Invest Like the Best with Patrick O'Shaughnessy
· 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?
· John Kim
[00:00:00] S1: The most common mistake is super easy — people over-index on logic. It blows me away. Logos, ethos, pathos, right? Logic, emotions, and values. Simon Sinek talks about the question why, which is actually your emotional and your value or your intuitive engine that actually makes you make decisions, and that the frontal lobe is what puts meaning to all of the feelings. Well, as it turns out, that's generally true. There are two ways I get people to remember this, that don't get confused with, here's the logic of why you need to do it. And usually the logic is, my returns are so great, I do such a great job. It's table stakes. But I always remind people of two things. First, I say, back to the difference between belief and trust. You can win the belief, this plane's not going to crash. I'm still scared — money's not going to move. So in other words, you got to get them past the fear. And people don't address the fear in the room. Biggest mistake is they stay with logic. They don't address the person in the room. They address the fiduciary objectives in the room. Second, the way I get them to remember it is, the phrase "-ization" literally means to create a condition. So you think of civilization means to take something that is hedonistic or brutish and to make it civilized. So you create civilization, but it does not start out as civil. To create organization, something is chaotic and dispersed, and you are creating that from something that is not naturally in its state into something that is now organized. Well, then what is a rationalization? Rationalization is you're taking something that is not rational and you are actually forcing it into becoming something that it is not, which is rational. In other words, rationalization is just the thing that we make up in our head to explain why we feel the way we feel. The most important thing to remember is that if you want to get to yes, it's desire minus fear. But desire and fear are both emotional states. They're both ethical states. And you have to win the hearts and bodies of the people and get them to a place where they are not instinctively scared. They trust you and they have an emotional desire or ethical desire to do this. Then the logic will follow. And the logic just helps define or helps justify the decision they want to make.
· John Kim, Patrick O'Shaughnessy
So the first mistake that everybody makes is that they think that the logic is where you're winning it. The logic actually is an output of a successful sales pitch, not the input. [00:00:00] S0: If I try to take that very helpful insight and put it in terms of what you said earlier, is it fair to say that in your equation of differentiation, fear is complications, track record is rationalization, and that differentiation is really the remainder — it's all this desire stuff. [00:00:00] S1: Well, that's pretty good actually. I think that gets you to quite a great description. Yeah, I love this. I've spent maybe 15, 20 years talking about track record plus differentiation divided by complexity of thought. And it's a trinity, just like any other trinity — size, speed, and terms; logos, ethos, pathos. And yeah, it does fit in that. [00:00:00] S0: After doing this in so many different interesting ways and seeing others do it in so many interesting ways, is there anything we've left on the table about the process and purpose of really good fundraising in a business that I haven't asked about?
· John Kim
[00:00:00] S1: The tactical part is what kind of person are you and what kind of person do you want to represent you? Are you looking for a salesman, a service provider, or are you looking for a Secretary of State? And what is a Secretary of State? Secretary of State's one of the most powerful people in the cabinet who actually is the one department where you actually don't have control over the constituents. You have control as a president over the Treasury. You do have control over energy. You do have control over Health and Human Services. You do have control over national security because you control budgets, you control influence. You do not have control over China. You do not have control over the UK. So therefore, you have to have a Secretary of State that actually allows you to interact with them and helps you create that and can represent you when you're not there. That's what a great fundraiser is, when you can send that person in and say, ah, this person is here. I know you speak for the president. And that's really hard to do. And it's fascinating how many people get this wrong. It's fascinating how when somebody asks me, well, what kind of Secretary of State am I looking for? I always say to them, well, what is the first impression you want people to make when you're not in the room? So if you think about presidents of the United States, President Nixon, he had Kissinger, kind of that look and feel of realpolitik. You take a look at President Clinton, he had Madeleine Albright — policy wonk of the highest order, United Nations ambassador. Incredible reputation of having the deepest international policy experience ever, exactly the image that President Clinton wanted. And then you take a look at Barack Obama. Barack Obama, he looks and says, Well, you know what? I want to be change that you can believe in. I want to be inspirational. And he also has very little foreign experience. So he hires his opponent to show that he can cross the bridge and also happens to be one of the most experienced people to ever sit in that chair — Hillary Clinton. It's just 100%, who do I want you to see? And that person has to be of industry. So when I meet somebody who says, well, the reason why I could be such a great fundraiser as an investment banker, as an ex-deal partner, is because I understand the system. I look and go, that's exactly the wrong person.