How to find the tipping point for a dramatic change?

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1. Graffiti on the subway and broken windows.

In the 1970s and 1980s, the urban environment of New York was notorious for its poor conditions and rampant crime, with the subway stations, renowned for their filth, serving as hotbeds of criminal activity. In 1994, Bratton took office as the chief of the transit police department, initiating efforts to improve New York's security and targeting the city's subway system, which was perceived as a "free-for-all" zone. Contrary to expectations, he did not deploy additional forces to tackle major crimes; instead, he directed the police to crack down on minor offenses such as fare evasion while also cleaning up graffiti from train cars and station platforms.

The outcome of this strategy left nearly everyone astonished: crime rates significantly decreased, with almost one out of every seven fare evaders caught being a wanted criminal. Moreover, as the train cars and platforms became cleaner, the conditions of station stairs and streets gradually improved, eventually extending to various neighborhoods. This transformation turned New York into one of the best-governed cities in the metropolitan area. 

How did cleaning up graffiti and cracking down on fare evasion affect a city? This brings us to the famous "broken windows theory." Based on an experiment by psychologist Philip Zimbardo of Stanford University, James Wilson and George Kelling argued that if the broken windows of a building are left unrepaired, more windows will be broken over time.

This reminds me of VERITAS, a company where I once worked. The company initially placed office supplies such as pens, tape, and staplers in public areas for employees to use freely. However, the consumption rate of these supplies increased rapidly, necessitating frequent replenishment and procurement. Upon investigation, the company found that many employees would forget to return the items after use, and some even took them home. Consequently, VERITAS's management decided to place these communal items near the managers' desks. Following this simple adjustment, the rate of office supply consumption decreased to one-tenth of its previous level, avoiding unnecessary waste and reinforcing the impression of a rigorous and responsible corporate culture among employees. Later, in 2005, the company was acquired by Symantec for $13.5 billion.

In reality, the cost savings achieved by relocating office supplies at VERITAS might not have been substantial, but the underlying logic behind this phenomenon is worth contemplating. Self-service office supplies, like graffiti on the walls of New York's subway or broken windows in buildings, all convey an impression of lack of supervision and environmental chaos, leading individuals within them to become more lax and negligent. This insight is crucial for entrepreneurs and business managers: the environment significantly influences a team's execution ability and efficiency.

Placing office supplies near managers, cleaning up graffiti, and repairing broken windows are essentially environmental corrections that signal the presence of supervision and order, thereby ensuring the maintenance and uniformity of the overall environment. These seemingly trivial matters often have a significant impact in the end.

And these seemingly minor actions and decisions are at the core of what I want to discuss with you: the concept of the Tipping Point.

2. The three-part logic of the tipping point.

In the year 2000, renowned British author Malcolm Gladwell penned "The Tipping Point." In this widely circulated work, Malcolm summarized the three factors that create trends:

(1) The Law of the Few

(2) The Stickiness Factor

(3) The Power of Context

While the central ideas of this book are primarily explored from a marketing and advertising perspective, I believe these concepts can be effectively extended to the realms of entrepreneurship and investment and be utilized effectively. After all, for entrepreneurs, effectively managing and influencing teams, as well as promoting one's own business, are essential courses on the road to success.

Firstly, there's the Law of the Few. Malcolm's viewpoint suggests that the popularity of products and ideas relies on a select few key individuals. From this, one can infer that the success of a startup, and whether it can overcome the "valley of death," lies in the hands of a very small number of decision-makers.

During the 1970s and 1980s, the semiconductor storage market was dominated by the giant Intel. However, in 1985, much of its market share was snatched away by the emergence of Japanese memory chips. The company faced a critical decision: whether to continue its core storage business, albeit at a loss, or to pivot towards the smaller and uncertain future of microprocessors? Gordon Moore, then CEO, and co-founder Andy Grove debated this extensively. 

Once, Andy, looking out of the office window at a Ferris wheel, asked Moore, "If we were to step down, and a new CEO took over, what do you think he would do?" Moore replied, "He would get out of the memory business." To this, Andy responded, "Then why shouldn't we?"

Thus, Intel embarked on its most perilous yet pivotal transformation. To focus solely on microprocessors, the company downsized by 7,200 positions, nearly a third of its workforce. However, in that same year, Intel launched the 386 microprocessor, becoming a milestone in computer technology.

 Later, it was Microsoft that launched the globally sensational Windows 3.0 operating system in 1990, built upon the 386 processor. These stories were chronicled by Andy Grove in his autobiography "Only the Paranoid Survive."

There are numerous tales of brave individuals defying conventional wisdom to determine the fate of enterprises. Whether it's Elon Musk securing a low-interest loan of $465 million from the U.S. Department of Energy on Christmas Eve, preventing Tesla from collapsing the next day, or Tim Cook going against Steve Jobs' pre-mortem wishes to focus heavily on the Chinese market, propelling Apple to surpass a $3 trillion market capitalization, all serve as outstanding examples of the Law of the Few in the business world.

Malcolm Gladwell's second argument is the Stickiness Factor, suggesting that to trigger a trend, the disseminated information must be memorable and possess strong stickiness. This is essential guidance for entrepreneurs. Whether it's the communication and execution of internal company information or the dissemination of products and services among the masses, they are all crucial factors determining whether entrepreneurs can command their teams effectively and whether their brand image can be recognized and accepted by the public. An enterprise culture with vitality and infectiousness is what I, as an investor, most desire to see in the soul of a startup.

The final point is the Power of Context. As previously mentioned, humans, being social animals, are influenced by external environments in their behavior and decision-making processes. This applies to individuals, groups, companies, and nations alike. If a company wishes to accomplish something, it needs to create an appropriate environment to efficiently achieve its objectives.

After going public in 2012, Facebook missed the initial wave of mobileization. To accelerate its transition to mobile, Mark Zuckerberg mandated that all meetings must be mobile-related, with any unrelated meetings being canceled. This decision initially had a significant impact on the company and its employees, resulting in widespread complaints. However, it ultimately successfully facilitated Facebook's transition to mobile. Just three years later, 90% of the company's daily active users came from mobile.

Today, Facebook is undergoing a second transformation, venturing into the metaverse. Zuckerberg even went as far as renaming the company Meta. For a well-established tech giant, renaming is exceedingly rare. Furthermore, Zuckerberg prohibited employees from using the name "Facebook" within the company. Now, six months later, Meta has become widely known and used by most people, marking the company's gradual establishment of a new corporate culture and image in the public consciousness. This exemplifies the power of the environment. Of course, whether Meta can ultimately achieve new breakthroughs as a leading company in the metaverse domain remains to be seen.

The above represents my extrapolation of the Tipping Point viewpoint. In my opinion, a good founder and company manager also need the qualities required to ignite trends: they need to have accurate judgment, sufficient influence, and decisive execution. Through their words and actions, they should consistently influence their teams, thereby establishing an excellent corporate culture and building an outstanding team.

3. The essence of the tipping point

From our previous discussions, the essence of the tipping point lies in this: when something has accumulated enough, at a critical juncture, a small event can go on to influence the course and development of events. This small event can be a founder's decision, an employee's suggestion, or even a customer's recommendation, and so on.

In October 2010, the timely communication software Kiki emerged out of nowhere, attracting over 1 million users worldwide within two weeks. At that time, the only similar app promptly launched in the domestic market was MiChat by Xiaomi. Allen Zhang, leading a team tirelessly refining QQ Mail at the time, was quickly drawn to Kiki's rise. He proactively sent an email to Pony Ma, marking the prologue to Tencent's initiation of WeChat development. Allen Zhang led a team of just six or seven people and developed the WeChat 1.0 version in just two months.

However, Pony Ma later revealed that at the same time, there were actually three teams within Tencent developing similar products, but Allen Zhang was the fastest. This was all thanks to his team accumulating enough foundation in the QQ Mail business and polishing each other's skills well enough. To save time, Allen Zhang directly built WeChat on top of the technology of QQ Mail. When a user sends a message, essentially, it is sending a mini-email to the other end's phone.

When WeChat was launched, its performance was not particularly ideal. However, when subsequent features such as "shake to meet strangers" were added, it began to show explosive growth, eventually achieving the legendary status of being China's national app. The feature of communicating with strangers was inspired by the message in a bottle feature added by Allen Zhang during the development of QQ Mail.

If we say that Allen Zhang's proactive email was the tipping point, then the accumulation of QQ Mail business allowed the first domino knocked down by that email to continue falling and push the next domino.

Another example is TikTok. As an internally launched project at ByteDance, TikTok had almost no traffic within a few months of its launch at the end of 2016. In order to improve the user experience, the operations team once held meetings with users willing to try the app, compiling feedback and submitting it to the product development team for modifications until two or three in the morning the next day. With the team constantly refining the product, the software's user experience became better and better. Until March 2017, comedian Yue Yunpeng posted a video with the word TikTok on Weibo, initiating the first wave of traffic influx to TikTok. It then gradually entered the fast lane of development and became a global social media giant.

For entrepreneurs, if properly utilized, the tipping point can have a huge impact on the company's development. However, countless examples also tell us that the premise of ignition requires an adequate foundation and a complete accumulation. Only then, at crucial junctures, can the company's business be pushed onto the right track, helping it move forward all the way.

The tipping point is not luck but represents continuous efforts. No one can predict when opportunities will arise, but as entrepreneurs, they can seize the time to continuously prepare and wait for the day when the wind comes.