Betting Against The Sure Thing
Monday, January 25, 2010
Last week's New Yorker included an excellent Malcolm Gladwell article called "The Sure Thing" (abstract only). The article is about how entrepreneur's are rarely the risky mavericks that we like to imagine; rather, most successful entrepreneurs are extremely rational and risk-averse. They get ahead by doing their homework and limiting the potential downsides to their decisions.
The entire article is worth a read, but the part that stuck out was a little anecdote about John Paulson, a hedge fund manager who made billions of dollars betting against the housing market. This guy had a hunch that the housing boom was too good to be true. His team did the homework, and were convinced that housing prices were sure to come back down to earth. So they spent millions of dollars placing bets (in the form of housing insurance policies for banks) against the inflated housing market. Everyone thought that they were crazy. Conventional wisdom said that the housing market was a never-ending gold mine, and you were a fool if you weren't taking advantage of it. Conventional wisdom was wrong.
It got me thinking. If I was going to bet against a commonly held belief in our industry, what would it be? What are the assumptions that everyone is making right now (and putting real dollars against) that will prove to be foolish investments in the future?
My colleagues at Undercurrent had a healthy debate about this last week. One idea that got some attention was the assumption that there's a profitable business to be had in porting digital display advertising to mobile devices.
Personally, the assumption that I've been questioning most often recently is that more fans/followers = better. I think that holding your online relationships to a high standard, and limiting the quantity of relationships that you maintain, could ultimately provide more business value for the brand.
What commonly held beliefs in our industry would you bet against? Comments welcome.
The entire article is worth a read, but the part that stuck out was a little anecdote about John Paulson, a hedge fund manager who made billions of dollars betting against the housing market. This guy had a hunch that the housing boom was too good to be true. His team did the homework, and were convinced that housing prices were sure to come back down to earth. So they spent millions of dollars placing bets (in the form of housing insurance policies for banks) against the inflated housing market. Everyone thought that they were crazy. Conventional wisdom said that the housing market was a never-ending gold mine, and you were a fool if you weren't taking advantage of it. Conventional wisdom was wrong.
It got me thinking. If I was going to bet against a commonly held belief in our industry, what would it be? What are the assumptions that everyone is making right now (and putting real dollars against) that will prove to be foolish investments in the future?
My colleagues at Undercurrent had a healthy debate about this last week. One idea that got some attention was the assumption that there's a profitable business to be had in porting digital display advertising to mobile devices.
Personally, the assumption that I've been questioning most often recently is that more fans/followers = better. I think that holding your online relationships to a high standard, and limiting the quantity of relationships that you maintain, could ultimately provide more business value for the brand.
What commonly held beliefs in our industry would you bet against? Comments welcome.
4 Comments:
Oh I agree. The interactions with individual followers far outweigh however many followers you have. It's far too easy to by those followers. Proving your value, in person, in tweets, in whatever is far more important. And in a sense I think that the analytics and measures that many rely on when it comes to new media at present don't give a fair indication of how valuable their investment is.
I question the assumption that a larger social network is a better social network. Take facebook: the truth is, I'm still really most interested in friends I have a close offline relationship with. Sure, it's interesting to see what distant acquaintances are up to, but more and more I'm tuning them out in favor of people who are a more integral part of my actual life.
Likewise, I've found Linkedin connections are a poor substitute for real-world connections. The best results from my experiences on LinkedIn are directly related to the tightness of the bond outside the realm of Linkedin.
A social network online is identical to a social network offline: trust, respect, and usefulness are tied to familiarity. These tangential bonds are sometimes useful and often engaging, but they rarely produce the results deep and meaningful bonds do.
Great post. Made me instantly think of media planning. A lot of people argue that the fragmented media landscape necessitates a greater coverage of spend across the channels that your consumers occupy - which makes sense. However, for years I've seen media plans become more and more diverse and I always think - perhaps less could be more? If some brands could be brave enough to completely ditch (or at least wildly attenuate) a large number of their normal channels with the aim to refocus and dedicate all their efforts into fewer that maybe something quite special could happen? Fortune favours the brave.
I can't see the full article, but it sounds like it delves into the lovely world of contrarians, both for investors and for entrepreneurs (which can be the same, and also very separate). It is the World of the Salmon; when the masses zig, you zag. It can be a very difficult landscape to traverse. Who wants to hear the iTablet killjoy when everyone is enjoying their Kool-Aid?
As long as you're not disagreeing just for the sake of disagreeing, it can be a very lucrative stance to maintain (on the investment side; I can't imagine many entrepreneurs getting off the ground very easily with this worldview). In terms of digital, I agree with your assertions, poster-Mike & commenter-Mike; quantity != quality (I'm biting my tongue on raising Avatar here, though I would posit that as an example). As someone who needs fewer friends of very high quality - versus many friends of diminished connectivity - I love the idea of intimate, valuable networks. But realistically, as we then move into the "who'll pay for that" territory, its sustainability breaks down quickly. However, I hope to see a balance struck soon between mass and niche here, as we continue to fragment content, attention, and time. Viva la small biz!
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