The Math of Mediocrity
There are two ideas about statistics that I think about frequently in relation to agency growth.
The first one, is that 50% of the population has to be below average. And there can be no mathematical exceptions to that. It’s true for everything. Brain power, looks, blood pressure, income, kindness, generosity, all of it. Half of us are below average.
The second statistical idea comes from investor Howard Marks. From a 2014 memo:
For years I’ve posed the following riddle: Suppose I hire you as a portfolio manager and we agree you will get no compensation next year if your return is in the bottom nine deciles of the investor universe but $10 million if you’re in the top decile. What’s the first thing you have to do – the absolute prerequisite – in order to have a chance at the big money? No one has ever answered it right.
The answer may not be obvious, but it’s imperative: you have to assemble a portfolio that’s different from those held by most other investors. If your portfolio looks like everyone else’s, you may do well, or you may do poorly, but you can’t do different. And being different is absolutely essential if you want a chance at being superior. In order to get into the top of the performance distribution, you have to escape from the crowd.
How does your agency compare?
So here we are, with a line representing the spectrum of all agencies.
We can all agree that being on the left side is not an option. But, mathematically, 50% of us will always be there.
The first question everyone should ask is, what do we need to do to be on the right side? The second, optional, question, how far to the right do you want to go and what are the risks you’re willing to take to achieve it?
A few things to consider
Unconventional does not equal good. In fact, unconventional may often land you in the bottom 10% of firms. We see this around us everyday, everywhere. And the lines can be razor thin. Is there really such a wide margin between wildly successful business and political leaders and the dregs of society?
If you’re learning and evolving at the same rate as everyone else, you’re actually not changing your position in that hierarchy. If you want relative movement, you need to move with some velocity. Some people may argue that life isn’t a zero sum game. It’s not, but the business of your agency has to be. The client is giving the budget to one of you.
Be honest about what you want. Most firms will say they want to be a top 10% firm. But they don’t want to take top 10% risks. Goals and tolerance need to align.
It’s very challenging to assess this stuff within the confines of your firm. What you think is wildly different may be table stakes. Or there may be a clear way to normalize something that’s simply draggin you down. Make a habit of talking about this stuff with other agency leaders to learn and improve, or bring in someone like Logline to give perspective on the market.
