hisnameismanuel
hisnameismanuel on Hacker News
I'd like to be proven otherwise, so, here are my key points, which you didn't contend with:
-> It's possible to completely isolate the effect of advertising spend, thereby making the effectiveness (or not) measurable.
-> I pointed to growing revenues on Google/FB's platforms, two platforms which make isolated measurement feasible.
In terms of _externally_ verifiable facts, that's the best I'll be able to give you.
The rest, you (and others) have to take on a/ good faith b/ using basic logic, that I'm telling the truth.
But with many parts of digital, you can show certain pages of your website exclusively to those who have clicked on ads (ie. hide those pages from regular browsers).
In this way you can directly measure the direct effects of the advertising spend.
There are many businesses, including three that I own, that have grown as a sole consequence of social media advertising. We have not promoted these businesses in any other way (no SEO, no trade shows, nothing).
I'm not going to share my advertising accounts with you; I'm just going to ask you to trust that when I get my laptop out and show my results to my 'marketing skeptical' friends, they stop being skeptical.
Actual words, from one of these friends: "wow. That is like a money printing machine."
Consider for a second: how many advertisers that are actually succeeding are going to publicly call attention to their success? Would you?
The only hint is Facebook and Google's revenues. They go up, and I am one of the people who makes their revenues go up.
I'm in Australia and 5g of dried mushrooms does not leave you pleasantly couchlocked, as you say. On 5g, you will have a massive, epic trip.
I have taken shrooms three times. My biggest dose was 3.5g. This was a transformative experience with ego dissolution and a thorough, extended series of interactions with my sub-consciousness and all of its complexity.
To be clear, we're talking about a profit margin cap.
Our bet is that in 2030, we'll be a massive business because of the volume we're driving, which will come from the customer satisfaction that is derived from our continuous reinvestment into the business.
This is Costco's business in a nutshell - satisfaction drives scale, they reinvest the benefits of scale into their customer satisfaction (good products at low prices), and the resulting customer satisfaction drives more sales which means more scale, and on it goes.
Amazon is trying to get at something similar with their 'it's always Day 1' and 'customer obsession' refrains, but this effectively relies on Jeff Bezos staying alive or his successor being equally effective.
We believe that that's a bad structure in the long term. If we can build the right long-term economic incentives directly into the business structure and then allow it to play out for long enough to prove the benefit, then that should hopefully limit tinkering by our successors.
We are also building some other culture-reinforcing mechanisms into the business, such as ensuring that ALL employees, including devs, execs, office cleaners, etc, regularly speak with customers. It will be part of your contract upon signing with the company that you must speak with X customers per week.
This way, we won't be tempted to make an anti-customer decision, as ALL of us will face the heat on our phone calls for the coming weeks and months.
We're setting a fixed margin. 14% (exact number TBD) of all revenue will go into a profit account. And that will be the profit, it can be reinvested into the business only as capital spend.
86% of revenue is what the rest of the team will need to work with. They will be required to spend that 86%, all of it, on team and customer satisfaction (improving the product, improving the service, reducing the price).
They'll primarily be measured on customer satisfaction. All promotions (unless you're in a role that is directly tied to say, online conversion rate), hiring, firing, and ongoing management will be based on metrics around how happy our customers are.
Our profits will increase with volume, because we'll have happy customers.
Note, an analog to this model is very common in the franchising industry. Many franchises take a fixed percentage of revenue as their 'take', but in our case the business 'take' will simply go to a profit account.
We won't do 14% on day one, it will take a little while to get there, but that model will be our overall guidepost.
I'm working on a startup right now that has this understanding at the core.
We are building a revenue model with a fixed margin of profit.
In our company, no matter how many costs the teams cut, they'll always end up with the same short-term profit. So - it's pointless to screw the customer to try and get some kind of short term win.
Their job won't be to manage the P&L, their job will be to reinvest all the remaining margin into the customer experience.
We got this idea from Costco, who do something a bit similar.
In terms of Google, I don't have an easy solution, but it's clear that Google's internal incentives (actual culture) are overriding whatever barrier is in place (that thing is called culture).
YOU used a mental model - 'the game of chess' - yet failed to see that it doesn't map to the real world.
If you had paid more attention to mental models, you would have realised that chess is a very poor model to use to compare to the world of business.
Just take the very first in that list - 'the map is not the territory.'
Have you ever seen decisions being made using Spreadsheet data that hold fine in formulas or projections? (But then don't translate to the real world?)
This is a very common problem in business and part of the reason I will move very cautiously before hiring an MBA once more.
'Really good chess players don't consciously think like that, at least not in a sort of pronounced way. They've incorporated knowledge and play by intuition. They can make 'good moves' in a second or two.'
This analogy simply does not hold.
The best investors/entrepreneurs as proven by their records DO swear by mental models.
Not just Munger. Chuck Akre has a ridiculously simple mental model - the three-legged stool. Jeff Bezos is also a big user of the concept.
I interact with investors regularly. Many of them also use mental models, unsuccessfully. The difference between them and the best is that their mental models are woeful (Post hoc ergo propter hoc). They'd have a better understanding of their mistakes if they were to dedicate more time to learning more deeply about this topic.
~
Why is a chess player more worthy of your respect than Munger, Buffett or Bezos, who are playing infinitely more complex games? And at a much higher level of success than you or I?
Do you need reminding that they are not just dealing with the psychology of ONE other player, but that of _millions_?
What is it about these giants that causes you to immediately discard their wisdom?
I think a better question is one you should be asking yourself:
"What am I missing here?"
Because by definition, if you can muster the humility to see it, you are clearly missing something
I'd rephrase it to 'start with the individual'. A huge chunk of internet businesses today sit down and look at a single individual and ask themselves - how can I make this experience better, for this person?
And then they look at the next person.
And from there they try to generalise the best possible solution, while introducing no-futz personalisation
Spotify, Netflix, iPhone, it's easy to forget that it's personalised to you until you look at someone else's.
I have a company - not a start-up, just a regular ol business- - that will do just under 7 figures of revenue in this, our very first year. 100% bootstrapped from savings.
In an industry which normally requires a high level of trust (think $4000+ upfront spend), we've signed up dozens of customers with ZERO reviews or prior reputation.
How?
We treat other people like humans - we talk to them like they're adults, treat them like they're adults, and have created a very special product that meets their needs as human beings.
Everything is designed from the ground up to be HUMAN FIRST, systems, policies and software be damned.
As long as human beings are the ones spending the money, companies like mine will own the future.
As an interviewer, this is one of my goals - to hunt for easy filters.. the social version of a FizzBuzz test.
That competitor was bought in the last couple of years and we all thought this would be our chance to go #1 as their head office inevitably screwed it up somehow.
That hasn't happened yet. They're still #1, we're still #2, and the gap hasn't closed. The only sign of trouble might be that their product, which was already lagging, hasn't seen a major release in that entire period.
A lot of SEO marketers try to get links into articles. This is part of what they do.
Many of them are legit.
Enough are not legit.
This causes links to get pointed to shady websites. It also happens that legit websites get taken over and re-built as shady websites.
This has gotten to the point where many newsmedia organizations or publishers have set blanket policies that NO ONE is to be linked to, or at the least no one receive will receive do-follow link.
As a member of the 'entire LGBTQ+ community', we're not monolithic, or even close to it. SO is the first mainstream website (at least in the circles I run in) that has even attempted this kind of thing.
I'm willing to cut them a little slack as they navigate a topic which has been incredibly fraught.
Say what you will about their ridiculous financials, the product itself is good.
Revenue is Vanity
Profit is Sanity
Cash is Reality
I was referring to the cola companies having problems.
To your other point, Buffett doesn't always have the time to elaborate on each answer, so perhaps you missed it in this context. In general, a supreme distribution network is something that he values highly. It's known as having a 'moat' and is one of his most cited investing principles.