8 lessons about marketing effectiveness from two of the world’s richest men

Billionaires Charlie Munger and Warren Buffett are not marketers by trade but there’s a lot marketers can learn from them.

learnAuthor Haruki Murakami has a brilliant quote about reading: “If you only read the books that everyone else is reading, you can only think what everyone else is thinking.”

The same applies to marketing.

We all need to read and cherish the core texts from the brilliant marketing minds. Reading How Brands Grow, The Long and Short Of It or Ogilvy On Advertising should be part of any marketer’s training. But they should only be table stakes. If you’re looking for a fresh perspective, it can be useful to pull concepts from books and places your peers won’t think to explore.

To find an ‘edge’, it’s important to steal with zeal from other disciplines and find ways to apply your findings. We’re often told that marketers should be ‘T’ shaped (know one area really well and understand the broad strokes of others). This should also apply across disciplines – being a generalist in what you read and learn about, rather than specialising in just one area. Specialisation is for insects.

I love Edward O Wilson’s concept of ‘consilience’. He says evidence from independent, unrelated sources can often converge and create a common groundwork of explanation. Having a diverse range of lenses to apply to marketing problems, a kaleidoscope way of thinking, is a great way to avoid the ‘man with a hammer‘ problem. The data supports this too. Personal and professional ‘range’, as David Epstein calls it, is of huge benefit.

Personally, I believe investing is the sector that unknowingly has the most to say about marketing. Read or listen to people like Morgan Housel, Barry Ritholtz or Patrick O’Shaughnessy and you’ll quickly see what I mean. They speak about a broad mix of topics like consumer behaviour, psychology, budget investment, branding and understanding how to influence others.

Two investors in particular stand out. Blogs like Farnam Street have devoted hours to studying the financial wisdom of Charlie Munger and Warren Buffett. So many of their best ideas apply to marketing and branding.

One of the best books on the duo is by Peter Bevelin, who juxtaposes some of their thoughts from down the years with ideas from other disciplines. If you read it with a marketing lens, there’s just as much to learn as there is from a pure marketing textbook.

Here are some examples:

1. Keep it simple – you only need to get the big things right

According to Buffett and Munger, “you can live with quite a bit and still succeed if you avoid the most important mistakes”. So long as you are right on the very, very few big things that matter, most of the time you’ll get the right outcomes. They urge the reader to “always look for the answer in the most fundamental way possible” and to not get lost in the detail.

In a marketing era that seems to thrive on unnecessary complication and getting deep into the tactical weeds, this concept is refreshing.

As I recently wrote, unnecessary complication isn’t helpful. Most of the time we need a few helpful rules of thumb to get to efficient, likely correct decisions about advertising.

You don’t need to get everything right as a marketer. Usually a good, simple strategy that clearly states what we will and won’t do is enough to be better than most of your competitors.

7 models for greater marketing effectiveness

2. Even very smart people do very dumb things in groups

According to the duo, a lot of poor investing is really just down to mindless imitation of other people. It’s crowd folly, “the foolishness of groups of people who resemble lemmings jumping off a cliff”. This is partly what causes economic bubbles and busts.

But it’s far harder to take a step back, see the wood from the trees and be contrarian. It’s difficult to not follow the crowd. You tend to take some stick for being different.

This too has a clear parallel in modern marketing, where many of our seemingly smartest minds have been seduced by the lure of purpose, precise targeting, millennials and other ideas that don’t hold up to scrutiny. High ranking CMOs are expected to pontificate on some of this stuff to keep up with peers. In both marketing and investing, those who stand back from the crowd, try to remove the hype and don’t mindlessly follow trends tend to prosper.

3. When you have complexity, by nature you have fraud and mistakes

Buffett and Munger aren’t Luddites, but they don’t like complexity and distrust systems that aren’t easy to understand. They advise that investors “dread and avoid as much as you can rewarding people for what can easily be faked”.

Sound familiar?

It’s fair to say that if Munger and Buffett were marketers, they wouldn’t be fans of programmatic.

For all its incredible benefits, this is the current state of digital advertising summed up in a few lines – uber-complicated, fraud ridden and easy to fake with only a small percentage of people who really understand how it works.

In fact, the worst parts of modern advertising are a bit like the worst parts of modern finance – unnecessarily complicated, driven by algorithms that nobody except ‘experts’ understand, fraud ridden and ineffective in the long term.

It’s generally better to avoid systems that can’t properly be understood at all costs.

4. The creators of a technology constitute the worst possible sources of advice as to how it should be utilised

“Don’t ask a barber if you need a haircut,” says Buffett. And yet how often do we do that?

A lot of us rely on Google, Facebook or other tech giants to teach and educate us about their products, without a lick of scepticism. We rely on trade bodies with obvious biases for data and the effectiveness of their particular channel.

As Wieden + Kennedy Amsterdam’s head of planning, Martin Weigel, said in his recent Cannes presentation, learning from for profit vendors is a dumb way to learn about creativity’s possibilities. It’s useful to take with a grain of salt the advice of others who are incentivised to sell to you.

True for investment, and certainly true for marketing.

5. Force yourself to look for counter evidence

“Most people have an intense tendency to process new and disconfirming information so that any original opinion remains intact. Force yourself to look for counter evidence. You have an obligation to do this if you’re truly intellectually honest.”

We tend to fall in love with their long-held opinions. It’s incredibly difficult to be open minded to having your perspective changed on something you really believe in.

And yet like so many great investors, Buffett and Munger apply the mantra of “strong opinions, but loosely held”. We all “contain multitudes” and it is unreasonable to expect perfect agreement with all of ones own ideas.

As Paul Feldwick wrote in his brilliant book The Anatomy Of Humbug, there’s no one right way to do marketing that applies in every scenario, rather there’s a variety of approaches that may apply or be correct in many scenarios.

In fact, intense ideology is a bad thing according to Buffett and Munger, since it ‘cabbages the mind’ and turns you into a lousy thinker.

Many of the loudest voices in marketing land could certainly learn from this.

6. Exactitude is not truth

“There is no sense in being precise when you don’t even know what you’re talking about.”

Buffett calls this ‘physics envy’ – the common craving to reduce enormously complex systems to one-size-fits-all Newtonian formulas. You can be as precise as you want in one area without ever truly understanding the full picture.

Another problem that’s rampant in modern marketing is the false illusion of precision, the trap that we can be incredibly precise with data but actually be looking at the wrong thing.

Many modern marketers value only that which can be measured. This creates all sorts of false confidence. Marketing is mainly about creating intangible value. That by its very nature is difficult to quantify on a spreadsheet.

7. The iron rule of nature is that you get what you reward for

What Buffett and Munger are saying here is that in finance, people focus on what they get rewarded for, but this can pervert behaviour and causes unintended consequences.

This is Goodhart’s Law at play. “When a measure becomes a target, it ceases to be a good measure.”

If you incentivise someone to hit a target, they tend to focus on that target above all else, ignoring any possible unintended consequences.

The same issue occurs in marketing. If you set your KPI as a short-term metric like social engagement or click-through rates, then you incentivise people to focus only on this and ignore the impact on more important metrics such as reach, awareness or sales.

8. A majority of life’s errors are caused by forgetting what one is really trying to do

There is an old story about ‘Buridian’s Ass’ named after the 14th century French philosopher Jean Buridan that Munger hints at.

A thirsty and hungry donkey is standing in a field, exactly halfway between a tasty bale of hay and a thirst quenching bucket of water. He’s been working all day, and can’t wait to tuck into both.

But he keeps looking left and right, left and right incessantly. It’s a tough choice as to which way to turn first, and he’s unable to decide between them. Eventually, paralysed by choice, the donkey keels over and dies.

The moral? Decide what you want and don’t lose sight of it or you’ll suffer.

In any business, but particularly in marketing with its new found short-term, magpie mentality, this is critical.

Getting to a simple, elegant strategic plan is ridiculously difficult. It’s far easier to over-complicate, to err on the side of quantity instead of editing down for quality. But it’s what we must do – create a plan and stick to it. There’s no benefit to running if you don’t know where you’re going.

Strategy is about a clear informed opinion about how you win. It should rule in and out viable options. Without this, we’re just like the ass.

It’s clear these two old heads have plenty to say about marketing and branding, even if they don’t directly reference it.

But the main point is that whatever your area of interest outside marketing, the notion that you can apply lessons from it effectively and give yourself an edge is wonderfully inspiring.

Some of the most insightful, enlightening thoughts about marketing I’ve ever heard have come from sport (teams, innovation and leadership), psychology (how the mind really works and how we make decisions) or film and music (different approaches to creativity and telling stories).

It pays to read widely.

Plus, if nothing else, this hunt for understanding from different spaces broadens your frame of reference and makes you more interesting, which is never a bad thing, right?

Shane O’Leary is a senior strategist at Rothco. You can find him on Twitter @shaneoleary1.

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