The Liabilities (and Assets) of Newness with Dr. David Croson

Source: GeniusDen archive transcript checked against the recording. Administrative opening and closing material is omitted; the presentation wording is otherwise preserved with light readability edits.

Thanks, Joe. Hi, I'm David Croson. I'm a professor in the Strategy and Entrepreneurship and Business Economics group at SMU.

Closer. Okay. And so today I'm going to give you an overview of sort of two topics blended together that I teach in our MBA and our Master's of Science and Entrepreneurship program, part of which is about strategy for new businesses, what types of assets new and young businesses have that older, larger businesses can't match. And the second part is some of the liabilities of being a new business. And so I brought you here with the idea that I was going to be talking about liabilities of newness, which is my first major item.

If we go to the first slide, we'll actually get a chance to see it. The management field has a terrible problem with actually naming new concepts. And so when we were trying to generate an overall list of why new, young businesses seem to have a lot of difficulty competing, somebody suggested that the reason why they would have these liabilities was because they were new and therefore we should call them liabilities of newness. And this always sounded to me like it's a body part, like the islets of Lagrahan's or something.

You say, where are these liabilities of newness and what do they actually look like? Okay. So today I'm going to be talking about, if you will, the computation of net worth of newness. We're going to think both about the assets of newness and the liabilities of newness, and see what happens when you subtract the liabilities from the assets in order to get the entrepreneur's equity. Okay. So what do these liabilities of newness look like, other than the fact that they happen to be liabilities faced by new firms?

So if you go to the next slide. So we have some data on the infant mortality of newly formed firms. So there is a statistic which keeps shuttling around, even though there's no empirical data for it, that 80% of new firms fail in the first two years. That's just not correct. There is no statistical basis for that whatsoever. It actually turns out that 70% of new firms fail over 10 years. That's a little bit different when you think of it in terms of its half-life. But the important part for what to remember is that if you're going to fail at all

If you're going to look at all of the firms that don't make it 10 years, well more than half of them don't make it the first two. That's the infant mortality story which has been around since the 1980s in the US economy. And so the question is, what is it about these new firms that makes them fragile? It's not just that they're small, it's that they are in effect newly born. They don't have defense mechanisms set up the same way that larger firms do. They don't have the cash cushion, they don't have the experience.

And so let me just point out some of the reasons why these new firms have a lot of difficulty. One of them — establishing your brand and establishing awareness of your products and services, just so that people consider you as something that they would potentially buy — requires time and expenditure. It's not a secret, for example, that Coca-Cola spends a lot of money on marketing, but they have spent money on marketing over the course of decades. You know what Coke is, and you know what Coke stands for, you know what it's like.

If you are a new company, not only have you spent zero dollars, but people have spent zero days and zero months and zero years listening to your ads, and literally they may have no idea that you exist. This was found out in spades during the first dot-com boom. Startups found out that they could spend tens of millions of dollars on advertising, and yet almost nobody would know who they were. And because they didn't know who they were, this was before search engines were a big deal.

they couldn't find their products on the web and they didn't make any sales. This is not something that an established firm that's been around for 50 years has a problem for doing. This would hold for business incubators as well as for universities. If I wanted to start up another university right next to SMU, I mean I could set up a new business school, but nobody would apply to it, nobody would come because they didn't know it was there. And so that's a problem that new universities have as opposed to SMU that's been around for 100 years.

The second one is the going concern problem. Customers who are thinking about patronizing your business over and over again, who are going to form some kind of relationship with you, are a little bit worried. They have, if you will, an ongoing concern that tomorrow you're not going to be a going concern, that you might be here and then vanish and just pack up and leave, maybe with their security deposit. But, you know, if they switch over to you for another firm, they have no idea how long it's going to be until your firm actually leaves.

If you're around in 60 years, that's great, they win their bet, but they know that if you're going to leave at all, you're likely to leave in the first two years, they're a little bit reticent about switching over from somebody who's an incumbent who's been there for decades just to provide patronage to you even if they're pro-startup. They just don't want to. And this is a problem that you face because you are a new firm. The third one is you're at step zero on the learning curve.

If you've never been in this industry before, your competitors have years and years of experience on what not to do. They've made mistakes that you have yet to discover. You can overcome this part by bringing on industry veterans who are not themselves new to this industry. They're just new to your firm. But if you want to use this to attract customers, you have to tell your potential customers that you have industry veterans there so they don't think you're going to be wiped out by these incumbent firms.

And so you have to advertise your firm, but you don't advertise what your firm does. You advertise who your firm is. You say, we brought somebody who has 20 years' worth of space planning experience from [unclear] in Los Angeles. That makes a lot of difference to potential clients because they recognize that you're likely to be around for more than six months. You're at learning curve step zero. That's bad for you if you're actually new to the industry. But if you're not new to the industry, you have to emphasize this to your clients.

Most of the time, this is not what startups' advertising material contains. It talks about their product. It talks about how wonderful it is. It talks about how attractive their price is. It doesn't really talk about what the qualifications of their founders are. That goes in the investor documents, not in the marketing documents. You don't have a lot of cushion. You don't have a base of existing customers who are buying an existing set of products that are providing you with cash flow that you can use to fund experimentation and growth.

If you're Coca-Cola, you can completely change your award-winning formula that's bringing in billions of dollars of cash flow and try it out for a while and say, oops, that failed, and fall back on your existing customers and still recover. That is not available to you as a new firm. You don't have a group of people who will continue to give you money no matter how terrible your new initiatives are because you don't have a base of customers buying products that are already out there in existence.

That's terrible. I mean, it's like living hand-to-mouth, like paycheck to paycheck as a new firm. We know that's not a good idea. And then, finally, we have a very nerdy strategy concept, which is the concept of isolating mechanisms. Isolating mechanisms prevent firms from competing directly with each other, right? It keeps you, you know, a room apart, basically. There are two types of isolating mechanisms. The first is barriers to imitation. So, if you're coming in and you're trying to be just like some other firm, you find that the first firm that you try to imitate is really, actually, really difficult for you to imitate.

You don't have any experience in how to do this. You don't know what they're like. It's difficult for you. The other piece of an isolating mechanism is something that prevents you from poaching their customers. The customers are loyal to the other firm. They elect the other firm's brand. They've bought the other firm's software, whatever it is, which prevents them from switching. You, as the new firm, have to overcome that switching cost before you can get any customers at all, whereas it's kind of unfair. Your established competitors who are already incumbents in the market don't have to overcome that.

And so you're facing an additional handicap. So, there's a famous example of this in the breakfast cereal market, in particular, about the enduring power of cornflakes. Cornflakes is the most boring, basic cereal you can possibly imagine. It's been around for 100-plus years, and it is by far the top-selling cereal in the United States, even though nobody really likes cornflakes all that much. And the reason is, people haven't found anything better. They just keep buying cornflakes over and over and over again, because they don't want to try a brand new cereal which pops up, because it might be terrible.

New cereals come and go rapidly. There are 30 to 50 new cereals introduced every year. Only a few of them make it. And Corn Flakes continues to be the number one selling cereal, because even though it's kind of bland, it appeals to a broad market base. That's not good if you're trying to create a blueberry mint-flavored granola. Right? It's terrible for you, because nobody will buy it even to try it out. Okay? So, as we know from research and entrepreneurship, a small business is not the same as a little big business.

Our entrepreneurship director at SMU, Jerry White, wrote a very influential article about that several decades ago, while he still had hair, but it's still true that small businesses worry constantly about access to resources. And in particular, they don't have access to the same kinds of healing resources that big firms do when they get into a fight and lose. If you're Coca-Cola and you decide that you want to create a new, I don't know, chauffeured shuttle service to compete with Uber, and you lose $100 million on it and you decide it's not going anywhere, you can shut it down and continue going on with your business selling soft drinks.

That's just not possible for a small firm. It's a really bad idea for these small firms to get into knock-down, drag-out fights with established incumbents, to attack them on their own turf using their own tools and their own methods, and hope to win. And so this is the first piece of advice I have to these startups. They don't actually stand still and exchange heavyweight punches with these incumbents because, you know, it's just not a good idea. It's going to hurt a lot. There's a reason why barriers to entry are called barriers to entry.

You have to overcome these things. They don't. You're going to harm yourself. You're going to incur a lot of cost just by trying to engage them in the first place. You're engaging somebody who, by definition, is bigger and stronger and older than you are. They're better resourced. They've had more training. They have more money. They have boxing gloves that you don't. These things are called first mover advantages for a reason. And despite the fact that they may not have a whole lot of advantages over their other incumbent rivals.

they have a lot of advantages over you. Since you're the new guy on the block, you don't have any first mover advantages at all. And so the score might be 1-0 in their favor, or 2-0 in their favor, or 10-0 in their favor, or 100-0 in their favor. But you're behind. And the final piece, which I think entrepreneurs undervalue, is that even if you manage to win, it's not nearly as rewarding as you think. Think about what happens when you successfully win your entry battle with an incumbent.

You manage to get some of their customers to actually buy your product. Excellent. You've generated some revenue. That's about as good as you can do in the first round. The trouble is they're not going away. You now have the privilege of competing with them, possibly for years or decades, on their home turf, in their market, in their arena, where they have all of the expertise and they have all of the customers except for the few that you've taken away. And if you're lucky, after a while, you'll be able to get up to their level and beat them to a standstill so that you and they will split the market.

So what has happened? You've invested a huge amount of time and effort, you've lost money over a long period of time, to get half the market. They have the whole market before you came in. And even if you win, you're only going to get half. It's twice as attractive to be them as it is to be you. And so, of course, if you're an investor and you're deciding whether you want to bet on Coca-Cola or you want to bet on Jones Soda, I know who I want to bet on, right?

I want to bet on the company that's likely to be able to actually generate money over time, and that's not the startup. So the noted management theorist, Mike Tyson, had a comment on this. He said, everybody has a plan until you get punched in the face. Everybody has a beautiful business plan describing exactly how they're going to work through these issues, exactly how they're going to attract customers, exactly how they're going to slip in unnoticed against these incumbents, and then they lose a fight. And then they go completely berserk and they lose all of their money and they're broke within six months.

This is a liability of newness, trying to figure out how you're actually going to insert yourself into this market. And so we know that just going straight in and doing a full frontal assault on these massive incumbent firms isn't going to work. And now that we know what's not going to work, we can take a look at some strategies which actually might work. So let's take a look at some of these strategies. So this is a paraphrase of some strategies put together by the late Peter Drucker, whose book Entrepreneurship and Innovation I recommended on the first slide.

You can get a million used copies of this on Amazon for one cent plus $3.99 in shipping. It was published in 1985. It's a really interesting read, even though it's not about technology. It's about industrial kind of companies. But there's a lot of wisdom there. And so here, this is Peter Drucker, who is Austrian by the way, attempting to talk like a Texan about getting there the firstest with the mostest. So the basic idea about how to succeed as a small business here is that you wake up and you say, I've got this amazing idea.

And I'm going to zoom to the market sweet spot. I say, I'm going to take a position that nobody has taken before. This is the best possible place to be in terms of my product, in terms of the customers, in terms of my cost and price. You get the perfect spot before anybody else actually gets there. You say, 'This is mine.' You plant your flag in it and you try to build a wall around it so that other people can't come and take away your sweet spot.'

And this is a basic strategy that a lot of startups do. And they say, what I'm trying to do is to become an incumbent in this niche market. Once other people figure out that this is the place to be, I will have been there for long enough that now I'm the incumbent. Now I'm the old firm who understands how to compete here. I've built up the customer share. I've made some money. I've built up some walls and barriers to entry. It's going to be difficult for them to actually take your fort away from you.

So it sounds nice and simple. A lot of people, this is all the strategy that they put into their business plan. But there are a few key questions that you have to ask before you decide to commit yourself to this kind of strategy as a new entrant. And I ask this question to a lot of strategy startups that I advise, a lot of new e-commerce startups that I advise. I say, okay, so question number one. If you're going to spend all of your money getting there and actually getting these customers-

And growing to a certain size, how are you going to defend yourself, right? What are you going to use in order to build a brick wall around you in order to prevent other people from coming and taking your customers away from you? If you've already spent all your money, you have to hold back some resources in order to protect yourself. It doesn't do you any good to actually take territory that you can't actually hold. The second question is, what happens if you say, hey, I'm going to go and zoom to that sweet spot.

You get there, you step on the gas in ludicrous acceleration mode in your new Tesla, and you burn all of your resources getting to this perfect spot. And you get there and somebody's already there. They've taken your parking spot. You say, oops, there was somebody who was closer to getting there who got there a little faster. Maybe they had the idea at the same time that they executed a little bit better. Now you're completely sunk and you haven't even gone into business in the first place.

And there's no way that you can tell that that's not going to happen before you actually get reasonably close to your position. The third problem is, what if you're wrong? You step on the gas and you zoom off to a different place. You get there really fast, but it turns out you've gone to the wrong location. And then you plant your flag, you build a fort, and nobody challenges you for your customers because your market position is terrible and they don't want to be there. How do you avoid that problem?

And the last one is you say, well, what if you succeed, but it's not actually profitable for you to actually be in this market in the first place? People look at it and they say, well, we tried to take it away from you. We've decided it's not worth it. We're going to leave you alone. But then you find that it's just barely enough to break even and you're just in subsistence mode. We might call this brass cannon entrepreneurship. There's a famous story about a city employee, a veteran

Whose sole job it was to actually polish the brass cannon outside of the courthouse. And the whole idea was that, you know, this person drew a pension, had health care and benefits in his declining years, and his job was to keep the brass cannon completely shiny and clean. And eventually he decided that he was going to be smart and he said, look, I really hate the idea of working for somebody else. He bought his own brass cannon and went into business for himself. Okay? So that's the story about brass cannon entrepreneurship.

You say, it's entirely possible that you can replicate something that your opponents have done, but it's not worth anything to you. The only reason why it's useful is because it's part of something which is larger as a whole. Okay? So that's getting big fast and taking the hill. It's a type of entrepreneurial strategy which could work, given that standing and slugging it out won't work. The second type of entrepreneurial strategy which could work is so-called hitting them where they ain't, which is especially appropriate given that it's baseball season now.

The whole idea is you're going to go and find places where customers are and your competitors aren't. And you're going to locate where your customers are and your competitors aren't, and that's all you're going to do. You're not really going to try to defeat them because they're not in this market. You're not really going to try to protect this market against them because they're not in this market. You're just going to go and try to imitate what they're doing in the markets that they're in, in markets that they're not in.

So, for example, you say, this company's got a really great idea. I can go and do what they're doing, maybe a little bit better, in a different place. And as long as they don't bother to come and attack me and I don't bother to come and attack them, I won't get creamed. So, for example, there is an Australian company which has basically reinvented the Cinnabon. Apparently somebody from Australia came to the United States and they said, Hey, Cinnabons are really good. They have a lot of cinnamon and sugar and butter in them.

They have to be good. They said, I'm going to go and rip off the idea of having this incredibly rich, melty cinnamon roll, and they went to Australia where Cinnabon had not penetrated, and they completely owned the Australian cinnamon bun market. And they did really well because Cinnabon didn't actually enter that market. It worked out pretty well. JustAboutEverything.com, that's not actually a real domain, although I guess we could go and register it. JustAboutAnything.com in China is an imitation of a successful e-commerce site somewhere else, right? So you have Baidu, which is the Google of China, for example.

You have Alibaba, which is designed to be, say, the eBay of China. Everything.com in China starts off with a big benefit because it can advertise in Chinese and get a small fraction of a large market in China, but they don't have to create any new business model. They can just go and say, let's take a look at what's working and go with that. And so I have no doubt, in addition to the fact that there's already an Amazon of China and things like that, I would not be surprised if there were an Airbnb of China, an Uber of China, and everything else of China that you could imagine.

These firms really could not compete in another market where the large firm had already established a presence. But given that the large firm is not addressing their market at all, they say, we might as well make hay while the sun shines and bring in some cash flow until our market actually gets targeted. And some of these firms get rewarded by being acquired because the large firm would rather buy them out rather than fight them head-to-head in their own market for half of the share. This is actually a good strategy if your goal is to build a company and cash out for a modest amount of money

and then use that as a capital springboard to go onto another area. There is a piece of rule of thumb based on going second. This comes from Pankaj Ghemawat, who is now a professor at IESE Business School in beautiful Barcelona, Spain, which is that first movers have a lot of advantages, but second movers have two big counter-advantages. One is, on average, it's a third cheaper to get to a market, and it's a third faster to get from R&D stage into a market if you're second rather than first.

And so if it took your competitors three years and three million dollars to get there, it'll take you two years from the time that they enter the market until you're ready to rip them off, and it'll only cost you two million dollars to get to that same level. And so the rule of thumb is you save on average about a third. This is held across a lot of industries. There's no mathematical reason why it has to be exactly 33.3%, but you also may notice it's about a third.

We see these types of plans all the time in business plan competitions, saying, I want to be the insert big successful company here of teeny weeny little market that nobody cares about here. This is a good way to create a niche business, but it's not a good way to create a large business, because if it is a large area, you have to ask yourself, why didn't the big firm decide to target it in the first place? There's probably some hidden reason why they can't do it.

The third strategy is to find the ecological niche. The whole idea is you're going to find a niche and fill it, to pick a place which is big enough for one firm and not two. And so the whole idea is you say, this here town just ain't big enough for the two of us. You wedge yourself in, and you thumb your nose at the incumbent, and you say, you would have wanted to fill this niche, but you didn't get here first. You can't get me out of it. That's it.

So for example, you might think of something that people want to do. Here I'm calling it X, because I didn't have time in order to think of a good example. And you say, anybody who wants to do X has to pay me a dollar. You buy a patent, like a patent troll, which is why I call this the troll bridge strategy, the troll gate strategy. And you say, anybody who wants to do this, pay me a dollar. Now hopefully a lot of people want to do that, and you have a whole big stack of one dollar bills.

The beauty of that is that you can rely on something formal like intellectual property protection, patent, copyright, or trademark, or a trade secret. Or you can just continue to collect dollars until somebody decides to innovate around you, to invest a lot of money in order to figure out a better way to accomplish that, to do X without paying you a dollar. There's a famous story about Bill Gates' worst deal ever. When he was creating Microsoft Office in the first round of this, he was outsourcing a lot of the capabilities of Microsoft Excel. And in particular, he worked with a set of entrepreneurs who were in charge of getting Excel to recalculate.

This was a big deal in early versions of Excel, where the idea is it would automatically recalculate all of the cells that were contingent when you change one of your assumptions. And he worked out a deal with them, where he said rather than paying you an enormous amount of fixed cost in order to actually create recalc, we'll pay you one dollar for every copy of Excel which is sold. Everybody thought this was a great deal when Excel 1.0 came out. And everybody thought this was a great deal when Excel 2.0 came out. But by the time Excel 3 and 4 and 5 came out

Bill Gates was like, paying them a dollar for every copy of Excel which is sold is really, really expensive for us. We're selling millions and millions of these copies, and they haven't done anything for us since 1989. They're just collecting huge amounts of revenue. And for Bill this was incredibly upsetting because that's his strategy. He says, look, I want to be able to collect those dollars. And so he went to them and kind of casually said, well, how about we give you like 30 million dollars and we won't have to pay you the dollar anymore.

But these guys were smart. They put it into Excel and they figured out that it was worth a lot more to keep collecting the one dollar at a time. And they said, no thanks. Right? And they kept collecting and they kept collecting and they kept collecting and they kept collecting and kept collecting. And finally, I think it was in 2010, they announced that they had finally bought out this group for something like 150 million dollars after having given them one dollar for two decades of every copy that Excel was in there.

That's a really nice kind of business to be in if you could be in the right place at the right time. Those dollars really add up. The second part of the ecological niche is a specialty skill. You basically create an incredibly narrow capability with high barriers to entry. And so, for example, there are a lot of medical practices like this. You become a hand surgeon, but not just any hand surgeon. You specialize in removing skin cancer on the hands, but not just any technique of removing skin cancer on the hands.

You use a particular technique which leaves no scars. Right? You're talking about a segment of a segment of a segment. You spend your whole life learning how to do this. You are clearly the best in the world. You can charge whatever you want to a tiny fraction of customers who want to actually have this done. You now have a natural monopoly on a tiny little market. It can be a nice little living. It can support more than one physician for sure. You can bring in hundreds of thousands or millions of dollars a year. You don't have too many tens of millions of dollars opportunity.

And finally, there's the specialty market strategy where you are deliberately trying to appear unassuming and unthreatening to the main competitors by flying under their radar. By basically saying, you don't have to worry about us. We're not a threat to you at all. At least until you're ready to actually fight them mano a mano. So a case study which is near and dear to my heart on this is Dr. Pepper. Dr. Pepper followed this strategy very effectively as it spread from Waco, Texas, obviously, through a lot of different drug stores and grocery stores in the south.

Coke and Pepsi had been going at it with hammer and tongs in the cola wars for decades and nobody cared about Dr. Pepper because they didn't think of Dr. Pepper as a cola. Dr. Pepper was marketing itself as a fruit drink. And they said, well, we happen to have this drink which happens to taste more or less like prunes, although they dropped that from their advertising, thankfully. And they said, we have this other fruit flavored drink. We're not a cola. When you think about it, Dr. Pepper is a fizzy beverage which is brown and it contains caffeine.

It kind of tastes like what a cherry Coke might taste like if you put some other spices in it. It has cinnamon in it the same way that other colas do. By the time Coke and Pepsi said, hey, we really have to worry about Dr. Pepper. There are some people who like this a lot and they're buying Dr. Pepper instead of Coke and Pepsi. Dr. Pepper had already set itself up so that it had bottling plants and it had loyal customers and it had distribution arrangements and it was in every vending machine and they weren't going away.

And so this is brilliant. Coke and Pepsi stamped out literally dozens or hundreds of competing soft drink brands, but they never worried about Dr. Pepper, because Dr. Pepper flew under the radar until it was large enough and they had a big enough fan group of people that they said, now we don't have to worry about it. So this strategy is often called the puppy dog strategy. If you actually Google on puppy dog strategies, you'll see a whole long list of industries which have been entered by rivals that nobody took very seriously until you realize that they kind of grabbed onto 10% of the market and they're not letting go.

So this is a way that new entrants can come into the market without getting completely smashed flat by the incumbents. And so finally, Drucker's original idea was to use a technique called judo strategy. This was something that was originally developed by two economists, Gelman and Salop at Georgetown and then followed up by a couple of Harvard Business School professors, David Yoffie and Mary Kwak. And the whole idea behind judo strategy is that you are using your opponent's strength and weight against them. I don't actually practice judo, so I have to use a rather broad metaphor here.

But the whole idea is that you're going to use your positioning and you're going to use leverage in order to exert a little bit of pressure on your big, lunky, and dumb opponent in order to get them to go flying across the room even though you couldn't actually punch them or lift them or anything like that. You're going to use their strength and their clumsiness against them. So I'd like to point out, this is a small list of things that small companies can do that large companies just simply cannot afford to do.

So for example, you can change your name. Coca-Cola is never going to change its name. If you're a small soda company, you can change your name as often as you like. You can give away your product free worldwide for a day. Coke could never do that. So you could run a really outrageous ad campaign. So for example, you could use a risque theme. I recently taught a case on Minnetonka, which is a company that invented soft soap, pump soap in a bottle, who also brought Calvin Klein's obsession to the world.

And they had a very distinctive kind of ad campaign that featured very steamy kind of suggestive scenes with it that traditional perfume makers just would never run. There was a tiny little brand and nobody cared if it flopped. You've got nothing to lose, but if it really takes off, you can get paid off $10 million to one on your original investment. You can't do that if you're Estee Lauder, if you're Chanel No. 5. You could find your biggest customer and say, take a hike. Coke's biggest customer is McDonald's.

It could never go to McDonald's and say, we're never going to sell you a Coke again. Whereas, again, I'll just pick a soda manufacturer. If you're Dr. Pepper, for example, you could say to McDonald's, hey, we don't like the way you're, I don't know, treating your suppliers. We don't like the way you're setting up your, you know, your beef growing. Whatever it is, we're going to cut you off. No more Dr. Pepper at McDonald's. You could fire your biggest customer if you're a small company. And that's something that a large company can't do.

I'm not advocating this would be a good idea. I'm just saying it's in your arsenal of things that you can do. And if you can figure out how to get advantage, you can do this. You can sell yourself to a larger firm. Coca-Cola will never, ever be acquired by a larger firm. There is no larger firm out there in the food and beverage industry. What are they going to do? Merge with General Electric? I mean, how is that going to work? You can go and latch yourself onto a larger firm, which has the resources and capabilities that you don't.

And all of a sudden you can start using their offense and defense in order to help you out. You can tear up your business plan. You can say, that didn't work out. We invested $100,000. It's not working out the way that we thought. Let's pivot. Let's salvage what we can, tear up our business plan, and go into a new business entirely. Coke can never do that. These are strategies which you can do as a small firm that they cannot do as a big firm. And so because of that, you have to think of these as assets of being new, rather than liabilities of being new.

So Malcolm Gladwell, a couple of years ago, wrote an interesting book called David versus Goliath, where he talked about the ability of small firms to beat large firms in these markets. Something that I've been teaching about for 10 years, although Malcolm didn't seem to find any of my work out there. And the whole story here is that you're taking advantage of your big, strong, hulking opponent, and you're using their strengths against them in a very particular way, enabling them to cooperate in their own destruction. So I'd like to give you a little Jeopardy quiz here. Many of you probably think you know the story about David versus Goliath.

Epic battle, Valley of Elah, Old Testament, shepherd, becomes king, big hulking guy, Philistine, spears. Okay? So the question is, crossword clues S, five-letter answer, with what weapon did David slay Goliath? According to 2 Kings 7 or whatever that verse is. With what weapon? Starts with S, five words. So how many people think they know the answer? How many people think the answer is sling? Okay? You're wrong. Now how many people think they know the answer? Okay? How many people think the answer is stone? You're wrong. What's the answer?

Now how many people think they know the answer? Sorry? No, that's more than five letters. Sorry. Okay? No. The answer is sword. Right? David goes and picks up three smooth stones. He does not go up to Goliath and say, hey, how about we duke it out? It's like in The Princess Bride. You mean I put down my sword and you put down your rock and we try to kill each other as nature intended? He does not close ranks with Goliath. He basically takes a stone. He spins it really fast. He hits Goliath right in the middle of his big old forehead.

and knocks him down to the ground. And while Goliath is rolling around down on the ground, partially unconscious, David takes Goliath's own sword and beheads him with it. Okay? That's the part of the story that everybody forgets. So choose a weapon that you actually know how to use. Hit them in a precise place where you say it doesn't make any difference how big they are if they're rolling around on the ground. Right? Let them actually fall down. Give them time in order to lose their ability to hit back at you.

And then step four, which is kind of like after the question marks and profit, is you say, use their own weapon in order to destroy them. It would have been really hard for David to kill this seven and a half foot giant with like a little sling and a couple of rocks. Right? He needed that sword in order to actually finish the job. And finally, don't act like you know what you're doing. Don't explain your brilliant strategy to your rivals until it's far too late. History is full of this.

So now I'm going to invoke 80s singer and classic management theorist Julie Brown. Not to be mistaken for downtown Julie Brown, you understand. This is the one from Earth Girls Are Easy, who had a hit song called I Like Them Big and Stupid, which you can actually see on YouTube. It's classic 80s bubblegum pop. The whole idea is don't play with your food. Do not, like every James Bond villain ever, explain your whole strategy to your rivals before you do it to them. Can you imagine how the world would be different?

If David confidently sent out a press release saying, you know, I've been selected in order to do this task, and I picked up some smooth stones, and my strategy is I'm going to go and hit him in the middle of the head with one of these stones before he knows what's happening, and knock him down, and I'm going to use his own sword to kill him. Don't do that. You rely on the fact that your opponent does not realize that they are vulnerable. This is a problem that every evil overlord ever in any book or film makes.

So there's a classic evil overlords advice list on the internet with 300 principles of how to manage world domination like this. Do not explain your strategy. Do not put it in your business plan. Do not publish it. Do not give interviews to magazines explaining how you are going to defeat the giant companies in here. I see these companies making the mistake all the time. They're laying out their strategy, and they're giving their opponents an idea of saying, hey, maybe I should wear my helmet. Maybe I shouldn't bring that sword. Maybe I should stay far enough away

That I don't get hit with the rock. You're giving them a chance to actually defend. Don't let them take advantage of that. You are the one who has the idea. Make them pay for the fact that they didn't have this idea. So I've been talking about assets and liabilities of newness. If you're familiar with the accounting concept of net worth or shareholders' equity, when you take assets and subtract liabilities, what you're left with is net worth. And I want to give you this graph, which is from the Census Bureau's Division of Government Statistics.

on job creation in the United States. It turns out 100% of all of the net job creation in the United States is done by new firms. Not small firms, you understand, although most new firms are pretty small, the same way that babies are pretty small. New firms. Firms that have been in existence zero to five years. And so that's the blue line up here on the top. Those are net new jobs created by new firms. This middle, the orange time series in the middle, which is kind of bouncing around zero.

bouncing around zero are firms that have been in existence for six to ten years. They're more or less breaking even. They've gotten to a mature stage. They've gotten about as big as they're going to be. They're past their massive growth stage. And they're in steady state. They're profitable. It's a lot more profitable to be a firm that's been around for six to ten years. But you're not hiring any more people, which probably says you're not actually growing. And then there are the old firms, which are the yellow series.

You see that these old firms are on net-shedding jobs. Now, they could be increasing their profitability by downsizing or rationalizing their workforce, but in general, they're getting the tar wailed out of them by these new firms. These new firms are putting them in their sights and saying, I'm going to go and take you down when you are least expecting it. Every bit of all of the new job creation which is happening in the United States comes from firms that are less than five years old. Not small firms. Not small business. Young businesses.

Despite all of these liabilities of newness. Despite the fact that customers don't really want to buy their product. Despite the fact that they're inexperienced. Despite the fact that they don't know how to imitate. Despite the fact that they could easily be grounded to anchovy paste by any one of these incumbents who decides to notice them. They create all of the net jobs in the US economy. So think about that in terms of the net worth of being new. You have a lot of assets and you have a lot of liabilities.

On balance, the field of competition is tilted in your favor. The odds are biased in favor of success for these small firms, despite these liabilities. But the reason why these small firms are actually able to succeed is because they figured out a plan to actually deal with some of these liabilities. As I mentioned before, don't fall for them. Come in with some experience. Tell your customers about them. Demonstrate to customers that there is a cereal out there that's better than cornflakes. Give them a free sample, right? Hand out a little cup in Sam's Club and say, try this. I think you'll like it.

Make it easy for them to experience why your quality is superior. If it turns out that you need to get customers to be aware of you, think of a way in order to get lots of customers to be aware of you without taking out Super Bowl ads featuring sock puppets like pets.com. Address these liabilities of newness directly and you'll be in a position so that your assets of newness exceed your liabilities of newness enough that you can actually have some net worth for your startup. That's the major piece of my presentation. I'd be glad to have some questions if you have any.

Thank you very much. Go ahead. Should I give him the microphone at this point? Okay. I'll just point it. Oh, I mean, it depends. It's the relationship between what the firm is good at and what kind of competitive position you're trying to insert yourself in. I mean, I love judo strategies as a way of thinking about inserting yourself into a position because it's almost always correct to think about ways to take advantage of the fact that you're the little new guy. But you have to use a blend of all of these things. It's certainly not one strategy fits all.

And so when Peter Drucker talked about these strategies in 1985, he was marveling at the idea that there were four strategies that seem to encompass all of new firm's successes. I don't think anybody has invented a fifth strategy yet. So these four strategies have held up pretty well over the past several decades. Please go ahead. Where would I say that crowdfunding fits into the strategy? So crowdfunding is a method of financing that gives new firms an opportunity to get capital when they desperately need it, even though they're new.

I would be skeptical of saying that crowdfunding solves all of these problems, even just the problems of capital availability. Because when you are trying to get investment from one investor, from one angel or one VC firm, you only have to go and pitch to one person. Whereas when you're crowdfunding, you have to go and persuade large numbers of people who are putting smaller amounts of capital into your business. It can be harder to do that. I mean, you're not taking advantage of the fact that nobody knows anything about you.

And so in some respect, I think crowdfunding is better for established firms that want to grow. Firms that have been around for 10 years, but actually want to expand their operations, rather than brand new firms that nobody's ever heard of. Because I mean, I wouldn't want to put $10,000 into a firm that had never done anything other than written a business plan, right? It seems like it's better suited for growth capital than it is for startup capital. On the other hand, any capital is better than no capital.

If it turns out that you can't get it from banks, and you can't get it from equity offerings, and you can't find somebody who's willing to put a substantial amount of capital behind you, because they view it's too risky, if you can conduct some kind of guerrilla marketing campaign that gets a large number of people to give you small amounts of money, because they want to see change in the market, you might be able to play up the idea that you are the little guy trying to take on Goliath.

And generate some money through that sympathy idea. So I think of, say, GoFundMe crowdfunding as being very different from, say, something going through crowdfunder.com. Disclaimer, I'm an investor in two crowdfunding companies. So, you know, I know something about the challenges of getting crowdfunding campaigns to actually run and close. It's a great idea, but in practice, it turns out you're signing yourself up in order to close hundreds of small deals, rather than closing one big deal, and that can be very difficult, the same way, you know, if you want to go and buy 100 condos, you'd rather go and buy them in a package.

rather than going and trying to negotiate with 100 individual landlords. So there could be a crowdfunding-based solution out there, which is ideal for taking advantage of assets of newness, but I don't think it's been formed yet. Go ahead. Well, so, yes. The question is, is there a relationship between the probability of success and how a company is capitalized? So aside from the fact that I would say, well, having a capital cushion is better, right? You know, a lot of firms go in to these competitions being

Incredibly marginally capitalized. And this is like going into a heavyweight prize fight having almost starved yourself beforehand. It's not a good way, right, to make weight. It's not a good way in order to actually approach any of these problems. You know, aside from saying more is better, what you'd really like to do in terms of your capital structure is to find investors who are willing to bet on something very specific happening that doesn't require you to be profitable. And so, for example, rather than having equity financing where you have to actually generate net income

and pay out dividends or get acquired or go public in order for people to see a liquidity event, you'd like to have some kind of contingent capital where your investors are making a very substantial wager that says, for example, you'll be able to sell 100,000 floating vacuum cleaners, right? You're able to achieve some particular business goal. You know, revenue sharing or royalty-based financing, for example, works very well in those kinds of settings because you as the management team can persuade investors that indeed your product works

and that you'll sell some without having to persuade them that you can actually control your overhead and your fixed costs enough in order to make a profit. And so you may find investors who are willing to take that very particular kind of risk and put money into it that you would otherwise not be able to get. Again, Coca-Cola can't do that. Can you imagine a publicly traded company like Coca-Cola saying, oh, by the way, we're going to go and trade away 8% of the revenues from our beverage division?

To this other company who's going to try to build a space hotel? They'd have a shareholder revolt on their hands. Whereas as a small company, you can get all of your shareholders together in one room and say, we're agreed that we want to do this, right? And just go forward. You're taking advantage of the fact that you're small and nimble to do that. Go ahead. So the question is, how important is corporate social responsibility to get people interested? So it's a plus. There is a class of investors and certainly a class of customers.

who are willing to pay premiums for companies who are responsible. I would say, however, that that strategy is no longer new, right? I mean, it was revolutionary 10 years ago, but kind of everybody has picked up on the idea that there are people who will pay premiums for green products and there are investors who really want to push companies in that area. I would say it's becoming really, really competitive to be green enough to stand out, right? That's just one aspect of social responsibility, environmental responsibility.

Or to say, we're employing people who come from disadvantaged minorities. We're trying to pay a living wage. Anything that you pick. Somebody has already identified that as a key driver, right? We sell a pair of shoes. We give a pair of shoes. A lot of those, if you will, gimmicks which have as their prime focus to generate awareness for the product have been tried. And you find that you're competing for Mindshare with other people who have it. So I would say, yes, it will work, but you have to find some kind of theme.

that matches up to the group of people who will actually care. And they won't say, oh, you're just trying to be another Tom's, right? Oh, you're just trying to be another Costco. The trouble is, you don't get credit for imitative strategies for being responsible. They have to be original. And it's far easier to rip off and copy somebody else's strategy, right? A third cheaper and a third faster to do that. And so I would say, they do work, but it's not nearly as easy as you would think.

Go ahead. Yeah, you said that Coca-Cola can't just jump in because of their shareholders? Right. Isn't that exactly what Apple did when they went into phones? I mean, that's a completely uncharted territory they jumped into, unrelated to anything they ever did. So Apple is an anomaly. That's a question. Yep. So the question is, I said, you know, I'm talking about how it's difficult for Coca-Cola to move around. And, you know, Coca-Cola is not the only behemoth that I could be picking on. I could pick General Motors, right, IBM, et cetera. But Apple is something of an anomaly in this situation, right? And the question is, how can Apple get away with betting the company over and over again?

on one particular product and having their shareholders kind of go along with it? So I think there are two answers to that. One is, and we know this from history, Steve Jobs in particular bet the company repeatedly. He was just constantly pushing all of his chips out into the center of the table and declaring himself all in. And he was the luckiest SOB ever in terms of winning those product markets that he absolutely positively had to win. And so he doubled up and he doubled up and he doubled up again.

And he never actually lost one of these things. You can believe that if Apple went and spent billions and billions of dollars on these new product launches without consulting shareholders and telling them what's going on and explaining what the risks were, and then something went wrong, they would be sued from here to oblivion. It's just that that hasn't happened yet. So it's very hazardous to look at Apple's strategy because, of course, any company can gamble. But the odds will catch up with you if you keep doing these incredibly risky things for

Larger and larger amounts. And so, for example, I hear that Apple wants to go into the smart car business. That they want to have a self-driving car. This sounds like the dumbest idea I have ever heard in my entire life. Okay? So I hope that they are not actually serious. I think that what they're doing is they're floating the idea to see whether their shareholders will endorse it or not. But I sincerely hope for the benefit of Apple's shareholders, who are doing very well based on iPhones and Macs and things like that, and in particular for the add-on services that

are available in higher-end iPhones. I seriously doubt that their shareholder wealth will be improved by Apple diversifying into smart motor vehicles and deciding to compete not only against Google, who has a huge jump against them, but they're going to compete against Tesla, too. And they're going to compete against General Motors. And they're going to compete against Ford. And they're going to compete against 100 other startups who are in the formation stage now, trying to create self-driving cars. I just don't see it happening. Where does Tata tie in?

Okay. So I actually don't know where Tata is tying in on the electric car. Do you have a case study that's going on? Sorry, I'm jumping. Yep. Where would Tata go to their standards in India? Well, it's a good question. I mean, I assume that they're going to be able to pass the safety requirements and things like that with their lower-end cars, while still being able to control costs on their higher-end cars. I think of Tata as being a manufacturing conglomerate rather than a brand retailing conglomerate.

Brand, you know, retailing conglomerate. Range Rovers are a pretty high-end car. They require precision manufacturing capabilities. And the fact that they're getting steel at lower prices because they're vertically integrated into it, that doesn't give them a huge advantage in actually going into Range Rover, you know, any more than, you know, Chrysler got an advantage when they were integrated with, you know, some of the luxury German brands. I think that if Tata wants to enter the United States market, it needs to ask itself two key questions. It needs to say, what is this new U.S. business going to do for our firm overall, for our global

firm? Why would we want to do this? And second, what can our firm in India and its capital base and its manufacturing excellence do for this new US startup? I mean, I think each of those questions is quite challenging. It's not enough just to say it's a big market and we have zero percent market share and so any market share would be good because we're going to get revenue. That's a terrible reason to actually diversify and branch out into a new area. You have to have a very strong and compelling reason of saying, not only will we be able

To make our car company in the US better than other car companies in the US because we have steel and manufacturing and IT consulting and other diversified things in India and for that matter in Great Britain. But also, why should we care? Why is it that success in the US car market would make us a better steel company, IT consulting company, or luxury car company in Great Britain? I think that second one is a lot harder to answer than the first one is. And so if you have answers to one of those and not the other, all you have is half a strategy.

And so I would predict that if they went and tried to invade the US car market, they would fail spectacularly like almost every other company that has tried to invade the US car market. A little piece of strategy trivia for you. It turns out that there was a study done about the life cycle of the US car company, so between Henry Ford et al. and the shakeout which resulted in General Motors going bankrupt, where people meticulously went through and counted the number of companies, actual marks of cars, complete automobiles, that have been offered in the United States.

How many different brands, lines like Buick or Rio or VW, do you think have been offered in the United States since the first gasoline-driven car was offered? Approximately. 100? 1,000? This is like the Price Is Right. Right? 1,001? So the answer is 2,350. Now, almost all of them lasted less than two years. Some of them had like two steering wheels where you and the passenger were sharing the guidance responsibility. Some of them had three wheels or five wheels or six wheels. Some of them didn't have headlights.

Right? But there have been literally thousands of companies who have said, I know how to make a better car than is out there. And every one but, say, five, has gone down to destruction. And so that's just in cars. Right? There are higher tech markets than that that are harder to get into and succeed. But you know, that's a cautionary tale. No student believes that it's more than about 100 because they've only grown up knowing about 20 different kinds of cars. But literally there have been thousands of failures in the US car manufacturing business.

I'd like to do that same study on airlines actually. Because airlines have destroyed an enormous amount of shareholder value over the past 30 years. Southwest Airlines has been the only airline company, the publicly traded airline company that has a positive return on equity over the past 30 years. And it would be really interesting to count all of the different airline companies who entered the market and said, you know, we're going to lose a lot of money if we stay here. Maybe we better go back to where we started.

I think that we're going to find that airlines are even more difficult to succeed in than cars. And so I'm skeptical that Tata will be able to land its products in the US. When General Motors decided that it wanted to enter China, it went into a joint venture with a state-owned company in Shanghai. And it was very, very clear it was only going to share technology into China that it wasn't worried about China introducing into the US. And so they shared lots of technology from Buick because they weren't really worried about

Chinese companies coming in and making Buicks that were 80% as good as US-made Buicks. But they did not want to share information about Cadillac because they said, we do think that Chinese companies could come in and potentially undercut us in the Cadillac market. I suspect that if Tata did that, it would have to make something that was very, very like a Range Rover in quality at a price which is very, very much like a Ford Escort. And I just don't see that they have that much of a cost advantage to make it work.

So I have two comments about that. So one of them is, I certainly don't deny that Apple has managed to get its money in under favorable conditions. But indeed, it was probably 70%, 80%, 90% likely to win any one of these things where it was betting the company. But you can only go to the well so many times before you actually suffer some kind of problem with that. And everything looks really nice ex post until you have one failure when you're able to estimate. I would say you're describing a different decision from somebody who was thinking about investing in Apple common stock in 1990.

You're really describing something like a pair trade where you say you're going to buy Apple and short Microsoft at the height of Microsoft's power. And so you're benefiting not only from hindsight both on Apple and Microsoft, where Microsoft has been kind of flat or in competitive difficulties during that time, whereas Apple has zoomed up. But also you're saying you're not taking a position overall in the total increase in capitalization of these technology companies. It was not at all obvious in 1990 that everybody and their mother was going to be walking around in 2015.

with $700 smartphones in their pockets that were made by Apple. I don't recall them betting the company on the Apple Cube the way that they bet on, you know, the iPhone. I think that it's quite possible to say this company has an advantage that they're more likely to win than any other company that's there. They're clearly the favorite. I mean, you know, you could describe this in terms of a horse race without saying it is a deadlock that in any possible scenario Apple is going to succeed over and above these other companies. And, you know, certainly, you know, we know that in the short run the stock market is a voting machine

But in the long run it's a weighing machine. The stock market has said Apple has indeed created and captured a huge amount of value over the last two decades. But it's incredibly difficult for me to endorse the idea that says, oh, yes, you would have been able to see all of these things unfolding step by step. I don't see all these things unfolding, but it really had a vision, and the vision was important. And you also have to have faith in the person that's leading the company. Not only that, but the vertical integration allowed them a lot of flexibility. Because they were so vertically integrated, they were able to react a lot faster than Microsoft. Microsoft had to get all of the other companies; its expertise was very limited compared to Apple's, and it had to rely on a lot of other vendors to be able to provide these types of software support that Apple had internally. So that was the key to their success. I saw that in the '90s. Well, you know, certainly I can't argue with the success that Apple has had, not only its technology has put it, something that it's done specifically as a firm, but the way that the industry has evolved

Not only from, you know, continuing to be relevant in the personal computer market, but moving into the, you know, personal MP3 player market and then the smartphone market, certainly everything has come up roses for Apple. You know, I would just simply say, I don't think it's quite fair to the 99.99% of people who either bought Apple and sold it at some point during that time or who never bought Apple in that particular period to say, oh, you should have been able to see that Apple was going to be successful because it has been successful.

I think that the number of people who predicted that Apple was going to succeed in things is vanishingly small compared to the number of people who predicted other things. And so, you know, I firmly believe that Apple has been aided by things which could not have been foreseen. And it may be the case that they're going to be depending on that again. They might continue to win. I'm not saying that they're necessarily doomed. Although, if they decide to actually commit tens of billions of dollars of their available cash to an electric car.

right, to a self-driving car, I would think just about anything else that they would do would be better. Okay, so let's kind of move on to something kind of, you know, less related to a multiple, you know, billion-dollar market cap company and onto something that's effectively smaller. Final question? Go ahead. Please attach additional pages if necessary. So I've just completed teaching a, you know, a two-week series on Blockbuster's complete and utter dominance of the VHS industry, the challenges in adopting and switching to DVD at the right time. How do you relate it to the Apple thing? Which of those four strategies would you say, I know it's a combination, but which primary one, primarily, would you say Netflix used to overtake Blockbuster?

and then being basically eclipsed by video streaming, right, by Netflix in that area. So, you know, what Netflix does is it uses exactly the same value drivers that Blockbuster did in exactly the same way. The whole idea is people want to watch what they want to watch when they want to watch it. Blockbuster competed on having stores that were everywhere, having complete breadth and depth of inventory for people who wanted to drive up and get a VHS and be done. Netflix first competed by offering people DVDs by mail

Which was great if you happened to live next to one of their distribution centers, and terrible otherwise because you had to wait five days in order to get it. They then built 44 other distribution centers so that you could get your flicks a day later. They loaded up the channel so that you would have three Netflix discs on your kitchen table, so you wouldn't feel like you had to wait. You could go and pop in another disc immediately. And then they decided to go to streaming because they were having a huge inventory problem

Of keeping these discs actually in stock in all 44 of these locations at the same time. And they realized that they'd much rather do a revenue-sharing arrangement, right, and pay studios when their movies were actually streamed, rather than using some kind of bulk-buying arrangement like they did for acquisition. So I would say basically they just, you know, this was a full frontal assault on Blockbuster. It was not in any way subtle like judo. It was not trying to fly under the radar. They said our product is superior. We're going to start small. We're going to grow organically.

We're going to go and figure out how to actually provide a better experience to people from Blockbuster. Well, Netflix was founded in 1997, which was the year that the first consumer DVDs were available. And so I don't think they're second to market. They were not certainly the first people to play with the idea of renting DVDs to people, but I do believe that they were the first major DVD by mail company. They were not the first streamers, but I think they were the first subscription-based company

Which is a business innovation rather than technological innovation. And certainly they were the first company in order to evoke the preferences of the viewing public by setting up the queue. That gave them a huge informational advantage over all their rivals, simply by knowing exactly what they needed to stock. And so I would say Netflix used business innovations rather than technological innovations in order to go and take over. Well, we should take into account the idea that VHS was the dominant technology for close to two decades.

DVDs lasted for about one decade, maybe a decade and a half. And streaming is still in its infancy. I don't think it's a foregone conclusion that Netflix is going to be, you know, a $500 billion capitalization company even with everybody subscribing at $8 a month by any means. And so, you know, we're looking at them. They're enjoying tremendous success. They're producing an enormous amount of value in the economy. I mean, I know a lot of people who subscribe to high-speed internet for $50 a month solely so that they can have Netflix, which they only pay $8 a month for.

So they're basically driving demand for telecom services like crazy. And people's value is much, much higher than what Netflix is capturing. They're doing quite well now. But of course, there's a limit to how much they can capture. There are only so many households who need Netflix subscriptions, right? And so the question is, will they be able to sustain the growth that they've had? Or will they simply kind of top out and become a cash cow the way the Coca-Cola is? Well, Redbox has a streaming service too. It's just not very good, right?

And, you know, Amazon has a streaming service and they have this, you know, marvelous one- or two-day delivery of DVDs that you actually buy for $6 and want to hold in your inventory. I actually think of the physical DVDs going away. I think of the idea of having hundreds of DVDs in their library as something which is a passing fad and people are going to look at this like, you know, your 8-track tape collection, right, in 10 years, right? People are going to say, look, don't you pay for movies by the month?

The same way that you pay for music by the month. Yeah, exactly. But, you know, I think of the DVD is going to turn out to be the one where you say everybody thought this was a great technology, but DVDs and Blu-rays in their physical form are going to turn out to be largely irrelevant as we go forward. And Netflix is a really interesting company. As I said, I recently taught a case on not only how Netflix managed to help Blockbuster kill itself basically, right, help Blockbuster make some critical mistakes, but also how it managed to systematically exploit the fact

that it was doing exactly the same thing that Blockbuster was doing for its clients, only better. Saying you don't have to do anything really revolutionary, you just have to kind of keep on soldiering on this same value proposition of saying we're doing it better, you're getting it faster, you can be more impulsive about what you want to watch and when, and we have a broader and broader and broader selection, and certainly they seem to be in a position to dominate the market, until some sharp-elbowed new entrant comes along and says we think we can do better than Netflix

As long as we can manage to get somebody to pay attention to us. Okay? Thanks very much for your questions