Permanent Equity: Investing in Companies that Care What Happens Next

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Insanity and Inflection Points

I went to a college that didn’t play FBS football, so when we moved to Missouri we logically thought we’d adopt Mizzou as a rooting interest. But don’t do it, I was told by the locals, because the program is doomed and nothing good ever happens to us.

The track record to date is that mostly that’s true except that this year has captured most everyone’s interest. What’s more, ahead of the game at number one ranked Georgia in early November (which the Tigers ended up almost pulling out), pretty much everything was on the table.

As for why that was, you could trace it back to Coach Eli Drinkwitz’s decision to fake a punt against Kentucky down 14-0 and facing fourth and 10 in week 7. See, Mizzou had lost to LSU the previous week and was on the verge of getting blown out. But instead Missouri scored, changed the momentum, and went on to win 38-21. And then the team carried that momentum into homecoming against South Carolina and blew the Gamecocks off the field. In other words, the fake punt was an inflection point in the sense that it leveled up the baseline of what was possible and the team took full advantage.

Author Malcolm Gladwell is famous for calling these “tipping points” and his so-titled first book is full of case studies of small, niche products that had a few things go right and “tipped” into becoming cultural phenomenons, leveling up the baseline of what was possible. And it seems correct that if you do something in football or business that creates a massive opportunity, you go ahead and take it. But is it?

Now that I’ve broken the seal on talking about the foibles of mid-Missouri dining establishments, I have no shortage of stories and this one is about the fiercely independent local juice bar (if you know, you know) that decided to expand its breakfast menu. On its face, this was a sound strategic decision. Breakfast is a logical complement to juice and capturing more wallet-share from a customer is good business. What’s more, we heard that the addition to the menu, some blueberry wheatcakes, were delicious. So delicious, in fact, that Mizzou students camped out to get them and customers came from as far away as St. Louis and Kansas City with lines out the door.

When we went to try them, however, we were told they were no longer being served. They’d gotten too popular and the lines were disruptive, stressful to the staff, and inconvenient for the cold-pressed-juice-drinking regulars. (Befuddled, Brent offered to buy the recipe, but the juice bar demurred.)

Faced with an inflection point that could level up the baseline of what was possible, the fiercely independent local juice bar walked back. So a fair question to ask is: Is that insane? 

Whether you agree with the decision to stop selling delicious blueberry wheatcakes or not, the juice bar in making it was practicing risk management. See, the thing about inflection points is that they create variance, and the thing about variance is that while it’s great, it also makes a lot of people uncomfortable. Facing an onslaught of new customers demanding blueberry wheatcakes, the juice bar might need to hire more employees, upgrade its kitchen, lease new space, or maybe even stop selling cold-pressed juice to cold-pressed-juice-drinking regulars in order to take advantage of the opportunity. There’s reward to be had from this, sure, but it could also not work out and maybe it’s not why the juice bar got into business in the first place. 

To me, creating an advantage with significant upside and then not pressing it is, yes, insane, but you could also argue insanity is doing something you don’t want to do because someone else thinks it’s insane not to. Still, they should have sold Brent the recipe.

– By Tim Hanson


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