Good morning, friends.
My husband Anthony and I recently had a discussion about how some of the most important innovations have come from the world’s most unlikely sources. In other words, disruption happens at the fringes.
One thing led to another, and I asked Anthony to write a guest column on this subject. I hope you enjoy. (You can sign up for his daily newsletter on business, finance, and Bitcoin here.)
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Society has been obsessed with the concept of traditional education for decades. We send children to school, encourage route memorization, test knowledge via standardized tests, and finalize the assembly line of education with a paper certificate. The issue is that we spend all of our time teaching students what to think rather than how to think.
The general knowledge that schools are based on can now be accessed in milliseconds via the internet. What was the date of a specific event in history? How do you compute that math equation? Which country is a certain city in? It isn’t that this type of information is not valuable, but rather that it is less important than the mental models and first principles perspective that ultimately leads to value creation. You can think of it like this — the internet now serves as the database for most of the information that our schools previously obsessed about downloading into students’ brains.
Critical thinking skills are moving from a nice-to-have to a need-to-have skill in the modern world. Most people have access to the same information, so how you process that information — and how you apply it — becomes the differentiator. Let’s look at some historical examples of people who used their lack of general knowledge in an industry to ultimately become successful:
— Elon Musk was an outsider to the automobile and space industries. He was able to drive innovation in both by critically thinking of specific problems from a first principles perspective. Today we have semi-autonomous electric vehicles and reusable rockets as a result. Musk was able to apply computer science mental models to physical products, which increased technological innovation and decreased costs.
— Oprah Winfrey grew from television news anchor to daytime show host to successful billionaire. At each inflection point, she applied a business owner mindset to her compensation, while the industry incumbents were focused on talent deals. When they were seeking cash deals, she was seeking equity deals. When they were looking for equity deals, she was asking for equity and royalties. When they were looking for royalties, Oprah was spending $16 million of her own money to buy back the content IP from the distribution company. This type of outsider thinking kept her one step ahead of the competition and ultimately led her to build one of the largest media empires in recent history.
— Mark Spitznagel has a unique investing strategy — he intentionally loses money every day. Spitznagel’s strategy is to purchase out of the money options that only pay off when there is a significant market decline. He loses money every day until this moment, but when the market decline occurs, Spitznagel will drive thousands of percent in financial returns. His hedge fund returned more than 4,000% earlier this year, which made him the greatest hedge fund manager in the last decade. He has done the exact opposite of what every investor is trying to do — lose money — but his first principles thinking and intellectual courage created outsized returns.
— Cathie Wood, a multi-billion dollar hedge fund manager, prioritizes the hiring of people with non-traditional backgrounds for her investment team. Her thesis is that a scientist may not initially know how to invest, but they are better suited to evaluate the prospects of a company’s gene editing technology. The same is true with a battery engineer who is dissecting the electric vehicle industry — investing may not be a core skill, but they will understand the technology better than almost anyone else. Wood and her team can teach someone how to invest, but the non-consensus thinking and industry expertise has proven to be a game-changer for her investment business. As of this writing, Cathie Wood and her team manage 5 of the 10 best performing ETFs so far in 2020.
— Chance the Rapper turned down many record deals in order to pursue his music aspirations as an independent artist. It was previously believed that the only way to find success in the music industry was to leverage a record deal and the plethora of resources and experience that came with them. Chance and his manager decided that they would attempt the seemingly impossible — go it alone. Their strategy was to cut out the middle man and execute a digitally-native campaign that focused on building a fanatical base of followers. This differentiated approach ultimately led Chance the Rapper to success, where he now regularly sells out arenas, has made millions of dollars from his merchandise business, and is the sole owner of his music.
These examples highlight that there is no single recipe for success. You can do it the traditional way or you can forge your own path. However, true innovation and disruption comes from those outsiders courageous enough to believe they can enter a field and do it differently. The lesson here is that how you think is always more valuable than what you think.
The ability to think from first principles may be the most highly-coveted skill in today’s technology-driven world. The greatest innovators of our time have proven it over and over again. Maybe we should start paying attention.
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THE PROFILE DOSSIER: On Wednesday, you received The Profile Dossier, a comprehensive deep-dive on a prominent individual. It featured Aaron Sorkin, the mastermind behind America’s favorite films. Become a premium member and read it here.
PROFILES.
— The billionaire who lived a double life
— The husband-and-wife team behind the COVID vaccine
— The unlikely challenger bank CEO
— The adult-magazine mogul trying his hand at investing
— The music legend reflecting on his career
— The news giant cracking from within [**HIGHLY RECOMMEND**]
— The app that turned Venezuela into a cashless test lab
— The General Motors of cosmetics
PEOPLE TO KNOW.
The billionaire who lived a double life: Over the past five years, Robert F. Smith has become one of the nation’s most prominent billionaire philanthropists. But he had a secret: He’d played a role in what federal prosecutors allege was the biggest tax evasion scheme in U.S. history. He admitted to hiding profits in offshore accounts and filing false tax returns for 10 years. This is a mind-blowing story about Smith, who was extremely well-liked and respected in the tech and finance community. (Washington Post; reply to this email if you can't access.)
“You can only judge people on how you know them. I trust his integrity.”
The husband-and-wife team behind the COVID vaccine: Two years ago, Ugur Sahin founded his company BioNTech with his wife, Dr. Özlem Türeci. It was mostly focused on cancer treatments. It had never brought a product to market. Covid-19 did not yet exist. On Monday, BioNTech and Pfizer announced that a vaccine for the coronavirus developed by Dr. Sahin and his team was more than 90% effective. Meet the scientists behind the breakthrough. (The New York Times)
“Trust and personal relationship is so important in such business, because everything is going so fast."
The unlikely challenger bank CEO: Anne Boden doesn’t conform to any banking stereotype. “I’m a woman. I’m 5ft tall. I’m Welsh. I’m middle-aged. I’m from a very ordinary background and I’m the sort of person who’ll chat to somebody in the ladies,” she says. As Boden began to re-imagine banking with Starling Bank, her business partner took the team and left to launch his own challenger bank competitor. What a ride. (The Guardian)
"People did think I was crazy, that no one ‘starts a bank’ ... I was 54 and confident enough not to care if somebody said I was stupid.”
The adult-magazine mogul trying his hand at investing: Norman Zadeh revived the United States Investing Championship after a more than 20-year hiatus. Zadeh is many things ... it's hard to put him in a box. He's a poker king, a porn magazine magnate, Joan Rivers’ former “boy toy,” an intellectual property warrior, and a wealthy man who lost a lot of money. Here's what he's up to in his second act. (Institutional Investor)
“I am the classic ‘do whatever I don’t do’ investor. When I buy, you should be selling, and when I sell, you should be buying.”
The music legend reflecting on his career: Although Willie Nelson is now one of the most beloved and iconic figures in American music, he didn’t find real success until he was in his late 30s. Before he moved to Nashville, in 1960, he worked as a radio DJ, pumped gas, did heavy stitching at a saddle factory, worked at a grain elevator, and had a brief gig as a laborer for a carpet-removal service. Nelson, now in his 80s, walks us through his remarkable career.
“I’d been struggling like the dickens to make some money at the music game and failed miserably."
COMPANIES TO WATCH.
The news giant cracking from within: It's hard to think of many businesses that have benefited more from Donald Trump’s presidency than The New York Times. After Trump’s election in 2016, subscriptions grew at 10 times their usual rate. Its stock has risen fourfold since Trump took office. But as the Times became less dispassionate and more crusading, a raw ideological turf war over the paper’s mission and future has been brewing within. A must-read. (New York Magazine)
“Hate drives readership more than any of us care to admit."
The app that turned Venezuela into a cashless test lab: Venezuelans have embraced digital money out of necessity. Thanks to Maduro’s socialist government, runaway inflation has made the bolivar worthless. Now, many of the residents are relying on an American money transfer service called Zelle, which is owned by a group of seven of the largest U.S. banks. Here's how Venezuelans are using Zelle to gain relief from a rapidly depreciating currency. (Bloomberg)
“Venezuela is in a very unique position of being the only country currently in which the government is subject to comprehensive sanctions but private people are not."
The General Motors of cosmetics: Cosmetics company Estée Lauder is one of the most dazzling corporate success stories in the history of the United States. This is the story of how Leonard Lauder took and built his mother's company into a roughly $89 billion behemoth with 25 brands and approximately 1,600 freestanding retail stores in around 150 countries. How? He took a strategy and turned it into a company mantra: “Launch at the top, and stay at the top." (Bloomberg)
“Everyone imagines that I was heir to a great family fortune. They forget that I had to build the fortune first.”
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AUDIO TO HEAR.
Maria Popova on forming a writing practice: Maria Popova (yes, she's also Bulgarian) is the wildly talented writer behind the blog Brain Pickings. She started Brain Pickings as a weekly email she would send to seven friends in 2006, which explored "what it means to live a decent, substantive, rewarding life." Fourteen years later, it attracts millions of readers per month. In this podcast, Popova discusses her disciplined writing process. (Link available to premium members.)
James Clear on how your habits form your identity: Author James Clear wants you to know one thing: Every action you take is a vote for the type of person you want to become. "The real reason that habits matter is that they can re-shape your sense of self," Clear says. "They help forge your self-esteem." This is a must-listen. (Link available to premium members.)
VIDEOS TO WATCH.
Elon Musk on propelling humanity forward: Entrepreneur Elon Musk lives on the cutting-edge. He’s one of the most radical and innovative thinkers of our time, which means that he’s also attracted heavy backlash from the incumbents he’s trying to disrupt. Musk has taken on everything from the automotive industry to aerospace to solar energy to satellite to even multi-planetary expansion. This free documentary gives us a glimpse into his remarkable career. (Link available to premium members.)
Noah Galloway on finding reasons to live: After witnessing the events of September 11, Noah Galloway dropped out of college and enlisted in the military. During his second deployment to Iraq, Galloway's vehicle was blown up by an IED. He woke up in a hospital bed on Christmas Eve where he realized that he had survived but he was missing his left arm and leg. Galloway fell into a deep depression, which led to an alcohol addiction, a DUI, and time in jail. Here's how he emerged from the darkness and saved his own life. (Link available to premium members.)
Martha Stewart on becoming America's tastemaker: Like it or not, Martha Stewart was America's original influencer — years before social media ever existed. "I never thought about doubting my ability to reach a large group of people," she says. "In the 1980s and early 1990s, social media was really PR. It was reaching people through newspapers." This is an amazing conversation. (Link available to premium members.)
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