#231: Maximal Blame Avoidance, Power Corp. & Disruption, Marco Pierre White's Journey.....
“The truth is, I never wanted that door to open.”
Hello! This week’s newsletter looks into psychology from a seasoned marketing executive whose insights on how our fear of blame derives much of our decision-making. Then it’s the premium newsletter on Power Corporation, the family that owns Wealthsimple (Canada’s highest-valued startup). That’s followed by a look into Marco Pierre White’s fascinating journey on becoming Britain’s first three Michelin star chef and the lessons he took from it. The last essay is a thought-musing on an immigrant’s language and cultural barriers to building a relationship with his parents.
As always, feel free to pick and choose from the categories below and I hope one of the things I wrote is of some value to you.
Business & Investing
Culture & Systems
Introspection & Habits
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Business & Investing
We Optimize Avoidance of Blame for Sub-optimal Creativity
Rory Sutherland is a marketing executive who worked for 25+ years at Ogilvy, the giant ad agency. He also wrote a book on psychology and human behaviour that is on my shortlist. I found his ideas and insights interesting the first time around so I decided to review them again through his interviews on Farnam Street and Invest Like the Best.
Absurd solutions.
Everyone is looking for the logical and rational solution. So look for the seemingly absurd and irrational ones. Culture limits your competitors from doing the latter in most cases.
Companies trying to solve with absurd methods may be the ones with the greatest ROI. It might fail but isn’t the point of investing to achieve above-average returns? How can you expect to do that by looking at the average solutions (i.e. rational and logical).
Consider game theory. If all your competitors do the rational thing, shouldn’t you do the irrational thing?
A culture that appears irrational because of the number of optically weird solutions they implement may have created a virtuous cycle. Such a culture will bring more people who will have the emotional freedom to do test out more irrational solutions. Not all will work but the ones that work will have above-average results. Business is non-linear so the pay-offs will warrant the cost. Consider how Constellation and Topicus are conglomerates yet they don’t centralize. They go the opposite way and break up business units and keep them small.
Weakness into Advantage
Hertz had this slogan: “When you’re only No. 2, you try harder.” What other companies use their comparatively weaker positions to their advantage?
Environmentalists Should Like Marketing
Intangible value is the most environmentally friendly form of value creation. If I can be made to feel my bag is invaluable. I may never get another bag.
Self-Deception
Robert Trivers’s idea of self-deception for self-deception as being an evolutionary advantageous thing people learned to do.
“...we deceive ourselves the better to deceive others, because the best way to bullshit is to start by believing your own bullshit."
Low Cost + Effort = High Value
Consider how the cumbersome process of getting furniture at Ikea is by design. People equate the long process of walking through showrooms, having to write down what they want, finding them in a large warehouse, pushing boxes to the checkout, bringing it home to assemble all as “fun”.
It’s a suboptimal process for cheap furniture that costs us exponentially more in time. But we don’t think of it like that. We end up valuing the full experience and the furniture more despite its lower price tag.
Same for people who pay money to pick cheap strawberries. Berries that would’ve ended up in the local supermarket.
I’ve been ruminating on an idea of making a clothing business where one has to apply to purchase. A business with the tagline: Consume Life, Not Things. Questions like how little they spent on Amazon the past year. Would such an irrational process make the shirt have a higher value?
The desire to put in work to feel like something is worth doing might also explain why there isn’t a single cosmetic product that would solve everything. People might deny it but I think the act of spending a long time applying various cosmetics leads to an effect of self-value. Remember the L’Oreal slogan: ‘because you’re worth it’.
Vacation is Capitalism
When I met a British couple in Vietnam, they were shocked at my three-week vacation policy. They asked how it was expected for people to actually travel anywhere. I said it was better than the Americans who had no national minimum for vacation. From what I gather, the British have five weeks and the Christmas holidays are an additional period of vacation, per this couple.
People equate vacation time with being lazy and a “socialist-European” view. But there is enough evidence to show one works harder after a period of resting. Anyone whose competed in sports should know this. Strength athletes take long breaks in between sets. Same for sprinters. That should be the same for mental work too.
Vacation is also where people spend all their money and consume. People buy cars because they can use them on weekends. That’s why they buy vacation homes, holiday gear, etc.
"I mean, Henry Ford created the two day weekend so that people would buy cars. It's slightly apocryphal, that story, by the way. But I mean, it was Henry Ford rather than legislation that that seemed to have created the two day weekend in the US, partly because of his surmise that if that became a norm, then it was worth the American worker owning a car. If you only had one day off every week, not so much."
North Americans have two-day weekends so companies can make more money. I bet remote working will lead to higher consumption as well.
Brands to Blame
You go with a big brand because you trust they will deliver on the promise. If they fail to, then you can blame the brand. That’s what the premium price tag was for.
If a firm uses the Big 4 accounting firm and there is a fuck up, the blame is on Deloitte or EY. If they use a small accounting firm, who could do just a stellar job or better, but they fuck up, then people will blame you for picking a small accounting firm. They will say “what did you expect?
When the benefit of the decision is “the job gets done” while the cost can be “it doesn’t work” then people will choose the big brands. After writing about Power Corp in the premium newsletter, I thought about life insurance from a startup context.
I don’t care how cumbersome or inefficient the current life insurance industry is. I will work with a company that has proven its ability to deliver on its promise. That means the company needs to have lasted longer than the lives of its customers. Most startups don’t meet that hurdle. Simply because of time. Time is the great equalizer. No amount of innovation and funding can get past that fact.
Brands are important when all we are trying to do is avoid the worst-case scenario. When I buy a TV I just need it to do what every other TV does. I won’t risk it not working one day to save $100 buying a brand I’ve never heard about.
Bias towards Engineering
Most people consider marketing solutions (i.e. psychology and human behaviour) cheating whereas engineering solutions are legitimate. Look at the big consulting firm’s obsession with data and analytics as an indicator of people’s desire for something to blame.
When a formulaic solution leads to a disaster, it’s easy to blame the formula. When the solution came from subjective creativity, the person will get blamed.
People believe a heavier wine bottle or statement of its expensive price makes wine taste better. Most don’t have any objective idea of whether a wine is good or not. Same for a restaurant. The restaurant could be three Michelin stars in food but a poor ambiance will kill it. Environment comes first in restaurants and that’s the same for wine in its container or brand.
Business isn’t a Science
Whereas physics has one right answer, business can have multiple right answers. It’s possible for two investors who have invested in the same stock and for one to have considered a mistake while it was a success to the other. Let’s say the stock goes up 15% annually for 5 years. If my goal was 20% per annum, I’ve failed and my opportunity cost of not investing in another company also exists. But an investor who wanted to beat the index which did 7% annually for the same time period succeeded. There are many answers because success is subjective.
In trying to make economics a science (it isn’t), the solutions have also failed to consider the complex non-linearity of the world. People do things for many reasons. Economists and academic psychologists might think it’s only one reason with one true “rationality”.
“...the problem with economics is not only that it's wrong, it's that it's incredibly creatively limiting because it tends to posit a very one dimensional view of human motivation.”
This bias becomes prominent because of our desire for artificial certainty. People hate change and uncertainty. So we will seek out formulas that can explain things. We are creature of post-rationalization.
“...there's a huge tendency for people to crave artificial certainty. And a lot of the reasons for that are entirely defensive, that within an institutional framework, the urge not to break ranks and not be considered possibly wrong, you know, it's much easier to get fired for being illogical than it is for being unimaginative.”
Therein lies the vicious cycle to the death of creativity in companies. The pursuit for creative solutions runs antagonistic to the desire to fit in and avoid blame.
Long Game = High Upfront Cost
High upfront costs are signals for the business or person’s willingness to play the repeated-long game. Buying expensive equipment for your factory or an engagement ring could be such signs.
A person who gets a graduate degree shows their commitment by paying for more school with money and time. Their competence is secondary to the signal they’ve displayed.
People who do the hard work ahead of time showcase a signal. Seeking out an apprenticeship for no pay is another costly signal of your desire to be in it for the long haul. The same can be said for someone whose been doing all the work they would be doing in a career before even getting paid for it (i.e. writing a book or investment reports before having either as a paying career yet).
For people and businesses playing the long game, their reputation matters. That’s also why trust in the brand exists. If Mercedes wants to stay in business, they have to maintain a standard to keep their reputation in the market.
Last Week’s Premium Newsletter
Power Corporation: Generational Disruption
"If you’re going to be disrupted by a technological innovation, you might as well do it to yourself."
Culture & Systems
Marco Pierre White on Dreams
Marco Pierre White is the first British chef to win three Michelin stars. He is known as the godfather of British gastronomy and the man who trained chefs like Gordan Ramsey and Mario Battali.
I became familiar with him because of how Anthony Bourdain referred to him as the first celebrity chef. A guy from a working-class background who wrote a book that was the Kitchen Confidential for Bourdain when he wanted to be a chef.
Bourdain’s admiration for White was an important referral. I liked how Bourdain thinks, what he values and his judgment of character. What I particularly liked about White was how he decided to give Michelin back his stars because maintaining it no longer fulfilled him.
I decided to listen to his talks at Oxford and Cambridge. Both interviews start with White’s monologue on his career. They are each about 25-30mins and I suggest you pick one and listen to it. White is a brilliant storyteller with an amazing voice. I won’t tell you his entire journey here. Rather, it’s a montage of what I found significant.
His Journey
White got his start as an apprentice at the Hotel St. George. He walked up to the kitchen door and knocked to ask for a job and a place to live.
“The truth is, I never wanted that door to open.”
It was there that he worked during the day as a shoeshine boy. That’s where he picked up Egon Ronay’s Guide to discover the Box Tree (two Michelin stars) was the best restaurant in Britain.
He went to work at Box Tree and was given the dream of three Michelin stars with five red knives and forks. After Box Tree, White went to work at Le Gavroche (two Michelin stars).
He found himself in front of the Le Gavroche’s kitchen door in the middle of the night because he missed his last train and walked aimlessly through London in the middle of the night. He realized after looking into the beauty of the restaurant within that he needed to work there.
“Let’s not forget, I’ve been traveling for 24 hours with no sleep. I’m tired, I’m hungry, I’m thirsty. But you know something? That’s irrelevant.”
While was hired when the interviewing chef learned he had worked at Box Tree. The chef said that was where he had his best meal. White said he was hired on the reputation of Box Tree alone.
After Le Gavroche, he went to work for Pierre Koffmann at La Tante Claire (three Michelin stars). Koffmann worked at Le Gavroche prior to and only hired Frenchmen.
White didn’t tell Koffmann he worked at Le Gavroche. Instead, White told Koffmann he would work for free. In three weeks, Koffmann told White he would pay him.
White planned to go to Paris to work at Lasserre (three Michelin stars). All three Michelin-starred chefs were either French and/or cooked in Paris at the time. But White decided to forego that trip and help out a chef friend who was struggling.
He worked for his friend for free for six months until the restaurant went belly up. He cooked dinner for two clients every day during that time.
Eventually, one of the two clients came to White asking if he would become the head chef of his new restaurant. Harvey’s opened in 1987 and it struggled from the get-go.
White said what saved his restaurant was when Egon Ronay, whose guide he had read in St. George to start his culinary journey, walked into his restaurant. Until then he was Marco White. But Ronay asked him about his name.
Marco told Egon his full name was Marco Pierre White. That became the centerpiece of Ronay’s review on Harvey’s. About a chef with long hair who had three names —Italian, French, and English. Ronay gave White his name.
It was at Harvey’s that White went onto earn three Michelin stars and five red knives and forks.
“In January 1998 we won three stars and five red knives and forks. The truth is, I never won 3 stars. I didn’t. I was the composer, the conductor. The chefs behind me, they were the ones who won the three stars. Not me. They realized my dream. In return, I showed them what was possible. It’s about honesty…. Dreams can come true. A lot of them don’t but you have to keep on persevering.”
“I’d realized my dream all those years laters. That dream I had when I was 17. I was now 37 years old. So for 20 years I had worked to realize my dream. Things don’t happen overnight. You have to make the emotional and personal investment to make your dreams come true.”
After realizing his dream. White gave the stars back and retired from running a restaurant for ~15 years. Maintaining the stars would’ve required creating a factory that churned out the standard and he didn’t want to do that.
“Winning three stars has got to be the most exciting journey of a chef’s life. Retaining them is the most boring job in the world.”
“Winning three stars was just a stepping stone to where I wanted to be in life…..I was never ambitious. If I ever was ambitious then it was by default from just doing my job….. My entire motivation was to be accepted…..We have to question ourselves, especially if we want to turn our dreams into reality.”
Dreams and Introspection
“If you have a dream, then you have a duty and responsibility to yourself to make it come true.”
It was also in achieving this dream that White learned to examine himself. To be honest with himself to see how he got the dream in the first place. What he actually wanted and who he was.
“I had worked 22 years for something that I had never wanted.”
“By discovering yourself, then you have the opportunity to accept yourself. Through acceptance you do things for the right reason….you have the opportunity to realize your true potential. But you have to go deeper and really question everything.”
“It’s about self belief, at whatever cost.”
Success, Luck & Opportunity
White looks at his career as a mix of luck and his ability to maximize the opportunities he seized. Opportunities are boundless and it’s those who take advantage of them that succeed.
“It’s all been about luck…it’s about luck. Success if born out of luck. It’s awareness of mind that takes advantage of that opportunity….. If you don’t take advantage of your opportunity you will never realize your dreams. Whether you want them or not is an irrelevance. You don’t know that until you achieve it.”
Strategy compensates for talent but not the other way around. Strategy is how you get consistent. Consistency is what a pro does. Emotions are for the bedroom, not the kitchen.
“Albert Roux [of Le Gavroche] once said to me ‘I can’t create a three-star chef. Three-star chefs create themselves. But what I can give you Marco is three-star discipline. The secret to everything in life is discipline.’”
On Food & Cooking
The environment, the company you sit in, and the service with a smile are what take precedence over food. The most important things about restaurants are:
environment
service
Food
In that order.
Three things common in a great chef
They accept and respect that Mother Nature is the true artist and they are the cook
Everything they cook is an extension of themselves as a person
They give you insight into the world they were born into, the world that inspired them.
Pierre Koffmann inspired White the most. After achieving his three Michelin stars, Koffman gave them back to run a small restaurant.
“Today he has a restaurant in London with no stars. But you know something? It’s my favourite restaurant in Britain. You know why? Because he cooks food you want to eat.”
Michelin stars are not what’ll make the restaurant your favourite place. I think if you liked two restaurants equally and one had Michelin stars while the other didn’t, you probably like the one without it much more. The one with stars just has the prestige “bump” to mess with your psychology.
Introspection & Habits
The Dichotomy of an Immigrant Writer
I think a desire every writer has is to be understood. I’m not a fast thinker. I just don’t like to lose so I talk fast and use complex words. That’s makes me into the kind of person who will steamroll people with circular reasoning that doesn’t get noticed in the conversation.
Writing lets me take my time. I can delete the parts that show how flustered I get. The side that is unbecoming.
It’s one medium to express the thoughts I can’t in the world around me. The kind of world that thinks it’s weird that my greatest materialistic desire is a shelving unit designed by Dieter Rams.
Instead, I’ll write about it in the hopes I’m understood by someone else. But it can be frustrating when you can’t communicate your passions to those you love. Particularly the ones who brought you into the world.
No other scene in Modern Family hit me harder than this:
That’s how I feel trying to explain business and investing in Korean when my parents get a hot stock tip about a pharmaceutical company that is “supposed” to 10x. I imagine that’s how every child of immigrant parents feel when they try to share more about something they love with their parents.
I love writing and reading about business, psychology, and philosophy. You might’ve guessed that from my essays and book list. But I find it a challenge to communicate these to friends that do not share the same interest.
It’s near impossible for me to communicate business and investing fundamentals with friends who think share prices are important, CNBC is legitimate and venture capitalists’s advice on public equity should be trusted. Oh, and that’s in English. With a language barrier, there is a multipier effect to the frustration.
That’s just one occurrence. Reading annual reports in Korean and reading Korean newspapers was one way for me to get over that hump. But with every new book I read, every new lecture I digest, every new essay I write, the gap inevitably feels like it’s widening with my parents.
It takes serious work to even maintain it. Three-hour FaceTime conversations have now become a norm as I try to explain what a newsletter is or what I used to do as an accountant or investor. Remember that I was just talking about language here. Cultural differences are another multiplier on top of that.
Consider the oddity where I’m taught in school that I have to make eye contact with people because it’s rude if I don’t. Yet, I’m taught at home not to make eye contact because it’s rude.
One benefit this gap could have is in how I write. The goal of every writer is to speak the truth. That is, what is true for me. This can be difficult for people whose parents and loved ones are both fluent in English and love to read.
I learned it’s a fear writers have that people close to them will read what they write. I realized I didn’t have that fear. Mine was related to how strangers I never met — but might meet — might think of me.
The truth is, my parents signed up for my newsletter recently. After three years of writing, I was happy to see their support in my mailing list. Though I admit, I think they’ll have a difficult time reading what I write.
It’s not just them. I think I told my closest friends I was writing a newsletter but I never asked any of them to sign up. See, most of my friends don’t like to read and a newsletter is probably akin to a foreign language to them.
Their absence in my maillist is support I would’ve liked to have had. It would be a great way to not have to answer the question “what have you been up to since last year?”. But it also means most people reading what I write don’t see me for coffee every week or know of my adolescence.
Yes, I would love it if my parents could understand everything I write and I hope they will. There’s still a part of me who is the child that wants my parents to tell me I’m smart. But a part of me is relieved that this gets to be my own space. Quite like how I don’t like talking to anyone or know anyone at the gym. It’s my space to do the work I need to do. Space where it’s easier to be honest and tell the truth.
Marco Pierre White told a story of his teacher who showed held out his palm in front of him and asked Marco what he saw. Marco said he saw a palm. The teacher said he saw four knuckles. That’s just beautiful.
Daily Log on Instagram:
Currently, I’m recording my daily training, fasting and nutrition at the end of each day on Instagram. It’s not the typical type of content you see you Instagram but it seems apt to share the daily struggles with discipline.