Power Punching

Dear reader, I read a fascinating article recently about the “Myths of Power Punching”. It discusses Floyd Mayweather’s victory over Connor McGregor by TKO.

Going into the fight, many believed that while Mayweather may have been the better and more experienced boxer, McGregor possessed “one-punch knockout power”. In the end, McGregor was the one who was knocked out.

Raw size certainly matters: Physics dictates that Force = Mass x Acceleration. The larger the fighter, the more force they can generate. The article argues, however, that McGregor’s famed knockout ability is based more on skill than size, and has always had 3 components:

1. Creating Collisions
In addition to Mass, the other component of Force is Velocity. Instead of just trying to become quicker (for which there are natural limits), one of the most powerful ways to double velocity is to create a collision. Two cars travelling towards each other results in a much deadlier collision than if one car hits the back of another.

2. Importance of Accuracy
It is far deadlier to hit someone on the temples or the jaw, than on the forehead. Where you hit is as important as how you hit.

3. The Element of Surprise
It’s the punch you don’t see coming that will knock you out. The strongest, most violent punches are often also the most obvious. Unexpected punches when your guard is down are the most dangerous.

What interests me most is the applicability of such ideas to general strategy.

1. Creating Collisions
Can you increase the “power” of your company by meeting the right markets, at the right time? Too many companies are solutions in search of a problem. Do you create product/market fit? What problem do you solve for your customers?

Companies like Uber and WhatsApp demonstrate the power of the right product meeting the right market at the right time: even in the absence of “traditional” management structures and business planning.

2. Importance of Accuracy
Avoid the danger of mistaking efficiency for effectiveness. Efficiency is doing something well. Effectiveness is doing the right thing. What you do, is often more important than how you do it.

The 80/20 Pareto principle pervades most things. For most businesses, 80% of revenue comes from 20% of clients. Conversely, 80% of problems usually come from 20% of clients.

Focus on what is essential, and discard the rest. All of Apple’s products will comfortably fit on a single table. It is the daily decrease, not the daily increase, that counts. Simplify.

3. The Element of Surprise
Most people think in terms of linear improvements. Is there a way in which you can imagine a step-function change in what you are doing? In solving problematic mathematical proofs, Carl Jacobi admonished: “Invert, always invert.” Meaning: start from the end and solve backwards. Consider the opposite or counterfactual of the problem you face.

In its early days, Airbnb realised that it needed to hit a critical mass of listings in each city, and that what drove stays was having good pictures of each property. So instead of waiting for people to take their own pictures, they paid professional photographers to go around and do it for their customers. PayPal likewise paid early users, in order to achieve network effects.

What if you, likewise, did the opposite of what everyone else in your industry is doing? What if you inverted fundamental “truths” of your industry, like cryptocurrencies are doing with payments and banking?

Yours Sincerely,
Henry Chong