How to Use The Blue Ocean Strategy For Your Investment Fund

Hey guys, welcome back. So in this episode, we're gonna walk through red ocean, blue ocean. This actually comes from a book called Blue Ocean Strategy that talks through this whole concept. I gained a lot of insights from that, and another book called Play Bigger. Both books I absolutely love, and I wanna walk you through that question, 'cause a lot of people ask me, Bridger, I don't, I understand the fun thing, but I don't know exactly where to structure it, where to go, and what market to reach out to. And I think this gives a lot of clarity. On how you should structure this business or any other business really, this really applies. So what Blue Ocean Strategy talks about is that there are markets out there and these markets are what they call oceans. So, and they call a red ocean and they have another thing called a blue ocean. Okay, I'll put red ocean and blue ocean. So what a red ocean is, is they're both oceans, they're both markets, but a red ocean is dominated by category kings. And a category king typically has around 80% market share. Maybe there's 1 or 2 category kings of that space. That category king dominates this space and becomes very bloody, and that's why it's a red ocean. Imagine like sharks coming in and eating. They're all eating and trying to get market share. It becomes a very bloody type of scenario. And then this last 20% usually is left over for scraps for all the little companies to come in and fight for all the scraps. What Red Ocean and Blue Ocean Strategy talks about in Play Bigger is that you should not go in and try to capture market share in an already dominated market. Like, the biggest thing Play Bigger talks about is like, I hate, he goes, I hate when people come and pitch me and go, hey, you know, Amazon, the market size is like $400 billion. If we could just take 1% of that market, we would all be multimillionaires, right? He's like, that's a terrible strategy. You wanna be a category king. You wanna have, I'm gonna put category king and dominate a little market, be a big fish in a little pond rather than a little slice of a huge market. He says that's a great theory, he doesn't see it happen very often because of what's happening here. So I'm gonna give you 2 examples, both are from our good friends at Microsoft, right? And if you look at the computing space, Microsoft, I mean the 2 biggest players, right? Apple, Microsoft. And Microsoft. They dominate 80% of all computer shares go through them, right? But we're not gonna talk about that today. We're actually gonna talk about Google. So there's another red ocean down here. It's called internet search browser, like search, right? Internet. The biggest dominant, obviously category king is Google. Google has 89% of all searches right now go through Google, okay? At the beginning it was Yahoo and Google kind of going back and forth. AOL had a little time there, but Google obvious category king. So Microsoft wakes up one day and says, hey, we have a great idea. Let's go compete like a lot of people think. We're gonna go grab some market share from this internet browser space. We're gonna create something called Bing, right? So Microsoft comes in and says, we're gonna create Bing. They think Bing's amazing. They announce it's amazing. It's 2009. They come out with Bing and it completely flops. And it's because Play Bigger talks about is Bing comes out and says, hey, we're gonna make something Better, not new. And I'll dive into that in a little bit, what they mean by that. But they came out and said, we're gonna make something better, right? And let's— you could argue Bing is a little bit better, maybe a little bit faster, a little more unique than Google. But unless your market and your product is 30% better than the original category king, the existing customers aren't gonna move over to you, right? They don't wanna move because they're already used to it. So they come out with Bing, big flop. Currently Bing has 4.5% market share. AOL, no excuse me, Yahoo, Yahoo has 2.5% market share, and Google I believe has 89% market share, right? They dominate and they're not gonna be toppled anytime soon. Now let me ask you a question though. What is the second largest search engine in the world? And guess what, it's not Bing. It's actually YouTube. YouTube is the second largest search engine in the world. So what YouTube did is they came over and said, we're not gonna compete against Google. And obviously I know Google bought YouTube, but YouTube originally came out and said, we're not gonna compete for search volume, we're gonna come out and create not something better, something new. So they came off this and they created a blue ocean of, called YouTube. And it was video search, right? Searching for videos. YouTube became a quick category king of this market. And now there's other players like Wistia and Vimeo, but nobody even comes close to YouTube as the category king. They decided to branch off, create their own thing, create something new, not something better, and do that. And then obviously Google comes in and buys YouTube for, I think, $500 million acquisition, comes in. So that's the first example, that's example number 1. Example number 2 is also with Microsoft. They found this little company called Skype, and they had a decision to make, right? Do we want to do what we did with Bing? And the timeline's a little bit different, but they made 2 decisions, right? Just go with me for a second. Do we wanna try to create a competitor? Yes, we have the engineers, right? We have all the infrastructure. We could create Skype, you know, pretty easily, right? We could recreate the software. However, Skype is already a category king of video conferencing. They have the user base, they have millions of users that already love Skype, already use them. Microsoft said, there's no way we can create something 30 or 40% better, let's just acquire them. So Microsoft comes in and acquires Skype for $1 billion. They probably could have built Skype exactly for less than $1 billion for sure. Skype's not that complex of a software. But they come in and buy Skype because they dominate this market share and they wanted that user base, right? That's what made them so valuable was becoming a category king. Last example is with Amazon, right? Amazon is like the biggest company in the world, right? Everyone loves Amazon. Amazon started out as an online bookstore. Now their goal originally was to dominate online retail, but he said, we're only gonna start with one category, one place where we can win. He said, we, I believe, Jeff Bezos goes, I believe we can win in books, right? So he goes, launches Amazon just in the book space to sell books and to kick out, and there was no online competitor. He quickly became the category king. Like brick-and-mortar bookstores started closing their doors. They dominated that category, and then they said, now we have enough audacity to go and conquer other categories, and they slowly expanded to conquer and discover other blue oceans. Blue oceans, and sometimes conquering red oceans, to now become the online retailer of the world, right? I think every dollar spent online, 25 cents goes through Amazon. That's how big Amazon is, which is crazy. So the moral of the story is create something new, not something better. Now in the next episode, we're gonna talk about how this applies to the fund world. And I hope you guys enjoy it, help you discover exactly what blue ocean you could find in your fund.