Jeff Bezos recently made headlines by predicting that one day Amazon will go bankrupt. The comments by Bezos reverberated globally due to the perception of most business leaders and retail analysts that Amazon is invincible.
In business and in sports, no company, team or individual athlete is invincible. There is always a weakness. The challenge is finding and exploiting the weakness. Something I refer to as The Schmeling Effect.
The Unbeatable Joe Louis
In 1936, a 21 year-old boxer from Detroit name Joe Louis Barrow, but referred to as Joe Louis by the press, had amassed a record of 24 fights with 20 knockouts.
The talent of young Mr. Louis was so great that none other than the writer Ernest Hemingway, himself a boxer and an ardent admirer of boxing, said this after witnessing Louis beat fellow heavyweight Buddy Baer “Too good to be true, and absolutely true . . . the most beautiful fighting machine that I have ever seen.”
To state that Louis was considered the Champion in Waiting is an understatement. It was universally accepted within boxing that not only would Louis become champion, Louis was unbeatable.
A German fighter named Max Schmeling, the “Black Uhlan of the Rhine” as he was referred to by the press, was selected to become the next victim of Louis.
At age 29 and with a record of 49 wins, 7 defeats, and four draws, Schmeling was viewed as being a good fighter who stood no chance against the Great Joe Louis.
The fight, or as some writers whispered under their breath, the massacre, was scheduled to take place on June 19, 1936 at Yankee Stadium.
Overlooked at the time was the fact that Schmeling wasn’t playing the part of victim. Instead, Schmeling was extremely confident and truly believed he would beat Louis.
When asked by reporters why he, a 10-1 underdog, appeared to be so confident in the face of his impending execution at the fists of Louis, Schmeling replied “I see something.”
What Schmeling saw was that contrary to what everyone was saying and writing about Louis, Louis in fact had a weakness. The weakness discovered by Schmeling was that Louis tended to drop his left hand during a fight and he often pulled his left hand back low after throwing a jab.
To Schmeling, this meant that Louis would be vulnerable to a counter right cross, something Schmeling possessed in his arsenal of punches.
As with many scenarios where everything is supposed to work perfectly without any chance of disruption to the inevitable, things did not go as planned for the “The Brown Bomber” Joe Louis.
When the fight took place it quickly became evident that Schmeling had indeed seen something, a flaw that could be exploited.
Schmeling consistently tagged Louis with right hands throughout the fight. A knock down of Louis by Schmeling in round 4 was followed by a knockout of Louis in round 12.
Shakespeare wouldn’t have dared write such an ending. The invincible Joe Louis had not only been defeated, he had been knocked out by a 10-1 underdog.
The Schmeling Effect In Business
I speak frequently at conferences and business round table discussions. The Schmeling Effect is always popular with audiences as it effectively explains the ability of an individual to see and exploit a weakness.
The story also applies to business. Regardless of how invincible a company or how entrenched an industry, there is always a weakness that can be exploited.
Below is a list of individuals who saw what others did not to create new companies and in some cases overcome larger more established competitors to take market share:
Henry Ford – The founder of the Ford Motor Company didn’t invent the automobile or the assembly line. He did, however, see an opportunity to build the first affordable car for the middle class thus taking the automobile from a curiosity to a practical means of transportation.
Michael Dell – The founder of Dell Computer saw the value of a manufacturer selling computers direct to consumers. In 2001, Dell surpassed Compaq as the world’s largest PC maker.
Steve Jobs – The co-founder of Apple saw the digital revolution and the need for digital appliances. Steve saw the future and chose to help shape it.
Michael Dell was famously quoted on October 6, 1997, at a Gartner Symposium, when Dell was asked what he would do if he ran the then-troubled Apple Computer company, he said: “I’d shut it down and give the money back to the shareholders.”
By 2006, Apple’s market capitalization eclipsed Dell proving that Steve Jobs could see further than Michael Dell.
Elon Musk – The co-founder of Tesla and the founder of Space-X has proved he saw new ways of not only disrupting established businesses and organizations from cars to rockets, he continues to see ways of doing things that others do not.
Larry Page and Sergey Brin – The founders of Google saw an opportunity to apply page linking in academic writing to the Web. Page and Brin’s breakthrough was to create an algorithm – dubbed PageRank – that managed to take into account both the number of links into a particular site and the number of links into each of the linking sites.
Google remains the number one search engine.
Travis Kalanick – The co-founder of Uber saw an opportunity to create new business models for ride sharing and commercial transportation in order to take advantage of growth in the sharing economy. Uber is considered to be one of the most disruptive companies ever created and has a market capitalization in excess of $60B.
Mark Zuckerberg – The co-founder of Facebook saw the potential in creating a social media and social networking site. Facebook is the largest social platform with over 1 billion users as of 2018.
Sam Walton – The founder of Walmart saw a new retail business powered by logistics and technology to deliver Every Day Low Prices to consumers. Walmart has 11,695 stores and clubs in 28 countries, under a total of 63 banners generating over $400 billion in revenue.
Jeff Bezos – Arguably the most influential executive in the history of business. In 1994 Jeff left a job at a New York City hedge fund because he could see the potential of the internet as a mechanism for commerce.
Amazon currently has a market capitalization larger than Walmart and impacts so many areas of business and retail that a term, the Amazon Effect, has been created to explain the impact of Amazon. Bezos continues to see further than anyone else in business.
History proves the power of being able to see what others do not in order to exploit a weakness or to create a business model to unseat a market leader. All it takes is for someone to see something that others do not, The Schmeling Effect.
What do you see?