Inseparable Pairs

Hundreds of books and movies have depicted World War II. Eugene Sledge, a Marine who fought on Okinawa and Peleliu, says almost all of them ignore one of the most important stories of the war: how hard it was to keep soldiers stocked with ammunition.

U.S. soldiers were supplied with 40 billion rounds of ammunition during the war, according to historian Rick Atkinson. A typical soldier carried 80 rounds – 10 eight-round clips. So soldiers had to be resupplied with ammunition something like 500 million times, or on average of about 100 times per soldier in combat.

Sledge writes in his memoir that the ammo is often portrayed as just being there, ready to take. It wasn’t:

We spent a great deal of time in combat carrying this heavy ammunition on our shoulders to places where it was needed—spots often totally inaccessible to all types of vehicles—and breaking it out of the packages and crates. On Okinawa this was often done under enemy fire, in driving rain, and through knee-deep mud for hours on end. Such activity drove the infantryman, weary from the mental and physical stress of combat, almost to the brink of physical collapse.

Carrying bullets doesn’t make for good stories or movie scenes. Shooting them does. But the combat part of war relies on the supply logistics part having first been met. There’s a long history of armies running out of food and ammo before bravery and spirit. You can’t have one without the other. They’re inseparable pairs. The amazing stuff doesn’t work without the boring stuff.

A lot of things work that way.

Some skills are necessary for big achievements and also nearly irrelevant unless they’re matched with other skills. And those other skills tend to be less exciting than the things that get the attention.

A few similar things in business and investing:

Strategy is important, but it has to be matched with good communication to have a shot at working.

Tim Chen, founder of NerdWallet, was asked what the hardest part of starting his business was. “I think one of the hardest parts was convincing other people I wasn’t crazy,” he said.

Most great investing or business strategies sounds crazy at first because few people have tried them, or they’ve tried and failed. Getting people on board relies on your ability to explain your vision in a way that convinces investors, employees, and customers that you’re worth betting on. Good storytellers with OK ideas are more persuasive than average people with the right answers. This is obvious because everyone knows how much money and effort goes into marketing. But communication isn’t a skill a lot of technical minds have. Communication is easy to downplay if you’re technically minded because it’s a soft skill, the kind of thing low-IQ people resort to. The person capable of discovering a cancer drug isn’t always the kind of person skilled at PowerPoint design. But communicating your idea in a pitch meeting or quarterly letter requires one as much as the other. The crazier the idea, the truer this becomes. The most technical geniuses I’ve met are, to a person, frustrated that not everyone can understand what they see.

Chen said:

You can’t just put your head down and work hard and do things. You have to communicate well what it is you’re trying to do—the vision behind what you’re trying to do—to get other people inspired to understand what you’re doing and help you out.

Part of this is managing longevity. Few strategies work right away, or work all the time. Keeping people around during the downtimes requires them believing in your story, which requires you being able to tell a story.

Investing skills are important, but they have to be paired with personal finance skills to be sustainable.

I’m surprised how many good investors I know with terrible personal finance habits. Maybe I shouldn’t – they are completely different skills. The ability to uncover an undervalued investment is not associated with your propensity to avoid lifestyle bloat. The irony is that people who will move mountains to gain a few basis points of return bleed ten times that amount on personal spending that all science says adds little to their net life happiness.

But investing and personal finance rely on each other because few industries are as cyclical as investing and as Charlie Munger says, “the first rule of compounding is to never interrupt it unnecessarily.”

Compounding works only to the extent that your lifestyle doesn’t force you to sell investments at inopportune times to fund your lifestyle. Someone earning average but uninterrupted returns may be better off than someone outperforming by 50 basis points a year yet forced to liquidate a portion during every bear market to pay off lenders.

An unrelated but similar point: one divorce can erase a lifetime of alpha.

Marketing is great, but it has to be matched with a great product to be convincing.

A lot of marketing problems are just product problems. Marketing that’s too pushy or too gimmicky is rarely the fault of the marketer. It’s hard to sell a product no one needs and few want.

CBS Moneywatch published a list of 10 companies with great marketing and 10 companies with “insanely bad” marketing. The great marketers (Apple, Nike, Geico, FedEx, Toyota) all sell products with high rates of consumer satisfaction. The bad marketers (Motorola, Sprint, Blackberry) … don’t. This is not a coincidence. Buffett’s line about when good managers run bad businesses, it’s the business’s reputation that prevails works for the relationship between marketing and products, too.

In the eager quest for growth some companies plow disproportionate energy into marketing that, in hindsight, often should have been spent further developing a product people need and want.

It’s not that product is superior to marketing – every company has to tell their story – but one doesn’t work without the other. This is especially important today because the young generation who grew up with deep access to information have sharp marketing BS detectors.

Bold ideas are great, but they have to be matched with the realities of accounting, finance, and corporate norms to be practical.

Kanye West recently told David Letterman that “if you guys want these crazy ideas and these crazy stages, this crazy music and this crazy way of thinking, there’s a chance it might come from a crazy person.”

The same idea applies to business. Everyone wants unique vision. But no one should be shocked when people who think about the world in unique ways you like also think about the world in unique ways you don’t like.

A big part of this is that the kind of personality that lets you take big risks with strategy and product ideas – which is good – will also let you take big risks with accounting, finance, and HR, which can implode quickly. As a rule of thumb, people who are extremely talented at one thing tend to be deficient at another. The world isn’t fair enough for it to be otherwise, and amazing skills tends to come from a hyper focus that monopolizes mental bandwidth away from learning how other things work.

Pairing a big-idea thinker with a pragmatic operator and an unimaginative accountant is vital to giving big ideas a fighting chance of survival.

A little more on this topic: