Lessons from the Japanese Porn King

Bloomberg’s piece about the Japanese billionaire porn titan is well worth a read.

A few thoughts:

1. Business vs Product

“In three decades of financing pornography, Kameyama says he hasn’t set foot on an adult movie set more than once or twice, and he doesn’t watch his own films. To him, porn is the proverbial widget — a thing to sell for more than it costs to make and market, no different from any other product.”

Some people say you need to be excited about your own product, but you can be passionate about the business itself.

How do I find customers, how do I hire, how do I optimize, etc., are all their own challenges and triumphs; what you happen to sell obviously is important, but it doesn’t have to be the thing you’re into.

2. Being Warren Buffett

Owning lots of businesses is the new cool thing. People with wealth have always diversified, but you hear about it a lot more these days:

  • This story
  • The Saudis investing in assets outside of oil
  • Stories like Brent Beshore of Adventrues doing “mini private equity”
  • The $500 million Social Capital fund to buy tech companies that don’t want to IPO

3. Do Now, Adjust Later

He hates the lobby decor and design @ their HQ but did it because someone he trusted said it would help attract talent.

“I hate it,” he says. “But if it works, great. If it doesn’t, we’ll try something else.”

That feels like the philosophy of the great entrepreneurs I know. There is no fear of failure. Do now and adjust later. There’s no fear of feeling stupid. The whole thing is just one grand experiment.

That’s the same attitude he had earlier in life, where he tried a little of everything:

  • Accounting school, but dropped out
  • Semi-nude dancer at a gay Chippendale’s club
  • Washing cadavers at a hospital
  • Owned several movie rental shops in his late 20’s

4. Narratives All the Way Down

This story covers a few of the paths he tried, but I’m sure there are tons more. And I’m also sure that the successful businesses have their own fits and starts, too.

The great mistake is to compare the inside of your business to the outside of the businesses you read about online.

Media has to tell a story because that’s what we like to read. But most successes don’t have great narratives in the moment. They’re all constructed after the fact.1

5. Start Small

Great advice on how to contribute to society:

Kameyama’s : Start by building a company that lets a few people feed their families, instead of trying to tackle global hunger.”

Everything begins with a single customer.

  1. Cue Steve Jobs commencement speech quote: “You can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future”.

A Simple Way to Avoid Being Wrong

Not Even Warren Buffett Could Predict the iPhone Would Decrease Chewing Gum Sales is a fun narrative that I almost wrote about.

But it’s probably wrong.

So I wanted to know why I almost made that mistake and also how to prevent making the same mistake in the future.

Buffett did a great Q&A that that I’ve written about before. In one part while talking about moats he makes a prediction:

I’m not going to be able to figure out what the moat’s gonna look like for Oracle or Lotus or Microsoft 10 years from now. [Bill] Gates is the best businessman I’ve ever run into, and they’ve got a helluva position, but I really don’t know what their business is gonna look like 10 years from now. And I certainly don’t know what his competitors’ businesses are gonna look like 10 years from now… I know what the chewing gum business is gonna look like 10 years from now. I mean, the internet is not gonna change how we chew gum.

And then just a few months ago a bunch of places (including Business Insider and Recode) wrote a post with this chart:

Made by Euromonitor International

And they all basically said the same thing: “We’re so addicted to our phones that we don’t look up to buy chewing gum at the grocery store checkout. The iPhone has changed everything!

At a quick glance the idea seems very reasonable, even intuitive.

We know how much the iPhone has changed everything else about our lives, we can see ourselves bored on our phones during checkout, it feels a simple narrative, etc.

Until you think about disconfirming evidence.

What could prove this idea is wrong?

Everything I said about this being easy to believe is all evidence that confirms the idea.1

But what about something that would disprove it?

I can think of 2 simple things that would do the trick:

  • Is gum mainly bought at checkouts? If not, people being bored in checkouts would have to be a really strong cause to affect sales
  • Have sales of other products primarily available at checkouts also declined? I.e. why would distracted shoppers not buy gum because of their phone but continue to buy, say, candy?

It’s “hard” to think of disconfirming evidence when you’re first looking at an idea. It takes a concerted and conscious effort.

I found a simple study in the Robot’s Rebellion that confirms this.

Each of the boxes below represents a card lying on a table:

  • Each one of the cards has a letter on one side and a number on the other side.
  • Is the following rule true: If a card has a vowel on its letter side, then it has an even number on its number side.
  • Which card or cards must be turned over in order to find out whether the rule is true or false?

Take a moment to think about this before reading on.

The K is easily ignored and the A is simple. But the 8 and 5 are tricky.

The right answer feels like 8, and that’s what most people choose. But it’s wrong.

Picking the 8 comes from a desire to seek confirming evidence

Which is why we tend to ignore the 5. We already know it’s odd, so it can’t confirm the other side is a vowel.

But it could prove the rule to be wrong, i.e. disconfirming evidence.

If we turn it over and the letter is a vowel, we know the rule is wrong.

Seeking disconfirming evidence takes effort. We’re all biased to interpret new evidence according to our previous knowledge of the world.

Even stopping for a few seconds to ask “what would prove this false” would be a huge improvement in the project of finding truth.

  1. Confirmation bias FTW

Problems are an Entrepreneur’s True North

If Benjamin Franklin rose from the grave today happy and healthy he’d have a ton of questions:

  • What’s the state of the world?
  • What the hell is that thing? (pointing to cars, iPhones, etc.)
  • How do I ______?

Ben’s not one to sit out the action, and he’d like to get back into the swing of life! So he needs to learn how to get some stuff done:

  • How do I find food?
  • How do I stay informed and educate myself?
  • How do I get anywhere? Where is worth going?
  • How do I make money?
  • How do I buy things?
  • How do I find a romantic partner?
  • How do I communicate with people who are far away?

Morgan Housel wrote a great post about betting on things that don’t change:

In the last 100 years we’ve gone from horses to jets and mailing letters to Skype. But every sustainable business is accompanied by one of a handful of timeless strategies:

  • Lower prices.
  • Faster solutions to problems.
  • Greater control over your time.
  • More choices.
  • Added comfort.
  • Entertainment/curiosity.
  • Deeper human interactions.
  • Greater transparency.
  • Less collateral damage.
  • Higher social status.
  • Increased confidence/trust.

You can make big, long-term bets on these things, because there’s no chance people will stop caring about them in the future.

It’s an easy bet that Ben Franklin would desire all those things, too.

Before alarm clocks were widely available people still had to get up in the morning, so the profession of the “knocker-up” was born.

A knocker-up’s job was to walk around early in the morning and use a baton to knock on people’s doors and windows to wake them up:

I’m sure it gave the workers’ great pride in being such an important part of society’s daily life; how could the town run if everyone woke up late?

It’s easy to forget that all products and services exist to solve specific problems.

The problems of getting yourself from A to B, transacting with other humans, and finding food have existed for a long time.

And while the solutions to those problems have changed with society and technology, the core problems themselves rarely do.

So if you want to get into the business of providing goods and services (sometimes known as entrepreneurship) don’t do it in a vacuum. Solve a problem.

Even Elon Musk’s1 companies could all be summarized as “how to get from A to B, better”.

  1. Tesla, SpaceX, Hyperloop, The Boring Co.

No Freaking Clue About What Our Brains Are Doing

I found a great study that’s summarized in The Robot’s Rebellion. It freaked me out (the writing can be dense but it’s worth it):

Some patients who have sustained damage in their visual cortex display a seemingly puzzling set of symptoms. They develop a blind spot in their field of vision: they report seeing nothing in a particular portion of their visual field.

However, when persuaded to make a forced choice about a fixed set of stimuli (for example, to choose one of two shapes or lights) presented into their blind field, they perform with greater than chance accuracy despite their phenomenal experience of seeing nothing.

For example, when choosing between two stimuli, their choices are 70 percent correct despite the fact that on each trial they insist that they see nothing.

Often such patients have to be persuaded to continue to keep making the forced choices which they view as pointless. Many report that they are simply guessing, that they “couldn’t see a darn thing,” and question what the experimenter could possibly find out from such a pointless exercise.

Basically, someone has a blind spot. The tester puts a shaped object in the blind spot and asks the subject to guess the shape. The tester gets bored/frustrated because they can’t see the shape at all, yet they guess the correct shape more than 70% of the time.

This is crazy! The brain is updating with information and the subject is unaware of the entire process.

Some version of this has to be happening constantly.

And some people think brand advertising doesn’t affect them?!

We have such a small idea of what’s going on behind the scenes: how we make decisions, why we want something, what scares us, etc.

Maybe there’s something to the idea of being careful about what you put into your mind.