“The best investor is a social scientist.”
I’m always drawn to the reasons why individuals pursue their calling. Hugh Hefner asked for a $5 raise from Esquire, and when turned down, launched Playboy.
In Geekwire’s “How Tom Alberg bet on Seattle and Amazon, shaping the region’s tech industry and building a legacy of understated influence,” a couple of passages stood out. For one:
“Alberg wasn’t keen to join a giant, bureaucratic company. After his experiences in telecom and serving on boards for tech and biotech companies, he was eager to stay in an entrepreneurial space.”
Twenty years ago when I started my career after graduating in finance, I would have presumed to pursue a career as an analyst covering media companies, or doing M&A with a focus in media. Instead I veered towards entrepreneurship. Last year when I attended Anthony Scaramucci’s SALT conference, I had a bit of an epiphany and started the process to return to my roots in finance and investment. I finally started to invest, in public and private businesses.
When I read:
“Alberg doesn’t let people say ‘no’ to a vision. And believes that if you empower them by making them think about a vision of the future, there’s probably not a whole lot we can’t accomplish.”
I couldn’t help but think that in theory, anyone* can do anything, but no one can do everything (especially at once). Why the asterix? Over time, I grew more realistic with assessing people. In practice, I’m not sure anyone can do anything, let alone everything. So that should read “someone can do anything, but not everything.”
In business, not everyone is an entrepreneur; though in 2020, everyone has to be entrepreneurial. But frankly, successful leaders recognize people’s strengths even if they don’t actually manifest many leadership skills. After all, 1% are leaders and entrepreneurs, 9% are managers and intrapreneurs, while 90% are soldiers (some better than others). A great commander understands that and casts accordingly. A mistake entrepreneurs and investors make is failing to realize this.
The Value of Investing to Entrepreneurs
Another mistake entrepreneurs make is not realizing where a given project or interest falls along their spectrum ranging from “I can do this myself” versus “I should find someone to do this with,” regardless of whether partnering means being an advisor, operator or investor. We like to create jobs and value, but one reason why investing and advising becomes more attractive to entrepreneurs isn’t in the financial gain, but its utility as a release valve. Organizations eventually find one, maybe two things they do really well. As much as entrepreneurs hate to admit it, that’s probably where the organization ought to focus on.
Media’s One Trick Pony Trick.
This takes me to how I’ve evolved my thinking on “build” vs “buy,” as well as “partner” vs “invest.”
I came across this fascinating take recently:
“ESPN, originally started as a sports-only cable television station in 1979, began with a $9,000 investment by Bill and Scott Rasmussen. Almost 40 years later, ESPN is the world’s most valuable sports media brand.
For 13 years, ESPN directed all its attention to just one channel: cable television. Then in the 90s, the company began to rapidly diversify. It launched ESPN radio in 1992, ESPN.com in 1995, and ESPN the Magazine in 1998.
Even after the virus, ESPN has a presence on almost every channel and in every format available on the planet—from Twitter and Snapchat, to podcasts and documentaries. Yet ESPN didn’t diversify until its core platform (cable television) was successful.
The greatest media entities of all time selected one primary channel in which to build their platform:
- Wall Street Journal—Printed newspaper
- Time—Printed magazine
- TED Talks—In-person events
- Huffington Post—Online magazine format
- PewDiePie—YouTube Show
Most organizations that run to create and distribute more content try to publish as much as they can, in as many different ways and on as many platforms as possible. This is a failing proposition. Frankly, if you are a historian of media companies, this just doesn’t work.
In today’s climate, we might be tempted to start throwing all kinds of media against the wall, experimenting at will. And who knows, this might actually work…except that history tells us that it won’t.”
Indeed, many of the most valuable brands in the history of media have a very well defined and limited Platform/Format fit.
WatchMojo has adapted its core platform/format hit (top 10s about entertainment on YouTube) into derivative formulas for new:
- demographics: MsMojo
- platforms: Snap
- geographies: LatAm
But I finally recognized that to truly become a diversified media company, we will need to invest, partner, buy as well. But how to decide what to do when?
Winning: People and Competition
Fortune magazine hailed Jack Welch as the Manager of the Century. He was well-known and widely quoted for saying that unless you’re #1 or #2 in your market, you may as well get out. But more noteworthy was his emphasis on People & Competition, which go hand in hand in winning.
To win as an entrepreneur, you need (at least):
Hiring aggressively internally and trying to incubate projects doesn’t lead to a successful winning percentage. The best people you hired to operate the business plan tend to have certain skills and traits that are generally not possessed by entrepreneurs and who in turn lack some of the most raw and critical entrepreneurial traits. An organization’s best employees may not necessarily be that entrepreneurial, no matter how much you try to set that example. This is why intrapreneurs and intrapreneurship isn’t as prevalent as it once was with the rise of entrepreneurship. For you as an entrepreneur, instead of growing frustrated and disappointed, learn to appreciate soldiers for their strengths, instead of growing disappointed for traits they don’t have.
Over time, I realized that WatchMojo would fall prey to innovator’s dilemma if I didn’t grow realistic, fast. Innovator’s dilemma isn’t a phenomenon that is limited to traditional corporations. Even the most innovative of startups eventually suffer from its symptoms. One of the best ways to shelter an organization from competition and benefit from it is through R&D and M&A.
We look at that through 4 buckets and this may explain how we discuss it internally:
Adjusting Tactics, Adjusting to the Times
From 2006 when we launched to today, the world has changed… the 2006-era Pyramid paradigm that shaped my vision and execution doesn’t really makes sense today. Then, old media didn’t have an economic incentive to embrace the Web. Times have changed. For example, at the super premium layer: Disney blew up its business model recognizing times have changed. Today the pyramid is replaced with two spheres with content owners on one side, and platforms with audiences on the other. These spheres are converging and in that process comes many opportunities (both the “prosumer” and UGC layers merit deep dives by themselves).
As WatchMojo evolves to reflect this new world order, I have a better appreciation for what areas makes sense for WatchMojo to invest in internally, which ones we ought to partner, where we need to invest and finally, where we need to acquire.
Reading about the 30-year journey that led Alberg to turn Madrona into an institution reminds me of the paradox of growth: things that scale quickly aren’t usually sustainable; and things that are sustainable don’t scale quickly. There are no overnight schemes when it comes to entrepreneurship or investing: it takes time, patience and perseverance.