34: The legend of success

Where do legends come from? I have a theory that every success story is a little less successful than you'd imagine. Heroism and success change our lens on the fact. If you take a big bet and it pays off you're a visionary. If you tank, you were drunk on grand delusions. The stories we hear in the wild are also coloured by survivorship bias. Everyone wants to be a startup founder because the people that give talks and tell stories are the ones who won the game - the founders that survived. The ones that failed either went back to JP Morgan and McKinsey or are on a soapbox on ProductHunt evangelising about their latest punt.

The parable of Netflix is one often shared to warn established businesses against resting on their laurels. If you fail to stay nimble you'll fail to stay relevant. Derision precedes disruption. So the story goes.

How Netflix almost failed

It's easy to tell the Netflix story as a straightforward one. They took on Blockbuster, disrupted them completely with an innovative model. Blockbuster failed to smell the coffee. Netflix wins. The part of the story you hear less often is that Netflix pivoted several times, almost destroyed their own product, but survived with great founders at the helm.

Netflix's original business model involved mailing DVDs to your house. In 1998 that was the great disruption. They weren't the only business that let you rent DVDs but they let you do it online without having to browse at the store. It was awesome, but despite already seeing success, they pivoted to allow people to rent an unlimited number of DVDs as long as they returned the previous ones, for a fixed monthly subscription fee. Netflix made this first pivot in 1999 and gained over 200,000 subscribers in the next year as a result. Then they dropped their late return penalties, the very thing still holding up Blockbuster's revenue, and allowed customers to keep DVDs as long as they wanted, only returning them in order to rent another movie.

They had reached a million subscribers by 2003. By this time they were a public company, making almost $300m a year, and by 2005 they were shipping a million DVDs per day. The writing was already on the wall for Blockbuster. They saw the benefits of recurring revenue but by the time they pivoted to a subscription model, Netflix was going through another evolution.

By 2007 Netflix realised that the DVD rental market was a dead horse. The model didn't scale. They needed a blue ocean strategy. Netflix started a digital product, building in ratings and an algorithm for recommendations. DVD sales fell, but the business continued to grow. In 2009 they gave away 'The Netflix Prize' - a reward that coding teams competed for by building Netflix a better recommendations engine.

In 2013 they started using the data they were gathering about what their customers enjoyed to start creating original shows that were engineered to suit their demographics. If you were counting, this was their fourth pivot. At this point, they had reached 33 million subscribers, and the rest, as they say, is history.

Oops

I missed a step. In 2011 Netflix almost imploded. That was the year they tried to do away with their legacy model completely - DVD rentals. They tried to spin it out into an entirely different business, Qwikster, a DVD-rental only business, which would allow Netflix to focus on streaming. The catch was that existing customers were going from a single $10 all-in subscription to two separate $8 plans with separate profiles on completely different websites. You may also remember that 2011 was right in the middle of a global recession - probably not the best time for an overnight 60% price increase.

Qwikster was shut down within a few short weeks, but the damage was done. That year Netflix lost 800,000 customers and their stock price dropped by nearly 80%. Almost 30,000 people commented on Reed Hasting's blog post announcement, with some calling for him to resign as CEO. His apology to disgruntled fans was turned into an SNL comedy sketch.

Hasting's bet turned out to be the right one in the long term, but it wasn't always smooth cruising on the Netflix rocket ship.

Samurai, Ninjas and Spartans

A casual chat with two awesome people I've only recently met, Nathan Baschez and Dan Shipper (founders of Every, a writer collective) reminded me of how often historical legends are constructed as highlight reels, covering the best and leaving out anything that doesn't suit the narrative.

Here's a paragraph I read recently on the internet:

Samurai were a very honor-based class of warrior that focused heavily on their martial training while maintaining a strict code of ethics in their lives. Their code of honor, known as Bushido, prevented them from engaging in many of the acts that Ninjas performed regularly.

They prided themselves on facing their opponent in single combat and overcoming their obstacles in a direct fashion. This principle was a core factor in the philosophy that drove many Samurai.

Ninjas, on the other hand, operated almost entirely in stealth and focused on espionage, assassinations, and other actions that Samurai had disdain for. Ninjas operated in darkness and secrecy while Samurai were the enforcers or warriors that operated in plain sight.

It made me laugh because it's completely accurate based on their modern Hollywood conceptions, but those narratives miss a startling amount of historical context. You might be surprised to learn that the first Samurai were thugs, and the first Ninja were priests. I'll explain.

The way of the warrior

The story of the samurai begins in the Heian period of Japan - a lot later than you might imagine (790-1185 CE), as the samurai class emerged at the same time as knights of Europe. The samurai didn't start out as knights, however, they were mercenaries. Local lords known as Daimyo would hire skilled fighters as bodyguards on diplomatic missions, and as rough hands to shake down neighbours who owed them money. There was no special system of honour, these men were loyal to whoever paid them. In fact, backstabbing and betrayal among these bodyguards, then known as 'saburafu', was so rife that stories would spread of those who went against the grain by showing loyalty to a single lord.

The closest thing to Bushido, or 'way of the warrior' in these early years came from Hojo Soun who wrote “Lord Soun’s Twenty-One Articles”— a collection of lessons aimed at regulating the behaviour of hired samurai. In reality, the so-called samurai ethics we recognise today largely spread as a brand of neo-Confucianism which became popular in the Tokugawa era. This was a time of peace when mercenaries were no longer needed. Samurai had become wealthy by serving local lords and lived on largely by name and status. Before this point, Samurai also rarely used swords. They were archers who fought on horseback. It was only during this era of peace that Samurai were the only civilians allowed to carry swords, and swords began to take on a more decorative and ceremonial nature. They created new traditions to keep the spirit of the samurai alive, engaging in tea drinking, sword practice and other exclusive samurai traits that have become iconic today.

Much of what we recognise and respect about samurai culture comes from the story told in retrospect. The inflated ruling class created the traditions of political and social conduct by which they became known, and the idealised virtues from a time of unparalleled peace were transposed into the stories of legendary samurai who lived in times of brutal war.

The stories of two famous Japanese generals are told in Heike Monogatari, which chronicled the war for dominance between Minamoto and Taira clans. In the 12th century record, the two generals Minamoto no Yoshinaka and Minamoto no Yoshitsune were killed by their enemies. However, in later retellings from c.15th century, both committed seppuku, an act of ritual suicide instead. Similarly, in early records of Yoshitsune's exploits during the Genpei War, no mention is made of anyone called 'Benkei'. Yet by the peacetime Tokugawa era, the story now included a character called Benkei—the seven-foot warrior monk who embodied loyalty, respect, servitude and other Confucianist values of late samurai. Benkei was a faithful servant who died standing, the legend now says.

The mountain warriors

The heritage of ninja can be traced back to the yama bushi, meaning mountain warriors. Unfortunately, this was something of a misnomer—originally they weren't warriors at all, only monks. They cut themselves off from the rest of society, surviving alone in the mountains to worship nature.

Back on the ground, some of the farmers and peasants weren't too happy about the class system in which samurai were elevated over them. Members of lower classes had to bow to samurai as they passed. Failure to comply could be punished by instant beheading. Two peasant factions broke away, forming the Iga and Koka villages up in the mountains.

During the 100-year Warring States Period, Sengoku Jidai, the government collapsed and warlords began fighting for dominance. To protect themselves from local Daimyo and the samurai who served them, the peasants in the mountains learned to defend themselves, relying less on brute force than on espionage and subterfuge. The Yama Bushi monks taught them survivalist techniques in exchange for protection. In escaping the autocracy of local lords the ninjas established models of democratic leadership centuries before the Japanese government.

This ragtag group of revolutionary misfits came under the protection of the Tokugawa clan and were used as an asymmetrical force to thwart the warlord's samurai. When the Tokugawa government came to power, the ninja lost their purpose and their existence was eventually defeated by times of peace. They didn’t have the benefit of posthumous centuries in which to craft their story.

Come and get them

In recent years conservatives on both sides of the pond found a great affinity with classical civilisations. Euroskeptics and Trump supporters alike dubbed themselves Spartans—no doubt a reference to their willingness to hold the line and sacrifice anything for their campaign. Gun rights activists began chanting ΜOΛΩΝ ΛΑΒΕ, meaning 'come and get them'—the words purportedly uttered by Leonidas during the legendary Battle of Thermopylae.

Like the other examples we've seen, the true history of these ultimate warriors isn't what it might seem on the surface. In the Archaic period (c.800-500 BC) Spartan power increased largely by virtue of their sheer number. They didn't spend much time learning to fight, but every man was required to, and Sparta had about 8000 men. They were one of the biggest political communities at the time, but there was nothing to mark them out as particularly skilled fighters. Individually, they were actually comparatively weak as there was no standing army.

Most of the surviving records from that period confirm that Sparta was hardly noted in any military regard. War songs of Tyrtaios report of conflict with the Messenians, but say nothing of any military institutions or practices that were developed later on. Meanwhile, the choral songs of Alkman spoke of pretty girls, flowers and bees. Hardly the stuff of legend.

That all changed after the Battle of Thermopylae (480 BC). Popular tales of this battle focus on the 300 men of Sparta. This is largely the result of sensational propaganda because everyone seems to have forgotten the rest of the Greeks present. 7000 hoplites were deployed to hold the mountain pass. Xerxes and the Persians arrived sooner than expected and were winning faster than expected. At this point, most of the Greeks elected to flee. Except of course, for the 300 brave men of Sparta... and 400 Thebans... and 700 Thespians. The Spartans only made up a fifth of the men who stood to fight, but it was their king who first gave the order to stand, so they get the credit for the decision.

So the group of brave soldiers get absolutely battered, and the battle was a complete loss in every sense of the word, but the courage of the men that stood gave Spartans a moral victory, and they were immortalised as legends. They lost, but they didn’t run scared. Word started to spread. Enemies began to fear them. This state with zero historical record as a competent fighting force was suddenly spoken of in whispers and hushed tones.

After the Archaic period, gone were the songs of birds and bees, the leisure-class and luxury that Sparta was previously known for. These gave way to a new obsession with living up to their reputation as hard nuts. Suddenly other sources through the Classical and Hellenistic periods are waxing lyrical about Sparta's political stability and military skill.

Spartan culture bred strict obedience, which made their men more reliable in battle than other hoplites. The biggest conduit to their success was basic formation drills. They were the only Greeks that subdivided armies into platoons led by individual officers who could give their own commands. They taught their men to march to the sound of flutes and could change direction instantly without needing an individual general shouting at the top of his lungs. This made them incredibly versatile in battle, and their tactical superiority won them several notable battles. Individually they were weak but in units they became fearsome.

This simple tactical edge combined with a reputation that was founded on a single battle in which they were the smallest force, led to them being undefeated in a pitched battle for over 100 years. It was the ultimate self-fulfilling prophecy.

Life on a string

Our stories, like our legends, are seldom clean cut. Often we're defined by tiny slices of history that are pulled together in retrospect to form a coherent narrative.

When we look back we tell stories with linear progression. How did you get to where you are today? ‘I did x and then y and then z’. What we neglect to mention is that in the moment, none of it was scripted or intentional. We may have had self-belief, but no certainty of the outcome. The narratives we spin often omit our moments of confusion and disillusion—the valleys of despair.

Straight lines are boring. Human progression is rarely linear. There are always ups and downs. There is fluctuation in every decision. We waver, falter, and fall flat on our face. The chart doesn't just go up and to the right.

When we look at stocks and cryptocurrencies that are hugely successful or disruptive on a macro level, we see momentous success, but zooming in on any three-week slot can highlight the turbulence of market corrections. The moments where focus and clarity abandoned us. Moments when you would have sold.

If you were watching your life on a chart with no idea of what was to come next, speculating on your own success, would you bet on yourself in every moment? Possibly. What makes stocks worth sticking with are the higher highs. You hold on through drought when you know your pick will bounce back.

Every day I see people tweet "$1000 invested in [Tesla/Amazon/Bitcoin] in 2009 would have been x amount today". These narratives seem painfully easy when you're looking in the rearview mirror, but how many of us know the future? How many believers have the resolve to stay the course?

Success is built when you capitalise on opportunity; legend is built when you survive long enough to tell the story.

The curved line

In English counties like Suffolk, you may come across waved walls like this - they're called crinkle crankle walls:

At first glance, they look weird, but they're cooler than you might imagine. Walls like this only require one layer of brick to be stable, whereas straight walls require two. The inherent peaks, troughs and fluctuations make them more resilient using fewer materials than what you might require going the conventional path.

Many eventual successes will be preceded by hesitation, doubt and valleys of despair. It's a wavy line and we learn things both in the trenches and at the peaks. Our ability to learn from failures and bounce back is what determines ultimate success, and surviving is what helps cement our legacy.

You don't need to have been the best - you just need to last long enough to tell a great story.

It's the crinkles in our stories that let us stand the test of time. You don't need to worry when things don't go smoothly, or when you're wrestling through the turbulence of finding your path. It's okay for your line to be wavy. The truth is we're stronger for it.

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If you have any thoughts about historical tales and narratives of success, I’d love to hear from you! Reply via email, leave a comment or send me a tweet!

Read on for this week’s recommendations >>

Reading list

Books I’ve read/seen/will impulsively buy and add to my “to read” shelf on Goodreads. Recommendations from newsletter readers are always welcome:

1. A Swim in a Pond in the Rain by George Saunders - read. Saunders, a great writer in his own right, delivers a masterclass from Russian literary legends in writing and philosophy.
2. The Runner by Peter May - impulsively bought. The 5th instalment in May’s China series. Fun thrillers - I’ve enjoyed watching the relationship between main characters develop despite not reading chronologically.
3. Dishonesty is the Second Best Policy by David Mitchell - impulsively bought. The kind of read you pick up to give your brain a break from taking anything too seriously. Decent laughs.

Things I’m loving

Films and shows:

• Startup - A great show I stumbled upon this week featuring Martin Freeman, alongside a great cast who should be equally as famous.
• Yasuke - This was a cool anime inspired by the real Black samurai, an African man who arrived in Japan in the service of a missionary, and became a samurai under the Daimyo Oda Nobunaga.

Resources:

• Audible - I’ve just hit 33 books this year, almost halfway towards my yearly goal. It’s an irreplaceable tool I’ll consistently recommend. Plus, when you sign up for a trial you’ll get a free book of your choice that you can keep forever even if you cancel.
• NordVPN - if you value your security online, or just hate ads, cookies and online content blockers (Location-specific content on Netflix, Hulu etc.) set your devices free with NordVPN. They’re about to end their sale so it’s your final chance to grab 70% off before prices increase!