Pre-suasion key takeaways.

Privileged moments

Identifiable points in time when an individual is particularly receptive to a communicator's message. Natural human tendency to hunt for confirmation rather than for disconfirmation. Channeled attention is to alter what prominent in that person's mind at the moment of decision. A marketer could greatly increase the chance of finding survey participants by beginning with a opener asking people if they considered themselves helpful.

The importance of attention

The human tendency to assign undue levels of importance to an idea as soon as one's attention is turned to it.

What's focal in attention is presumed casual- to have the ability to make things occur. Car plate numbers in accident lifted expectations of lotteries success.

The attractors 

Features of information that automatically invite attention and therefore does not even require a communicator's special efforts. The naturally occurring commanders of attention. The sexual, the threatening and the different.

The magnetisers 

The benefit of holding the audience focus. The self-relevant, the unfinished and the mysterious.

Association

Language, imagery and places can be used to produce desirable outcomes such as greater job performance, more positive personnel evaluation. Possible to send ourselves in desired directions by locating to physical and psychological environment prefit with cues associated with our relevant goals.

If you wish to prompt an action, should find a concept already assocIated strongly and positively with the action and bring that concept to mind in potential helpers just before requesting their aid.

If/when then plans

Design to help us achieve a goal by readying us (1) to register certain cues in settings where we can further our goal, (2)to take an appropriate action spurred by the cues and consistent with the goal. What is more accessible in mind become more probable in action and this accessibility is influenced by the informational cue around us and by our raw association to them.

The universal principles of influence.

Reciprocation works best when it is meaningful, unexpected and customised.

To get people to like you, similarities and complements are the best routes to that end.

A credible authority possesses the combination of two highly persuasive qualities: expertise and trustworthiness. A communicator who references a weakness early on is immediately seen as more honest. The advantage of this sequence is that, with perceived truthfulness already in place, the audience is more likely to believe 

Unity 

A certain type of unity of identity, that best characterises a WE relationship and that, if pre-suasively raised to consciousness, leads to assent.

WE relationships can result from acting together synchronously, this produces mutual liking and support.

Use words of endearment like family. Buffet uses " with that I will tell you what I would say to my family today if they asked me about Berkshire today" to gain trust.

Music is allied with system 1 responding, people acting imprudently when channeled to that kind of responding. Recipients with non rational goals should be matched with messages containing non rational elements such as music accompaniment. Those with rational, pragmatic goals should be matched with messages containing facts.

What are the elements of our thesis for consumer products investing?

The first is a high level of product differentiation. This is crucial because if you are right that your new way of designing your product is going to be loved by consumers, then either the incumbents will copy you or new startups will follow you, similar to what is happening to Casper. In the case of Nest, we bet that Honeywell would have a hard time figuring out how to build a Wi-Fi connected, batterypowered supercomputer that connects to a cloud data science service, does AI and machine learning on all the different sensors built into the device, and makes intelligent decisions about your home heating and cooling. We figured it would take Honeywell about four years to copy Nest, and that’s exactly what happened. It took about four years before Honeywell had a product in the market similar to that of Nest. Nest has already taken more than 50% of the smart thermostat market. A high amount of differentiation is critical, not just because of the incumbents and challenger brands but also because of Amazon. If you are going to sell your products through Amazon — Amazon already has a significant number of private label brands such as AmazonBasics — if you’re J. A. Henckels and you sell cookware, and you’ve been selling it through Walmart for a long time but traffic is in decline, you are going to shift to selling on Amazon. Well, Amazon has their own cookware lines, and guess who’s number one in cookware on Amazon? It’s Amazon! You now compete with the retailer, so there needs to be a high amount of product differentiation for you to succeed.

Second, we look for zero-sum markets. These are markets where, if you buy my product, you won’t buy my competitor’s product. If you subscribe to Dollar Shave Club’s razors, you will stop buying Gillette razors. We like this because you tend to eat market share quickly, as opposed to having to grow the market in order to demonstrate success. Some examples of products that don’t fit this category are apparel brands — Bonobos pants, or women’s intimate apparel, or sock companies. They don’t fit our thesis because if you buy Bonobos pants you can still buy Levi’s pants, and you will never quite get the premium on the pain you are putting on the incumbents.

The third criterion we look for is incumbents run by professional CEOs, i.e., non-founder company leaders. This is true of almost every legacy consumer products brand, not because the founders got frustrated and left but because they died. These brands have been around for fifty or a hundred years, and when you have had a company that has been in the market for a hundred years, you are on your third- or fourthor fifth-generation CEO. Nothing against professional CEOs  They are fantastic operators, and many of those companies are run well. However, data shows they are super risk averse and unlikely to self-cannibalize. Companies run by founders — there was a Harvard Business School case study that showed 2x or more innovation versus incumbents. We love competing against professional CEOs. Founder-led companies tend to be the most innovative and risk-taking.

Finally, we like products that improve over time. We look for products that are different from the way products have been built in the past. Products that observe data about their use and perform some machine learning. The products are able to either download software updates or change their usage based on what they learn about a customer. This is different from the way legacy consumer products are built — they are constructed in a lab for a year or two, some focus groups are bought in used to figure out if consumers will like it. They name it, ship it to retailers, and the product enters the market.

Notes taken from the Manaul of ideas.

Areas where values can be hidden.

1. A gradual transformation of a B2B business with much lower profit margins into a B2C business with much higher margins if it becomes successful.

2. How operating cash flows in some businesses are far in excess of reported earnings thanks to over-conservative depreciation policy and how, over time, the reported earnings will catch up with operating cash flows simply because of passage of time.

3. How the true earning power of some growing businesses can become visible just by mentally stopping the growth capex. Charlie Munger once said: “You should seek businesses that just drown in money if they just pause for breath.” Well, then why not mentally make them pause some businesses to catch their breath and visualize the results?

4. How in a highly leveraged firm, debt reduction from sustainable operating cash flow will increase value over time. So might debt reduction from sale of some operating Visual Thinking 2 assets under some circumstances.

5. How a firm’s true earning power is camouflaged because the earnings of a great business are subsidising the losses of some miserable ones and there is a credible plan in place to stop the haemorrhage. Or maybe the camouflage is there because some businesses which have great potential are still in growth phase and have not yet started recovering their costs which were incurred for a certain scale yet to be achieved by them.

6. How an asset-heavy business that’s into manufacturing transforms itself into an asset light business by outsourcing production or generally speaking, how tradeoffs between margins and capital turns can change the value of a firm over time.

7. How the fundamentals of a business deteriorate over time thanks to increase in the intensity of competition in its industry (how the P&L will change, and how the balance sheet quality will change).

Taken from Sanjay Bakshi notes.

Key Takeways from Zero to One

Biggest mistake of a start up is to describe your market so narrowly so that you dominate by definition.  Every startup should start with a very small market. It's easier to dominate a small market than a large one. It's much easier to reach a few thousand people who really  need our product than to try to compete for the attention of millions of scattered individuals.

Characteristics of a Monopoly Proprietary technology - A rule of thumb - The technology must be at least 10x better than its closest substitute. The clearest way to make a 10x improvement is to invent something completely new or radically improve an existing solution.

Network effects - Network effects business must start with especially small market.

Economic of scale - Many business gain only limited advantages as they grow to large scale. Service business are especially difficult to make monopolies. A good startup should have the potential for great scale built into its first design.

Branding - No tech company can be built base on branding alone.



Difference between a biotech start up and software startup.




The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined. Only invest in companies that have the potential to return the value of the entire fund.

When considering investing in a startup, study the founding team. Technical abilities and complementary skills set matters, but how well the founders know each other and how well they work together matter just as well. Founders should share a prehistory before starting a company.

How much does the CEO intends to pay himself. A company does better the lesser it pays the CEO.

These are the 7 questions every business should ought to be able to answer.