The notorious eccentric billionaire Howard Hughes was 6’4” tall. To reassure himself that the details of his empire were sound, he reportedly rose at 4:00 a.m. once a week on Mondays, eating a snack of cold barbecue chicken before poring over detailed accounting records for each of his companies. After a five-hour marathon session, he would return to bed, sleeping much of the day.
Hardly any of that is true. But if it were, what would you make of it?
Much of this series is about science in the sense of determining how to uncover real-world data that may be relevant to your marketing decisions. In a very real sense, scientific debate must often be about methodology: how do we act on salient data rather than noise? Falling short of this rigor takes us into the realm of superstition. As a Leo, I can tell you… I like winning. And winning depends on… see what I just did there?
Here, I’ll refer to broader signals that people assess in their overall company growth strategies, so it’s a level or two up from just managing the spend.
This week’s topic covers a weird phenomenon stemming from superstition: the error of mistaking apparent correlations with causation. We’ve all heard of Pavlovian responses. One of my two cats feels convinced that the beeping of the microwave oven indicates that it’s dinnertime for her.
The famous story of the “Cargo Cult” refers to an African tribe that knew only that airplanes delivered bounty, and that the people on the runway seemed to summon the great metal birds with long sticks and odd costumes. The locals tried to replicate the costumes and the waving routine in hopes of triggering a repeat.
Many accounts of the quirks of business leaders are merely random observations infused with, at best, survivorship bias. The fact that Warren Buffett guzzles Sprite and supposedly lives in a modest house, driving a Ford, only makes him the world’s wealthiest philistine. These habits won’t be anyone’s recipe for massive financial success.
Calling Cargo Cult clairvoyance into question
PPC is nearly synonymous with company-building. Indeed, of all the online channels, keyword advertising is the most associated with new customer acquisition, although SEO and “earned media” (PR) seem to be on a par with PPC. PPC can be the costliest, which perhaps lends it more mystique. It presents a strong barrier to entry to the timid. And it raises never-ending existential questions about aggressiveness levels. It’s like living on a knife-edge.
Regardless of channel, company growth is an act of planning. In many cases, it’s a product of vision and imagination. There is no objective reality about trying to become the next FedEx or Starbucks, or even a family-owned nuts and dried fruit store (a physical store) that would go entirely online and ultimately become one of the most recognizable e-commerce retailers in North America (Nuts.com – a former Page Zero client).
What great entrepreneurs see isn’t always seeable. It’s like they have a sixth sense. Luck and various catalysts have to be part of it, too. Jeff Bezos is one of the world’s all-time greatest company builders, but I have to believe he got lucky when it came to the rise of Amazon Web Services (AWS).
Very good entrepreneurs can get distracted by mirages in the form of Cargo Cult responses to competitor success. In my observation, the sources of the “shiny plane” in planning career or business success fall into three categories, among others:
- Recognizing that someone has built a popular personal brand and is often a featured keynote speaker at relevant industry events and even in the media, and trying to ape their specific approaches to developing a “loyal, cult-like following” (the Pied Piper Mixup)
- Hearing about the organic search success and user experience (UX) leadership of a category leader in your field, and assuming that the SEO team’s tactics or specific button placements and page layouts are all “best in class,” and trying to mimic these (the “Paypal Mafia Must Be Right” Fixation)
- In product selection and positioning, web design, choice of channel focus, and more, thinking that a single close retail competitor (out of dozens) is worth “shadowing” because they achieved extreme success, growing from “their living room to $30 million in sales in only four years” (the Hypergrowth Superstition Set).
I’ve run across all of these. In some cases (remember, it’s very hard to start growing a business from a blank slate), I’ve been a willing or active participant in the fantasyland-type planning processes.
The Pied Piper Mixup
In the case of the first, the Pied Piper Mixup, I was once seated near a startup cofounder at an informal industry dinner. I’d known him and his company for its relentless PR and frequent pivots over the years. He’d been writing and speaking more, but he was a bit of an awkward character. My jaw dropped when he gave a fawning account of one of the most highly-followed influencers in digital marketing and said he was taking steps to be just like that person so he could also build a company just like that person. It sure helps to have a cult-like following, but in this case, not being oneself could have distracted from building a product that really addressed a market need, a feedback process that truly served customers, etc. And most of all, acting like a walking PR machine (without the underlying charisma) could have repercussions like failing to retain key employees.
His company may have had moderate success, but in my view, the “fame” goal was misplaced (a cursory reading of Good to Great by Jim Collins would take care of that myth). And guess what? Seven years later, his idol’s company *still* hasn’t exited, the idol departed the company and doesn’t quite have that same cachet anymore, and has launched a new company that focuses on – no surprise here – influence ratings in social media. Be careful who you copy.
Another case of “popular marketing conference speaker tells you how to brush your teeth” came from a prominent tweeter and conference presenter who had recently changed jobs to a director-level marketing role at a well-known, publicly-traded Direct-to-Consumer retailer. This hot brand enjoyed a couple of years as a bit of a darling due to its rapid growth and “revolutionary” business practices. People admired this speaker so much they thought his adamant presentations about the correct campaign structure might apply to their situation, as well.
Public company filings, however, provided significant insights into the company’s finances, and they weren’t good. Growth was bought on the back of shareholders’ money, to the tune of relentless losses. That isn’t to say this individual isn’t near the top of the profession, and worth listening to – just that his 15 minutes of fame shouldn’t distract from the fact that your takes on PPC campaign structure, or budget allocation across channels, could well be better than his.
The Paypal Mafia is always right
The “Paypal Mafia is always right” fallacy is another common mistake wrapped up in the envy and topsy-turvy logic that applies a halo effect to any category leader in a digital business. In this case, I was on a team working in part on organic search optimization and a complicated user interface in a relatively new type of online community site with a lot of user-generated content (UGC). We’d even caught wind of some of the specific personnel and vendors who worked on similar issues for this lofty competitor. As it turned out, though, this category leader broke many best practices in SEO and UX. Their continued high rankings in Google Search, and general brand awareness, were in spite of, not due to, the torturous and complicated (and highly redundant) site navigation structure. Due to the long odds facing underdogs, you can’t generally “tactic” your way to category leadership – especially when you don’t have Paypal-Mafia-level resources and Wall Street investment banks backing your company. Instead, if you learn and follow many of the best practices in SEO along with Human-Computer Interaction (HCI) first principles, and work steadily towards goals with the user experience in mind, you’ll likely be fine.
It’s a key point to grasp: others make mistakes, even if they work for category leaders. Go ahead and test this theory: perform an SEO audit, UX audit, or even a site speed check on the website of a popular apparel retailer like Lululemon. Notice how terribly they suck? For other reasons, $LULU became a very large company (as of this writing, valued at $42.7 billion). Guess they can afford to whiff on a few nerdy best practices… perhaps much more so than the startup that needs to be freakishly efficient with its capital.
In a new company that may well reach stupendous heights as compared with less successful peers, the path to success is paved in part with relentless optimization (in some unpredictable measure, as compared with vision, luck, etc., fit with tastes and demands, etc.). Whether it’s keyword bids, product descriptions, shipping and logistics, accounting methods, distribution channels, or whatever… few of us are experts in every one of these things. Until many of them are “fixed” and well-optimized, a business is something of a prototype. It’s a set of moving parts that can work in theory, and the chances of success are much better if you get around to optimizing many moving parts as you grow.
What will really set you back, unless you’re extremely lucky, is copying some visible elements of competitors’ success early on, as if those were true catalysts in building the other business (and as if your aping them is material to your business). It would be as if you’d learned that Bobby Fischer played the Caro-Kann defense 80% of the time when he had the black pieces, and you decided that was going to be the key to you becoming a chess grandmaster. Unfortunately, once those pieces start moving around, you keep losing, despite attempts to copy the master. Unfortunately, you never gained access to the complete workings of Fischer’s brain. Heck, you never even got to chat with him over a bowl of tomato soup with those small, round soda crackers he loves!* And what if you’d seen Fischer playing really stupid openings at an exhibition, and winning anyway?
The Hypergrowth Superstition Set
In a similar vein, tales of hypergrowth “from very modest sales out of the spare bedroom” tend to be unhelpful mythology. It’s nice to shoot for, but the tales themselves are no doubt sanitized and distorted. More importantly, they don’t provide any solid proof of which “stick-waving activity” you should adopt as causally connected with this bounty. Out of thousands of similar attempts, a single one won, and many random factors may have contributed to that. As Taleb points out in Fooled By Randomness, the “top” performers in business – as opposed to performance cellists – can often be simulated and produced at random. There are always going to be winners and losers, but we can be fooled by random outcomes and survivorship bias. At that point we begin backfilling the narrative with a number of characteristics (hard-working, decided to target x stratum of clients, great grades, boring dresser, etc.) that “explain” the random outcome.
By all means research competitors. But don’t be distracted by shiny superstitions. And chart your own path to success.
As a counterbalance to this point, it’s certainly useful to study models and inputs of successful comparison companies. For example, pursuing efficiencies in manufacturing, adopting strong positioning in a hot market, understanding the subtleties of your financials (such as LTV:CAC ratios), and many other relevant drivers of improved performance, may constitute relatively measurable causes of improvement in certain domains, adding up to overall improvement and growth.
Designing a nicer or more industry-appropriate logo even makes sense. But how much sense? You could hire a design firm or a branding consultant. But which one? What exact steps should you take to redesign your logo and will it really have a material impact on your business? It’s impossible to say: you must plumb the subtleties of these things in some detail – often in your spare time, since you’d best not steal valuable time away from operating your growing business. So much for work-life balance.
The vision stuff (although you will of course combine it with research around design principles and trends, as opposed to aping another out of Cargo Cult superstition) is, to some degree, magic. As one chess grandmaster was heard to say recently, at an advanced level, “you are calculating, sure, but you are also creating.”
If you do make a logo change, it’ll be hard to go back and run an experiment whereby the same business kept operating with no logo change. Don’t do like Munchies’ Burgers did when I was going to high school, though. You can’t use the golden arches. That one’s taken.
*-The cracker preference is made up, and even if true, would not be causal in chess dominance.
Read Part 38: Modern Portfolio Theory & PPC Strategy
