THE ANTIFRAGILE ROADMAP
How to be antifragile and gain from disorder
Inspired by Nassim Taleb’s Antifragile.
Much can be said about the transformation of business today, mainly that a company can afford to be vulnerable, but it cannot afford to be fragile.
As seen in a recent study by Accenture, 71% of companies are not prepared for a long-term crisis, while 75% have suffered a negative impact on their business from the virus and 55% have changed their business forecast.
In order to withstand impact and thrive on volatility, a company must strive for the opposite, antifragility. The antifragile, as defined by Nassim Taleb, thrives on randomness, uncertainty, stressors, errors and time, because it gains from it.
Consider Alibaba, the $470 billion e-commerce giant, it was created during a critical time like SARS. Looking back further, at Walt Disney himself for greater context, he survived the Spanish Flu, two World Wars, the Great Recession and founded the world’s largest media conglomerate.
Similarly, Uber, HP, Microsoft, Square, CNN, MailChimp, among other household brands were founded during a recession. They cultivated antifragility by creating more of an upside than downside from random events.
Nonetheless, creating an antifragile roadmap to success doesn’t come naturally.
Here are a few examples of how companies are developing a productive and flexible relationship with volatility:
1. Fortify your moat and shop ’til your CFO says so.
A new type of retail therapy and fast growth — opportunistic shopping. While some people purchase a new pair of shoes to feel better, Jeff Bezos is investing in companies to expand and deepen Amazon’s offering, starting allegedly with the acquisition of AMC Theaters and a minority stake in India’s Future Retail — India’s Walmart. Amazon is not alone. Facebook and Uber are among the other companies looking at business transformation.
Facebook recently announced the launch of Facebook Shops, which immediately raised the stock by 25% in anticipation of new revenue streams for the advertising giant. Similarly, the company acquired almost 10% stakes in India’s largest telecommunications operator, Reliance Jio Platforms.
Uber on the other hand, announced strong quarter numbers from UberEats and kept all eyes on US terrain, with the acquisition of GrubHub and stakes in Lime. Why share the market when you can own it? Should Rappi be next?
Perhaps. In April alone, Latin America’s delivery leader, Rappi, registered 2.5 more sales than March. The average ticket price during the quarantine was 3 times higher than the average ticket previously — with items now reaching 30 to 70 per ticket.
2. Fly like a bird, sting like a bee.
We can’t lecture birds on how to fly because they intrinsically have the knowledge and technology; but we can ask them to fly faster, all for the same reason. Can’t we?
Think again. Not all birds are equal. The answer depends on the company’s business model and sector.
WeWork rallied like a technology company with a valuation of $47 billion before its IPO to a valuation of $2 billion today. A prime example of what Taleb describes as unacceptable and what SoftBank describes as a foolish investment.
‘Not seeing a tsunami or an economic event coming is excusable; building something fragile to them is not.’ — Taleb
WeWork was already a vulnerable entity, only to become fragile in the midst of a pandemic. In other words, fail fast, learn faster.
The answer is vastly different for technology companies (outside hospitality), with an architecture designed to be lean and optimize ‘the flight experience’ based on algorithms and AI.
The accelerated growth of Netflix and The Trade Desk should come as no surprise. As more people are connected to their screens at home and consuming more content, programmatic video and CTV see a spike — while TV spend leaves much room for desired growth. Despite the coronavirus negatively impacting advertising spend for most of March, The Trade Desk still managed to post some impressive growth during Q1. The company’s top line jumped 33% year over year, nearly in line with the 35% growth that the data-driven digital-advertising specialist saw in Q4 of last year.
Other companies like Zoom and Mercado Libre follow suit. Since the wake of the pandemic, Zoom has pivoted and become a household name like Coca-Cola. From gym classes to meetings, fundraisers and concerts, Zoom has overthrown established video competitors like Google and Microsoft. In one year, Zoom accomplished the impossible — 300 million daily meeting participants — and a valuation worth more than the 7 biggest airlines.
Mercado Libre, LATAM’s largest e-commerce, is not far behind. Upon announcing strong Q1 results, the company’s stock surged 20% in a single day. Similar to its US counterpart Amazon, Mercado Libre is investing in long-term growth. The company is pouring every cent of potential profit into growth-accelerating business expenses such as operations and large marketing campaigns pushing brand and social awareness. In Mexico alone, they are expecting to invest $420 million and across LATAM they will be hiring 1,000 new employees this year. Not to mention, their first-quarter sales-and-marketing budget rose 58% year over year, outpacing the 38% revenue increase by a wide margin.
3. If you don’t control the narrative someone else will — in this case the government or the virus… or Musk, or President Trump. Also, diversify, diversify, diversify.
Take Tesla as an example. Elon Musk is known for his genius as much as his tweets and media domination. In other words, he owns the narrative, despite what analysts, the market, or the SEC says. Further, when the pandemic news and fears were circulating, Musk was releasing strong sales numbers for Tesla, producing ventilators, and sharing an optimistic outlook for outer space commercial ventures with SpaceX and NASA. His moonshot bets and diversified portfolio certainly have paid off and have broken records with a stock price above $1,000 a share, from $212 only a year ago.
Same advice applies to governmental figures. As a communication and marketing strategist, I counsel brands and leaders with strategy thinking — on how to best navigate the challenging waters and transform spend into capital.
It’s time to rethink and pivot in the face of a new normal — to drive versus being driven — to build antifragile systems or at least robust systems in order to avoid fragile outcomes. Ad-tech leaders like Direcly and DynAdmic are rising to the occasion and accelerating growth with repositioning strategies and through the launch of new product offerings and revenue streams. In fact, the non-profit organization, Little Pixel Foundation, fast forwarded their market launch in the wake of the pandemic, providing virtual learning to underprivileged communities at a critical time with Google Education.
In short, to be antifragile one must accept the vulnerability of our parts and reinforce them, as we reinforce our moats — as coined by Warren Buffet. One must think lean; think smart-growth; think inclusively and long-term.
All the success stories from above are success stories because the companies thrived under tremendous stress and use the media, marketing and talent for what they are, growth engines not expense generators. Corporate valuations, brand awareness, consumer perception and consumer confidence are driven largely by external communications which can be heavily clouded or neglected. If you don’t like what’s being said, then let’s change the conversation. But be part of the conversation. Webinars are a good starting point, but what’s next?
This is a historical time, the stress test of the new global economy. A great reminder that there are two ways to grow, by adding or multiplying. But above all, that there is strength in numbers, and we can be antifragile together.
