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It's Always Day One or It's Stasis

Awhile back, Jeff Bezos of Amazon released a shareholder and employee letter from 1997. In it, and much more recently, Bezos describes his company as a "Day One" firm. To him, a day one company is one which is just beginning in its journey, not in the middle, or at the end.

"Bezos compares "Day 1" companies — companies that are at the beginning of their potential — with "Day 2" companies. "Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1."

20 years later Amazon.com is still a day one company.

"It takes a long time to build sustainable long-term value. It takes a big long-term vision and obsessive focus on the few things that really matter (in Amazon's case, customer satisfaction). It takes a thick skin and the willingness to ignore the screaming and disgust of shareholders looking for a quick score (which, because of the intense competition in the money-management business, means most shareholders)."

To not fall into a day two trap, two things need to occur as a part of the culture, that I find particularly relevant to horse racing: i) Customer obsession and ii) a skeptical view of proxies.

The first is self-explanatory. Racing doesn't really do that, and frankly, has never really done that. For goodness sakes if you ask them who the customer is, they'll give you three different answers.

The second is more interesting, and I think explains a lot of the problems.

"This can happen very easily in large organizations. The process becomes the proxy for the result you want. You stop looking at outcomes and just make sure you're doing the process right. It's not that rare to hear a junior leader defend a bad outcome with something like, "Well, we followed the process."

I think of this often when bad policy comes down the pipe, it fails (or is a customer nightmare) and the excuses come out. I also think about it when something is proposed that's clearly and concisely detrimental to racing, but people do it anyway.

"We followed the right policy, but the weather was bad."

"Well, there's nothing we can do. We don't have a process to fix that issue."

"I know if we take more money from an ADW the customer will lose and long-term it might turn out badly for handle, but our processes say it's the only way."

"Changing the process of Equibase is a non-starter."

Perhaps the granddaddy of them all:  "When we need more money we raise takeout, because that's our process."

It's not about outcomes, it's about the process (or perhaps more apt, defending the process).

In horse racing there's tons of purse money, a revenue floor through alternative gaming, a huge edge through the UIEGA (to own a gambling business with a near-monopoly online), amazing data potential, and niche advantages that are too many to count. Despite that, foal crops are down and with 36% of the world's racing purses, North America brings in only 11% of world wide wagering.

Racing has reams of untapped potential. It's the quintessential Day One business. Why is it so resistant to act like one?

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