Invest Like the Best with Patrick O'Shaughnessy
· John Kim
If you know your bite size is going to be a certain amount, just plus or minus on a bell curve, and you know your conversion ratio is this, then all you do is say, okay, cancel Christmas, cancel Easter, cancel Valentine's. I'm just going on the road and I'm going to meet people. And by the way, who figured this out? Just the largest asset managers in the world. They're like, look, we're pushing our product through a conversion ratio. And our levers that we get to pull are how do we improve that conversion ratio? You can do it by having better performance. You can do it by having better differentiation. You can do it by reducing the complexity of your story. And now all of it ties together. Now appreciate you have to get past the hard reelect number, because that conversion ratio is artificially high. But once you get past your hard reelect number and you start getting the market and you're like, wow, one in ten people are saying yes, then it's really just a matter of, hey, how much do you want it? What do you want to get to? And so it's literally pipeline times conversion ratio times bite size. That literally is the only math that is important for a fundraise.
· Patrick O'Shaughnessy
[00:00:00] S0: I really like the simplicity of thinking through — you're raising money for a company or for a fund or whatever — starting with the law of differentiation, then thinking about these trade-offs, being deliberate about, intentional about what you're going to care about. And then it's the actual motion of going to do it, where conversion ratio is the thing. That allows us to come now to this idea of the drama triangle. So here's my value proposition, here's how I'm thinking about what I want. And here's the equation that's going to determine if I'm successful. Now I have to literally go sit and do meetings. And so I'd love you to describe this idea of the drama triangle and personas, because I think it's a really useful frame. If you're doing 100 meetings, it's a helpful thing to know.
· John Kim
[00:00:00] S1: There is a psychological framework called the Karpman Drama Triangle, and the idea is that we as people have a hard time accepting that we have agency in our lives. So we have a victim consciousness. And so when something bad happens, it happened to us. Life happens to us. When life happens to you, you're a victim. But when bad things happen, you're a victim responsible for what happened. And then when you're a victim, you're looking for a villain, and usually you're also looking for a hero. In a sales pitch, if you already know that this person is feeling victimized, or feels that something, in some way, is happening to them — if you can find out what that is, it is very easy then to craft a story that allows you to alleviate that pain. And if you can do that, then you become heroic. So for instance, somebody's complaining about the fees. You can, rather than saying, hate the game, not the player — which isn't so useful. You can talk about how you can mitigate fees if that will help them say yes. It's your choice. You can do that. And that allows them to say, okay, I've found a hero for my problem. I found a solution for my problem. That's really what they're looking for, a solution. But that's a heroic idea. If you can't be a solution, then you look at the villain and you have deep empathy for the villain that exists. And then you move into therapist mode. I've never met somebody who isn't better off by being empathetic to their problem. I've never met the person who has been shunned because they're overly empathetic to somebody's real problem that they've discovered. In fact, it's quite the opposite. You learn to trust them. And it is a very simple way to manage a meeting. Find out what the drama is, if there's drama in this person or these people. Do I have the ability to be a solution to that drama? If I cannot be a solution to that drama, can I empathize with that drama so they're listening to my solution as something that is useful to them? And in its own way, that's almost as much as you need to actually make sure that almost every sales call goes well, if you can find a wavelength to the person where they actually feel comfortable with you.
· Patrick O'Shaughnessy, John Kim
[00:00:00] S0: When I asked you, who are the great masters that you've encountered of building real trust? Who comes to mind and what is it that they're doing so effectively? [00:00:00] S1: Oprah Winfrey. And I would call Oprah's game a promotion of goodness. And people wanted that in society at that time. And frankly, I think people want it today. So what I mean by goodness is the combination of kindness plus conviction. You can be kind but not have any conviction. You can have conviction and not be kind. I think that whenever you saw Oprah open her mouth or whenever she presented something, there was a kindness to her, but there was a conviction that she stood for something, that she meant something. In some ways she preceded the podcaster, in that she had a conviction of what she wanted to get out of the person for the rest of the world to hear. Sometimes it was about pain. Sometimes it was about inspiration. Usually it was about inspiration. And so in terms of engendering trust, she did a wonderful, wonderful job of engendering trust with bigger audiences. She exhibited more institutional trust-building exercises like reciprocity. She would literally give gifts to the audience. [00:00:00] S0: Yeah, you get a car.
· John Kim
[00:00:00] S1: You get a car, right? But she also created consensus. She had the Oprah's Book Club. That was the mother of all consensus. The idea that this book club or these books are the best books for people to read — she became as powerful, or I would argue more powerful, than any of the best-seller lists. And that's a consensus idea. Who wants to read these things? Authority. She was able to use and recruit people with authority to talk about issues of our society that otherwise wouldn't have a stage. That's the podcaster's zone of influence today. She was able to create liking, which is a way of creating trust. I like you, you like me. And imagine how incredible this is in a population — that she's an African American woman. That she's able to sit, and she is a beloved individual in the Midwest, which tends to skew different demographically. But she's able to engender liking and she's incredibly empathetic. And so, consistency. She's very consistent with the way she actually brings people on stage and what she says and what she believes and how she was always able to give somebody something inspirational in a conversation. You never left a conversation with Oprah thinking, well, that was a downer. Just never happened. So if consistently, I'm gonna turn on the channel and I'm gonna see Oprah and I'm gonna be inspired, then that's her brand. And then the last one is scarcity. She had a scarcity about her in that she really didn't show up anywhere else but Oprah. You didn't see her in a lot of advertisements. You didn't see her doing other talk shows. You didn't see her doing anything else. She just was Oprah, and that's all she did. So if you want to see Oprah, you had to tune in to that, and that creates trust.
· Patrick O'Shaughnessy
[00:00:00] S0: So in this process that we've laid out, what are the most common mistakes that you see people make?