Let me share a story that has 2 of my most favorite things in life – NBA and tech investing. Did you know that Lakers legend Shaquille O’Neal invested in Google’s Series A round in 1999 at a $100Mn valuation? Which, as we all know now, has turned out to be the biggest venture outcome of the last 25 years. So, how did an active basketball player get access to the deal of the century alongside Sequoia?
Shaq revealed the story behind his Google investment during his appearance at TheEllenShow a few years back. Apparently, he was hanging out at the Four Seasons in LA & started playing with a bunch of kids at the next table. In his own words – “I felt like I was babysitting this guy’s kids while he was in a meeting”. As it turned out, this stranger (Shaq didn’t disclose who he was) eventually let him into the Google deal.
Now, knowing Shaq’s storytelling skills, am sure this story is a bit jazzed up. And given he was already an NBA star in 1999 (he would go on to win his first ring in 2000), obviously this stranger must have recognized him. But even discounting for these possibilities, it’s clear that some amount of serendipity was definitely involved – meeting an important investor in a famous watering hill located in a powerful city led to him accessing a once-in-a-lifetime deal.
As you digest this, let’s cut to a similar story of another star, this time in Hollywood. Ryan Reynolds is now considered one of the savviest marketers & investors around. Look at his track record:
- Became the brand personality for Mint Mobile, reportedly taking a 25% stake in the company. Mint recently got sold to T-Mobile for $1.35Bn!
- In 2018, started promoting Aviation Gin and also took a stake in the company. The company was purchased two years later by Diageo for $600Mn.
- In late 2020, co-bought a struggling fifth-division Welsh soccer team for 2Mn pounds. Used his marketing chops, including creating a Hulu documentary, to turn around the club’s attendance & revenues. It is now a thriving organization.
So, how does an active movie actor get access to deals that would be the envy of major private equity funds? And not just one-off – he keeps getting invited to the best deals one after another.
This is what I call the Success Flywheel at play. While the above are outlier examples related to top celebrities, I have seen the Success Flywheel working countless times both in my own career as well as those around me:
- Repeat founders with prior success get access to the most venture dollars from the best investors. The other side of this coin – VCs with successful track records keep getting preferential access to the best founders.
- The best recruiters (consulting, banking, investing, big tech) visit only the top campuses in each country for placements. So, these students get preferential access to the best jobs. And the flywheel doesn’t stop there – once you have any of these top logos on your resume, they act as preferential filters for subsequent jobs.
- Early success brings folks to major economic centers like the Bay Area, NYC, London, Bangalore & Shanghai, either to study or work. Just by participating in the natural flow of information & people in these hubs, they get exposed to the best opportunities.
Morgan Housel of Collaborative Fund has a similar observation in his awesome post “Tails, You Win“:
The Success Flywheel is like a law of nature because it stems from fundamental human behavior. Across countries, cultures, sectors or even historical eras, at a fundamental level, humans are wired to maximize risk-adjusted returns while doing deals. Very crudely, there are 2 ways to do this – increase the numerator (return) and/ or decrease the denominator (risk).
Equally importantly, time is finite so people are looking to get to the most optimal risk-adjusted option, as efficiently as possible. This gives rise to the concept of “access” – how does one get in the flow of these people looking to do the best deals? ‘Cos they will quickly choose from people in their natural flow.
Having a prior event of success helps in getting repeated access to this flow as it creates a strong credentialing signal that plays really well to a crude heuristic that the human brain often uses – “if the person has been successful before, they are more likely to succeed again”. This signal drives 3 kinds of access: (1) Inbound (“I should talk to X”), (2) Referrals (“you should talk to X”) and (3) Serendipity (“have you met X?”).
The more socially-visible & externally-validated the prior event of success is, the more broad-based inbound access it drives to various kinds of flows. People looking to do deals proactively reach out even without any significant outbound effort (trying to sell yourself). Hence, visibly successful founders, investors, leaders, celebrities & experts keep getting access to opportunities.
This is also why conventionally successful professionals in any field still continue to productize & distribute themselves, building their personal brand & constantly growing their reach via networking, blogging, tweeting or starting podcasts. Putting oneself out there drives familiarity, which is key to inbound flow.
Everyone in these flows is typically in a consciously-cooperative mode, trying to optimize risk-adjusted returns for each other via referring opportunities, in the hope of future reciprocation. So, if a person has a prior event of success & on top of it, is also well-networked, it turbocharges referral-based access.
There is also a mini-flywheel at play here where a success event attracts people to your network, which drives referrals & more preferential access, thereby leading to more potential success & so on.
Finally, even if you are not proactively looking for certain kind of opportunities (am sure Shaq wasn’t sourcing venture deals full-time), just being in the right flows puts you in the vicinity of serendipity that can take you in directions you never imagined. Shaq being at the LA Four Seasons at exactly the right time was the result of his outlier success as a basketball player, not his proactive networking skills.
The halo effect of success in one field generally transfers to other adjoining fields as well, which can drive massive serendipitous upsides. For eg. Peter Thiel’s track record as a co-founder of Paypal put him in the flows of Mark Zuckerberg in 2004, helping him become the first investor in Facebook. Or Jeff Bezos was able to invest in Google while it was still in the garage, courtesy of his success with Amazon.
Now the million dollar question – how does one leverage the Success Flywheel?
It starts by putting in the work to get your first event of success. The sooner the better so a sense of urgency goes a long way! And the good news is – unless one is born to privilege, most people start from scratch and build towards their initial success.
An event of success could be anything from cracking a top university, getting a coveted internship in a hot field, hustling into a brand-name job, hitting milestones with your business, creating a new product with buzz, publishing a paper, joining a board, building a social media following or just about any accomplishment in your context. Big or small matters less, it’s about getting a win on the score board to get the flywheel going.
While you are putting in the work towards your goal, also build a distribution network in parallel. This includes deep relationships & loose networks, both in the physical (IRL networking) & digital world (social media).
Once you get to that event of success, leverage your distribution network to amplify its impact. Make sure your success is visible, validated & shared in the ecosystem.
- As Inbounds start, connect with people authentically, leave a good impression & look to solve problems for others.
- To jumpstart Referrals, start using the tools & resources that typically come with success, to disproportionately give back to the network.
- To leverage Serendipity, follow the golden rule of “showing-up” everywhere – meetings, events, calls, webinars, conferences, mixers, even birthday parties. PS: if you find networking at events a huge pain like me but still want to get better, check out my post “Networking at Events for Introverts“.
TLDR: the way to get a Success Flywheel going in your life is to first put in the work with a sense of urgency, and create an event of success, big or small. Once you get this event, make sure you “distribute” it well and ensure its compounding by continuous learning & effort.
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