Two Ways to Predict the Future
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Happy Monday, May 4th!
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If you’re reading this but haven’t subscribed yet, do it! Each week, I write an essay that mixes business strategy with pop culture. It’s been called “fun,” “informative,” and “free.”
I grew up a huge Chicago Bulls fan. It was the Jordan years, and nothing excited me more than hearing the NBA on NBC theme music (Roundball Rock by John Tesh) and watching the Bulls run out onto the floor in their all-white warmups. One time, when I was six, I stole gel stickers from Zany Brainy, and my punishment was no Bulls games for two weeks.
So I have been loving The Last Dance, ESPN’s documentary series on MJ’s 1990s Bulls. It brings me back. There’s one story in particular that happened before my time, when I was two years old, that got me thinking and inspired today’s post.
In 1989, the Bulls lost to the Detroit Pistons in the Eastern Conference Finals. The Bad Boy Pistons, known for their physicality and for playing dirty, beat up MJ mercilessly, knocking him down every time he tried to go to the hoop. After the series was over, instead of complaining, Jordan hatched a plan. He knew his team was more talented than the Pistons, and that he was the best player on the court, but he also knew that the Bulls weren’t going to beat the Pistons unless they put on muscle. So he spent all summer in the weight room and transformed from skinny to jacked, and pushed his teammates to do the same. The next year, when the Pistons tried to knock them down, the Bulls got up every time on the way to a 4-0 Eastern Conference Finals sweep.
A lot of athletes guarantee victory. Jordan did more than that. He figured out exactly what he and his team needed to do, and then lead them in going out and doing it.
That reminded me of a recent essay I read about Carta, and got me thinking about the difference between loud companies and strategic ones, between Shotcallers and Worldbuilders. The result is this week’s essay.
Let’s get to it.
Two Ways to Predict the Future
There are two ways to predict the future: you can call it or you can build it.
In the 1932 World Series against the Chicago Cubs, Babe Ruth pointed his bat at the outfield wall, swung, and hit the ball 440 feet over the deepest part of the outfield wall. It wasn’t the longest home run in history. It wasn’t a game-winner. It wasn’t a 3-2 count in the bottom of the 9th in the 7th game of the World Series. To this day, people debate whether Ruth was even pointing at the outfield wall at all.
Despite all of things that Ruth’s home run wasn’t, Bleacher Report ranked it the most memorable of all-time. What made that specific home run most memorable even after 88 years is that Babe Ruth called his shot.
Sports has a long history of Shotcallers - athletes who predict that they’re going to do something and go out and do it. There’s nothing nuanced about it. It’s brash, cocky, and bold.
In 1964, Muhammed Ali delivered on his prediction of a first-round KO in his rematch against Sonny Liston. It was the 13th time he predicted the KO round. In 1969, Joe Namath guaranteed a Super Bowl victory over the heavily favored Baltimore Colts and won. In 1994, New York Rangers captain Mark Messier promised a Game 6 victory against the New Jersey Devils to stave off playoff elimination. He backed it up by scoring a hat trick in the Rangers’ 4-2 victory.
It’s easy to tell when an athlete correctly called his or her shot because sports are black and white. You win or you lose. Your prediction comes true or it doesn’t.
In the parlance of design theorists Horst Rittel and Melvin Webber, sports present tame problems for which “there is an agreement on the problem and a solution which will resolve the problem.”
To guarantee a Super Bowl victory, you don’t need to predict that there will be a sport called football, that the winner will win something called a Super Bowl, and that your team will win that Super Bowl by doing certain specific things. You know the rules, you know the prize; you only need to say that you’re going to grab it.
Consumer tech businesses, on the other hand, present wicked problems. These problems “are difficult or impossible to solve because of incomplete, contradictory, and changing requirements that are often difficult to recognize.”
Many factors contribute to this:
You need to build a company and an industry simultaneously
The technology needed for the plan to work doesn’t exist or is unproven
The plan requires coordination among thousands of people globally, both internal and external, over years
Customers need to want what you’re selling
Competitors can change the rules, cheap shot you, or just take the ball and walk off the field.
Because these businesses presents wicked problems, success can be the result of stumbling in the dark, adjusting on the fly, iterating until finding something that works, and then hanging on for dear life.
This meme blew up last week, and I think it describes the normal company path pretty well:
Most startups launch with a lofty vision, flail around for product-market fit, and then settle on a less ambitious, less differentiated plan.
Sometimes, though, a CEO lays out a clear vision and an unintuitive plan to achieve it from the earliest days. Then, against all odds, they make it happen. Those CEOs are the Worldbuilders.
I really struggled to come up for the right word to describe these people. Combining vision, planning, and execution in one person is so rare that the perfect word doesn’t really exist. When I asked Twitter for help, Brendan Schlagel suggested “Worldbuilder,” and I think it gets to the essence.
(Ed. Note: In a reply to that same tweet, a couple of people pointed out that Ray Dalio has a similar categorization called Shapers.)
In normal usage, Worldbuilders are people like J.R.R. Tolkien, J.K. Rowling, and George Lucas who create new worlds in their heads, work out even the smallest details, and then put those worlds on paper and get others to buy in. Our Worldbuilders do the same.
In sports, Shotcallers become legends. In startups, they become cautionary tales. In startups, Worldbuilders are the ones who become household names.
Worldbuilders all have a few things in common:
They predict something non-obvious about the way the world is moving before others see it and before the market is ready for their ultimate vision.
Building an Uber for X company is not Worldbuilding.
They create a wedge into the market and leverage it into a much larger opportunity. The public often ridicules or dismisses the initial wedge product.
They timestamp their vision, whether in public announcements or confidential documents.
Shotcallers, on the other hand, find an obviously big market, guarantee that they’re going to transform it, and try to spend their way into making that happen.
I think I’m supposed to use a table to help explain:
But I love stories and I think I was a little biased in my table-making, so I’d rather explain through three examples of Worldbuilders in consumer tech: two classics and one newcomer. Then, I’m going to ask you to share your favorite examples, whether in business, sports, or pop culture. I’ll include the best answers in Thursday’s e-mail.
For our first example, let’s go back to the first dot com boom to meet a young online bookseller with a distinctive laugh.
Bezos’ Book Wedge
Take five minutes to watch this 1997 interview with Amazon CEO Jeff Bezos. It’s an education.
In 1994, while he was working at the quantitative hedge fund D.E. Shaw, Jeff Bezos read that internet usage was growing 2,300% per year, and he wanted to get involved.
Bezos “picked books as the first best product to sell online after making a list of like 20 products you might be able to sell … there are more items in the book category than there are in any other category by far.”
Books were not an obvious choice. Book store sales in 1994 were $10.1 billion, compared to $273.4 billion in food store sales.
Bezos only raised $8.2 million in venture capital before going public. Meanwhile, in Foster City, California, a Shotcalling startup called Webvan raised $800 million in venture capital and IPO proceeds to go after the enormous grocery delivery market.
If that name sounds familiar, it’s because Webvan is the canonical example of early 2000s dot-com busts.
Here’s the best part: Webvan was founded by Louis Borders. If that name sounds familiar, it’s because Borders founded the bookstore chain that bore his name. Books were so non-obvious that the guy who made his fortune selling books offline decided to build an incredibly capital intensive grocery delivery business instead of trying to sell them online.
Many Shotcallers, like Borders, rushed headlong into selling products that didn’t yet make sense in the internet context. Bezos patiently built the infrastructure for his Everything Store by starting with the product that worked best for that moment in time. It’s a strategy that he has used time and again in the intervening twenty-six years.
Bezos has a strong claim for the G.W.O.T. (Greatest Worldbuilder of All Time) title:
He saw that in the future, nearly everything would be sold online, but realized that the internet wasn’t ready for everything yet.
He picked a non-obvious wedge, books, from which he expanded into an ever-expanding suite of products that now includes houses, cloud services, and streaming TV among over 120 million products.
He timestamped his strategy, albeit subtly, in the 1997 interview and elsewhere. He didn’t claim to love books or say that books were what Amazon was all about - he said that they were the “first best product” to sell online.
By starting with books, something that the internet was uniquely suited to handle in 1994, Bezos built an empire that made him the richest man in the world. And Amazon was finally able to break into the online grocery delivery business in 2013 ... by hiring a team of former Webvan executives (and even acquiring the webvan.com domain) to launch AmazonFresh.
The Classic: Musk’s Master Plan (h/t Tanay Jaipuria)
There’s a thin line between crazy and prophetic.
Over the past week, Telsa’s CEO Elon Musk has gone heavy on the crazy. He called shelter-in-place orders “fascist” on Tesla’s earnings call, tweeted “FREE AMERICA NOW,” tweeted “I am selling almost all physical possessions. Will own no house,” and on Friday, tweeted “Tesla stock price is too high.” That tweet sent the company’s stock price down 10% in 40 minutes.
But Elon Musk is also a Worldbuilder.
In 2006, three years into Tesla’s life and four years before it went public, Musk laid out The Secret Tesla Master Plan right on the Tesla blog for all to see. In it, Musk paints both a vision and a plan for Tesla’s future that the company has executed against, in the face of doubters and short sellers, ever since.
Fourteen years ago, Musk concluded synthesized the plan in four succinct bullets.
So, in short, the master plan is:
Build sports car
Use that money to build an affordable car
Use that money to build an even more affordable car
While doing above, also provide zero emission electric power generation options
Did they do it?
In 2008, Tesla released the Roadster at $109k (build sports car ✅)
In 2012, Tesla released the Model S at $57k (build an affordable car ✅)
In 2017, Tesla released the Model X at $35k (build an even more affordable car ✅)
In 2012, Tesla built the Supercharger network, in 2015 it launched the Powerwall, and in 2016, it bought SolarCity. (Provide zero emission electric power generation options ✅)
Musk did all of this in the face of Tesla’s and his own impending bankruptcy on multiple occasions, and had enough faith in his plan to pony up his own money to keep it going. Or he’s just crazy...
In 2016, Musk released the Master Plan, Part Deux. Musk is Worldbuilding again:
So, in short, Master Plan, Part Deux is:
Create stunning solar roofs with seamlessly integrated battery storage
Expand the electric vehicle product line to address all major segments
Develop a self-driving capability that is 10X safer than manual via massive fleet learning
Enable your car to make money for you when you aren't using it
Musk might be going a little bit crazy on Twitter, but I certainly wouldn’t bet against him.
Amazon and Tesla are both public companies with $1.14 trillion and $130bn market caps, respectively. While they continue to expand, I’m ready to call that they were successful in executing on their visions.
They are also obvious examples. Let’s up the difficulty a little bit and crown a Worldbuilder in the making - Carta’s Henry Ward.
Carta’s Cartography
I got inspired to write this post when I read Tribe Capital’s recent essay on its portfolio company, Carta.
Carta began its life as eShares, a company that built cap table management software - a simple way for private companies to see who owned how much equity in the business in one place instead of having to consult lawyers or spreadsheets. Alone, it was a simple and useful product, but nothing big enough to attract attention from well-funded competitors.
Carta’s CEO, Henry Ward, had a vision for something much bigger, though, which he laid out in his 2015 Series A deck:
Ward understood that cap table management software and a subsequent 409a valuation product were the wedge that would make Carta the system-of-record for asset ownership. Winning those unsexy pieces of the market made Carta a fixture in the fundraising process, a position they used to build a fund management product for investors.
What happens here is beautiful. Because investors’ portfolio companies were already using Carta for cap table management and 409a valuation, it was easier for investors to use Carta for fund management. Then, because the investors use Carta for fund management, they push their companies who aren’t already on Carta to adopt it. As I wrote about recently, Jeff Bezos uses flywheels to build insurmountable advantages at Amazon. This is Carta’s flywheel.
Today, “Carta holds the ownership graph of 35% of all venture backed businesses... they have over $1 trillion USD in total equity value managed on their platform.”
From this position, Carta is launching CartaX to unlock liquidity in the private markets - which is a fancy way of saying that it will allow owners of private company options or equity to sell it more easily.
Tribe believes that Carta can scale beyond venture-backed companies to all private assets that are owned by multiple parties, like private equity and real estate, markets which represent over $2 trillion in annual investment flows.
Because of all of the pieces Carta has patiently put in place over the past eight years, it is the only company in the position to seamlessly provide private market liquidity. It started with a boring wedge and has built an increasingly unimpeachable moat.
Carta is a work in progress. Many companies have looked like sure-things at this point in their life before flaming out spectacularly. Carta’s success is not guaranteed.
But it is building intelligently based on a bold vision and a clear plan and creating a strong moat in the process. Whereas a Shotcaller like WeWork has faced competition on all sides and has been forced to compete on price, Carta is building a product that gets more defensible as it grows.
I would bet on Carta becoming a public company worth more than $50 billion in the next five years.
Expanding the Framework
The Shotcallers vs. Worldbuilders framework can be applied to understanding why some consumer companies that initially seem too niche succeed while others that launch with such fanfare fail.
On Thursday, I’m going to follow-up with a comparison of one of recent history’s great Worldbuilders, Netflix’s Reed Hastings, and the most ridiculed Shotcaller du jour, Quibi, to explain why Worldbuilding is a superior strategy to Shotcalling for consumer tech companies. I’ll also show how easy it is to misidentify Worldbuilders using an example that I almost included this week. It tricked me until I dug deeper.
I want to build out this framework together. Sending a tweet that took me two seconds yielded the name Worldbuilders after I had been banging my head against the wall on it for hours.
Similarly, there are a lot of really smart people who read Not Boring, and I want to use our collective brain to stress-test this framework and build up a list of examples. I’m linking to a form with a few fields:
Examples of Worldbuilders in business
Why you think they fit the description
Examples of successful Shotcallers in business
Why they were successful
Your favorite examples of Worldbuilders in sports and pop culture
I will include the best examples, with credit, in Thursday’s e-mail and in a running Google Doc where I’ll be collecting Worldbuilders stories.
(Thanks to Dan and Meg for editing, and Brendan Schlagel for the word “Worldbuilder”)
Let’s Break 1,000 Today
April was a great month for the Not Boring newsletter. When the month started, there were 533 of us. When it finished, there were 877. Our little smart, curious, fun-loving family grew 65% 🤯 Thank you for reading and spreading the word!
May is off to an even stronger start. As of this morning, we’re up to 971 - well on our way to 1,000 before the end of quarantine. I want to blow through that goal today and begin the march to 2,000. So I have an ask for you:
You probably know a few people who like pop culture and business strategy. Text this post or another favorite to them, share it in your Slacks, tweet about it, post on LinkedIn. You can share easily by clicking the button.
I’m working hard to make this newsletter fun and valuable. I’m even enlisting editing help from my unfortunate family members. You sharing it means a lot!
Thanks for reading and see you on Thursday,
Packy
The comparison between what happened to Amazon and Webvan is fascinating. Borders is a great example of a business that could have innovated to stay profitable but decided to pivot.
Henry Ford and Walt Disney!