Brent Beshore: Learning to Pole Vault

Naked Brands are a new kind of brand — enabled by social media, powered by personality, and built for the digital age: 

  1. Naked Brands are transparent.

  2. Naked Brands are founded by social media influencers.

  3. Naked Brands prize on-going communication with fans and customers.

Since writing the original Naked Brands post, I've applied the concept to financefashionmusic, and basketball. Now, I'm writing a book about Naked Brands. 

This book project requires an extensive research process. I plan to conduct many interviews with writers, influencers, and entrepreneurs. The interviews will all be public and will live right here on my website. We'll go on this journey together — you and me. Together, we'll cross industries, speak with experts around the world, and explore the past, present, and future of Naked Brands.

If you have ideas or feedback, please send them my way. You can find my contact information here. I look forward to hearing from you.

Note: You can keep up with the series by subscribing to my “Monday Musings” newsletter.


Brent-Beshore-adventures.jpg

Brent Beshore

Brent founded adventur.es in 2007 with the goal of an organization that allowed him to do what he loved, in places he enjoys, with people he admires. Since then, adventur.es has made over 50 investments and ranked on the 2011 (#28) and 2017 (#428) Inc. 500. Brent reads a lot, writes occasionally, dabbles in wine-making, and was nominated for a VH1 Do Something Award for helping his hometown of Joplin, Mo. recover from the devastating tornado.

This is my second interview with Brent. My first interview with Brent was on the North Star Podcast. Ever since that first conversation, I’ve turned to Brent for wisdom on life, learning and business. One thing is for certain: The world needs more people like Brent Beshore.

Enjoy the interview!


David: Morgan Housel once wrote: "Marketing is increasingly cheap. Trust is increasingly expensive.”

And as you’ve said, “marketing and sales are the lifeblood of any organization.” You’ve also said, that content is an overrated way to get people to your website but an under-rated way to scale education and trust. What’s your philosophy on content as a way to push people down the sales funnel?

Brent: All marketing is content marketing. It’s redirecting attention, at scale, through a message. Once you have the attention, you can educate the person on your product’s features, advantages, and benefits. And/or, you can build trust. The purpose is to sell something, to change behavior, and people are almost always buying behavior.

The first challenge is getting people’s attention, which is different than interrupting them temporarily. Real attention requires you to help, which is why most marketing is ineffective. Buying a million cheap clicks isn’t nearly as valuable as getting a beautiful, entertaining, informative message into five hundred of the right peoples’ hands.

The problem with traditional “content marketing” is the chain of value that must be constructed to change behavior. For instance, let’s say I write an op-ed for the Wall Street Journal and the purpose of it is to generate leads for my consulting firm. Here’s what you have to believe to make it worthwhile: Out of the two million people who viewed the article, perhaps five percent of them actually read it. Now we’re down to 400,000 readers. Of those readers, perhaps 1/10th of 1% of them clicked my byline to read who I am. That’s 400 people. Of those 400 people, perhaps one or two of them is a qualified potential customer, which has a 10% chance of eventually buying my services. So for all the time and money I’d spend getting myself in a position to write for the Wall Street Journal, it’s an incredibly poor lead generation tool.

But when used differently, that same article can be brilliant. What if I took the article that was published and prominently displayed it on my website? Now people who are already interested in my firm and trying to learn more can find it. Buyers like proof points and having the WSJ hand stamp gives it more weight. Then provide a modified copy to the sales team to help start conversations with new customers, or reinforce our expertise with existing customers.

Marketing is like investing and, in some ways, is investing. You’re allocating resources to generate a return on invested capital. Like investing, you always want to understand what you have to believe for it to work out. If the type of investing doesn’t make sense, it’s highly unlikely to work. You want no-brainers.

 Brent Beshore (second to the right) with Warren Buffett

Brent Beshore (second to the right) with Warren Buffett

David: Your point about “no brainers” sounds like something Warren Buffett would say.

Shifting the conversation here: From elementary school to high school, to college, we essentially run the same race and compete for limited spots. We’re trained to compete. You do the opposite. You look for inefficient markets, where there’s little competition. In our current landscape, how would you advise somebody looking to build trust and generate attention for their business?

Brent: Marketing will only get you where you’re going faster. If your product isn’t valuable, marketing will help put you out of business, fast.

The best way to build trust and generate attention is to be relatively excellent. I say “relatively” because some markets are more efficient/mature than others. The less developed a market, the less valuable you have to be in absolute terms. You just have to be better than everyone else. I don’t want to try to outcompete smart, well-read, and hard working people. I want to find the lowest bar to jump over and then get good at pole vaulting.

Picking your field is arguably more important to your success than your current skill and future capacity. In some segments of business, everyone makes lots of money and the very best do outrageously well. In other areas, even the very best often declare bankruptcy. It’s a base rate analysis. Assume you’re only going to be mediocre, then explore what business and life look like if that’s true.

So choose your field wisely and get good at what you’re doing before trying to make noise.

David: The idea of finding small hurdles and learning to pole vault is so, so good. Going to put that one in my back pocket! That reminds me of another Brent-ism: Concentration Risk.

As you once said: "The special sauce that allows most companies to prosper is a form of human equity. It’s specialized knowledge about how a system works, or some hard-to-gain expertise, or a handful of high-value relationships. People leave, die, or get addicted to something unfortunate and go off the rails. The more concentrated this human equity, the higher the risk.”

Naked Brands may be susceptible to concentration risk. Their success often depends entirely on the founder, which can make them a risky investment.

How would you think through this dilemma?

Brent: Almost always, the smaller the company, the greater the concentration risk, because the owner(s) can’t/won’t invest in systems that live beyond individuals. A sales system that can take ordinary people and produce extraordinary results creates similar outcomes as the superstar salesperson, but is 10X more durable. On a risk adjusted basis, it’s also 10X more valuable because the system can’t get hit by a bus.

A brand can work similarly. If one person’s charisma, intellect, and vision cause a meteoric rise, that same person can cause a catastrophic failure that has nothing to do with the underlying product. Take Elon Musk as an example. Compared to other car companies, Tesla’s share price looks absurd by any valuation technique short of the elusive erratic tweets per car manufactured ratio.

Why?

Because investors believe, at least for now, that Elon can transform the transportation industry and perhaps cure cancer accidentally along the way. So when he acts erratically, it sends a shockwave through expectations. Ironically, pre-Cheech and post-Chong Tesla is identical. The difference is Elon’s brand and how much it induces an investor to believe in the future.

Small, boring companies usually share the same risk. If Bob of Bob’s General Contracting can acquire a reputation for reliability and honesty, he can usually create one heck of a business by personally engaging with his customers, employees, and suppliers. But like Musk, if Bob suffers a heart attack, or becomes friends with Joe Rogan, the business can quickly suffer.

The solution is to build equity in the business brand and/or a collection of brands, while always diversifying away from one individual. The first solution is fairly straightforward: don’t name the business after an individual, or make one person the star. The second is the Wu Tang Clan approach. Create a collection of voices that carry similar weight. Ritholtz Wealth Management has done an excellent job of this in recent years. In fact, I’m pretty sure they’ve pioneered a new business model that combines loosely affiliated media brands in a franchise system. It’s fun to watch and I bet they end up becoming a far larger organization over the next 5-10 years.

 Brent Beshore

Brent Beshore

David: When I think of “Naked Brands,” I think of sexy businesses. How can the Naked Brands concept of transparency, an active online presence, and consistent communication with current and potential customers apply to small, growing private-equity-owned businesses?

I suspect there may be counter-intuitive, under-explored applications of "Naked Brands" ideas for non-sexy, regional businesses like the ones you tend to purchase.

Brent: All businesses are “sexy” to those they serve. I’ve never been more excited to see anyone in my life than when the plumber showed up to fix my overflowing toilet. If something’s not sexy, it’s only because you’re not the target audience.

The mechanics of marketing work identically in every business, although the application varies wildly. Find customers. Educate them on your value proposition. Build trust. Deliver for them. Ask them to tell their friends. For small businesses, it’s just a smaller target audience.

David: You’ve worked in the marketing industry for more than a decade now. It’s a bit of a cliche, but I think it’s true: We’ve gone from a world where content is scarce to a world where it’s abundant. I have so many Chrome tabs open right now! How does the state of modern media inform your marketing strategy at Adventur.es?

Brent: It’s all about attention, which is the reason we don’t have an “outbound” deal sourcing strategy at adventur.es. We’re constantly pounded by marketing messages and distractions, so what good is more shouting? Instead, we try to make sure owners are surrounded by people who know who we are and can offer up something we wrote when they’re thinking about selling. The website is packed with information allowing the seller to educate themselves at their own pace on how we think, what we value, and qualify themselves as a potential partner.

This may seem pedestrian, but it’s not. Useful content attracts the right people, repels the wrong people, and saves everyone tons of time. Now instead of trying to grab someone’s attention and sell them on why they should let us buy their company, they’re coming to us and asking to start a conversation. And instead of starting at zero, we’re able to jump hours into the conversation with no fatigue.

David: Last question: in your study of history, where do “Naked Brands” style ideas pop-up?

Brent: “If we are uneducated we shall not know how very old are all new ideas.” – G. K. Chesterton

David: Closing it with a bang. What a quote! It reminds me of a quote from John Hegarty: "The Originality of an idea depends on the obscurity of sources." Thank you, Brent.

Brent: Thanks, David.


Note: You can keep up with the series by subscribing to my “Monday Musings” newsletter.