The butterfly effect is real. Because America had its civil war in 1861, Bombay became a prosperous city and today is one of the most populated cities in the world.
The American Confederate states stopped selling cotton to Britain if they didn’t recognize and support them. And so, Britain had to scramble for their thirst for cotton. Millions of acres of land in India shifted to cotton farming overnight.
Cotton trade between Britain and India jumped by 6 times in one year! All this cotton was sold from Bombay when British ships docked there. Where 29 year old Premchand Roychand became phenomenally rich and powerful. Half the old Bombay monuments and institutions are funded and started by him: everything from Rajabhai Clock Tower to the Bombay Stock Exchange!
So how did he amass his fortune?
How things worked was as soon as a British ship would dock, the traders in Bombay would learn about international cotton prices from the sailors. And the whole of Bombay would go in a frenzy with trading activities so that local India prices would match up to international prices.
So what did Premchand Roychand do? He rented boats and sent them out to meet the English ships sailing to Bombay. He would know the prices just a bit before everyone else and would take massive positions in the cotton market.
The art of the intercept
Almost 50 years before Premchand Roychand sent boats out to intercept cotton prices, the Rothschild family did something similar. But in an even sneakier way.
Nathan Rothschild set up a network of couriers to receive information about the battle at Waterloo between Napoleon and Wellington – before the British government did. When he heard that Napoleon was defeated, Rothschild counterintuitively started selling all the British government bonds. Others in the market followed suit thinking the worst: that the Britishers were defeated.
Taking advantage of the panic selling that followed, Rothschild quietly bought back all the government bonds and more at a fraction of their value. He earned a considerable fortune when official news of Wellington’s victory finally arrived in London!
How can you intercept to win?
The score was 28-24. 26 seconds were left on the clock. The Seattle Seahawks were trailing but had the ball at 1 yard line. If they would score the goal, they would defeat the New England Patriots and win the superbowl.
Everyone thought that the Seahawks quarterback would run the ball to score the goal as they were so close to the line. But he threw the ball to a receiver instead. And the Patriots rookie cornerback Malcolm Buttler intercepted the ball! And won the game for his team!
After the game, when Buttler is asked how did he intercept the ball? He answered that he had studied the videos of Seattle Seahawks game play for so many hours that he recognized what they were about to do. And so, he positioned himself to intercept the pass a few seconds beforehand!
To intercept, you first have to predict. Pattern recognition is important. Understand the behaviour and the routines. You have to study the past events and ask yourself: what happens before the event occurs?
The 2nd step to intercept
Before Sam Walton started Walmart, he was a college student with a different ambition. He wanted to become the student body president. He recognized that leadership is all about confidence and communication. So he formulated a strategy long before the elections.
It was simple: be the first to say hi. Speak to everyone on the sidewalk before they spoke to you.
“I would always look ahead and speak to the person coming towards me. If I knew them, I would call them by name. But even if I didn’t, I would still speak to them.
Before long, I probably knew more students than anyone else in the University, and they recognized me and considered me their friend.”
That’s all it took Walton to win student body elections. Being the first to reach out. Predict patterns. And then reach the target first.
When interceptions go wrong
We’ve all seen the ball being intercepted and then fumbled. But let’s take a look beyond fumbles – beyond execution. How can intercepts itself go wrong?
- Mistiming – When intercepts happen at the wrong time, they can be quite costly. As so many dotcom bust companies teach us. Webvan failed in 2001 and lost millions. But Instacart with the same idea of grocery delivery succeeded later on.
- Misallocation – Quibi bet on the idea that short form content will win more attention and eyeballs. And in their first year, they actually did well. They had 2 million subscribers using their app. But unfortunately, they had raised $1.75 billion dollars! And bulk of it was spent on extremely expensive ok content. This misallocation meant Quibi could not stay alive even with good numbers. They had to shut shop.
Both of these interception errors can be fixed by being agile. Fast iterations. Flexible resource allocation. Quick feedback loop that shows what’s working after the intercept.
- Intercept to win. Interception requires pattern prediction, and then rapid action to reach the target first.
- Anticipate the future. And then remain agile. Because mistiming or misallocation errors can be very very expensive.