Introducing Divinations

“Is this photo a dumb idea? It’s kinda dumb, right?” — Me

“Yeah, but it’s you.” — My wife

TL;DR—

• Divinations is a newsletter on business strategy featuring original essays that explore classic frameworks from thinkers like Christensen, Porter, and Helmer, and use them to understand today’s most important technology and media companies.
• It’s written by me, Nathan Baschez. I’ve worked in product roles at Substack (yes, this website!), Gimlet, and General Assembly. I founded a company aimed at reinventing books, called Hardbound, that Fast Company named one of the top 10 apps of 2016, and Apple’s editors called “beautiful.” Also, I co-created Product Hunt.
• The free version gets you occasional public essays.
• Full subscribers get my best and deepest work. Also, you’ll be enabling me to spend time making this good, without selling out! To learn more about paid subscriptions, click here.

A year after I graduated from college, I accidentally got my first exit.

It happened a month after I hacked together a little web app that let you write HTML and CSS, see a live browser preview, and collaborate in real-time with friends. (Like Google Docs, but for code.)

There was no strategy behind it, really. I just thought it’d be cool. So I spent a week building it, and then submitted it to Hacker News, where it stayed on top all day.

Probably forty thousand people visited the site that day. One of them was Brad Hargreaves, a co-founder of General Assembly. He sent me an email, we had a call, and a month later, I flew to New York to sell him my little website. That’s how I got my first job as a Product Manager.

In the grand scheme of things, this was perhaps the tiniest exit ever. But at the time I could not believe it was happening. I had only the fuzziest understanding of the forces behind it. I was thrilled, sure, but also a little terrified.

Was it just dumb luck? Or could I do it again? Perhaps even build a real business?

Meanwhile, I was pulled into a new world where, for the first time, I got to see how “business people” think. Through dinners, meetings, and hallway conversations, I became familiar with the thought processes that justified the company strategy. There were certain patterns in the logic and language that kept recurring. I wanted to know what they meant. Even more, I wanted to be able to make the decisions myself, one day.

So I became obsessed with strategy.

What is strategy?

Every strategy is really just a theory: “We bet if we do x, then y will happen.” 

X is everything in your direct control—the activities you do. It’s the research, planning, building, selling, recruiting, pitching, etc.

Y is everything outside your direct control—the activities other people may (or may not!) do. It’s the noticing, considering, buying, using, joining, investing, etc.

The goal of strategy is to devise accurate theories. It’s the art of choosing what to do. (Execution, on the other hand, is when you put theory into practice—actually doing “x”.)

What is business strategy?

In business, the y that people are usually aiming for is some sort of sustainable competitive advantage. Let’s break down why, and what that means.

Businesses are machines that generate cash flows. Some are big, some are small. Some grow fast, others plateau. Some are erratic, others are as reliable as Old Faithful.

Lots of people would obviously love to own a machine like this, so any time someone manages to build a good one, lots of people try to copy the design. The problem is, when there are lots of copies floating around, the original machine tends to breaks down. Each machine occupies a unique ecological niche, and can’t withstand a lot of crowding around the key resources it needs, like customers, labor, supplies, etc.

But sometimes, people manage to create money machines that are clone-resistant, and therefore incredibly durable. This kind of machine is worth many times the amount of money it spits out today, because you can count on it to keep spitting out money for a long time. Everybody wants one.

So, how do you make one? You’ll need a “sustainable competitive advantage.” No two are exactly alike, but they do share similarities, and loads of business theorists have created taxonomies and frameworks that enumerate them. Turns out, strategy is a rabbit hole that goes as deep as you like.

And back when I worked in that job at General Assembly, I dove as deep as I could.