Slides and simulation results from a 3 hour lecture I gave on July 11, 2018 at Saint Mary’s College in Moraga, CA:
It’s one thing to be obsessed with our looks, our beauty…
As the demands of beauty rise, not only do we have to do more all the time, but their nature also changes. Beauty becomes more important. It has begun to function as an ethical ideal. Beauty is often what we — rightly or wrongly — value most. It is what we think about, talk about and what we spend our time and hard-earned cash on. If we are good at beauty, we feel we are good, virtuous; if we are bad, we feel we are no good, almost no matter what else we do. We judge others too on how they look. We make assumptions about what people are like and how successful they are. We read character traits directly from looks, and we start doing this as young as four years old.
…but it’s another thing to confuse beauty practices for health practices.
Consumers are allowing themselves to be manipulated by obvious marketing tactics and the beauty industry is capitalizing on the opportunity. These marketing and advertising tactics remind me of the diamond industry, which I’ve written extensively about.
Let’s take hair for instance. “Shaving, plucking, waxing and lasering” have become so normalized that hair removal is no longer a “beauty practice” but has been “redefined as a hygiene practice, as part of so-called “routine” maintenance.” And these redefined social norms aren’t just for celebrities – they’re for everyone.
Hair removal becomes something we have to do, a requirement. It is not an option to refuse — like teeth-cleaning, but without any of the health benefits. Beauty practices are indulgent and optional; hygiene practices are necessary and required. You don’t have to do a beauty practice; you do have to do something that is required to meet minimum standards, just to be normal. Once the shift to routine is complete, the fact that this is a demanding beauty practice becomes invisible.
The Beauty Market
The Economist reported in 2003 (Real Men Get Waxed) that the US male grooming market was $8 billion. 15 years later, that number has nearly tripled and is on pace to grow by 12% annually.
Bottom Line: Societal norms and their changes drive huge shifts in spending – especially when there’s strong emotional connection or potential for embarrassment. What shifting & emotionally-charged norms can you capitalize on?
Profit and competition are inherently intertwined.
Profit is always being pushed down by competition. So profit is an unnatural thing. So you always have to to think: how can I make a profit? and once I make it how am I going to keep making a profit knowing that I’m going to attract competitors? — Stephan Kinsella, “Your Welcome” with Michael Malice 001 – Intellectual Property with Stephan Kinsella
The above concept is at the very core of profit-driven business strategy.
I wanted to dig deeper into what Kinsella meant by profits being “unnatural” so I pinged him on the twitters. Here was his reply:
Profit is in a sense unnatural–it tends to be driven down to the natural rate of interest as the market tends to equilibrium. Profit is hard to maintain in the face of competition. This is fairly standard Austrian economics AFAIK, though my argument doesnt depend on this insight — Stephan Kinsella
By the way: What he means by the “natural rate of interest” is the interest rate of borrowing money if we only consider the time-value of money and ignore the risk (and therefore increase in interest rates) associated with the borrower defaulting on their loan. Don’t worry if the natural interest rate part isn’t clear – I needed him to explain it to me as well and it’s not the point anyway.
Profit and Competition
More from the podcast:
When you’re selling a good on the market (or a service) you have to think “How can I make a profit on this good?” Because we know from economics [that] profit is – in a way – unnatural because profit is a deviation from the natural rate of interest and as soon as you make a profit you’re going to send a signal through the price system and through your activities to the market and you’re going to tell people “Hey! this guy is doing something that satisfies consumer welfare.. so come in and compete with him.
Kinsella added a few additional tweets as well to further flesh out the relationship between profit and competition:
Every entrepreneur who comes up with a business venture to make profit know that if he’s successful he’ll face competition and his initial profits will start to be eroded, so he has to keep on his toes an keep finding news ways to please consumers. — Stephan Kinsella
That’s why it’s hard to make a profit–you have to successfully forecast for the future in a world of uncertainty. But when you do this you make profit and this attracts competition, pushing down your profit, so you have to keep innovating. — Stephan Kinsella
Thanks Stephan – I appreciate the quick reply and economics lesson! FYI: Stephan Kinsella is the leading authority in the US arguing against intellectual property protection. Follow him on twitter (@NSKinsella) and check out his YouTube channel / podcast.
This week I spoke twice at St. Mary’s College in Moraga, CA – 30 minutes east of San Francisco. I whipped together an hour long presentation for the students in a Strategy course in the Business school to answer the question: What is Strategy?
It was great to force myself to present some of my ideas – several of which were only half baked – and to get so much positive feedback and concrete recommendations for changes.
I haven’t had a chance to incorporate feedback into the deck yet so I just decided to publish it for you as-is. I plan to tweak things and give this talk again soon though.
One big note: I designed this deck to be presented by me so it’s not 100% ready for consumption without me. You’ll get the gist though.
I reference my piece last week about Puddles Pity Party and my research on Moneyball (the 2002 Oakland A’s season) – only some of which I’ve published so far. Check out those posts if you haven’t had a chance yet.
The students were excited that I was taking back the word “strategy” – not just using it sloppily like many of their course readings. They expressed a lot of interest in the etymologies that I shared too, which is surprising given how boring that sounds.
And, they really appreciated that I actually defined the word strategy.
What is Strategy?
Strategy is the process of creating a set of well-aligned activities with the aim of occupying a valuable position in a competitive landscape.
I really emphasized that strategy is a process, not a static outcome.
In case you missed some of my posts from the past few days, here they are:
- Best Strategy Books
- New AI Report
- Metrics Fixation
- Niche Positioning Lessons From A Sad Clown Who Doesn’t Talk But Sings His Ass Off
PS: This is just for you.
PPS: If you’re not familiar with the trivium (slide 3), you’re missing out. I might write about it more next week.
Niche Positioning with Puddles Pity Party. Hit play.
That is Puddles Pity Party – a one man cover band. Puddles has nearly 400,000 followers on YouTube, many 20+ million view videos, 140,000 monthly listeners on Spotify, and he performs all around the world. Just last week he sold out the Palace of Fine Art Theatre, a 962 seat venue in San Francisco. Puddles was also an America’s Got Talent quarterfinalist in 2017.
How on earth did this happen? And how can you replicate Puddles’ odd but tremendous success?
This post will dissect how Puddles has positioned himself over time and identify lessons that might be applicable to your endeavors.
I love you – You’re unique, you’re interesting, you’re different, and people are going to remember [you]. – Howie Mandel
Puddles is remarkable – literally.
And that’s why during Puddles’ America’s Got Talent audition the judges had such high praise for his performance. Heidi Klum commented, “very unexpected, very original, very different, and I want to see more.” Even Simon Cowell had nice things to say.
Some call Puddles’ performance a gimmick. And yes, the juxtaposition is remarkable: a sad, mute clown who sings so beautifully that you can’t help but smile. But what may have started as a gimmick has turned into millions of people (and maybe you) falling in love with a fantastic performer and supporting his art.
Puddles differentiated himself so that he could stand out. Ironically, in order to be heard Puddles chooses to not speak, making his singing voice come off that much louder by further exaggerating the juxtaposition.
Hit play below and keep reading. This song should take you to the end of this article – just another 4 minutes.
Puddles wasn’t born Puddles.
Puddles Pity Party is Mike Geier – the 54 year old 6’ 8” baritone. He’s obviously a talented vocalist but that’s not enough to succeed these days.
Here’s Geier in 1994 performing Disney’s I Wan’na Be like You (The Jungle Book) with one of his previous bands, The Useless Playboys.
While entertaining, Geier’s performance isn’t unique. Geier hadn’t found his niche yet. So he kept experimenting – searching for what clicked with audiences.
Geier experimented with a lot of personas. He was Big Mike, Kingsized, Greasepaint, part of the Swing Noir band called the Useless Playboys, and a part of many other acts and groups along the way.
From what I can tell, Puddles was a minor character in Geier’s repertoire for a long time before taking center stage. YouTube videos from 2009 and 2010 feature Puddles, but not our 2018 Puddles. Those videos feature a “missing link” Puddles, bridging a gap between Geier and the Puddles we know today.
Puddles’ evolution seemed to accelerate when Geier was performing at a cabaret in Seattle called Teatro ZinZanni. Geier could experiment in front of an audience every night and continuously make small improvements.
Tight and frequent feedback loops are undervalued. When done properly, tight and frequent feedback loops force you to 1) put your work out there, 2) listen to your audience’s response, and 3) to try new things in order to improve.
The problem, of course, with tight and frequent feedback loops is that you have to put your work out there, listen, and try new things – which requires a lot of motivation, time, energy, and persistance.
When you’re just beginning, it’s important to start narrow – to do one thing well. You’ll get increasingly better at whatever it is you’re doing. But you also have to experiment and try new things.
To find the right niche, you may have to search and search and search. Hard work and persistence may pay off: You might discover your niche, your product-market fit, and become a ten-year “overnight” success like Puddles.
One obvious challenge here is balancing focus with experimentation. I think the best remedy is to be intentional – maybe even scientific – with your experiments. A “pivot” is holding most variables constant while changing others. Plant one foot while you find a better position for the other.
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The Anatomically Modern Puddles
A 2012 interview with Geier hints at a nearly modern Puddles. All of the Pagliacci hallmarks were there – white face paint with red accents and the baggy clown suit. But we also see Puddles’ trademark “P” crown and his operatic singing style.
So we have some understanding of Puddles ancestry, but what makes a good niche?
Seek a Niche that’s Worthwhile
People want to be entertained. Puddles delivers because Geier understands entertainment. He understands fans, culture, originality, comedy, presence, and performance. And he studied and emulated one of the greats – Elvis – for years.
But your niche can’t just be worthwhile to your future customers. In order to compete long term, your niche has to be worthwhile to you too – financially and artistically.
Puddles’ niche may be focused but it’s not small.
Puddles has enormous appeal. His covers of pop songs cut cross both time and genre – attracting fans of David Bowie, Lorde, Elvis, R.E.M., Sia, Queen, Tears for Fears, Radiohead, Johnny Cash, Twenty One Pilots, Coldplay, and even a mashup of STYX + Disney’s Frozen.
Seek a Niche that’s Under-served
Niching down sends a signal to your customers that you’re dedicated to a specific thing that they care deeply about.
Go after a market that’s under-served. Your market will be thrilled that someone is finally paying attention to them and reward you with their time, attention, and money.
Going after an under-served market lets you deliver disproportionate value immediately. When you over-deliver, your fans will be evangelical, bringing others into the fold and reducing your customer acquisition costs.
Seek a Niche that’s Defensible
There’s no lack of great singers out there – in fact it’s a competitive, cut-throat market for up-start singers. Supply is much greater than demand for talented vocalists. That’s the core reason why Geier didn’t have Puddles-level success as Big Mike, Kingsized, Greasepaint, or the Useless Playboys.
But as Puddles, Geier is in a category of his own – a great position to defend from competition.
I dare you to copy Puddles. You will fail. You’ll fail because blatantly copying his ideas will make you look ridiculous. You can never be an exact clone of Puddles anyway because he’ll always be the original and you’ll always be the copy.
When considering a niche, think about defensibility. There are many ways to defend your position in a competitive landscape. Ideally, one feature of your position would be an element of self-defensibility.
When you’re starting something new, seek out a niche – a niche that’s remarkable, worthwhile, under-served, and defensible. Experiment and iterate, holding on to what works and leaving behind what doesn’t. Once you find a valuable position in your competitive landscape, ruthlessly exploit it, cautiously grow it, and begin to invest in your next move. Land and expand.
I agree with Simon Cowell. I think Puddles is “fantastically brilliant” and I think his strategy for finding and owning a niche has been a success that will continue to pay off for Geier, his team, and his fans.
PS: If you have another 4 minutes, I’ll leave you with one final video from 2014 (Dancing Queen by ABBA). I want you to note how many people are recording him in this tiny coffee shop in 2014. Puddles is safe, fun, and worthwhile – the formula for sharability – a concept I lifted straight from Ryan Holiday’s Perennial Seller.
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