Building Counter Cyclically “That Dog Hunts” by Julie Meyer What’s the old expression? Don’t confuse Brains and a Bull Market? Something roughly along those lines was running through my mind as I set out to put First Tuesday behind me [sadly] in July 2000, and take my vision for “building Europe.net” to the next level by building the next platform, Ariadne Capital. I told myself that if I really believed, and I try not to fool myself, that First Tuesday had an unbelievable window of opportunity in the summer and fall of 1999 [and the window had closed by January 2000] had we been properly capitalised with the right DNA and leadership, but that the problem was that I was hamstrung from executing, from being in a position to do what I knew how to do, and that I did know what to do to seize the opportunity ….. then I must get out there again – forget the holiday, and regardless of whether the market had shifted 180 degrees in the opposite direction, to prove that my success is market-independent, recession-neutral … I understand where the next curve is; my abilities are not tied to all boats floating in a rising tide. Take out a clean sheet of paper with business partners with integrity and wisdom, and get out there and build what I know and contribute a verse. Invest in others’ success. Trust your instinct. You know more than you think you do. A good friend of mine recently sent me a wonderful email explaining that she and her future husband were quitting their jobs, moving to Italy, to “ride out the recession” …. I thought for a second about the carefree nature of that, and longed for it for a second, and then came to my senses as I realised that my instincts have always been to build counter cyclically. My experience has taught me in 13 years of living in Paris and London since graduating from university that you must invest and work diligently when others think there is no opportunity as when the markets return, and the masses flood in, the real opportunities will then be gone, but I will be ahead of the game at that point. Which is why my schedule these days is super punishing. While others are vacationing in Italy, I’m scared I’m going to miss the next big thing. Call it an obsession. Working for a living can get in the way of having an impact, and making money, and changing the world. The only way to do the latter is to be committed to listening very carefully to what your instinct is telling you. Pay attention to small things which indicate that large change is about to happen. Ask seemingly stupid and obvious questions. Invest in others’ success. Trust your instinct. You know more than you think you do. Don’t assume that the guy who is running a £1 billion venture fund necessarily knows more than you do. He/she may, or may not. In a similar way, at least to my mind, inefficient markets yield exceptional returns, but you have to be in a position to drive the efficiency to extract the returns. Europe is fundamentally inefficient, and therein lies the opportunity. Why build Europe.net? Because we know that Europe is becoming more efficient, but it is a 30+ year project. But I can count the increase in the number of cross-border transactions, the more mobile workforce, the change in attitudes, the rising number of new economy networks across Europe since I arrived in London 4 years ago, and of course a new currency. …you must invest and work diligently when others think there is no opportunity as when the markets return, and the masses flood in, the real opportunities will then be gone… EO.net closed its doors recently. Great idea. Wrong time. But as someone said to me this week as I defended EO.net, a good idea at the wrong time is a bad idea. Perhaps Europe was not ready for EO.net, but EO.net will be reincarnated at some point. It is inevitable, but it will happen from another angle. I convinced the 100+ individuals who built the First Tuesday network with me in the summer of 1999 that “trust is efficient”. I looked them in the eye, and promised them that if anyone made any money out of First Tuesday, we would all make money. I overestimated my abilities to bring consensus amongst the inactive shareholders to respect that promise. While First Tuesday did a huge amount to make Europe more efficient in many respects, and this ready-to-use network is part of our Unfair Advantage at Ariadne Capital, I wasn’t able to prove the business model of First Tuesday, only the cause which lifted its wings for a while. But great businesses use the efficiency of trust, whether directly or indirectly. It’s not soft; it’s good business.   you have to be in a position to drive the efficiency to extract the returns. Europe is fundamentally inefficient, and therein lies the opportunity. There’s no mystery when you see an outstanding success story that defies all the odds. Take a look at Xansa, and then listen to its leadership, and you can hear the cadence of smart businesspeople who created the conditions of trust to maximize their best asset – their people. In return, they created a billion dollar corporation. Anyone that thinks that the outsourcing of IT to India is a new idea need only recognise that they saw this opportunity in 1978. They knew that there was an arbitrage opportunity, and pursued it to great strategic differentiation. Trust is efficient; leadership is about creating the conditions of trust, and the combination of building counter-cyclically, learning to listen to yourself, seeking out inefficient markets, and investing in the success of others, leads to businesses that are both valuable and sustainable. And as a friend of mine says, that dog hunts.