One Step Up #48
This week, we look at ergodicity, Brands & Loyalty, Stripe, $FIVR, $MRNA, Big Tech, Hollywoodization of Peloton, investing in the Metaverse, Tiger Cubs, identifying moats, China e-com wars + more
You’re never going to get rich renting out your time.
A Big Little Idea Called Ergodicity (Or The Ultimate Guide to Russian Roulette)
If there’s only one article you read from this newsletter - let it be this.
In an ergodic scenario, the average outcome of the group is the same as the average outcome of the individual over time. An example of an ergodic systems would be the outcomes of a coin toss (heads/tails). If 100 people flip a coin once or 1 person flips a coin 100 times, you get the same outcome. (Though the consequences of those outcomes (e.g. win/lose money) are typically not ergodic)!
In a non-ergodic system, the individual, over time, does not get the average outcome of the group.
We tend to think (and are taught to think) as though most systems are ergodic. However, pretty much every human system is non-ergodic. By treating things that are non-ergodic as if they are ergodic creates a risk of ruin... If you want to not die or go bankrupt, ergodicity is an important idea to understand.
The brands of the next decade will win with loyalty, not acquisition.
Historically, loyalty programs work well in competitive markets with relatively undifferentiated products, where consumers are open to building brand affinity, and in categories that have low cost and high perceived value goods or services—think airlines, hotels, beauty and department stores.
Business breakdowns of the week:
The Power, Peril, and Plight of The Big Tech
“The Netflix of Wellness”: Inside the Hollywoodization of Peloton
…instructor Jess King tells THR that if she’s teaching a class with a particular message (such as being authentically yourself), she scripts it down “to every second of what I want to say” — not to mention rehearsing it and often memorizing it.
In many ways, Peloton operates like an old Hollywood studio, creating star instructors who are on multiyear contracts, producing all its own content and controlling its distribution.
Tiger Cubs: How Julian Robertson built a hedge fund dynasty
“Early on Julian gave you the ability to focus on being intellectually honest,” said Coatue’s Laffont. “For everything he forced you to see both sides of the debate. There were no zealots ever — every coin has two sides. If ever Julian thought that you had become dismissive of the other side of the story, then you were viewed as being unprepared — because you were viewed as being shortsighted or too narrow minded in your approach.”
How to Identify an Economic Moat
Step 1: Understand the Business Model and Identify the Economic Moat(s) - highlighted in the article
Step 2: Look at 4 Key Performance Indicators (KPI's)
Alibaba v Tencent: the battle for China’s e-commerce deliveries
The Attention Span. “Picking Fights.”
The crux is basically the importance of deeply understanding the stark reality of “what’s going on” before you even start, then you’ll see the potential inherent in the situation. The self-transforming mind adapts to it, nudges where appropriate and wins almost inevitably. This is what makes an unfair fight, and this is what brings together where you are with who you are.
A Dozen Lessons on Building a Business from Sarah Tavel
Ultimately when evaluating an early stage company, I say it’s a combination of art and science. The art is understanding how products work, the science is knowing how to measure it. The earlier the company, the more it is about art, which in this case is assessing what I think of the product and the use case.”
In non-transactional products, real value will be created when you create accruing benefits. A product has accruing benefits if a user would say ‘the more I use the product, the better it gets.
Four Keys to Changing Your Life That I Wish I Knew Before I Changed Mine
Bonus: A Steve Jobs story for the ages
Till next time. Stay safe and have a great week ahead!