper belt, or maybe even catch one in a triangle. And that makes me happy.

To stick to something, you need to love the process. Not the outcome.

Hope I remain as addicted to exercise as he was to BJJ. And that I start writing 20% as well as he did (not asking for much!).

3. Chart of the Week.

At least in its current form, AI won't take away your job.

Instead, it'll make you better at your job, faster.

4. The original "wedge" of today's leading consumer apps.

I enjoyed this thread by Olivia Moore about the original positioning of today's leading apps. Not what they said on their website, but what their early adopters experienced.

Here's Instagram for example.

Even though it was all about the filters when it started, the social aspect was what stood out to consumers.

Airbnb: "An apartment 3 blocks from Times Square for $100".

WhatsApp: “Instant messaging if you don't have a Blackberry”.

I'm old enough to have had a mobile phone (non-Blackberry) before Whatsapp existed. And this was why I installed the app. Even though Whatsapp's Nokia app was a crazy battery hog!

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Shorter Sunday Reads this week, as I'm on the road.

In case you missed last week's newsletter (the "Apple Test" to identify the best chatbot), you can find it here: One chatbot to rule them all. It's surprising how easy it is to trip up state-of-the-art AI tools.

This week, let's talk about the bull case for India.

1. The Indian century has begun!

I read Noah Smith's article Here...comes...INDIA!!! a few days ago. Inspired by it, I made my own list of amazing stats, about India's emergence as a world power.

(Next time you meet someone pessimistic about India's future, send them this article 😁).

Listing some of my favorite stats:

India has lifted 415 million people out of poverty in the last 15 years. 415 million!!

From the Economic Times:

In a "historical change" for India, 415 million people exited multidimensional poverty in the country in 15 years between 2005-06 and 2019-21, the United Nations (UN) said on Monday.

The incidence of poverty in the country dropped from 55.1% in 2005-06 to 16.4% in 2019-21, as per the latest Multidimensional Poverty Index (MPI) compiled jointly by the UNDP and Oxford Poverty and Human Development Initiative (OPHI).

Of the nearly 415 million people who exited poverty in India in the 15 years before the Covid-19 pandemic, roughly 275 million did so between 2005-06 and 2015-16 and another 140 million did so between 2015-16 and 2019-21, the report said.

Brain Drain → Brain Retain.

Remember the time folks in India used to talk about "brain drain"? Well, it doesn't exist anymore!

Less than 200 of the ~10K students from the IITs took up jobs abroad last year.

From the Times of India:

“Compared to 20 years ago, a very small percentage of students go abroad today. This is contrary to the general perception ,” says IIT-Delhi director V Ramgopal Rao. “Twenty years ago, 80% of the BTech class used to go abroad. Now these numbers are insignificant.”

Not even 200 of the approximate 10,000 students from the Indian Institutes of Technology took up positions outside India last year. Fifty students, who make up the largest contingent, will be leaving from IIT-Bombay, followed by 40 from Delhi, 25 from Kharagpur, 19 from Kanpur, 13 from Madras, 17 from Roorkee and five from Guwahati. In 2012, 84 IIT-B candidates had accepted international job offers.

Now, I'm sure this data is at least a tad sensationalized, and it may be only directionally accurate. But still, what a direction!

Apple planning to move 40%-45% of its iPhone production to India.

From the Wall Street Journal in Dec 2022:

In recent weeks, Apple Inc. has accelerated plans to shift some of its production outside China, long the dominant country in the supply chain that built the world’s most valuable company, say people involved in the discussions. It is telling suppliers to plan more actively for assembling Apple products elsewhere in Asia, particularly India and Vietnam, they say, and looking to reduce dependence on Taiwanese assemblers led by Foxconn Technology Group.

Apple’s longer-term goal is to ship 40% to 45% of iPhones from India, compared with a single-digit percentage currently, according to Ming-chi Kuo, an analyst at TF International Securities who follows the supply chain. Suppliers say Vietnam is expected to shoulder more of the manufacturing for other Apple products such as AirPods, smartwatches and laptops.

Will this be the fillip that Indian manufacturing needs?

India is now as rich (GDP per capita) as China was in 2006.

I remember 2006! It wasn't that long ago!

More than 300M people have gotten access to the Internet in the last 5 years.

Call it the "Jio Effect".

India has the demographic dividend in its favor.

Hundreds of millions of people, entering the most productive phase of their lives.

Infrastructure is a key gap today, and India is committing to bridging it.

India has quintupled the % of its GDP that it spends on infrastructure, in the last decade.

Now, I know there's a LOT still to be done, to make this the Indian century.

Lift more people out of poverty, build more infrastructure, create more security.

But let's pause a moment and celebrate how far India has come!

PS. What are your favorite stats about India's coming of age on the world stage? Will add this to a running list here.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join nearly 1,500 others who read my newsletter every week (its free!) 👇

Subscribe now

2. ChatGPT replaces... McKinsey?

Saw this tweet from Ethan Mollick regarding the ChatGPT Code Interpreter plugin, and I was astounded.

Won't paste all the screenshots from the tweet, but he was able to get ChatGPT to run detailed analyses on his data. Visualizations, summaries, even scenario analyses!

A few days of consulting work, in a few minutes.

I thought this was the future, not something we can do already!

[Yes I'm aware that excel analysis is not all that consultants do. I'm allowed a little hyperbole 😀. But also see this from Ted Chiang in The New Yorker: Will A.I. Become the New McKinsey?]

3. Golden Nugget of the week.

Love this anecdote from Khadim Batti, the Co-founder and CEO of Whatfix (via Sajith Pai).

Frame your offer right and sell to the right person, and you can price up 10x. Just like that.

Reminds me of Peter Reinhardt's story, of how the founders of Segment discovered that the ceiling for their pricing was... MUCH MUCH higher than they thought.

4. This left me scratching my head.

Umm... what should we call this? "Conspicuous non-consumption"?

5. As all my friends know…

I'm the Muhammad Ali of Email replies 🤣.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Couldn’t send the newsletter out last week, as I was helping out at a strength competition at my gym. (I didn’t participate 😁).

This week, I decided to test all the AI chatbots out there, to see which is the best one.

I used the “Apple Test” - a seemingly simple question that nevertheless tripped up (almost) all the chatbots.

[PS. I’ve been doing a course on using ChatGPT for coding. Will share more about that in the coming weeks.]

1. The Chatbot Wars: Which is the best chatbot?

So many companies have launched chatbots in the last few months weeks. It's so easy to get overwhelmed!

And the threadbois on Twitter aren't helping at all.

"10 ways to use ChatGPT to 1000x your productivity".

"Google has just launched Bard, and OpenAI is in so much trouble. 15 reasons why. 🧵".

"Bing is 2x better than ChatGPT Plus. And it's Free! 12 ways to use it to do all your work 👇👇👇".

Enough.

Instead of writing a long thread that no one wants to read (and I don't want to write!), I decided to do something different:

I ran the "Apple Test" on all the major chatbots (inspired by Ethan Mollick),

It's a simple innocuous question, that surprisingly trips up almost all the bots:

Give me 10 sentences that end with the word apple.

Sounds easy? Here's how the chatbots do.

ChatGPT Plus (runs on GPT-4)

ChatGPT Plus (USD 20 / month) does pretty well. It gets 9 / 10 sentences correct. It also uses different meanings of the word "Apple" - see #10 for example.

ChatGPT Free (runs on GPT-3.5)

The free version of ChatGPT does quite badly on this. I was shocked at how bad it was. Only two sentences ended in the word "apple".

FAIL. 👎

Bing AI (free, supposedly GPT-4)

Bing AI (now in free open preview) is supposed to run on a state-of-the-art instance of GPT-4. So I expected it to be as good as ChatGPT.

Was it? NO. Only 3 out of 10 were correct🤦‍♂️.

And that was in the "More Creative" mode. If you choose Balanced, the result is even worse. First it searches the Internet (no idea why). And then it proudly gives you 10 sentences that DON'T end with the word Apple.

DOUBLE FAIL.

Google Bard (free)

Google has just released its Bard chatbot on open preview. You can access it at

https://bard.google.com/.

If you believe the threaders on Twitter, it's the ultimate ChatGPT killer. How does it do?

ABYSMAL. 0 / 10.

Bard has a nifty feature - "View other drafts". See the top right. So, if you don't like the first answer it gives you, you can see alternate versions. Sounds like a great idea!

Well, I took a look, and these were their scores:

• Draft 2: 0 / 10

• Draft 3: 0 / 10

Well, guess that's how the Bard bungles.

Claude+ by Anthropic (free, limited use)

Another one of the supposed ChatGPT killers. Let's see how Anthropic's most powerful model does (available on Poe from Quora).

Only 2 / 10 - worse than Bing. FAIL.

(Plus, I'm not sure what "I bobbed for apples at the Halloween party" even means).

Final Results:

The winner is: CHATGPT PLUS! 🏆

[PS. This was mainly a test of verbal creativity. It should extend to brainstorming and problem-solving. I shared more resources for other tasks (image generation, coding, etc.) a couple of weeks ago, in All things AI. Check it out if you haven't already.]

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join nearly 1,500 others who read my newsletter every week (its free!) 👇

Subscribe now

2. Chart of the week - IQ vs. Income.

Saw this chart a few days ago, and it's quite interesting.

My reflections: If you feel that you're smarter than the folks richer than you, then one of two things is true:

1. You're wrong.

2. You're in the 90th percentile of wages. Congratulations!

Tyler Cowen says something similar, in The link between IQ and income is overrated:

The evidence is striking. One study of CEOs of large Swedish companies found that on average they ranked at the 83rd percentile of measured IQ (for CEOs of smaller companies, the rank was the 66th percentile). That’s above average, but it’s hardly a cluster at the top of the distribution. Many CEOs undoubtedly achieved their position through hard work, charisma, people skills and other abilities, not to mention luck.

In the broader distribution, the connection between IQ and income is also positive but underwhelming. One study concluded that moving from the 25th to the 75th percentile of IQ correlates with a 10% to 16% boost in earnings. That may feel significant when you get it, but it doesn’t push you into a whole new socioeconomic class.

...

One recent study, also based on Swedish data, showed two results of significance. First, much of the intelligence-earnings correlation weakens significantly and plateaus above salaries of 60,000 euros a year. Second, and perhaps more surprising, people in the top 1% of earners had *lower* IQs than the earners immediately beneath them.

Why that is the case, it’s hard to say. But one possibility is that the very smartest people prefer a more balanced life rather than working all the time. Or perhaps they prefer occupations with higher status and somewhat lower pay. Money isn’t the only thing you can enjoy. Maybe having a lot of it can make it harder to trust potential friends or spouses.

Moral of the story:

Being in the right place at the right time may be FAR more important than being the right person for the job. Act accordingly.

In the words of author Max Gunther, go where the fast flow is.

3. Golden Nugget of the week.

I saw this 2x2 on decision-making from Stripe CEO Patrick Collison, and immediately bookmarked it.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

Hope you’ve had a great start to the long weekend!

In case you missed last week’s edition, here it is: Blessed are the paranoid, for they shall win. We had a lot of follow-up discussions on this, both in the comments and in Substack Chat. Thank you all for your thoughts!

For the last several weeks, we’ve been speaking only about AI, and the world of software. Today, let’s talk about the physical world, the world of atoms.

1. When “move fast and break things” doesn’t work.

I read an incredibly eye-opening article this week: No, You Can’t Manufacture That Like Apple Does.

Having worked in Software, I didn't have an appreciation of just how hard Hardware is.

In software, there isn't that much of a difference in competence, between a big company and a small company. I mean, it's code. You can write it as well as I.

In fact, a small company may be better at software. I've written before about Paul Graham's advice to Startups - "run upstairs".

Use difficulty as a guide not just in selecting the overall aim of your company, but also at decision points along the way. At Viaweb one of our rules of thumb was "run upstairs". 

Suppose you are a little, nimble guy being chased by a big, fat, bully. You open a door and find yourself in a staircase. Do you go up or down? I say up. The bully can probably run downstairs as fast as you can. Going upstairs his bulk will be more of a disadvantage. Running upstairs is hard for you but even harder for him.

What this meant in practice was that we deliberately sought hard problems. If there were two features we could add to our software, both equally valuable in proportion to their difficulty, we'd always take the harder one. Not just because it was more valuable, but because it was harder. We delighted in forcing bigger, slower competitors to follow us over difficult ground.

Like guerillas, startups prefer the difficult terrain of the mountains, where the troops of the central government can't follow. I can remember times when we were just exhausted after wrestling all day with some horrible technical problem. And I'd be delighted, because something that was hard for us would be impossible for our competitors.

But when you move from the world of bits to the world of atoms, the gap between the small guy and the big guy becomes enormous.

As Ben Einstein says in the article:

Startups and big companies differ in a lot of ways. When it comes to hardware, the gulf between the two is massive.

Early-stage startups are painfully under-financed. This lack of capital makes manufacturing one of the most critically dangerous periods in a young company’s life.

One tiny mistake in a design, tool, or QC process and BAM, you’re out of business.

You cannot "move fast and break things" in building physical products. I mean... You can, but then your startup dies.

The other interesting insight is:

Even after you see a big company do something, you can't reverse-engineer the design and do it too!

Just because Apple does something, doesn't mean you can do it too.

At least once a week, I have a conversation with a founder that wants to design something that mimics an Apple product. Maybe it’s a surface with no ejector pin marks, or some complex texturing, or laser drilled holes, it doesn’t really matter: it’s impossible for a startup to do certain things.

“But no,” they say, “Apple does it. Why can’t I?”

Because Apple is an exception to nearly every rule.

What happened when Apple wanted to CNC machine a million MacBook bodies a year? They bought 10k CNC machines to do it.

How about when they wanted to laser drill holes in MacBook Pros for the sleep light but only one company made a machine that could drill those 20 µm holes in aluminum? It bought the company that made the machines and took all the inventory.

And that time when they needed batteries to fit into a tiny machined housing but no manufacturer was willing to make batteries so thin? Apple made their own battery cells. From scratch.

And some things that we now take for granted as consumers... are actually very hard to pull off!

Things that Apple does, that startups should absolutely avoid:

White plastic. White is of course the most difficult color to mold. If you NEED to use white, never have two separately molded white-on-white parts. They will never be perfectly color matched.

Molded plastic packaging. Many small Apple products come in polycarbonate + ABS/PC mix molded packaging. This is both harder and more expensive than you might think. Recycled cardboard is your friend

No ejector pin marks. Unless you’re a billionaire genius, your product will have noticeable ejector pin marks.

4-color, double-walled, matte boxes + HD foam inserts. I know you’re going to do this anyways, but be aware that these kind of boxes will literally be the most expensive line item on your BOM. It’s not unusual for them to cost upwards of $12/unit at scale. And then they get thrown away.

Making hardware is an arduous endeavor in itself. Don't make things harder for yourself than they already are!

To be more specific:

Don't ever - ever - do a Juicero.

As I wrote in Using a crane to lift buckets:

The story of Juicero, a Silicon Valley juicer startup that raised $120M from top-tier investors including Google Ventures and Kleiner Perkins, and shut down 16 months later.

Juicero built a high-tech juicing machine with 400 custom parts and juice press plates that wielded four tons of force (“enough to lift two Teslas”). The juicer retailed at an introductory price of $700 (!), later brought down to $400.

But as Bloomberg showed in a funny video in Silicon Valley’s $400 Juicer May Be Feeling the Squeeze, it turned out users could squeeze Juicero's proprietary juice packets just as easily… with their two hands 🤦‍♂️. No Tesla-lifting press plates needed.

And it was all because of a strange, obsessive, and pigheaded insistence on having the most impractical design possible.

As Dan Olson said on Twitter:

I have just enough engineer in my blood that I will, to my dying day, be obsessed with Doug Evans' insistence that the Juicero flat-press the entire bag at once rather than just using a vastly more efficient roller to squeeze the bag from top to bottom.

As Dan says, this requirement was insane! It's like you want to cut a tree, but you insist on using a baseball bat instead of an axe.

So don't try to create products with the finesse and perfection of an iPhone. At least at the outset. Ship a v1 that you are embarrassed about.

That's the only way you make it to v2.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join nearly 1,500 others who read my newsletter every week (its free!) 👇

Subscribe now

2. All things AI.

At this stage in their evolution, AI tools like ChatGPT, Bing, Midjourney, etc. are still quite erratic.

Sometimes they give you mind-blowing answers, and sometimes they say "Sorry, I am an AI language model…". Sometimes they give you goosebumps, and other times they can't even draw hands!

As someone said:

ChatGPT is like a brilliant intern that is not super consistent in taking their antipsychotic medication.

Ethan Mollick has the best content online on how to use these new AI tools well. Follow his advice, and they will become a 10x force multiplier in your work.

These two articles are the best place to start.

• How to Use AI to Do Practical Stuff: A New Guide

• A guide to prompting AI (for what it is worth)

For a "how-to" more focused on ChatGPT, check out my Ghost in the Shell - How to truly harness AI in the ChatGPT era. It includes tips on writing great prompts and a couple of walk-through videos too.

3. The age of automation is coming is already here.

4. At the end of the day, we are all AI language models 🤣.

Teachers: "AI is a disaster, how am I going to know who is cheating?!"

Students:

5. This story warmed my heart.

A simple Reddit answer, to an innocuous question on r/AskReddit: "Have you ever picked up a hitch-hiker?"

I won't quote from it, as any excerpts will not compare. It’s an incredible story (even Reddit co-founder Alexis Ohanian says it’s his favorite Reddit post).

Click through, and read the answer by the user "rhoner", from 13 years ago. You won't regret it.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share

First up, thanks to all of you who reached out over the last few weeks, asking why I haven't sent out a newsletter in a while 🙏.

Don't worry, I'm fine! (Although I'm down with a bothersome flu as we speak).

Just had a very busy few weeks, away from my reading and writing. Family and work stuff. But I’m so glad to be back!

… aaand I'm still talking about my favorite topic of the year, ChatGPT. But a different kind of story. A story of one particular day in mid-November.

1. Baby, we were born to run.

I've shared so many graphs of ChatGPT's breathtaking traction in the past. But it's been a while, so let me share one more.

Our minds just cannot compute a traction line that's gone vertical. Has any other technology ever expanded so fast? (No). Will any other technology ever expand this fast again? (Unlikely).

Words fail at describing this success. Any hyperbole is an understatement.

Which makes ChatGPT's origin story all the more surprising.

A story of how easily it might have... not happened at all.

Wake up on the wrong side of the bed... and you might change the world.

A New York Times article about ChatGPT starts as follows:

It's so fascinating! As Oliver Cameron says, were it not for one person at OpenAI waking up super paranoid, we might not be seized by AI mania today. We wouldn't be radically reinventing how we work. Google wouldn't be shitting bricks. etc.

Reminds me of Andy Grove's famous admonition:

"Only the paranoid survive".

As Grove says in his excellent book of the same name, Intel's leadership in semiconductors was anything but pre-ordained. The company had many near-death experiences. It only pulled through because it was ready to reinvent itself time and again. (sidenote: As I wrote earlier this year, Intel might not be paranoid anymore. With results to match, alas).

This notion - that a healthy dose of paranoia is essential to survival - is true in any competition. Whether between individuals, companies, or even countries.

One of the greatest stories of human technological innovation is:

The 1960s race to put a human on the moon.

Yuri Gagarin was the first human in space, in April 1961. And a shade over 8 years after that, Neil Armstrong took his first small step on the moon.

When Gagarin went into space, most of the technology to fly to the moon didn't even exist! The US hadn't even put a human in orbit. And yet, 8 years and 2 months later, Apollo 11 landed on the moon.

How did it happen so fast? Was the US just lucky to have the most brilliant scientists?

To paraphrase a popular saying: Paranoia is the father of invention. Especially if it reaches Cold War heights.

The US invested over 25 billion dollars in the Space Race (USD 200+ billion in today's dollars). A massive investment in innovation. They wouldn't dare spend a dollar less, because... well, what if the Soviet Union won the Space Race?

The US and the Soviet Union launched over 50 crewed spaceflights between them in that frantic decade. Always pushing the envelope, lest their adversary gets ahead.

A 1960s version of you might have asked, "Why should we go to the moon at all?"

…

"umm... I dunno. But what if our enemy gets there first and sets up a moon base?"

JFK was far more eloquent, of course.

We choose to go to the Moon. We choose to go to the Moon... We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard; because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one we intend to win, and the others, too.

"We choose to go to the moon... not because it's easy, but because it's hard." That's a great business lesson right there: when someone's chasing you, run upstairs.

Only the paranoid survive.

And the complacent... die.

So what happens when you stop being paranoid? At some point, you're so far ahead your competitors can't catch you. Surely you can relax then?

Let's see what happens when you slow down and begin to bask in your dominance. We need look no further than the most successful company of the early 2000s.

In 2006, it was the name on everybody's lips. Today... well, you haven't thought about it for at least 10 years.

I'm speaking, of course, of Nokia.

As I said in last year's How Amazon, Zoom, and InMobi became antifragile (and how Nokia became fragile):

Nokia in the 20th century was the archetypal antifragile company. A small company in a small country (Finland population: 5.5 million) somehow became the market leader in mobile telephony. At its peak in 2007, Nokia had 49.4% share of the mobile phone market.

And a mere 5 years later, it was languishing at 3.1% and almost bankrupt.

It was in such a dismal state, that it felt like Microsoft had paid too much, when it acquired Nokia for USD 7Bn (down from its peak of USD 155 bn in 2007).

How does something like this even happen?!

The story of Nokia’s rise is the story of a company that innovated in new technologies.

• Invested in digital data transmission tech in the ‘60s, because it seemed… interesting.

• Got into a JV with a radio telephone supplier, without a clear market visible.

• Invested in digital switches because that was a new technology in the ‘70s. And because Nokia didn’t have the funds to develop its own chips (like its bigger competitors like Ericsson did), it used an x86 microprocessor from some company named Intel in California.

End result - when different countries came together to formulate the GSM standards in the ‘80s, Nokia positioned itself center-stage to define those standards. And wrote its existing capabilities in!

After all that, winning was inevitable.

But then, over time, David became Goliath. The company stopped innovating. It was far more fun to just enjoy the market dominance it had built.

The company lost its muscle memory for innovation.

And with the sudden rise of iPhone and Android, the company found itself on a burning platform. But… the company had forgotten how to jump.

Here's the lesson: You can't set out to build a "stable" business. A "stable" business is not really a stable business. A small external shock, and down it goes. If you want to be resilient, you need to grow.

You can never engineer a business to be stable. It's either growing or it's dying. Those are your two options. Choose.

Now of course, reality is not so dramatic. You don't die the next moment, or the next day. But die, you will. Stasis is not stability. Stasis is death.

That's why Bezos says, "It's always Day 1." Because:

Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.

Just how paranoid can you get?

The story of OpenAI's paranoia doesn't end there.

Even after the release of ChatGPT, OpenAI isn't resting on its laurels. You could forgive the CEO Sam Altman for taking his foot off the pedal. He's just launched the most successful consumer app ever. Signed a landmark deal with Microsoft. Even made the mighty Google quake in its boots.

You could forgive OpenAI for carving itself a pricey pound of flesh. But no.

Max Woolf talks about OpenAI's API pricing in his article:

Everyone knew OpenAI would release an API for ChatGPT at some point. The APIs for GPT-3 alone enable the existence of companies such as Jasper and Copy.ai.

The real question was the price of the ChatGPT API.

For context, when GPT-3 went out of beta in 2021, it cost $0.06/1,000 tokens (a few paragraphs of text). An inflection point happened in August 2022, where OpenAI not only reduced the price to *1/3* ($0.02/1,000 tokens...), but soon after also introduced text-davinci-003 as the default GPT-3 endpoint: a finetuned GPT which can follow instructions very well.

I suspected that OpenAI would charge double for the ChatGPT API compared to the GPT-3 API given the amount of hype, as that’s typical price discrimination since everyone perceives ChatGPT to be much better and that they would not want to overshadow their existing GPT-3 products.

Instead, on March 1st, OpenAI set the price of the ChatGPT API to *1/10th* of the GPT-3 API, at $0.002/1,000 tokens.

Max is right. Standard pricing logic would suggest that OpenAI price up for the ChatGPT API. At least double the price. They'd find thousands of buyers at that price.

But OpenAI went the other way! It reduced the price of the ChatGPT API to 1/10th of the far inferior GPT-3.

OpenAI is throwing down the gauntlet. It's issuing a challenge to its competitors:

"So you think you can build as powerful an AI model as mine? Well, you're welcome to try. But... how would you then possibly beat me on price?"

Taking another leaf out of Bezos' book.

My profit is no one's opportunity but my own.

I used to love this quote, attributed to various athletes:

Every morning in Africa, a gazelle wakes up, it knows it must outrun the fastest lion or it will be killed.

Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve.

It doesn't matter whether you're the lion or the gazelle - when the sun comes up, you'd better be running.

I guess that's the lesson for us entrepreneurs and business builders:

You better love running.

Because the day you stop running, you die.

Before we continue, a quick note:

Did a friend forward you this email?

Hi, I’m Jitha. Every Sunday I share ONE key learning from my work in business development and with startups; and ONE (or more) golden nuggets. Subscribe (if you haven’t) and join nearly 1,500 others who read my newsletter every week (its free!) 👇

Subscribe now

2. Golden Nugget of the week.

I love this. In so many ways, constraints can be good for you.

3. Will AI take your job?

Sure, AI can take away middle-manager jobs. But company leaders add tremendous val...

Got to be more paranoid.

4. This blew my mind.

A few weeks ago, Microsoft released a concept for a new "Office Copilot". It's stunning, and it will *absolutely* change the way we work.

That’s it for this week. Hope you enjoyed it.

As always, stay safe, healthy and sane, wherever you are.

I’ll see you next week.

Jitha

[A quick request - if you liked today’s newsletter, I’d appreciate it very much if you could forward it to one other person who might find it useful 🙏].

Share