Chapter 31: How to Create a Business That Changes Your Life
Remember the TUNEF framework.
- The FTE.
- 3 Bs: Beliefs and the 8 beliefs scams, Biases and Bullsh*ts
- MP: Meaning and Purpose: the Why: the core driver
- FE: Fastlane Entrepreneurship: growing a fastlane business with the CENTS framework
- Kinetic Execution: Act, Assess, Adjust
- The Four disciplines: comparative immunity; purposed savings; measured elevation; consequential thought.
Everyone that succeeds once has failed before.
It’s ok.
The only question that matters is “will this failure be your last trial, or will you keep on hustling until you make it work?”
If you count the number of attempts Ronaldo made in his career, he has had more “failures” than successes.
And yet the guy is the best football player the world has ever known.
As such, failing doesn’t matter. The only thing that matters is to succeed once.
By the way, entrepreneurs fail on average 3.8 times before they succeed. So, chances are that you will know failure before you know success.
Luckily, Fastlane Entrepreneurship can help you succeed faster.
The CENTS Framework
Fastlane Entrepreneurship is an entrepreneurship foundation that ensures your business succeeds.
CENTS is an acronym for Control, Entry, Need, Time, and Scale. Together, these five commandments create a productocracy.
If your business respects these five commandments, your chances to succeed are much higher.
Chapter 32: The Productocracy: How to Print Money (and Sleep Well)
Advertising Is For Losers
Businesses that deliver great value don’t need to advertise because customers spontaneously buy from them.
Have you ever seen an ad inviting you to drive a Tesla?
Nope. They don’t even have a marketing department.
In Europe, it’s the chain of shops “Action” which is famous for not advertising.
They simply are cheaper than all of their competitors, and everyone knows it.
These businesses are productocracies.
To quote directly from the book:
A productocracy pulls money to the value creators, businesses who grow organically through peer recommendations and repeat customers, compelled by a distinguished product/service not readily offered elsewhere.
The productocracy doesn’t use ads because it doesn’t need to.
Whereas ads push goods and services to consumers, productocracies use a pull strategy. The customer is naturally attracted because the product/service is so good.
In fact, the products that advertise the most often are the crappiest. They suck so much they need advertising to be bought.
Think about it.
When was the last time someone recommended you McDonald’s, Coca-Cola, or Heineken? These companies are the ones that advertise the most in their market.
A business that pulls is a business that gives incredible value. It’s a business that solves problems a lot of people have, and that does it well.
This is why earlier, you were advised not to focus on money but to focus on value. Because it is value that is pulling the money. Not advertising.
Engineering a Productocracy: If It Makes CENTS, It Makes Sense
While a good product is important, it is not all.
The productocracy has five commandments:
- The Commandment of Control
- The Commandment of Entry
- The Commandment of Need
- The Commandment of Time
- The Commandment of Scale
Let’s have a look at them.
Chapter 33: The Commandment of Control: Own What You Build
The Commandment of Control requires that your business operation, from product development to marketing, to distribution, to everything else, be within your sphere of influence or diversified from influence.
Basically, it is making it impossible for anyone to crash your business overnight.
If such a person, or entity, or company exists (besides the government), you are violating the Commandment of Control.
Eg:
- You are selling products through Amazon only. The day Amazon shuts off your seller’s account, you’re toast.
- You own seven restaurants from a well-known franchise. One day, the company decides to roll out a mega-discount you can’t financially assume.
- Your business only runs on SEO. One day Google changes the algorithm, and you end up with zero sales.
Think of the Commandment of Control as the foundation on which you are building your house. Do you own the land, or does someone else do?
Chapter 34: Commandment of Entry: Difficulty IS the Opportunity
The Commandment of Entry rules that any market you wish to enter or problem you desire to solve should have barriers to enter so as to decrease competition and enjoy healthy profits.
The fewer barriers one business has, the more crowded the market will be, the fewer profits you are likely to make. The opposite is true as well. The higher the barriers to entry, the more likely you are to make money, the less competition you will have.
For example, there are only a handful of computer chip foundries in the world, because it is a tough business.
Likewise, it means that these companies make hundreds of BILLIONS of dollars.
Businesses with virtually no barriers to entry:
- Selling a book on Amazon
- Starting a blog
- Doing dropshipping
- Being a tour guide
- Doing affiliate marketing
- etc
As you see, the Commandment of Entry often joins the Commandment of Control.
When an activity has no barriers, it usually means that someone else took them down for you (Amazon has taken down a high number of barriers. As a result, they are incredibly profitable).
The Opportunity of Difficulty: THERE IS NO F*CKING LIST
Most people fail entrepreneurship because they don’t understand it’s about giving value and not buying Lamborghini.
Entrepreneurship, at heart, is about solving problems, creating convenience, and becoming valuable.
This is why it’s better to go for the hard problems than the easy ones. The hard problems are where the big opportunities are!
When the problem takes minutes to solve, you aren’t solving any problem.
This is why there is no list! There is no step-by-step plan for building a billion dollars company because it’s likely that whoever is doing it is doing it for the first time, and needs to figure out stuff no one else figured out before.
This is why companies that invent new products are valuable.
They’re doing what is hard.
You can measure barriers with the process one needs to achieve to create the product/service that will solve the problem. The longer and more difficult the process is, the bigger the opportunity is.
This is why there are a handful number of spaceships companies, and millions of restaurants.
On Execution Excellence
While it is advised against doing affiliate marketing, that doesn’t mean that you can’t grow rich doing affiliate marketing.
People succeeding in that space manage to overcome the crowd with execution excellence.
And guess what execution excellence is?
That’s right. It’s a process.
The lesson of this chapter is that if you hope to win in a crowded market (trading stocks, selling on Amazon), you’re going to have to be the best at it.
That means you are going to have to do stuff others don’t do.
Chapter 35: The Commandment of Need: How to Engineer Opportunity in Any Industry
An idea is simply a minor improvement to a product that already exists. You don’t need to come up with the iPhone, or the car.
In the realm of innovation, it’s better to be late than early. Peter Thiel calls this the “last mover advantage”.
It’s the idea that the last one to innovate an already-existing product is likely to make it much better than the first one, and hence create a monopoly (Google for search engines, Facebook for social media, etc).
If you can’t find an idea, it means you cannot find problems. If you cannot find problems, it means you are not looking hard enough (probably because you are focused on yourself, and not on others).
The Commandment of Needs is the most important one. It states that if you manage to create a business that you control, with relatively high barriers to entry, and based on an actual need that needs to be solved, you will win growth, profits, and maybe even passive income for the rest of your life.
Productocracy’s Pull: Value Skew and Value Competition
The value competition is what companies fight on.
Everyone tries to provide the highest value with the lowest price (or not, depends on what we are talking about). The company that wins the value competition is the one the consumer buys from.
The value skew is the subjective value of the product. Oil in Saudi Arabia is free. Oil in Switzerland isn’t.
You can skew value by making tiny improvements that your competitor doesn’t do.
Eg: When Freddy Heineken tried to sell his beer, no one was buying it.
No wonder, it’s absolutely disgusting.
So, Freddy, which was good at marketing, look at the logo of Heineken, and decided to slightly shift the “e” of “Heineken” so it looked like “the word smiled”.
It worked. He started selling for millions.
Value skew can also be:
- Price
- Ease of ordering
- Website design
- Guarantee
- Refund
- Payment options
- Compelling story
- Packaging
- Customer service
- Reviews
- etc
How Money Moves: The Value Array and Its Attributes
A market is a giant array where products sold by brands each score on a range of attributes.
The buyer buys the product that scores the highest on his array.
Eg: a buyer looking for quality will likely buy the most expensive product. A buyer looking for value will buy the product with the best ratio quality/price. The buyer looking for the cheapest product will buy…the cheapest product.
Three identical products with different attributes, three different buyers.
Skewing value is the force behind the setting in motion of a productocracy.
If you don’t have a business yet, you can sketch the value array of a product and see how you could improve it. It’s called market research.
Let’s look at Uber, for example.
The value array of people’s private transportation is:
- Speed: cabs take time to come. Uber does not.
- Cost ambiguity: you don’t know how much you will pay with cabs. You do with Uber.
- Reliability: you know where the Uber is when it says it is coming.
- Comfort
- Accountability: if the Uber driver behaves poorly, he gets bad reviews.
- Choice: you can choose who will drive you.
- Payment ease
- Cost: Uber is cheaper. And you get all these benefits.
Cabs never stood a chance against Uber.
Engineering Value Skew
As we said above, engineering value skew starts by sketching the value array of your product and the industry.
Identify ALL attributes.
The primary attributes concern the product itself. If you sell bread, it is the flour, the water, the yeast, and all of the other ingredients. If you sell wood tables, it is the wood you use, the board, the legs, the feet of the table, if it is extendable, how well it can be dismantled and built back, etc.
The secondary attributes are about your marketing: your website, your guarantee, your packaging, etc.
Whenever you have the occasion to skew value, do it. You stand out in your market and gain more customers.
Sadly, most entrepreneurs don’t see it this way.
They fall into the trap of the 6 value myths and fail the Commandment of Need.
The 6 Value Myths
1. The market myth: when the entrepreneur ignores the market to do what he loves and opens a fast-food restaurant next to McDonald’s…he often fails.
2. The isolation myth: it’s when entrepreneurs identify one variable only as a competitive advantage (and it’s often the same one): price. When goods or services are chosen by customers based on price only, the industry becomes commodified. Think about gas stations, air travel, or mobile phone plan. These industries compel companies to a race to the bottom to offer the cheapest prices, and shouldn’t be chosen for a productocracy.
3. The blockbuster myth: The blockbuster myth is when wantrepreneurs wait for “that one idea no one ever had” so that they can create a market and have zero competition. Whatever idea you have, you will unlikely be the first one to have it. What matters is not the idea, but what you can do to provide value in a way your competition doesn’t. JOBS: Just Offer Better Service.
4. The crowded-room myth: It’s the idea that “someone is already doing it” and so you don’t do it, which is dumb. Do you think hairdressers think “someone is already doing it” and so never become hairdressers? No. So how do you overcome this problem? Like above. You need to skew value. If someone is already doing it, you need to add something that will “do it” better. This is how Richard Branson started Virgin Airline. He thought air carriers that went to the US sucked. “There is no sense starting a business if not out of frustration”, he said. If it already exists, find a way to make it better.
5. The empty room myth: it’s the opposite of the above. It is when, upon research, the wantrepeneur realizes that no one is doing it, and hence, “there isn’t any market for it”, which is also dumb.
6. The use myth: Don’t worry if you are not a customer for your own good. Michael O’Leary doesn’t fly Ryanair. I doubt any executives from McDonald’s eat McDonald’s. I worked as a chocolate-making teacher, and I eat NO chocolate. The point is that you don’t have to use whatever you are selling, which is what the use myth is. Only other people need to find your idea valuable. You do not.
13 Ways to Find Fastlane Ideas
Fastlane ideas come from two sources only:
- Innovation: you invent something never done before.
- Improvement: you improve something which is already being done by skewing value.
Innovation is what most wantrepreneurs go for and simultaneously the most likely to make you fail.
Improvement is where most ideas exist.
In practice, CHOOSE NEITHER. Do what the market is telling you to do.
Here are 13 ways you can listen to the market so you can find a way to create value.
1. Language: listen to people complaining. When they say “I hate”; “this sucks”; “I wish”; “I don’t like”, it means there is room for improvement, and hence an opportunity.
Reed Hastings started Netflix because he had to pay the late fees after renting a movie from Blockbuster.
If you don’t like being among people, look online. Search Twitter for people complaining, or look at negative Amazon reviews. Or pay attention to your own complaints.
2. Inconvenience: Whenever something is inconvenient, there is room for improvement. Climbing stairs was inconvenient, so the elevator was born.
3. Simplification: anything difficult is annoying and deserves to be simplified. This is why the iPhone only has one button.
4. Wants: the whole entertainment, sports cars, luxury industry, and more are based on wants. Unnecessary things that people desire nonetheless.
5. Service gaps: Bad customer service is an opportunity for someone to come and do it better.
6. Geographical arbitrage: it is taking something that exists somewhere and doing it where it does not exist. It is selling Belgian beer in America, for example. Didi is the Uber of China, and Xiaomi the Apple of China.
7. Crowdfeeding entry violations: It’s simplifying a business with high barriers of entry so that the crowd can do it too. Think Shopify to sell online, Wix to make websites, Uber to become a taxi driver, etc.
8. Value arbitrage: Value arbitrage is simply adding value. It is buying something that sucks, transforming it into something awesome, and selling it for a profit. Eg: house flipping, website design, companies, restaurants, cars….
9. Repurposing: It’s about taking a bunch of “worthless” materials and making them into something valuable.
10. Marketing arbitrage: it’s about taking an asset with great value and skyrocketing the marketing to have more customers.
11. Overcapitalism: it’s when a company that used to care about its customers starts suddenly caring about its profits. These are opportunities because it means that a crowd that used to be served well, is about not to be so anymore.
12. Stakeholders demotion: It usually happens when companies get listed on the stock market. Suddenly, profits become the priority, and overcapitalism happens.
13. Improvement (removement): improving a product can also mean removing a feature from the product. If the food you sell has too much sugar, removing sugar will help you improve it.
14. The worst way to find an idea: Sometimes the best way to find an idea is to do what you least want to do: get a job. When you get a job, you acquire domain experience which enables you to solve needs in the niche.
If you don’t have time for domain experience, ask the people who have it.
This is how the founder of WPengine started his company. He mailed 40 WordPress experts for an interview about his service, got feedback, and launched his company.
Chapter 36: The Commandment of Time: Earn More Than Money, Earn Time
The Commandment of Time abolishes the link between time and income. It has two components: physicality, and detachment.
If you write a book and sell 1000 copies on Amazon every day, there is no physicality. Your book sells regardless of your presence.
If you have a waffle stand where you sell waffles, there is physicality. If you are not there, the waffles aren’t selling and you aren’t earning.
The second component, detachment, enables you not to care about your vehicle of wealth.
If you own a 24/7 restaurant, there is no physicality. Your employees are taking care of it. But if you manage the marketing of the restaurant online, there is no detachment.
The Commandment of Time dictates that a real CENTS business offers you both detachment and no physicality.
To honor the Commandment of Time, forget about it at the beginning.
Focus on a Legacy Value System instead.
Legacy Value System
A legacy value system is like a tree. You need to acquire the seeds and take care of it so it grows until you can harvest the fruits called passive income.
There are six legacy value systems.
Let’s have a look at them, from the most autonomous, to the least.
- Money systems: it’s the goal of the Unscripted lifestyle because it doesn’t get more passive than that. Basically, it’s a money tree that is printing cash whether you sleep, work, or party. Essentially, it’s a rental business. That business is producing dividends, interests, notes, option sales and partnerships income. The money system isn’t a way to get rich. It’s a way to STAY rich, that is, you need to have a LOT of money to earn through a money system, which explains its name.
- Digital products system: one of the most popular systems. They concern books, Youtube videos, website templates.
- Software/internet systems: SaaS, apps, video games, etc.
- Product systems: systems selling products. The product itself and its distribution system is the central execution challenge to building this type of company. Eg: food, books, clothing, jewelry, cosmetics, inventions, etc.
- Rental systems: renting out stuff: real estate, garage, cars, etc.
- Human resource systems: systems that require people to work. While a restaurant is a product business, it requires people to work. These systems demand multiple executions from multiple people, which makes them the hardest to execute. Eg: service business (web design, copywriting, consultancy), brick-and-mortar shops, etc.
Legacy Structures
Legacy structures are other systems that support your selling. They can be podcasts interviews, Youtube videos, Facebook accounts, etc.
The Cost of a Legacy Value System
The thing about creating these value systems is that it takes time.
So, think about the fact that disregarding which lane you are getting into, you’ll have to work anyway. Would you rather work building a system that leaves a legacy, or work and leave no trace of what you are doing?
It is better to work 10 hours a day seven days a week for 10 years (36 400 hours) than work 8 hours a day five days a week for 40 years (83 200 hours).
If you work at McDonald’s for fifty years, there is no trace of your work.
If you build a company for ten years, there is a legacy. That legacy is even making you money.
Why Sell a Golden Goose?
Why would you sell a company that is making you good money in a passive way?
There are three reasons:
- Will your company increase, or decrease in value? When it’s time to change technology or hire new people, or learn a new skill to keep your company afloat, you may just want to sell it instead of investing time in keeping something.
- Growing a company is different than managing one. If you don’t want to manage, it may be time to sell.
- You want to acquire a huge sum and make it your money system to have all of your time back.
Chapter 37: The Commandment of Scale
Scale demands that the value provided be replicated through mass or magnitude.
You need four components to reach scale:
- Legacy value system: your company must become an LVS by respecting the four prior commandments.
- Replication: whatever you offer must be replicated easily. If you sell bread, you should strive to sell millions of pieces.
- Mass or magnitude: sell A LOT of goods/services with moderate impact, or sell good/services with STRONG impact. Eg: selling millions of pieces of bread VS selling six or seven multi-million dollar houses.
- Profitable impact: you must be profitable now, not ten years later. Furthermore, the market you are in should be profitable enough so that the ceiling is high enough for you to rack up millions.
The equation behind this Commandment is the expected value equation, where that value is equal to the sum of the chances of a business to succeed or fail.
E(x) = SUM * P(x)
Eg: Let’s imagine you have the choice between business A and business B. Let’s see the odds for each of them.
| Business A | Business B |
| -$10 000 with a chance of 60% | -$3000 with a chance of 30% |
| +$50 000 with a chance of 40% | +$6000 with a chance of 70% |
Business A:
E= -10 000*0.6= -6000 USD
E= 50 000*0.4= 20 000 USD
20 000-6000= 14 000 USD of expected value.
Business B:
E= -3000*0.3= -900 USD
E= 6000*0.7= 4200 USD
4200-900= 3300 USD of expected value.
Business A is the one you should go with.
In life, EV is the outcome of many small choices and actions that one makes to improve chances to win.
It is learning online marketing instead of playing video games.
Starting a side hustle during the weekend instead of going fishing.
Learning how to code instead of learning how to throw darts at the bar.
Furthermore, if you hope to win big, you gotta play big. The plumber and the CEO of a SaaS company are both entrepreneurs on paper. One though isn’t making money that changes his life, while the second one is. And yet, both have to deal with the same problem: sh*tty customers, marketing, accounting, etc.
The Three Scaling Systems
The truth is that anything can be scaled.
You can do so in three different fashions:
- A customer strategy: getting more customers for your product (more clients for a SaaS, more foot traffic for a shop, etc)
- A chain/franchise strategy: franchise your business, or transform it into a chain (good for brick-and-mortar businesses).
- A channel strategy: acquiring a channel that does the selling for you. If you sell your product online, you could seek out a way to sell it through a retail chain. Most inventions scale when boosted by a channel strategy.
$2740
This number is the daily profit one should earn to become a millionaire within one year.
It’s not huge. All you need is to sell 110 units a day of a product with $25 of profits.
But let’s not put the cart before the horses. Before you impact millions, you need to learn how to impact one person, then a dozen, then hundreds.
Scale is a process, not an event.
Chapter 38: Executing Excellence: You Can’t Predict the Unpredictable
Remember the TUNEF framework:
- The FTE, which we talked about.
- 3 Bs: Beliefs and the 8 beliefs scams, Biases and Bullsh*ts
- MP: Meaning and Purpose: the Why: the core driver
- FE: Fastlane Entrepreneurship: growing a fastlane business with the CENTS framework
- Kinetic Execution: Act, Assess, Adjust
- The Four disciplines: comparative immunity; purposed savings; measured elevation; consequential thought.
Execution is when an idea goes from idea to reality.
But what is it exactly? Many entrepreneurs execute, but they are not doing the right thing. They are action-faking.
Action-faking is printing business cards when you have zero customers. It is learning how to code without knowing what type of code you actually need for your idea. It can also be reading dozens of books until you “feel ready”.
The truth is that you will never know anything in advance until you just do it and see what you need to know.
Chapter 39: Kinetic Execution: Everything Significant Started Insignificantly
Harry Potter started with one word. Apple started with two guys in a garage. And Walmart started with one shop.
Kinetic execution is about doing things that matter and that get you closer to your ultimate goal – not reading the tenth self-help book on how to think about how to think.
It’s about seeing which problem you have and solving it, before going to the next problem, then the next, then the next.
Kinetic execution is made out of:
- The Marketmind
- The three A’s
- The 7 P’s of process
The Marketmind
The marketmind is your master telling what to do and where you should go. It’s what the market thinks of your product. You need to understand that markets cannot be controlled or predicted. This is why business plans are bs. The only thing we can do really is to engage the market and go from there.
The marketmind is why companies everyone expected to succeed failed, and why companies everyone expected to fail succeeded.
Eg: Microsoft CEO Steve Ballmer’s reaction to the iPhone in 2007: “it will never work”.
Markets are not predictable.
Therefore your first task is to engage the market with your idea.
The 3 A’s: Act, Assess, Adjust
In construction, high buildings must be flexible to bend to the wind or they break. Stiff buildings don’t resist earthquakes.
It’s the same thing in business: you have to be flexible and ready to deliver the market what it needs, not what you want to deliver.
Kinetic execution is action before answers, hence the act, adjust, assess.
Action:
Action starts as we said with poking the market. This will trigger a reaction, or a lack thereof, which will likely tell you there is a problem to solve. Solve it, then move on to the next problem.
Assess:
Once you have taken action, it’s time to listen to the feedback of the market. You have two types of feedback:
- Diffusion: when the market ignores or absorbs your message (eg: no one clicked on your FB ad)
- Echo: when the market is giving you feedback. Whatever that is, it is your job to listen and assess.
Adjust:
The point of taking action and assessing is to be able to adjust. The key to adjusting well is recognizing pattern echoes which are regular and repeated feedback from the market.
If one client tells you your design sucks and nine others love it, then you’re good as you are.
If one client loves your design and nine others hate it, you probably should adjust.
