Never Multiply by Zero
$10 million times zero is zero
It is a Friday night and you know what that means, it is time to watch a movie with the family. There is only one place you go and everyone goes there, Blockbuster. The iconic blue and yellow sign illuminates and provides a light to the holy land. Movies, games, and shows line the wall, your younger self overwhelmed by the number of options. It had everything you could want for a good Friday night.
That was until it didn’t, the world innovated and moved along but Blockbuster didn’t go with it.
It began in 2000. The world was becoming more digital and in 2000, a company called Netflix came to Blockbuster wishing to sell itself for $50 million. However, the Blockbuster CEO saw Netflix as too much of a niche business. Netflix co-founder Marc Randolph described the meeting with Blockbuster CEO John Antioco, Netflix co-founder Reed Hastings, and CFO Barry McCarthy at Blockbuster’s headquarters in Dallas. When Netflix pitched the offer and mentioned the $50 million purchase price, Marc Randolph wrote about John Antioco’s reaction.
"But as soon as I saw it, I knew what was happening: John Antioco was struggling not to laugh."
Blockbuster was trying not to laugh at the idea of what Netflix was.
Fast forward to today, and we now see how it unfolded. Netflix has the 61st largest market cap in the world and over the past year, Netflix’s stock is up 63%. Meanwhile, Blockbuster is dead. Operations ceased in 2014. Now just a blip in our memory, a piece of our younger self we left behind. Video rental stores are now largely extinct.
Not to mention, Netflix produced a TV series that began in 2021 about the last remaining Blockbuster. It is about a fight to keep the store open. Talk about savage. A company that once nearly laughed you out of a sales pitch, you now made a show on their struggle to stay alive. In typical Blockbuster fashion, the show didn’t last long, only one season. The show probably didn’t change to the needs of the audience. Life does come at you fast and safe to say, that Netflix got the last laugh and still laughs today.
Blockbuster refused to move along with the adoption of the internet and largely never innovated. Zero risk was taken. They multiplied by zero and as you know, anytime you multiply anything, anything at all, by zero the answer is in fact, zero.
You can spend all the time in the world building a video rental chain to have 9,094 stores and employing almost 85,000 people but if you refuse to change, adapt, and innovate you are effectively multiplying by zero.
They bet that people would continue to drive to stores to rent movies. They didn’t believe in the ease of access of DVDs arriving at your door and then eventually becoming a part of your TV where no wait is necessary. It was a bet that involved putting all their eggs in one basket. When the brick-and-mortar video rental sector went to zero, blockbuster went right with it.
Much of success in life involves avoiding pitfalls. Staying alive so you can play the long game, rather than trying to expedite success. If you take $1,000,000 and multiply it by zero, you get zero. If you take $999,999,999,999 and multiply it by zero you get zero. It is one of the simplest rules in math. If zero was involved, it was the easiest question on your multiplication table test.
Think about it for us. If we spend all the time prioritizing and managing our finances, working to get yearly raises, living below our means, actively managing our portfolio but we choose one day to pour it into the new, hot crypto, dreaming of the crazy returns it could provide, and the crypto goes to zero or the governance system is hacked, all that is lost.
Stay in the Game
Sometimes it is about just staying in the game, not always trying to win the game. Even if it is just a sliver of hope to stay alive it is still greater than zero. Sometimes you eventually win the game just by simply staying in it, survival of the fittest.
The best basketball player you have never heard of tragically couldn’t stay in the game. He was the most complete player in the 1986 draft class and even drew comparisons to Michael Jordan. Some even said he was better than Jordan. Consensus First Team All-American, two-time ACC Player of the Year, and the second overall pick in the 1986 NBA draft. He is even in the Basketball Hall of Fame. Len Bias was that special.
He was drafted by the Celtics in 1986 and he was set to be the Robin to Larry Bird’s Batman. Tragically, you have never heard of him or got to see just how true the comparison to Michael Jordan was. Two days after getting drafted, he overdosed on cocaine. All the blood, sweat equity, and tears were sadly multiplied by zero. A champion that never was.
In efficient markets, risk is proportionate to reward. Your choices always yield positive or negative results. It is important to avoid multiplying by zero. Risk is a necessity but within reason. Too much risk is a recipe that is ripe for disaster. Assuming too much risk and putting yourself in a situation to multiply by zero is a dangerous line to walk.
It was seen all too much with crypto. Crypto has largely taken a backseat because people became greedy. It provided a select few with outsized returns and others became enamored with becoming one of those few. “WAGMI”, we all are going to make it, populated the crypto world and everyone was convinced they could get rich quick. In crypto, money was infinite or so they thought.
However, what few realized is that when you levered up your assets and put an uncomfortable amount in crypto, you can’t stand to lose all of, someone is bound to get hurt. Reddit became a wasteland to those who risked too much. Countless stories of those who saw the shiny object but it was just that, a shiny object. Those who wanted the reward but failed to realize the bust can be just as big as the boom.
As Morgan Housel likes to say,
“The bust is only dangerous if you depend on the boom.”
Some of the coins weren’t backed by anything and when they went to zero, sadly some people’s bank accounts went right with it. They multiplied by zero.
Parting Words
Life is a long game. It’s a marathon with many twists, turns, hills, and cracks. Sometimes it’s just about staying alive. Staying alive and slowly overcoming those hills and mountains life throws your way. Multiplying by zero is the quickest way to lose that game.
Play life with your eyes. Observe. It can lie in plain sight but it is also about learning from others and remembering what we have always known. It is hard to remember a company that continued to succeed despite refusing to innovate. It is difficult to find someone who retired by “YOLOing” in penny stocks.
Don’t try and expedite the success, life is more about avoiding the pitfalls. It is about staying alive and playing the long game. It’s hard to beat the person who never quits and the best way I know to never quit is to never multiply by zero.
Thanks for reading.
Scantron’s Selections - A few things I loved this week
There’s Nothing More Real Than Your Potential - More to That - Have you achieved what you thought you wanted, only to feel more empty than you’ve ever been?
Steven Bartlett on Mastering Business and Life: The Power of Self-Belief, Leading with Vulnerability, and What Matters Most - Rich Roll Podcast - Huge fan of Steven Bartlett and enjoyed hearing him on the eye side of the mic.
blockbuster, like many other "old guard" brands are testament to the adage that 'if you stand still, you move backwards'.