Here's What You Don't Understand About Strategy | Seth Godin

Seth told me, "It doesn’t matter how fast you’re going if you’re headed in the wrong direction." He's right. 

Here’s my attempt to create a hierarchy for this idea:

1. Strategy = This is your approach, given all the factors, systems, games, players, and environments. It’s about who, how, and why.

2. Objectives = To-do items or steps on the path to help you achieve the goal. It’s about how you’re going to get there.

3. Tactics = The actions or individual steps for accomplishing the objectives. It’s about what you’re going to do.

“A goal might be part of strategy, but strategy is not a goal,” Seth explains. “Strategy is a goal along with a sketch that becomes a plan.” 

Unlike a rigid plan, the strategy must allow for flexibility. It should act more like a compass than a fixed map, providing a directionally correct route to success rather than insisting on a singular path. 

Transcript

SPEAKER_01 0:00

Here's the deal. It doesn't matter how fast you're going if you're headed in the wrong direction. And strategy is a philosophy of becoming. Strategy is getting clear about who you're changing and the change you're making. So of course, culture is part of strategy. What Drucker is saying is MBA strategy, that solipsistic, self-absorbed, narcissistic, whiteboard quadrant stuff, that's not going to get you anywhere if you don't know how to lead and commit to building something that creates the conditions for change.

SPEAKER_02 0:45

Hi everyone, welcome to another episode of the show. Seth, welcome. Always a pleasure, Brian. Good to see you. Always great to see you. This is strategy. This is strategy.

SPEAKER_01 1:01

We need it because people don't know what strategy is.

SPEAKER_02 1:06

Yes, uh, maybe including me. One of my first questions, I was thinking of that Peter Drucker quote: Culture eats strategy for breakfast. What is your take on this?

SPEAKER_01 1:18

Drucker's right, but culture is strategy. Here's the deal: it doesn't matter how fast you're going if you're headed in the wrong direction. And strategy is a philosophy of becoming. Strategy is getting clear about who you're changing and the change you're making. So of course, culture is part of strategy. What Drucker is saying is MBA strategy, that solipsistic, self-absorbed, narcissistic, whiteboard quadrant stuff, that's not going to get you anywhere if you don't know how to lead and commit to building something that creates the conditions for change.

SPEAKER_02 2:05

You have always told me, you know, uh off-camera and on camera, Brian, it's basically about two questions. Although I think as I'm reading this book, it's been expanded uh beyond the two questions to something like 297 questions. Fair though. I like it. Um you've always said, Brian, focus on who it's for and what it's for. And so maybe that's a jumping off point to expand on these thoughts. Um can you break down the four threads, you know, how they're woven together? You you talk about in the book these four threads. Let's start there. Yeah.

SPEAKER_01 2:48

So, well, what I've the reason to write the book is as you know, I spend time talking to friends about what they're trying to do in their work. They think they have a marketing problem. They don't have a marketing problem, they have a strategy problem. And their strategy is dances with four things. Yeah. The first one is systems. Yeah. Systems are the invisible forces that are there with or without you. Systems fight to stay the way they are. Number two are games. Not games like Monopoly, but games like game theory. Games are where we have limited resources, limited time, where there are players and rules and where there are outcomes. If we call them games, it's much easier to not take it so seriously, to realize our moves might need to be better, but we are okay. And we need to see who the other players are. We need to see what plays have worked in the past. The third one is empathy. The fact is you can't make other people do something because it's important for you. That we only engage with the market when the market wants to engage with us. And in the hustle of the internet, we forget that a lot. And the fourth one sorry, go ahead. Yeah, please continue. Let's cap it off. The fourth one is time. And the way uh to engage time and empathy is uh time flies like an arrow and fruit flies like a banana. And this idea that time flies like an arrow means tomorrow is going to be different than today. What are you doing today that will create the conditions for tomorrow to be better? Forests aren't built by transplanting trees. They're built by planting seeds, the right soil, the right conditions, and then a thing grows. So when we weave the four pieces together, we can have an intelligent conversation about what you're building and how you're building it. But if you ignore all those things and just do your job, you're building yesterday. And yesterday's never gonna happen again.

SPEAKER_02 5:05

Okay. Uh let's unpack that a little bit. So what makes up a system? And maybe let's give some real-world examples.

SPEAKER_01 5:13

Well, world is a great way to start. The most famous system of all is the solar system. Even four-year-olds know about it and Pluto and all that other stuff. Why does the Earth rotate the sun? It's not because it wants to, it's because of gravity, an invisible force that keeps things the way they are. So there is a system of higher education. Why is Harvard or Yale famous? Why does a kid want to go to the University of Florida or whatever to see a football team play? There's this massive industry built on this tiny little kernel of an idea 400 years ago. But the system runs very deep. And so when you show up in Silicon Valley to raise money, you're part of a system. When you build uh an Instagram page, you are part of a system. What is the system? Why is it there? Who benefits from it? Why will all the people in that system make a decision based on what happened yesterday when you show up tomorrow? And if you can't see the system and name the system, you're just flying in the dark.

SPEAKER_02 6:21

Okay. And so can you think of some Do you have a case study of companies or people who are, I don't want to use gaming the system because that's such a negative connotation, but like who are winning. I mean, I can think of you. You sort of jump into a system, let's call it publishing. And yeah, you followed the status quo sometimes and you broke it other times when you felt like trying something different. I remember when you went non-traditional. Uh, I think it was Poke the Box. Uh, that was a non-traditional publishing play. Uh, you've done lots of things in your career that have challenged the status quo, specifically in publishing. Uh can you talk a little bit about how you've played in that system and how you've won and maybe lost or won and learned?

SPEAKER_01 7:15

Well, I'm not always the best example because my objectives might not be what other people's objectives are.

SPEAKER_02 7:20

Okay.

SPEAKER_01 7:21

I tend to try to find things that are interesting as opposed to things that are traditionally successful. Uh I can tell you how many times I've been wrong. So, you know, when publishing discovered the DVD ROM, which it looks like a Netflix DVD, but you put data on it, they needed people who would build products that could live that way. So I invented the official price parenting guide on DVD. And it sure looked like publishing was going to run with that. But I didn't understand the system. The book publishing system has been around for hundreds of years. And the thing is, book publishers care about bookstores. They don't care about readers, they don't care about printing presses. They mod to make bookstores happy. Right. DVDs did not make bookstores happy. And if I had seen that, realized that, I never would have wasted two years of my life building a DVD division. The system fights back. To give you an example of how long the system sticks around. In book publishing, there are two seasons, fall and spring. They announce all their fall books and all their spring books. Even though most books are sold in the winter. Why isn't there a winter list? The reason is in 1910, when book publishing was in its infancy in the US, most of the publishers were in New York, and most of the books were shipped via the Erie Canal. But the Erie Canal freezes in December. So they couldn't ship books for the winter. So there's a spring list and a fall list, and a hundred years later, there's still a spring list and a fall list. Because that's the way we do things around.

SPEAKER_02 9:01

How about another example I'm thinking of? Um, I I feel like right now is such an exciting time. It reminds me a lot of like 1998 when this thing called the internet was just getting started. So AI is upon us. The future is now. Uh, it feels like traditional search is changing. There's new AI, like, you know, Microsoft has got their version, there's ChatGPT, there's I can't name them all. There's Claude and all the others. Um, it feels like the system is changing with search. Yes. Uh even you know, social networks are becoming search platforms. Can you can you help me understand the how to win at search?

SPEAKER_01 9:49

This is a great thing to riff on. Okay. Okay. So I was at Yahoo in 1999. We had the chance to buy a company called Google for 10 million dollars. That's how much profit Google makes every 30 seconds. We had a chance to buy the whole company for $10 million. Google understood something Yahoo did not. And it's this Yahoo built a site where their entire strategy was get people to come to the site and have them click and click and click and click and click and never leave. Yeah. Amazon had a strategy of get people to come to the site and buy things. Google's strategy was have people come to the site and leave. That was the entire orientation of Google for years. Come here and leave. And they made a lot of profit doing that by selling all those ads. Okay. That made them all rich, but now AI shows up. Suddenly, search algorithms are different, being found is different. How we engage with uh each other online is different. This is called a change agent, a moment when all the rules in the system are going to be turned upside down. And Microsoft has made some brilliant moves in the game that's being played, and Google is doing terrible at this. If you're a small organization, a freelancer, somebody who needs to be found on the internet, AI is not going to help you. It's just not. Right. Because it is working its way through millions and millions and millions of data points. You're not going to get more than your fair share of traffic. Which means you have to have a different approach to the market. You need the smallest viable audience, a few people, a dozen people, 20 people, 200 people who would miss you if you were gone. And then you need to give them a reason to tell their friends something that engages in a network effect, that raises their status, that makes their life better if others come along. And if you are relying on Perplexity or Chat GPT to find your new customers, you're going to be waiting a very long time.

SPEAKER_02 12:05

Yeah. So how do we win? How do we how do we jump into that system and take advantage of it?

SPEAKER_01 12:11

Well, I think the biggest win is to play a totally different game. Because you don't get to announce we want to get better at the old game. It this is true. Western Union had the chance to buy the telephone company 100 years ago. And instead of doing that, they decided to invest in making better telegrams.

unknown 12:32

Right.

SPEAKER_01 12:33

This is not a good, not a good idea. Connect the same thing. Connect the same thing, yeah. If I was starting today, I would use AI to build tools that connect people in ways they couldn't be connected before. And I wouldn't be a victim or hope to get picked by AI. I would put AI to work for me. Be able to go to organizations and say, I have this tool, I have this network or this connection, and you will benefit from being part of it. And that's a wide open door. This is the biggest shift in our world since the invention of electricity. And there's going to be a moment before and a moment after. Right now we're in between, but we're getting very close to the after part.

SPEAKER_02 13:23

Okay, so let's stay on this for a minute because I'm intrigued. Um you have committed to a platform of writing blog posts. By now, I suspect you've probably written close to 8,000 in a row. More. More. Yeah. You're at 9,000 now? Okay. Yeah. So it's like, yeah. Um, and that's your platform. Now you have other ways that people can find you. You have a RSS feed to social platforms, social networks, but basically, it seems like you've committed to creating your own GPT uh via your blog. So could someone do the same kind of thing with a with AI and basically curate, aggregate, put all the content that you've already created in a GTP? I think they call it like an RAG or something that's your own system. Yeah.

SPEAKER_01 14:15

First of all, again, I'm a terrible example. If I was being smart, I wouldn't put all my eggs into the blog basket. I do it because I love it and because I have a streak that I'm not willing to break, but it's not smart business. Every year my traffic goes down because Google doesn't like blogs and I'm fighting uphill. If my goal was to be more well known, I'm doing it wrong. Okay. Number two, we built the first person-powered AI. It's been on my blog for a year. You can go ask Seth.blog, not me, but Seth's blog, questions using AI, and it will answer you. It's really cool. Yeah. It's not a good business. It's a terrible business. I'm not making any money from it whatsoever, and I'm not trying to. But even if I was, I don't believe that that sort of AI, based on my three, two, three million words, is going to be a profit center. Because people aren't going to pay for it.

SPEAKER_02 15:13

Right.

SPEAKER_01 15:15

So to get specific, let's say you're a freelancer. Let's say you understand how, I don't know, the um the wedding industry. Okay. There are all these people in the wedding industry who have things to say to each other who need to be connected to one another. It's hard to do that. With an AI intermediary in between all of them, new value could be created. Trevor Burrus, Jr.

SPEAKER_02 15:39

You're talking about people who uh make food, the people who do the flowers, the people who supply the tables and chairs, the cutlery.

SPEAKER_01 15:47

Exactly. So imagine there's a tireless, confidential intermediary who knows everything about everybody in the circle. Now a bride can say, who's available on Saturday? Because I gotta do a shotgun wedding, blah, blah, blah, blah, blah. Well, instead of making 40 phone calls, it can just it knows, right? If you build that circle of short-term magic, important knowledge, lots of people are gonna pay to access it.

SPEAKER_02 16:16

Yeah.

SPEAKER_01 16:16

And there's only gonna be one of them. So there are all of these kinds of opportunities. Just like when the web came along, the first websites were things like Zay Frank doing silly dances. Nobody was busy building hotels.com at the beginning. Right. Well, it's a reshuffle now. Who trusts you? What do you know? What can you connect? Right? I mean, here's a really simple example. There are 50 companies, all about the same size, all about in the same industry. They all have payroll. You go to them and say, my AI is gonna look through your entire payroll records and tell you who's overpaid and who's not. Is that worth $50,000? Because it's gonna save you a million. Right? Now, that only works if a bunch of companies say yes. Because if I only have one company, it's worthless. But if a bunch of companies trust me enough that that confident information is confidential, magic happens. Or you do it for an insurance company and say, we can look at every hospital's records and tell you how much an appendix removal should cost. And we will look at every single appendix operator. You get the idea, right? It's that sort of tireless, confidential work that is the next frontier. No one's gonna build another cloud or chat GPT. We're we're done with that for right now. There'll be a new version of that in two years. Right. But the interim room are these tiny silos of very special information.

SPEAKER_02 17:51

I got it. And and it's understanding those systems that's critical to be able to see the opportunity, right?

SPEAKER_01 17:58

Right. And so I know people my age who say, oh, I'm too old for this. And so they're just checking off. They're checking out. Why would you do that? It's not that complicated. I'm not asking you to build one of these. I'm saying these are our tools the same way the steam shovel was a tool. You need to know what it can do. And you can build a construction company without knowing how to use a steam shovel.

SPEAKER_02 18:23

I mean, it kind of reminds me of 2008. Uh we're back to tribes. It's just you've got updated technology. And so what's what's the good of you know bringing people together, having a tribe, leading a tribe? I mean, that's kind of what you're seeing.

SPEAKER_01 18:38

Yeah, I mean, if if all AI does is cost reduce by removing the frontline customer service worker and anybody who works with information, your company's doomed because you can't cost reduce your way to greatness.

SPEAKER_02 18:56

Uh I'm gonna bank that sound by maybe I'll put that on a pillow as well. I like to embroider your quotes on pillows now. Glaze them on a plate.

SPEAKER_01 19:04

I sort of stole that one from Tom Peters, to be fair.

SPEAKER_02 19:07

Okay. Uh so uh let's stay on the four threads for a second. So we talked a bit about systems. I feel like I know what empathy is. Do I? Uh empathy is basically putting yourself in someone else's shoes. It's imagining what it feels like to be them, you know. So if it's taking their pain away or if it's um, you know, a surprise and delight. Is that what we're talking about here? Empathy?

SPEAKER_01 19:35

Well, yes, you know what it means. What do we do to put it into practice? Because it's not about giving stuff away. Let's think about all the misguided things Amazon has done in the last 12 to 14 months. Amazon built a company based on saying, is it possible for us to be seen by consumers as the best customer service company in the world and also offer the fastest service and the best prices? And by doing all three relentlessly, they won. And then they started an ad division that last year uh generated billions and billions of dollars of revenue. According to the great work of Corey Doctorow, now when you do a typical Amazon search, the best item is seven seventeenth on the list. You're gonna pass a whole bunch of other things where someone paid to move up. Right. If you're a consumer, they had no empathy for you, they just made it worse.

unknown 20:32

Right.

SPEAKER_01 20:33

If you are an advertiser, what they're saying to you is if you want anybody to come to the product you sell, you're gonna have to pay us. Right. And that's not good for them. And then they also make you they also say, and by the way, you're not allowed to sell your products uh anywhere else for cheaper than here. Which means that the only way to pay for those ads is to raise your prices somewhere else, which means that in the short run, Amazon will do better. None of this has any empathy for anybody except their shareholders. Yeah. That's not a sustainable long-term way to approach the marketplace. That's what a monopolist does. Yeah. If we think about uh a medical provider who forces you through some sort of insurance portal, and then when you call them, forces you through an AI and all these other things that make the process of being a patient worse, there's no empathy. We go down this long list of organizations that say, I have no choice, I have to jack up profit by hurting my customers. They don't get the joke. And the joke is simple strategy is resilient when the people we serve would miss us if we weren't here.

SPEAKER_03 21:46

Mm-hmm. Mm-hmm.

SPEAKER_02 21:48

Okay, that's great. Uh, games. So there's games in every strategy.

SPEAKER_01 21:53

Uh break that down a little bit for us. Well, okay, so it doesn't have to be Fun for it to be a game. It's a game when you have to make choices, and those choices affect the other players. And so if you are uh you know Chase Jarvis years ago, Chase says there are all these people who are trying to sell uh education online. I'm gonna play a different move. My move is my seminars are gonna be free, extraordinary, but if you miss the live one, the repeats cost money. That was a brilliant move because he ended up satisfying the group of people who cared a lot, building word of mouth, and then happily charging for things people trusted would be good, right? So those are a series of moves in a game. I used to have a lot of courses on Skillshare. My Skillshare courses did very well, and then one day they made a shift. They said, from now on, everything is uh a penny a minute. There's like you just become a member. We're not gonna sell a la carte the way Udemy does. That was a move. And so we need to look at are we racing to the bottom? Is our move to simply just cut our prices but be like them? Or are we making a move by doing something other people aren't willing to do?

SPEAKER_02 23:23

Is there a brand that comes to mind right now that's doing this well? That's that's playing the game the right way?

SPEAKER_01 23:31

Maybe a brand that we don't expect that's not like every time I pick a brand, yeah, then they fail. So I'm not going to. Is that true? It's a little bit of a curse. Um, you know, I gave you a couple of small business examples. When you think about the move Howard Schultz made at Starbucks, he said, There's a dunkin' donuts in a lot of places.

SPEAKER_03 23:54

Yeah.

SPEAKER_01 23:54

I'm going to move over here in a different quadrant and offer a certain kind of person a certain sort of thing. Then they dominate. So then blank street coffee comes along and they say, we're just like Starbucks, except you can't sit and hang out, and we're cheaper. And then someone else will move over here and someone else will move over there. So the the landscape keeps changing, but the idea still comes down to what do people want and what are you able to do that your competition won't. Mm-hmm.

SPEAKER_02 24:23

Okay. And then time. Talk about time a little bit. What I mean, timing is everything, as expected.

SPEAKER_01 24:30

Timing is not the same as time. Time, James Click has written a brilliant book about the history of time travel. Now, that seems absurd, the history of time travel. Turns out the time machine was invented by someone. We know his name. It's not a real time machine, it's just the idea of the time machine. Before 18 something, when H.G. Wells started writing about the time machine, there is no record of anyone ever talking about going back in time. That's just nuke. Which blows my mind, right? And when we think about time as this invisible axis that's parceled out to everyone at the same rate, whether you're a billionaire or not. What it means is you get to plant seeds when other people say it's not important. And then you are able to carve out spaces that when it does become important, you've already gotten there. So my blog had a hundred readers when I launched it, maybe 50. And it wasn't for a year before it became Seth's blog. But by the time my streak was a thousand, it was too late for anyone to catch up in my category. Sure. So I saw time as one of those components. I may not be the fastest person today, but I'm going to be running this race years from now when you've lost interest.

SPEAKER_02 26:00

Yeah, I feel like I'm running that race too, the tortoise, the tortoises race, slow and steady. Uh so maybe that's a good segue into choice. Because you talk about the choice equals the future. Um you talk in the book about choosing your clients, choosing your competition, uh distribution. Can you talk about how the choice is the future? Okay.

SPEAKER_01 26:28

Who are your customers? Right? So back when you were working for an unnamed, uh arrogant, difficult person. Which one? I'm not going to mention any names. Yeah. You signed up to spend your days making that person happy. You picked your future when you picked that customer. Yeah. If I was in a fish store uh a few years ago on a in a really wealthy uh seashore suburb. And I said to the owner who was busy, it was off season, I said, What do you do with all the jerks who come in here who are demanding this and demanding that? He said, It's very simple. I give them one warning and then they can't be my customers anymore.

unknown 27:12

Yeah.

SPEAKER_01 27:13

You can act any way you want out there in your Mercedes, but if you're in here, this is how we talk to each other.

SPEAKER_02 27:18

Yeah, no soup for you.

SPEAKER_01 27:20

He doesn't want to he doesn't want to spend his days engaging. Pick your customers, pick your future. Number two, pick your distribution, pick your future. When I decided I wanted to be a book packager and work with major New York City book publishers, I didn't get to decide what kind of books were going to get created. They did. Because it didn't matter that I could prove with a spreadsheet that people would buy my book. They were my distribution. They were in charge. Right? And the third one is pick your competitors. That if you're competing against people who break the rules and race to the bottom, that's what you're gonna have to do.

SPEAKER_02 27:58

Yeah, there's one more you mentioned. I like it. You pick your validation. Can you talk about that one?

SPEAKER_01 28:03

Yeah. So you and I have talked about this. You know, are you are you are you counting how many uh TikTok views you have? Are you counting how many YouTube followers you have? If you have an easy metric in front of you, it's quite likely you're gonna pay attention to that. And where you look for validation is going to change the work you do. Right.

SPEAKER_02 28:27

I mean, sometimes optics matter. Sometimes they do, I guess, in this in the system of things, right?

SPEAKER_01 28:33

Well, if I need to persuade somebody to go along with what I'm doing, and they are looking at a number to see if I have status, then I have signed up for that number to matter. Right? So I decided that if someone needs me to have perfect five-star reviews, they aren't the person I need to read my book. Right.

SPEAKER_02 28:57

I guess I think like a company like Meta, or you know, in the back in the day, it's Facebook, they needed critical mass. You know, you that's a business that you build that you need a certain amount of users to get momentum. Yeah.

SPEAKER_01 29:12

Uh, and so, you know, sometimes and then Cheryl, and then Cheryl and Mark started measuring something else. And you can point to um a couple elections ago. Should Facebook take political advertising? Right? Because what they had done is woven together a community of more than a billion people in the spirit of connection. And then to make the stock price go up, they start working with unethical organizations that violate people's privacy and they start running ads that divide people. They didn't have to do those things. That was a very bad strategic decision.

SPEAKER_03 29:52

Mm-hmm.

SPEAKER_02 29:54

Um let's shift to scaffolding. I love I love how you are making distinctions between marketing and tactics and strategy. They all sort of operate in an order of operations, but you talk about building scaffolding in marketing. Can you Right?

SPEAKER_01 30:15

Okay, so it's a hundred-year-old term that comes from a T a researcher who found that students, kids, will get stuck learning almost anything unless a teacher intervenes at the right moment and gets them up the next to the next level. Then they can work on their own for a while. Scaffolding is that help. And one of the challenges we have of our divided class system is a kid who is growing up without enough support isn't going to learn the next thing and the next thing. They're going to get stuck.

SPEAKER_02 30:50

Right.

SPEAKER_01 30:51

Well, the same thing is true for customers. We need to build scaffolding to onboard them and move them up. We need to build scaffolding to make it easy for them to tell their friends. That one of the reasons that Facebook grew is it was so drop-dead easy to invite other people to use Facebook. Sure. That's scaffolding. The engineers who built that didn't get paid enough because it worked so well. Got it.

SPEAKER_02 31:18

Um what are some, you know, a lot of people who read my regular articles, they listen to the podcast. A lot of them are small business owners. A lot of them, and you know, if I'm doing the math right, last I checked, there's about 32 million small businesses in the United States compared to, I think, 11,000 sort of enterprise-sized Facebook-sized companies, which means, you know, uh 1% of the company uh companies in the United States are responsible for 99% of the revenue. And the rest of the small business owners are holding it up kind of like with all these tiny little toothpicks. Um how does the how how does one, if they have a small business, think about scaffolding?

SPEAKER_01 32:04

Okay, so there are two kinds of small businesses. The vast majority of small businesses are jobs without a boss. And I'm not opposed to jobs without a boss. If you are a landscape architect and you have no full-time employees and you like being outside and making decisions, you have a job without a. You can't get five times bigger. Your hair would fall out, right? There are other businesses that are small but mighty and have a system in place that could benefit from growth. And so the opportunity for these kinds of organizations is to say there's institutions that can't do what we do. You can't call up McDonald's and have them cater your kids' christening. They don't do that. They have no they can't compete with you, they're not even gonna try. Right. So go do that. But don't build a little fast food place right next to McDonald's, they're trying to out McDonald's, McDonald's. You will not succeed. And to give you an idea, idea of the scale of this, it's 2000, 24 years ago. I get invited to Bentonville, Arkansas to speak at Walmart. And Walmart has a big banner for their employees. It says you can't out Amazon, Amazon. They gave up 24 years ago because they weren't willing to go to a place that Bezos was willing to go. And it was a worthwhile stall because for 25 years they've done fine. In the long run, they're gonna be in trouble. But that's a pretty long run, 25 years. So the point is if you have a small business, you need to look at big businesses and say, what aren't they willing to do? Right. And who am I gonna do that for? Right.

SPEAKER_02 34:00

And that's yeah. And that makes a lot of sense. By the way, how how is the um your wife's bakery doing?

SPEAKER_01 34:09

Uh, by the way, is now in hundreds of retail outlets. And um some of the new items are the tastiest ever. So the bakery continues to flourish.

SPEAKER_02 34:22

That's great to hear. Um let's talk about pricing for a second. So this is always a fun exercise for me. I love everything about pricing and price strategy. Um there's several different pricing strategies, whether it's a skimming strategy or a strategy of planned obsolescence or, you know, all of these different things. Um, how do you think about pricing as it relates to strategy?

SPEAKER_01 34:47

Price is a story. It is also an exchange of money, but it is a story. Uh, Journal of Wine Economists did a study with wine lovers and uh sommoliers, and they found that they all prefer $100 wine to $10 wine. Okay. And then and then they switched the bottles.

SPEAKER_03 35:08

Yeah.

SPEAKER_01 35:09

And they found that they prefer ten-dollar bottle of wine in $100 bottles even more.

SPEAKER_03 35:15

Yeah.

SPEAKER_01 35:17

And so it's the story of how much the wine costs that we're paying for, not the wine itself. Yeah. And so when we think about our price, our price is a signal to people who don't have time to look at everything else. So one choice you can make is you can say you can pick anyone, and I'm anyone. And if you say that, you better be the cheapest or the most convenient. The other choice is to say you'll pay a lot, but you get more than you pay for. Your competition is not willing to say that. If you can say that and make it true, you're probably going to be happier.

SPEAKER_02 35:55

So, how do you know what are some signs and signals that we're on the right path or the wrong path in terms of strategy? How do we know our strategy is right or wrong?

SPEAKER_01 36:05

So there are some games where logic is the only thing that's involved. So a good chess master can tell you after 10 moves who's going to win the game. There's no doubt about it. That's not the way it works for the rest of us. So the question is, did you make assertions about what was going to happen next and what was going to happen after that? That if you created these assets, you would get these results. Are your assertions working out? Right? Is this getting easier or are you lying to yourself and putting even more money after the money you already spent? That it's very easy for the people in an industry that's struggling to say, I'll just do what I did yesterday and sooner or later it will work. The same way, if you buy enough lottery tickets sooner or later, you'll win. But you don't have enough money to buy that many lottery tickets. If your strategy, for example, was in service of how do I become a well-known public speaker, well, are you able to turn a TEDx talk into a second TEDx talk, into a TED talk, into a speaking gig for free, into a speaking gig for a little, et cetera? If there's no progress in that direction, you're just waiting for a miracle. That's not a good strategy. And so we've been indoctrinated by school into thinking if we just do exactly what we're told, sooner or later we will get a prize. Right. That is not how we work in a world of change. In a world of change, we have to say, if I acquire this asset, will it give me the resources to acquire that asset? And can I repeat that enough times to get to where I'm going? Yeah.

SPEAKER_02 37:56

So is it as simple as saying strategy is sort of your goal, is your North Star? You talked about, you know, it's more of a compass than anything else.

SPEAKER_01 38:07

It's I love goals. And um Zig Ziggler taught me a lot about goals. A goal might be part of strategy, but strategy is not a goal. Strategy is a goal along with a sketch that becomes a plan of how I'm going to get to that goal. Right. And so the subtitle of my book is Make Better Plans. Plans are not strategies. Managers love plans because plans imply that if you do everything on the list, you will get the output. Right. So a pilot has a flight plan. And if she does all the steps, she's going to get to Cleveland. That's not what I'm talking about. I'm talking about first, you have to make the plan. I can't guarantee the plan's going to work. But if you don't even make the plan, you got real trouble. So the plan is the assertion. Here we go. And that assertion includes where are we going, but it also includes how are we going to get there.

SPEAKER_02 39:09

Okay. Um and in my experience, you start with a strategy. You have your plans that go along with this, and then your tactics, and then you kind of see how it goes, and your strategy could change, right? I mean, there's nothing wrong with changing your strategy.

SPEAKER_01 39:30

There's nothing wrong, but you're much better off changing your tactics. A good strategy doesn't demand to be changed very often. So what we're trying to do, back to the empathy thing. The people you're hoping to serve, if they knew what you know, would they buy from you? Most of the small businesses, I know the answer is no. Right? Yeah. I'm trying really hard on my air conditioning installation. Yeah. But are you saying there's something about how you install air conditioning that's that much better than everybody else? Or are you just really looking for work? Because the fact is that if you're the only person in town who has the device that can clean to this and the do-the-tothing, then yes, smart people who are well informed will pick you because your strategy created that asset. But this just bold American assertion of I'm better because I said so, that's not a strategy, right? That's just a bunch of tack.

SPEAKER_02 40:32

Okay. Uh that seems to make sense. How about um, you know, something you mentioned over 50 times in the books is status. We've you and I have talked about status before. Uh I'm going to keep talking about it until people understand what I mean. Yeah, let's let's keep it going. Um, you know, price price has uh price and status goes hand in hand, you know, sometimes low price and high price. You know, I'm someone who uh you know, if you go to thrift stores, for example, uh, that might be a flex. Like I am someone who uh values not spending money on fashion, right? Or if you wait in the line at Chanel and you're number 70 in the in the line and you have to wait three hours to get in, and then you get to buy the $5,000 bag, that says something about your status as well. I've got the time to do this. Yeah.

SPEAKER_01 41:26

Status doesn't have to involve cash. So this is an astonishing story. There is a chain of stores in Germany called Aldi, and the two brothers who started it had a bitter falling out. One brother wanted to sell cigarettes, the other one didn't. And so they split it into Aldi Nord and Aldi Sud. And one of those two, I can never remember which one, expanded to the United States by buying Trader Joe's. And the other one expanded to the United States by starting Aldi. Both Aldi and Trader Joe's will sell you food for close to the same price. But Trader Joe's offers the status of really cleverly packaged and delicious store brands that people will wait in line to get. And Aldi offers the status of showing your friends you're too smart to buy things that are expensive. It feels like thrift. They do that on purpose, right? That they give you a cardboard box that's left over to put your groceries in. It probably costs them more to do that than to have a paper bag, but it's part of the message. So both Aldi and Trader Joe's have strategies, and both of their strategies are about different kinds of status.

SPEAKER_02 42:48

Yeah, I'm gonna let that sink in for a minute. It's it all rolls back up under and also becomes a default of picking your clients because once you pick that strategy, then it also is automatic. Right. Yeah. Exactly. Yeah.

SPEAKER_01 43:08

Exactly. And so the problem with most small businesses that I know that are online is they're on Upwork, they're on Fiverr, they're on Rover, and they're like, here I am. I hope you picked me. And so what you're getting are customers who just want someone cheap and easy. Well, then don't be surprised if that's what they want, because that's what you set up for.

SPEAKER_02 43:30

Right. There's a lot of people out of work right now. How does that relate to job hunting? If you are kind of the same, you know, you're one of a thousand resumes in a pile. How do you how can someone navigate that if they're looking for work?

SPEAKER_01 43:44

Well, if you pick your distribution, which is resume getting read by an AI machine, don't be surprised that the way to do it is to fit in more than anybody else. Right? If you pick your customer, which is a big company that doesn't Don't care what they're hiring and you can apply it in an ATM, don't be surprised that they don't care about their hiring. Right? There are plenty of jobs for people who are unique, irreplaceable, linchpins, who create enormous amounts of value in an idiosyncratic way. They're just much harder to find on demand. But when I talk to bosses, they keep telling me that's who they're looking for. But then they get people who show up who pretend they are those people, but when pressed, they act like the people who are trying to fill a box. So again, the tension here of which one are you picking? A job that's easy to get or a job that's worth getting.

SPEAKER_02 44:41

Let's say more about that benefit of tension. Uh how do you create the tension and and what are the benefits of it? Maybe, you know, going back to another example.

SPEAKER_01 44:57

Um, if I think about it, uh a freelancer like um Chip Kidd or Debbie Milman or uh Sarah Jones, or I mean, I have a long list of colleagues and friends, they don't have any trouble filling their days because they generously organized something in public. Right? If you want a great book cover, say, get me Chip Kidd, well, how do you know who Chip Kidd is? Because he did this, he did this, he did this, he did this, he did this, he did this. He's not just in a Rolodex somewhere. Debbie Milman's podcast has, you know, been going on for 14, 16 years. So all of that leadership means that when you get Debbie Milman, you know what you're getting. And so she doesn't have any trouble being asked to do interesting things because she's interesting. And it's easy to feel like you're a victim because no one's picking you, but you could start by picking yourself. Elegant strategies. What are elegant strategies? It's super simple. An elegant strategy is a strategy that helps you get to where you're going with the least amount of effort because you're riding the waves with grace, because you see the system, because you're playing an efficient game, because you have found your way forward and through, as opposed to wrestling around in the dark.

SPEAKER_02 46:30

It sounds like something I want. It also sounds like uh magic.

SPEAKER_01 46:40

Well, it's okay. So let me give you a super easy, trivial example. Okay, please. Let's say you come from a family that doesn't have a lot of money. And let's say you want to go to an overpriced, famous, old educational institution. Okay. If you do a little bit of research, you will see that more than half the people who go to Harvard University get in because of athletics. You will see that Harvard just recently, in fact, started a um woman's uh rugby team. I think it's rugby and invested a fortune. Was it rugby? I it's a sport that at least as obscure as rugby, let's pretend it's rugby. Yeah. And spent a fortune building it out. The coach has a big problem. The problem is there are almost no high school students who do that. Right? And so if you're 16 years old, spending your time to be on the football team doesn't make any sense. But if you're 16 years old and you live in an unusual place compared to where Harvard usually recruits, like um Ghana, and you learn how to fence, the chances of you getting into Harvard just doubled. It's way easier to get into Harvard as a fencer from Ghana than it is to get in as someone who's pretty good at calculus. That's an elegant strategy. You are using the system to accomplish your goal, right? Why does Harvard have all these sports? Well, that's a long story that involves anti-Semitism, anti-Asian sentiment, et cetera. But that's what they picked. So they already decided what their system is. Their system is if you're somebody who doesn't look like you and me, and you are really good at an obscure sport, you're on a different line than other people. And so the elegant strategy isn't a hack. The elegant strategy has empathy, which is there's someone in Harvard who doesn't know all the reasons why they have these policies. All they know is they got to get themselves a good fencer.

SPEAKER_02 48:45

Yeah, it's making me think. So I've got a son who's 16 who uh runs the 400-meter. Did you watch any of the Olympics with some of these? Uh I'm allergic to the Olympics, but I hear you. Okay. Fair enough. He's a runner. I'm not a runner, but he's fast. And so we're thinking about strategies. Uh, because he comes from a family that believes in uh paying your own way to college, you know, getting in on merit. And if that means you go to a junior college first, that's fine. And Trump in favor. Or if you don't go to college at all, that's fine. If you get a get some sort of trade, if you learn a skill, it doesn't matter, you know. Uh anyway, so he is his strategy is to run his way into a D1 or D2 or D3 school. That's the strategy. Uh, and so we're thinking about that.

SPEAKER_01 49:37

And uh I would tell you, as someone who has written about the uh college industrial complex a great deal, that's not a great stratum. Right.

SPEAKER_02 49:47

I'm realizing that as I listen to your Ghana story. Um so uh help me then. Uh let's have some empathy.

SPEAKER_01 49:57

Yeah. If if you want empathy, what's his what would be the best school he could possibly go to from for him?

SPEAKER_02 50:04

Uh I think he would like to go to Duke.

SPEAKER_01 50:07

Great. Yeah. Duke, the Yale of the South. Um the admissions people, the coaches, they all have problems. They're bureaucrats and they come to work every morning with a problem. If someone shows up and solves their problem, they get in. Right. Right? I I when I was an undergrad, I had breakfast every single morning with the head of admissions. He was my buddy. And we brainstormed all of these things. And I looked at applications and everything else. He had a problem. He had to make his boss happy about the incoming class. So what is it about Brian's son that if I let this kid into Duke, I can brag to my boss, I got this kid.

SPEAKER_03 50:52

Right.

SPEAKER_01 50:52

Well, unless he's the state champ, the the track coach isn't gonna give me a hard time about getting him in. Right?

SPEAKER_03 51:00

Right.

SPEAKER_01 51:01

And so the strategy I've proposed to some kids, um, which is really effective, is let's say he's into something that isn't sports. Let's just pick physics. Sure. Right. The physics department at Duke is pretty lonely because there aren't that many high school kids who are into physics. Right. So I would go that I would go now. Notice nothing here is a manipulation. Everything we're doing here is very straightforward, and everyone who's involved is going to be happy. Yeah, it's strategic. I would go to the website of Duke and find five physics professors. Then I would research any papers or books they've written, then I would read their papers or their books, and I would write an email to each one of them. This has to happen more than a year before I'm applying, asking them honest, insightful questions about their work. And I would have a correspondence with this person for nine months about their work. And then I would send them a note saying, I'm going to be on campus. Uh, can I stop by and introduce myself? And then I would stop by. And if I like the person and they like me, I'd say, I'm thinking of coming to Duke, it might be my first choice. Can you help? If that physics professor sends a note to the admissions office saying, in all my years, I haven't had a kid this precocious, this interested in what we're doing, and I would like this person in my department, you have made the physics professor's day better. And if the person in the admissions office gets that note compared to some kid who's vice president of the student council or whatever, why wouldn't they pick your son? That's an elegant strategy.

SPEAKER_02 52:39

I love it. I love it. Yes. Yes. Yeah. Um the wheels are turning. I gotta get to work on that with him. He's got to get to work on that.

SPEAKER_01 52:58

It's very it's it's so unfair that we ask 17-year-olds to make the most important financial decision in their lives.

SPEAKER_02 53:04

Yeah. Yeah. Duke Duke could be good because his brother's there. Of course, you know, UNC is not a bad school either. I mean, good enough for Michael Jordan.

SPEAKER_01 53:12

Yeah. The problem is we you and I know nothing about what makes something a good school. We just know what makes it a famous school. True. A dear friend of mine, she and I started working together before she uh went to college. She went to junior college, did great. That got her scholarship to famous uh California school. Then her work there got her scholarship into medical school, and now she's the best doctor I've ever met. And that journey involved nothing with famous schools. Famous wasn't Yeah.

SPEAKER_02 53:47

Yeah. I agree. Yeah. Does it have the right opportunities, maybe the right people, the right environment? Yeah. I would love for him to go live close to his brother because they're so far apart in age and it's just, you know, life has happened that way. That I would love them, and they're close, but I'd love them to have that bond. Sure, you know, be even closer. Uh, maybe the last thing we've got a couple minutes here. Can you break down the two by two positioning grid? I looked at this and I thought, okay, fascinating. I've seen something like it before. What is it and why should we care about it?

SPEAKER_01 54:22

This is one of the most important elements of an elegant strategy. We're trying to be empathic here. We're trying to make it very clear that we can't be for everyone, that we should be for someone. So when we pick a position on a grid where every one of the four corners is a good one, and we're just going to pick one, we're not denigrating our competition. Right? We're not differentiating ourselves. We're saying for people who want this, we have this. Yeah. So what is Ferrari's position? If you go to a Ferrari dealership and say, I'm looking for something to haul my nine kids around with, they don't try to persuade you to buy an Enzo. Right. They say, My brother-in-law has a Volvo dealership down the street. Let me call him for you. Yep. Right. If you want to buy a chocolate bar and you don't care about price or slave labor or quality, you should buy a Hershey bar or a Nestle bar because they're very, very, very good at making you feel like a six-year-old and they're cheap and convenient. On the other hand, this quadrant, this quadrant is for people who can tell the difference and who want this kind of story, etc. Right? Right. So the hard work is to honor your competitors enough to admit that they might be the right choice for someone. And if you can't articulate which quadrant you're in, neither can your customers.

SPEAKER_02 55:54

Do you think there's a temptation to see ourselves or our brand, what we're doing, in multiple quadrants? You think that's part of the problem?

SPEAKER_01 56:02

Yes. People are either honestly saying to themselves, I'm terrible, only an idiot would pick me. Or they're saying, I'm working harder than anybody else. Everyone should pick me.

SPEAKER_02 56:13

Yeah, we're for everyone, therefore, yeah.

SPEAKER_01 56:16

Right. Like so you go to a local pizza place and they've got all those signs and stuff to try to make it sound like they're the best pizza place in the state. Well, no, because they're also convenient, local, and inexpensive. You can't be convenient, local, inexpensive, and the best pizza place in the state.

unknown 56:33

Yeah.

SPEAKER_01 56:33

You're local, convenient, and inexpensive. So own it. Whereas if you go to that place in Arizona, which was uh for a long time the best pizza place uh in the country, you're gonna wait an hour and a half for a piece of pizza. That's the deal. They have a different position in the marketplace. You can't try to position yourself for everyone. Last question.

SPEAKER_02 56:59

Uh yes, sir. Sunk costs. It's hard to ignore sunk costs, like my sunk cost of my uh Pepperdine University uh experience. Uh it is a cost that is sunk. I paid for it, and uh it was a big price tag on that education. Uh how can I ignore sunk costs?

SPEAKER_01 57:22

So when was the last time you ran one of your events in uh Origin? Let's see.

SPEAKER_02 57:31

Uh it was April of this year. And actually, technically, I ran the event in New York. Right.

SPEAKER_01 57:41

But they used to be on a different scale, right? Like the one that I flew out for. That was an enterprise thing where if you run a couple of those a year, you're done. And you built something with an enormous amount of effort. You earned a lot of trust. You pulled it off. You did all the hard part. And then, COVID or whatever, it's like, I can't do this anymore. It's a sunk cost. I it would be stupid for me to do it again and have it fail, regardless of how hard I worked to make it work.

SPEAKER_03 58:13

Yeah.

SPEAKER_01 58:14

That's a sunk cost. It's a gift from old Brian to you. Yeah. The market shifted. You don't have to accept it. You can say, Thank you for working so hard, but the world has shifted. No, thank you. But we get stuck because we say, Oh, I have to keep doing this. I'm trapped. No, you can just say no, thank you and go do the other thing. And I have walked away from many assets, many projects that were hard won, right? Like the Information Please Business Almanac, 850 pages, award-winning. It was magic. And then they invented the internet. Like, I don't need to do the new edition because it's not worth anything. I know you worked hard to give me this gift, Seth, but I can't use it. And so we, when the world changes, we need to forgive our former self and say no, thank you.

SPEAKER_00 59:09

I mean, we were just sitting back, you know, chopping it up, reminiscing about the good old days and all that. You know, tracking my roots, where I came from and where I'm going.