Charlie Munger shared in his speech at Harvard University the lollapalooza effect. It occurs when different tendencies or mental models combined to act in the same direction provide a greater result. It is like synergy, 1 plus 1 is not 2 but 3 or more. The outcome is much bigger than the sum of the parts.
One of their investments that yielded great returns was their investment in Coca-Cola. Here are the factors that contributed to the Lollapalooza effect on Coca Cola:
1. Great product
2. Powerful stimulants – sugar and caffeine
3. Availability – it is available in every supermarket
4. Clever marketing – “the brain of man yearns for the type of beverage held by the pretty woman he can’t have”
5. Social proofing – almost everybody drinks it