“Is this photo a dumb idea? It’s kinda dumb, right?” — Me
“Yeah, but it’s you.” — My wife
Divinations is a newsletter on business strategy featuring original essays that explore classic frameworks from thinkers like Christensen, Porter, and Helmer, and use them to understand today’s most important technology and media companies.
It’s written by me, Nathan Baschez. I’ve worked in product roles at Substack (yes, this website!), Gimlet, and General Assembly. I founded a company aimed at reinventing books, called Hardbound, that Fast Company named one of the top 10 apps of 2016, and Apple’s editors called “beautiful.” Also, I co-created Product Hunt.
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A year after I graduated from college, I accidentally got my first exit.
It happened a month after I hacked together a little web app that let you write HTML and CSS, see a live browser preview, and collaborate in real-time with friends. (Like Google Docs, but for code.)
There was no strategy behind it, really. I just thought it’d be cool. So I spent a week building it, and then submitted it to Hacker News, where it stayed on top all day.
Probably forty thousand people visited the site that day. One of them was Brad Hargreaves, a co-founder of General Assembly. He sent me an email, we had a call, and a month later, I flew to New York to sell him my little website. That’s how I got my first job as a Product Manager.
In the grand scheme of things, this was perhaps the tiniest exit ever. But at the time I could not believe it was happening. I had only the fuzziest understanding of the forces behind it. I was thrilled, sure, but also a little terrified.
Was it just dumb luck? Or could I do it again? Perhaps even build a real business?
Meanwhile, I was pulled into a new world where, for the first time, I got to see how “business people” think. Through dinners, meetings, and hallway conversations, I became familiar with the thought processes that justified the company strategy. There were certain patterns in the logic and language that kept recurring. I wanted to know what they meant. Even more, I wanted to be able to make the decisions myself, one day.
So I became obsessed with strategy.
What is strategy?
Every strategy is really just a theory: “We bet if we do x, then y will happen.”
X is everything in your direct control—the activities you do. It’s the research, planning, building, selling, recruiting, pitching, etc.
Y is everything outside your direct control—the activities other people may (or may not!) do. It’s the noticing, considering, buying, using, joining, investing, etc.
The goal of strategy is to devise accurate theories. It’s the art of choosing what to do. (Execution, on the other hand, is when you put theory into practice—actually doing “x”.)
What is business strategy?
In business, the y that people are usually aiming for is some sort of sustainable competitive advantage. Let’s break down why, and what that means.
Businesses are machines that generate cash flows. Some are big, some are small. Some grow fast, others plateau. Some are erratic, others are as reliable as Old Faithful.
Lots of people would obviously love to own a machine like this, so any time someone manages to build a good one, lots of people try to copy the design. The problem is, when there are lots of copies floating around, the original machine tends to breaks down. Each machine occupies a unique ecological niche, and can’t withstand a lot of crowding around the key resources it needs, like customers, labor, supplies, etc.
But sometimes, people manage to create money machines that are clone-resistant, and therefore incredibly durable. This kind of machine is worth many times the amount of money it spits out today, because you can count on it to keep spitting out money for a long time. Everybody wants one.
So, how do you make one? You’ll need a “sustainable competitive advantage.” No two are exactly alike, but they do share similarities, and loads of business theorists have created taxonomies and frameworks that enumerate them. Turns out, strategy is a rabbit hole that goes as deep as you like.
And back when I worked in that job at General Assembly, I dove as deep as I could.
Theory, meet practice
After months of reading The Innovator’s Dilemma and watching bootleg Michael Porter HBS videos, I started to try and put some of this knowledge to work.
One time, I was talking to our CFO in the elevator, and I think he mentioned something about fragmented instructor base being good for us. I said “Ah! Yeah that’s one of Porter’s five forces — the bargaining power of suppliers.” At first he looked at me with a surprised grin, like how you’d look if you saw a dog on a skateboard, then he just smirked and said “Porter, eh?”
The message was subtle, but clear: it’s a little lame to bring up frameworks from books like that. It’s not that the ideas are wrong, exactly. It’s just that they’re too abstract to be useful in this context. Getting excited about them marks you as an egghead who is more interested in academia than reality.
In my experience since then with many varietals of “business people,” I discovered that this attitude is widely held. The thing that felt so vital and interesting to me seemed almost useless to everyone else.
So I tried to figure out why. Turns out, they have an interesting point. Sometimes strategy can kill an otherwise great business.
A little strategy is a dangerous thing
You should be wary of strategy for three reasons:
First, it’s abstract — business school theories aren’t sufficient to create good strategy, let alone execute one. The most valuable knowledge, by far, is highly specific. For example: a subtle shift in consumer expectations or beliefs, or a cheaper way to produce a critical good, or a tiny corner of the market that’s growing faster than anyone realizes. This kind of knowledge matters much more than broad ideas like “the five forces” or “jobs to be done.”
Second, it might not be relevant to you — most strategy theory is made for people managing big businesses. Startups, in my opinion, are still undertheorized. Sure, there’s tons of “startup advice” to be found on twitter and in blogs, but no systematic thinking on the level of a Drucker, Porter, or Christiansen has emerged yet. (In my humble opinion.)
Third, and most importantly, it can cloud your focus — When you’re more focused on abstract concepts like “network effects” than on user needs, it’s easy to devise a plan that looks good on paper, but bears little relation to reality. (Just ask Magic Leap.) Strategy focuses your mind on what’s good for you, which means you’re not focused on figuring out what people actually want. This is why MBAs had a terrible reputation in Silicon Valley after the dot-com crash.
I can feel it in my own experience: When I was building my little code editing website, I wasn’t thinking about how I would profit from it. The inspiration came from my experience as a user of these types of tools.
Had I spent all my time obsessing over business strategy, I probably never would have noticed it as an opportunity. Furthermore, if someone had come to me with the idea, I would have told them to do something dumb like forcing people to login with Facebook and auto-post to their newsfeed. (This was really a thing back in 2012!)
Ironically, sometimes it’s more strategic to be user-obsessed than strategy-obsessed.
“Drink deep, or taste not the Porterian Spring”
But does this mean we should just ignore strategy? I don’t think so. My hunch is that Alexander Pope had it right in An Essay on Criticism:
A little Learning is a dang'rous Thing;
Drink deep, or taste not the Pierian Spring:
There shallow Draughts intoxicate the Brain,
And drinking largely sobers us again.
(The Pierian Spring is a metaphorical source of divine inspiration for poets and philosophers. The Porterian Spring, pictured below, supplies divine inspiration to business managers.)
If you were to ask anyone who runs any kind of successful organization whether strategy matters, my prediction is that 99 out of 100 would say “yeah, duh.”
The solution is not to ignore strategy, but instead, to push past the initial intoxication (“Strategy Drunk,” I call it) in order to achieve clarity.
When you hear stories of Bezos picking books as Amazon’s first vertical, or Systrom and Krieger building the “follower” model into the v1 of Instagram, or Weisberg and Zakin choosing email as their distribution channel for theSkimm when everyone else in the industry saw it as a toy, it’s important to recognize these decisions were not accidental. They were strokes of genius.
Reed Hastings, CEO of Netflix, said it best in his foreword to 7 Powers: “Execution alone will not ensure success. If you don’t get your strategy right, you are at risk.”
Strategy is hard. There’s a lot of information out there. Much of it, frankly, is shit. The goal of Divinations is to make it a little easier for people like me, who want to drink deep.
So here’s the plan:
Free subscribers get:
Occasional public essays on interesting new companies.
Full subscribers get:
Access to the Divinations resource library, curating (and summarizing/reviewing) all the best books, articles, and podcasts on strategy.
Unlimited access to the archives.
The ability to comment on any post. (I’ll answer all questions, and do my best to get interviewees to do the same!)
Last, but certainly not least, you’ll provide the fuel for me to dedicate time and energy to making this as valuable as possible for you and you alone. (No clickbait, ads, etc.)
I’m not sure how many strategy nerds like me exist in the world, but I don’t think it’s that many. And I want this to focus truly on the people who are fully bought in, without pandering to a “lowest common denominator” audience. So I need my pricing to work even if I’m not reaching millions of readers.
At the same time, I realize that Divinations is a new and unproven newsletter, and it takes time to build sufficient trust to merit a paid subscription. So I’m trying something new with my pricing.
Subscriptions will cost $200/year, but I want to discount them heavily while I’m getting my sea legs. So for the next week, you can get your first year for $50 (a 75% discount!)
I'll raise the price every week until it seems like it’s not a good idea to keep raising it. So next week, your first year will cost $60, the following week it’ll be $70, etc.
If you ever want one, email me and ask for a refund. I’ll give it to you, no questions asked. If this isn’t creating value for you, I want to know! And I want it to hurt! It’s critical information and I don’t want to be shielded from it.
Also, if something ever happens that causes me to not be able to fulfill my commitment to you, I’m refunding you for that time.
If you want a subscription, but the price is an issue for you because money is tight, email me. I’ll make it work for you.
If you’re on the fence, just email me! I’d love to chat. I’m nbashaw at gmail.
Epilogue: My ulterior motive
I gotta admit, I’m not doing this because I love helping people create money machines.
To me, the most exciting thing about strategy is how disorganized and unscientific it is—what an opportunity! I love questions like: How much further could humanity push our collective understanding of strategy? How many new businesses would be created if the knowledge was distributed more widely? How much could these businesses accelerate human progress?
Now feels like a moment that’s ripe for a revolution in our understanding of strategy. The internet obsoleted so many long-held assumptions in business, it’s become a sort of natural experiment to help us separate the essential from the accidental. There’s nothing like fresh, confusing data to move a field of study forward. Thinkers like Ben Thompson have emerged to help us sort it through, and I think more will emerge and build upon this work.
But it’s not just our understanding of strategy that’s changing, it’s also our understanding of what strategy can be good for. It’s not just about making giant companies a little more giant. It can also be about creating cash flows that allow world-positive innovations to sustain their growth and achieve their highest potential impact.
Of particular interest is an essay The Atlantic published this summer by Patrick Collison and Tyler Cowen, calling for a new science of progress. They argue that in order to solve humanity’s greatest challenges, “one of our highest priorities should be figuring out interventions that increase the efficacy, productivity, and innovative capacity of human organizations.”
And as Paul Graham wrote just weeks ago, “There is so much more to learn about how to do great work. As old as human civilization feels, it's really still very young if we haven't nailed something so basic. It's exciting to think there are still discoveries to make about discovery.”
The prerequisite for progress is believing it’s possible. I asked on Twitter whether people thought business could ever become closer to a science, and the responses weren’t optimistic. I’m not so sure.
Why? In the words of Jason Crawford:
“It's true that we can't see today how we might solve some of the problems we face. But this has always been true, and it's the nature of progress. Just because we don't know how we'll solve problems, doesn't mean we won't. That, historically and philosophically, is why I'm optimistic.”
My deepest motivation for working on Divinations is to help contribute to that project—the project of human progress.
I’m optimistic, too.