PODCASTS / E26
JULY 15, 2020
00:19 Welcome to Episode 26: How to Filter Advice. One of the most important weekly tasks for founders new to CPG is networking. And yes, you better damn well be doing it every week, or don’t admit it to me.
00:35 If you don’t build a broad professional network across stakeholders sets, your ability to source advice and expertise quickly when opportunity strikes will remain low, and then you will be faced to chase opportunities without the benefit of more experienced eyes guiding you.
00:52 I’ve avoided this topic, folks, for awhile, because I wanted to collect more stories from founders who took bad advice and suffered for it. I’m ready now to share the patterns I’ve inferred from the ashes of inventory burnt by taking the wrong advice. I do hope this helps founders learn to vet advice better, and seek it out proactively better as well. The latter being my preferred recommendation, is try not to become an audience to unsolicited advice of any kind.
01:26 First, there is the specter of decontextualized advice. It’s most likely to come from the older generations, who are most tempted, socially and culturally, to become patronizing douchebags. They often mean well, true. I’ve talked to them. But really, I think they’re just bored. Be it, a little clueless, about intergenerational interactions in 2020.
01:55 Decontextualized advice is generally coming at you unsolicited by the random hordes out there. The zoom hordes. What is it I’m talking about? I’m talking about advice that’s given without exploring A, your financial goals; B, your business model; or C, the specific competitive context of your offering in its category. All praise category analysis. Sorry.
02:20 It’s advice plucked out of past experience, detached from its original context, and then sloppily thrown your way as some kind of a gift. Thanks?
02:32 Decontextualized advice derives from a classic ego fallacy in human logic. I don’t have an Aristotle quote, but I’m sure he beat me to this concept.
02:42 My superficial read of your thing reminds me of a business I ran, or some such anecdote I know more than you about, yada yada yada. Poor extrapolation, weak interpretation, low content, shitty advice. It’s as likely as a coin toss to be correct. Do you have a coin? You probably don’t. You’re so digital. Awesome.
03:02 Unsolicited thought-provoking questions are the only thing you should happily receive from someone who hasn’t studied the context of your business. That, ladies and gentlemen, is the sign of the well-intentioned advisor.
03:18 You know, if I were you, I would take note of unsolicited advice anyways, but just don’t react to any of it unless you’re getting the exact same comment across different stakeholder groups, preferably those with conflicting business interests.
03:32 Experienced entrepreneurs, older industry titans, agencies, consultants, your smelly older brother. None of them have the same interests, so if they’re all saying the same thing, then yes, you probably need to go and have a drink. Patterns are generally revealing of something that potentially is quite real about the social reception of your thingamajiggy.
03:53 This leads me to the second principle of advice filtering, the empirical basis for claiming to know something. Ooh, so fancy.
04:02 Remember, the less of a name you are in the industry, the more you will attract free advice and negative comments. It’s part of being at the bottom of the social hierarchy in general. It’s sociology 101, folks. This is why most of it has to be ignored in the long term.
04:19 However, within the ocean of critiques will be some pearls, but how do you find them? Well, that’s what the second filter’s for. You’ve got to filter for some details on who is giving the critique. Let’s assume here that this is a critique you more or less invited as a proactive learner, which you should always be.
04:42 You’ll save yourself a lot of time by only soliciting critiques from stakeholders who’ve had access to hundreds of case studies related to the business issue their critique focuses on. This case study experience should lend them to decent pattern acquisition, absent of statistical data set.
05:02 Certainly, that hard-won pattern recognition is vastly better than just chatting up a couple of entrepreneurs over drinks, who’ve run one or two companies on any random topic that’s bothering you at the moment.
05:14 Why? Because two cases, even from entrepreneurs who practically killed themselves to run those one or two companies, cannot yield patterns. Just like two points in time does not constituteth a trendeth. No matter how much you stare at those two points and want to make a line appear.
05:32 I just let you know, folks, why I’m not a big proponent of entrepreneurial peer groups other than for motivation, and crying and celebrating. That’s because they tend to devolve into a shit ton of non-patterned, decontextualized idea-sharing in a cloud of chaos. Then things get misapplied to your business, and sometimes under the influence.
05:58 Thirdly, the final filter that you need to use is that you have to ask yourself a question. Is the advice that I just received part of this person’s core expertise or something tangential they’ve learned along the way? The osmosis knowledge, right?
06:15 My favorite punching bag here are the numerous private equity deal hunters who used to, before this pandemic, flock like flies to investor conferences and trade shows. These are the folks who love to spout off over drinks about branding and marketing and pack design, and yada yada yada. But they have no formal training in it, and they have no formal pattern analysis based on any data, either. They literally have no fucking idea what they’re talking about. They’re just another guy with a cocktail.
06:42 You know, I guess if you’re rich, your opinion must automatically be well-educated. I hope this pandemic is driving most of these folks out of the sector forever. I think you’ll agree we could all use a lot less background noise like that. All of us.
06:59 The point that I’m making here is that an enormous amount of bad advice is simply the most poorly thought out opinion on one business issue, from someone who, ironically, is actually a pattern-driven expert in another area of business, but won’t keep their mouth shut.
07:13 I’ve rarely met anybody in private equity who stays in their finance lane. I really haven’t. It’s a problem because I think it’s something to do with living on a big hill on the fortress of capital.
07:25 But more seriously, how do you know if someone is talking outside their core expertise, unless they’re just honest about it? Well, they say phrases like, “I don’t know.”
07:38 Like many advisers, I attract folks at different stages in their journey, and I can say that most of the people coming to me are not asking nearly enough contextual questions about me. I assume they’re doing this with other folks as well.
07:50 Now, maybe they’ve vetted me through a million channels already if they’re smart. And granted, if they’ve read my book, it’s pretty clear that what my core expertise is. And I don’t claim it’s for every founder. I’ve never claimed that and I never will. Honestly, many are just not ready for moi, despite my dashing good looks. That was a joke.
08:12 As the premium CPG sector gets more and more competitive, and debt financing harder to find easily, I hope folks will start to understand how important it is to get a lot smarter about growth.
08:26 The future in this industry, I believe, is for professional founders. And the most sophisticated private equity firms out there only work with this new class of founder. They’re not working with the bumbling family business people of yesteryear. Not unless they’ve gone through the professionalization curve.
08:44 And those firms, I can tell you, those institutional investors, they’re very good at filtering for those folks. Very good at it. But more importantly, those professional founders are very good at filtering business advice. Why? Because they already have a business background. Probably not in CPG, but they already have that background.
09:02 So just make sure that any advice you act on passes the three tests above. It comes to you after a deep contextual understanding of your business, financial goals and competitive situation; was based on the advisor’s pattern knowledge on a specific topic, not just a few anecdotes; and lastly, was tied to their actual core expertise. Be safe out there, folks.