The Rebel Allocator

by Jacob Taylor

“First, for seventy-seven years now, I’ve tried to go to bed a little smarter than I woke up. Constant improvement is the only way to succeed. It makes what is difficult to achieve become inevitable. Success is a few simple disciplines, practiced daily. Failure is simply a few errors in judgment, repeated daily.”

“It is remarkable how much long-term advantage I’ve found by trying to be consistently not stupid. You should try it sometime. Instead of aiming to be very intelligent, just don’t be a dumbass. If you avoid most of the big mistakes, you don’t have to be that smart to succeed.” Good news for us dumbasses of the world.

Most people overestimate what they can get done in a day, but radically underestimate what they can get done in a month… in a year… in a decade, with four hours of dedicated work. You could goof off the rest of the day and still run circles around your peers. At least that’s been my experience.”

“Finally, five: take action. Perfect is the enemy of good enough. Yes, it’s important to make decisions supported by data, but realize you’re never going to have all the numbers to feel completely confident. You still have to move forward at some point. There are very few decisions you can’t undo, so just making a decision and being willing to change keeps you moving forward.”

A brand is like a promise of a specific experience.

“Here’s the filter we use: Will this expense go toward delighting our customer? If the answer is no, then we’re ruthless about cutting it. We call these non-strategic expenses because they don’t advance our strategy of making the customer happy. We’ve found these expenses to be like fingernails; they always need trimming.”

“We also have something we call strategic expenses. These expenses advance our strategy of delighting the customer. For strategic expenses, we seek to outspend the competition by a long shot. Strategic expenses build a moat around our castle so the customer only wants to do business with us. We aren’t afraid to spend in those categories. We view them as investing in the happiness of our customers.”

Let’s put a pin in that for now, but I will give you a general rule of thumb: if you have more than five competitors in your fishbowl, don’t expect to be able to control the price of anything.

The value of something always depends on your individual context.”

“In general,” Mr. X continued, “there are three ways to make the brand triangle bigger. Be the cheapest. Be the most convenient. Or be the best. Good companies aim for at least one of those objectives. Great companies find a way to achieve two. Doing all three is a rarity.”

“The answer is surprisingly simple. You only have to answer yes to one question: If you wanted to, could you raise prices and not lose customers? If you can answer yes, you probably have a differentiated product.

You either have to be the lowest cost producer or build up a brand that lets you charge more if you want to earn higher returns.”

I caught a spark. “It looks like there’s a trade-off between profit and brand. When the Price

“No man ever steps in the same river twice, for it's not the same river and he's not the same man.” Deep thoughts, with Jack Handy.

‘People don’t want a half-inch drill bit. They want a half-inch hole in something.’”

I’ve noticed that when there’s a lot of easy money sloshing around, the returns on capital start to suffer.

Trees don’t grow to the sky in nature or business.

when you know, you just know.”

“The problem is, humans aren’t always logical. Our brains evolved for survival, not necessarily logic.

“Could your customers explain in ten seconds what makes you so great?

When you stop to think about it, a flower is nothing more than a weed with an advertising budget.”

“If you’ve had some recent success, you might think you’re on a hot streak. Many don’t appreciate the dynamics of luck and skill in complex systems. Your hot streak may have a lot less to do with your abilities than you think.”

Did you know that the sun is 99.8% of the mass of our solar system?”

“She called it the endowment effect. It showed that we generally think the things we own are worth more, just because we own them.”

There are seasons and cycles--remember our humble pinecone? Reversion to the mean is incredibly powerful. It’s easy to fool yourself otherwise and commit suicide by extrapolation.”

The ancient Greeks famously said that the revisiting of definitions is the beginning of wisdom,”

“Two young fish swim by an older fish,” he wheezed. “The elder says, ‘Morning boys, how’s the water?’ The two younger fish swim on. Eventually one looks at the other and says, ‘What the hell is water?’”

‘The time to reflect on your investing methods is when you are most successful, not when you are making the most mistakes.’”

As Upton Sinclair remarked, ‘It is difficult to get a man to understand something, when his salary depends upon his not understanding it.’”

‘Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.’”

Fund strategies, not individual projects.

Be patient like the pine cone. Everything moves in cycles.