Strategists are interested in confidence men – not only do con’s make good stories but the con itself requires a good grasp of  a number of the strategic principles.  Being a con artist is a high risk strategy and one of questionable value – it is illegal and often the brilliant minds of con men would profit more by focusing on legal means of accumulating wealth (just as there is far more money to be made by starting a bank rather than robbing one).

Studying con artists such as Victor Lustig (the man who sold the Eiffel Tower) and the brilliant Joseph Weill aka “The Yellow Kid” teaches us most about the strategic principle I call “Morale” – a con is all about human nature and power of belief and desire overriding common sense.

“Each of my victims had larceny in his heart. The desire to get something for nothing has been very costly to many people who have dealt with me and with other con men,” Joseph Weil

The ‘Theft’

On August 22, 1911 Vincenzo Peruggia perpetrated what has been described as the greatest art theft of the 20th century. The former Louvre worker hid inside the museum on Sunday, August 20, knowing that the museum would be closed the following day. Emerging from his hiding place on Monday morning, he wore one of the white artists’ smocks that museum employees customarily wore and was indistinguishable from the other workers. When the Salon Carre where the Mona Lisa hung was empty, he lifted it from the wall and took it to an enclosed stairwell. There he removed the protective case and frame and concealed the painting under his smock and left the Louvre with it.

After having kept the painting in his apartment for two years, Peruggia grew impatient and was finally caught when he attempted to sell it to the directors of the Uffizi Gallery in Florence; it was exhibited all over Italy and returned to the Louvre in 1913.

Peruggia claimed he was an Italian patriot and the reason for his theft was that the painting should be returned to Italy for display in an Italian museum. Peruggia was hailed for his patriotism in Italy and only served six months in jail for the crime. After its recovery the painting was exhibited all over Italy with banner headlines rejoicing its return and then returned to the Louvre in 1913. Peruggia was released from jail after a short time and served in the Italian army during World War I.

The Con

In 1931, a reporter named Karl Decker revealed information that was passed onto him seventeen years earlier by a man named Marque’ Eduardo de Valfierno. Decker stated that the interview took place in Jan/1914, but Valfierno swore him to secrecy until after his death.

Valfierno was a con man who sold fake Spanish masters, such as Bartolome’ Murillo, in Buenos Aires. His partner, Yves Chaudron, was a conservator and master forger.  would show a dishonest, wealthy tourist in Buenos Aires a painting in a museum, and convince him that he could steal it and deliver it to them in their native land. After delivering a copy of the painting, he would fake newspaper clippings that announced the theft.

In 1910, Valfierno moved this operation upscale. Valfierno convinced Peruggia to steal the MonaLisa, so they could sell it for a fortune. After the theft of the painting Valfierno  never even contacted Peruggia – he did not really want to sell the painting that would be far too risky instead he had Chaudron make 5 expert forgeries and had already sold all of them as the original to foreign collectors.

Why it worked

Geography

• Art is extremely valuable yet small and easy to hide or transport – it is also often far less secured than money, gold, or jewelry
• He pre-shipped the forgeries to the same city as the buyers before  the painting was even stolen – this way he did not risk them being discovered in transit after all the publicity erupted

Morale

• He chose an incredibly famous painting knowing the theft would generate huge publicity – exciting the buyers even further and ensuring their skepticism would be lower than normal
• Even if a customer did manage to track him down and confront him after the Mona Lisa was ‘returned’ he could very plausibly claim that the Louvre was displaying a fake so as to not be embarrassed at losing a French national treasure.  This is a lie the buyer would very much want to believe as to think otherwise would be to admit being duped.
• As an aside the thief Peruggia’s claim of being an Italian patriot was a good strategic move in the realm of Morale (I suspect he was advised to do this by Valfierno).  Italy refused to extradite him, he served just 6 months, most of it in comfort and ended up living in France after he retired!

Logistics

• By selling forgeries he could sell the painting not just once but 5 times.
• He could sell the paintings for enough to retire – no need to expose himself to risk again.
• Even if his forgery was discovered there is no risk of the buyer going to the police as the buyer himself is engaging in an illegal act.

Tactics

• Convinced someone else to carry out the theft
• Did not bother to collect or pay for the original painting thus avoiding a lot of risk AND saving money
• He had carried out this con before on a smaller scale and so

There have been more spectacular cons and perhaps higher value ones such as the selling of the Eiffel Tower or the selling of a gem mine to Tiffany & Co. but for the sheer creativity, low risk and success I think the Valfierno Mona Lisa sale must be the best con ever.

Viewed through the lens of a strategist Neil Diamond’s book “Guns, Germs and Steel” (GG&S) is a deep analysis indeed on what creates winners and losers on the level of societies. It is in fact one of the most profound analyses of the strategic principle we at Silver Yeti call “geography” and is an excellent book for understanding the importance of geography with regards to strategic thinking.

Guns Germs and Steel a bite-sized synopsis

The central question posed by Diamond in GG&S is “Why were Europeans the ones to do the conquering and colonizing and not Australians, Africans or Native Americans?”. Diamond shows that despite colonialist justifications it was not divine providence, nor superior intelligence – when these cultures collided Europeans came out on top because of better technology (guns and steel) and more deadly diseases (germs) to which Europeans had developed resistance to and others had not. Disease was a particular advantage practically emptying the Americas and Australia of its native people. So why did Europeans have more virulent diseases and better technology?

Diamond shows how technological advancement and disease are direct consequences of greater centers of population density, this greater population density happened because Eurasians were the first farmers domesticating plants and animals long before other parts of the world.

Iran/Iraq/Turkey were the original “Farmville”

The humans in Eurasia were the first farmers not because some genius hunter gatherer invented agriculture but because the wild crops growing there and animals living there were far more suitable for domestication. The wild plants growing in the ‘fertile crescent’ of West Asia were mostly annual plants (which tend to have large seeds) and the species mix included large-seeded, self-pollinating grasses like wheat and barley – as well as the large seeds there were mutations of these grasses creating stems without a tendency to break making it easy for humans to gather the seed.

The result was a ‘package’ of crops including protein-rich cereals and pulses which meant the benefits of staying in one place and cultivating these plants outweighed the benefits of roaming in search of other food. Other regions lacked such a crop ‘package’ and had to make do with potential domesticable crops which were less valuable – i.e. they  yielded far less food per acre for the input of cultivation effort and even less protein.  With potential plant domesticates so poor the motivation for people to give up hunter/gatherer lifestyles were often very low and so simply did not happen.

Diamond carries out a similar analysis for the domestication of large mammals. While there initially appear to be many animals, such as say the zebra, which could have been domesticated especially in Africa it turns out that very few animals are actually suitable for domestication. Either they were impossible to tame (zebras), too dangerous (african buffalo), do not breed in captivity (the cheetah) or could not be penned in (many antelope). The success of Eurasian domestic animals is proven by the fact that when they did become available to the indigenous people of other continents they were rapidly and enthusiastically adopted.  Domestic animals provided not just food but also labour (horses, oxen, dogs and reindeer) and potentially massive military advantages (horses).

Finally Diamond suggests a key difference between the continents: the primary axis of Eurasia is east-west, whereas the axes of Africa and the Americas are north-south. Because crops are climate dependent and climate varies most with latitude, crops and domestic animals could spread across Eurasia far more easily. Not only did Eurasia get the best starting package they got the best possible environment for dissemination of the package.

For a more detailed explanation read the Wikipedia article or better yet get a copy of Guns, Germs, and Steel: The Fates of Human Societies

From crops to guns

Civilisation requires the food surplus only agriculture can provide, and once you have agriculture it becomes possible to support non food-producing specialists, these specialists come up with advances in technology as they are devoting most of their time to working on their craft rather than finding food. It is easy enough to see how the farmers support the guys who makes the tools and with them working on it full-time the tools evolve, some of those tools are weapons and when civilizations bump up against one another competition for resources leads to war which in turn provokes an arms race.

What do we mean by “Geography”

The word comes from the Greek geographia - which means the study of the Earth and its lands, features, inhabitants and phenomena.  In GG&S Diamond is talking about the interrelationship of biology and ecology and how these affected human development. The scope of this book and the power of its arguments really show us how profound an impact our environment has upon us.

In the Silver Yeti strategic lexicon ‘geography’ therefore means the environment in which one finds oneself operating.

• Your industry
• Your reach…region, country, state, city, neighbourhood – as is appropriate
• Your competitors
• The pricing landscape in your industry. Where you fit in (low-cost supplier? premium pricing?)
• Your potential customers and their moods, habits, feelings
• Seasonality.  Is the industry seasonal? What affects these seasons?

We are trying to discover all the elements that are pre-extant. Do you have emmer wheat or swamp taro growing in your backyard?  Both are domesticable but wheat provides about 5 times the carbohydrate yield and 10 times the protein of swamp taro.  If the only option is swamp taro you might be better off remaining a hunter gatherer and keeping the population density low rather than ramping up to villages and then towns.

Too many people want to make a blockbuster movie and live in Beverly Hills. Not enough people want to dig holes. – geographical advice on competition by the brilliantly outspoken entrepreneur Felix Dennis from his book How to Get Rich: One of the World’s Greatest Entrepreneurs Shares His Secrets

Why Europeans and not Middle Easterners?

In early drafts of this article I was asked if Diamond explained why in the end it was European cultures which came to dominate, after all if domestication arose first in the Middle East why did Europe eventually surpass this region in economic growth and technology?

Diamond does not cover this in his book but first-mover advantage in the Middle East meant this region was the first also to discover the problems with agriculture – overgrazing, deforestation, environmental impact, climate change. Thus the forests which once covered Babylon and Assyria were cleared never to return. So despite the greatest geographical advantages poor logistical management meant that Middle Eastern civilizations lost their early lead over Europeans.

Geography is not the sole strategic principle – logistics is the principle we will investigate next so add Silver Yeti to your RSS feed.

Nestled below the Lesoto highlands lies the beautiful Matuse Valley valley in the Free State province of South Africa. The valley is known for its spectacular beauty, ancestral African spirits, rock paintings, sheep farmers and jackals.

The jackal is the black-backed cape jackal, canis mesomelas, a very territorial animal and every evening the valley resounds with the calls of the male jackals echoing out over the valley. “We are the Hare Ambushers…This is our territory…stay away from here.” – jackals mate in monogamous pairs .  One starts and then the others reply in a chorus “We hear you! We are the Sheep Stalkers. And this here is our territory…stay away from here”.

It is an idyllic and wonderful place however the jackals and the sheep farmers have a relationship that is to put it mildly…a little strained. Jackals will eat lambs and even older sheep. The typical response of the local farmers to losing a couple of sheep is to head out into the hills with a .303 rifle spend a couple of nights out in the cold and eventually ambush the ‘Ambushers’.  This normally solves his problem for a couple of months  until another pair of Jackals sets up house in the newly vacated territory and also decides that sheep seem like a remarkably tasty if rather unchallenging meal.

Due to livestock losses to jackals, many hunting clubs were opened in South Africa in the 1850s. Black-backed jackals have never been successfully eradicated in hunting areas, despite strenuous attempts to do so with dogs, poison and gas. - Wikipedia

That’s 160 years of pursuing an unsuccessful strategy.  When hunting proved ineffective farmers tried traps and strychnine.

Although poisoning had been effective in the late 19th century, its success rate in eliminating jackals waned in the 20th century, as jackals seemed to be learning to distinguish poisoned foods. - Wikipedia

What happened was a domain problem, the farmers were considering which tactics (poison, guns, traps) they should be using against the jackals but kept failing because the far more significant domains are geographic (how to stop more jackals coming into the territory once you have neutralised the present jackals) ,  logistical – how to reduce the time and energy required to neutralise the Jackal and morale (how to make jackals not want to eat sheep).

Shocking new approach

One farmer must have heard the saying about the definition of stupidity being doing the same thing but expecting a different result and decided to try something a little different.  Taking a sheep carcass which jackals had killed but gotten interrupted before they could eat he wired it up to a bank of batteries and returned it to the field.  The returning jackals suddenly found themselves getting a nasty shock every time they tried to take a mouthful of sheep.  Jackals are extremely intelligent canids – far more so than even the smartest dogs and they quickly absorbed the lesson that the sheep in this area were inedible – they would just have to go back to their traditional if slightly more challenging diet of beetles, grasshoppers, crickets, rodents, hares and young antelopes.

Not only had the farmer solved the problem of the Jackals and his sheep but he also no longer needed to worry about a repeat of the problem as the local pair would keep any ‘untrained’ jackals from entering the areas. Just what we like to see a solution encompassing logistics, geography and morale with tactical delivery via a car battery.  Now it may turn out that the training does not last long or the car battery is inefficient – however this is still a far more considered and humane approach to the issue. I mean after all it is hard to fault the jackals when their intention is the same as that of humans - to eat the sheep.

The latest issue of Fortune magazine lead with a provocative cover article “Is Google Over” . The premise of the piece is that Google has moved from being a growth stock to a mature company and is no longer an industry pacesetter. Have the creators of the first truly useful Internet search, the worlds best email software and whole lot of other incredible Internet tools lost their mojo?

Not declining just not growing as fast

Its not that Google is doing badly – they are not, they are still growing and still making truckloads of money. However when stacked up against some of the other giants and Internet innovators Google have not had a great 2010.  We are used to seeing a powerful Google moving into markets and making serious waves, we are used to competitors truly fearing them but for now it seems that other companies are making the running.

Apple’s iPad and iPhone4 have been huge successes; the app store is a phenomenon and although Android is catching up to IOS4 in terms of market share from the point of view of revenue there is no contest. Amazon’s cloud services like EC2, S3 and Mechanical Turk are going from strength to strength; the new Kindle is a huge hit, ebook sales are growing like crazy and its core online sales business is producing huge profits. Then there is Google’s primary headache – Facebook… Facebook are on a roll, hiring away key Google engineers, posting massive growth numbers in 2010 and steadily creeping toward capturing the no. 1 Internet traffic spot from Google.

Facebook wall all their data off out of reach of Google’s search engine & they are getting progressively more successful at competing with Google for the long-tail advertising spend.

Google’s performance in 2010 so far has been…

• A slowing search market (including Bing now powering Yahoo’s searches).
• A litany of failures in the social media space such as Wave, Buzz, and Orkut.
• The reputation debacle over its joint announcement about ‘net neutrality’ with Verizon. My favorite headline from that imbroglio: “Google drops the ‘don’t’ from ‘don’t be evil’”.

Not gone. But does Google know where it is going?

Perhaps they hired away too many Microsoft engineers, perhaps that legendary difficult hiring process is good at finding optimizers rather than innovators or maybe they just have way too much money to spend. Whatever the reason Google seems to have lost direction, trying to compete with others rather than making the running themselves. Have they lost sight of their mission and is it now just about being the biggest kid on the block? How does beating Twitter tie in to Google’s stated aim of organizing the world’s information and making it universally accessible and useful?

Core to understanding Google is to realise that they are best when fulfilling that mission by operating as an infrastructure company – their massive investment in datacenters, power stations, and fiber optic connections means that when it comes to sheer computing power Google are easily able to out-muscle anyone. So the questions for Google should be what are the best ways to leverage their engineering talent and vast computing power?  Enter Automattic and their crown jewel – WordPress.

Automattic don’t literally ’own’ WordPress as it is released under a free software licence however they definitely have de facto control of the platform much like Google does with Android or Canonical with Ubuntu and with this control are able to leverage this platform into all sorts of areas.

WordPress – taking over the Net 1 website at a time

The latest version of WordPress, 3.0, was downloaded 11 million times in just over a month. Almost 8% of the world’s top million websites are now built on top of Wordpress!  Over 85% of all blogs are WordPress based.

WordPress is easily the no.1 content management system on the web today and after raw HTML runs more websites than anything. Silveryeti runs on WordPress and it is hands down the most powerful and easy to use content management system.  Wordpress has so much going for it it would take a blog post just to list all its brilliant qualities: Installation is a breeze, it has tens of thousands of beautiful templates, it is open source, it is free, it is easy to extend and modify, it has a fantastic ecosystem of plug-in developers, and on…

So what would buying Automattic offer Google?

• 35 million pageviews per month from WordPress. com.
• Many further opportunities for adsense integration
• Fantastic credibility in the Open Source community
• Access to a vast ecosystem of developers creating plug-ins.
• As yet there are no sales of premium plug-ins via a plug-in store akin to the android store – this is a big opportunity and could be a very solid source of revenue.

“Smart companies try to commoditize their products’ complements.” Joel Spolsky - one of the better strategic thinkers blogging about business and the Internet. See his strategy letter about just this principal.

Google indexes websites,  Wordpress makes it really easy for people to create websites and add content to them. WordPress alone is a huge win for Google but Automattic has another product easily as exciting – Buddypress.

Serious ammunition in the fight with Facebook – Buddypress

The unstoppable openness meets the immovable closed system

Buddypress runs atop WordPress, its is a social media platform which allows anyone to create their own little niche Facebook. Although the latest version is much improved Buddypress has not had nearly as much investment as WordPress and has nowhere near its sophistication.  Google could potentially change that and up its power dramatically – and fast.

Buddypress (and a hosted buddypress.com) will allow the building of niche social networks some of which will no doubt be very successful – especially if there is an RSS type feed linking all social networks together, requiring just one log-in and just one entry of personal data. Each one of those networks then has the potential to take time and attention from Facebook. Social networks which are open to the web, inter-operable and fully searchable represent a huge win for Google.

Google Me, Google’s so-called “Facebook killer” might well be a flop along the lines of Orkut or Google Buzz. Google has already shown that while their engineering is excellent they struggle to compete in the social  space – their touch just seems clumsy.  If instead they focus on what they do best, engineering and providing a platform then there is a real opportunity to compete effectively with Facebook.

What about Blogger?

Blogger has not exactly thrived since Google bought it and it often seems like Google doesn’t know what to do with it.  It has suffered from under-investment and has been trounced by wordpress.com the hosted version of WordPress. Blogger is an inferior product to WordPress and this is shown by the growth of wordpress.com relative to Blogger:

The solution is simple – roll the blogger accounts into WordPress.com.

The marvelous Mr Mullenweg

Those benefits alone would be massive but part of the key to the purchase would be Google reinvigorating its morale. The free software and open credentials Matt Mullenweg would deliver could make a huge difference.

“When you ‘open source’ something it’s a lot more work, you have to do it in the right way, you have to involve the community, you have to test the code a lot more thoroughly. But I feel like it’s just intrinsically good, and when you do something as a company that’s intrinsically good, that’s morally right, you get more excited in the morning when you wake up.”

Ah – a move from ‘don’t be evil’ to ‘ intrinsically good’. Go on Google make Matt an offer he cannot refuse.

“The beatings will continue until morale improves” ~ WWII Japanese submarine commander

This classic sarcastic quote illustrates the impossibility of forcing morale. Morale unlike tactics or logistics is a much fuzzier force and thus there is a tendency to ignore it in strategic thinking. This is a mistake as the impact of morale is huge.

When I was in primary school and up until halfway through high school I used to get into a lot of fights. While I wouldn’t say I always won I never really lost a fight either. Being a classic Dungeons and Dragons playing, computer club geek I received my fair share of provocation but I was pretty stubborn and refused to be pushed around. This meant the bullies would often pick on some of the softer targets which always got my sense of justice riled up and next thing I was confronting the bullies. Hence all the fighting.

I grew up in pretty strict Christian all-boys boarding schools in South Africa where we wore uniforms and had to call the teachers ‘Sir’, however at the bottom of the playing fields or in the dormitories after dinner we had regular mini fight clubs going on. One of the benefits of fighting a lot is you start to get pretty fearless and somewhat competent. My main tactic was generally to charge at top speed, head-on at someone then start grappling on the floor – this meant the bigger kids couldn’t use their reach or weight against me and on the floor sheer aggression and energy counts for a lot.

A lot of this aggression and energy came from knowing I had something bigger on my side – justice. I was in the right & I knew it. These guys were picking on us and bullying us and it wasn’t going to wash… It was only when things changed in my teenage years that I realised how big an asset that belief in the rightness of my cause was.

When I was 15 it all changed the arrogance of adolescence and a desire to seem cool had eroded my moral clarity and I took the first serious beating of my life. The whole school was away on something called “Veld School” a rite of passage all South African schoolkids had to go through in the 1980s, ‘Veld School’ means roughly ‘Bush School’ and is basically a week away in the countryside with your classmates running obstacle courses and eating dreadful food – a kind of stripped down boot camp presided over by overweight Afrikaaners. The supposed intention was to build character but it seems the primary reason was for teachers to get out of town for illicit affairs & heavy drinking – it was considered unpleasant by almost all the students on it.

Anyway while there we each got a turn at serving food and while on breakfast duty I gleefully handed out extra food to all my friends. A new kid at the school asked for extra and when I refused grabbed some anyway, I proceeded to whack his hand with the serving spoon – HARD. He was justifiably pissed off and thanks to the provocation of 150 odd bored 15 year old boys we were soon squaring up behind the dormitories for a fight.

I lost badly. Even now I can recall his knee slamming in to my head….repeatedly. No agression, no speed, no desire for the fight. The thing is this kid was no bigger, faster or tougher than any of the others I semi-regularly clashed with at school but the fight was just not in me – I really should have been apologising to the guy not fighting him.

The moral elements are among the most important in war. They constitute the spirit that permeates war as a whole, and at an early stage they establish a close affinity with the will that moves and leads a whole mass of force, practically merging with it, since the will is itself a moral quantity. ~ Von Clausewitz

Morale is one of the key considerations in formulating a strategy. Your team, your customers even your competitors will be affected by your sense of purpose and the rightness of action you bring to your endeavor. Think of the dramatic momentum Google had in its early days. How much of this was down to its mission – “To organize the world’s information and make it universally accessible and useful.” ? Compare this to Microsoft’s mission of “A computer on every desk and in every home, running Microsoft software.” A mission which began to seem downright creepy when Microsoft was facing anti-trust actions. Any wonder Microsoft has in the last 5 years leaked much of its top programming talent to Google?

The Microsoft Blue Monster - click to see Hugh Macleod's explanation

The Blue Monster was a quixotic attempt by Hugh Macleod and some friends of his at Microsoft to shift Microsoft morale from the grass roots but lacking deeper buy in from higher up in the organisation it seems doomed to simply make Microsoft look even more stodgy. Morale is’nt just a high-level ideal though it is also profoundly affected by operational and structural issues. By all accounts Google is no longer the incredible working environment it was in its early days – it has simply grow too large to keep the same sense of unity and purpose.

The French, typically, have a fantastic term for morale – Esprit De Corps. How is yours?

The Internet is going to be an ever increasing component of your world – whichever business you are in. The Internet is the first many-to-many communications medium – this is extremely significant. You might want to consider the impact of the first 1-1 communications medium aka speech or the first 1-many communications medium aka writing to get an idea about just how big an impact this medium will have.

Think of the evolution of 1-many communications from pictographs, to the alphabet, to the printing press (the automation of 1-many communications), to the radio (the ‘electrification’ of 1-many communication to use McLuhan’s terminology), Cinema, and finally TV perhaps the ultimate form of this type of communication.

It was not immediately apparent that the Internet was a whole new category of communication and Web 1.0 was characterised by Internet magazines, and Internet Radio and various other ways of adapting 1-many communications to the new medium. However the medium began to have its way eventually as all mediums do and with the emergence of web 2.0 it became clear that this was something different and true many-many communication began to happen.

The web is also an excellent medium to enable 1-1 and 1-many communication – but it is in the area of the many-many communication that the true revolution will happen – a revolution which is only at its barest beginnings. If we compare it to writing we are probably in the stage of moving from pictographs to the alphabet.

An Example

A computer programmer friend (A Ruby hacker – quite in love with the elegance and ease of his chosen tool) was somewhat horrified when we discussed the extent of what non-programmers can create using tools such as WordPress, Iceberg combine this with how technical skills are rapidly becoming commoditised and the key now is creativity and artistry not knowledge or technical ability.

Yet these tools are only just starting to be developed and combined, most of them are less than 10 years old! And now we can have the web with us everywhere in the form of our smart phones which accelerates the process dramatically.

Another consideration – the methods of crowdsourcing and long-tail niche exploitation which were invented online are moving offline as Chris Anderson explains in his WIRED article “Atoms Are The New Bits”.

Hold. Onto. Your. Hat.