It's taken me awhile to learn this but, generally speaking there are 2 types of people. Those who prefer results and those who prefer control.
Results People
These people want to measure everything, they want to make adjustments that are measurable and then readjust. With these people, change is inevitable and constant. There is no question that they move the ball forward because their outlook is that failure is just part of the learning curve and the more they learn, the more they succeed. In a team setting this type of participant is willing to try new things and gather information that can be used in the future to better then team or organization. The decisions are calculated so that success is achieved or a valuable lesson is learned at minimal cost. These are the people you want in leadership if you want growth.
Control People
The second type of person prefers control. Results are not even a consideration. Instead, the end goal is a completely controllable situation where there are no surprises and no risks. Any potential surprise, risk or uncertainty is neutralized. In a team setting, this type of participant seeks to keep the status quo and to use any means necessary to eliminate other players who may upset the status quo. They do this because any positive or negative progress will expose their lack of progress and challenge their authority and thus disrupt their control over the situation. These are the people you want in leadership if you want a standstill, or to hold the line. You do not want them in growth situations because they will purposely foil it and chase out the results people.
1.08.2018
12.10.2016
Why Avoiding Micromanagers is Best for Society
Just a heads up but I'm going to use the term difficult people to describe micromanagers, sociopaths, narcissists, psychopaths. It's just faster. :)
Studies show that difficult people contribute to lower productivity. Therefore, if workers quit their jobs and found new jobs with better people the world would be more productive with the same amount of resources. So, at a very high level, the proper course of action when you encounter a difficult person -- is to leave.
That's right, just leave. Quit your job, move away from difficult friends or family, break up. Do it gracefully and politely, but do it.
You see, difficult people are unlikely change. Spending resources trying to change them is a fruitless endeavor. Seeking strategies for dealing with difficult people is one step better, however, the time and resources spent learning these strategies could be spent on more productive activities.
Think of the countless hours people spend reading and writing articles titled "5 Ways to Manage a Micromanager" and "How to Get Along With Your Sociopath Boss." What if that time was spent trying to cure cancer or invent spaceships or volunteering with disabled kids? We waste millions of hours every year just trying to learn about getting along with difficult people. Does it help?
Think of difficult people like lids on your productivity. Remove that lid. The results would be massive. If the entire US workforce increased their productivity by 1% it would be like adding 1.5 million workers to the economy but with no additional cost. In my experience I am about 100% more productive without a difficult person in the way. That would be like adding 150 million workers to the economy at no additional cost.
So leave. Leave the difficult person. Yes they will call you immature and a quitter and a baby whatever else but the truth is they are stifling you, wasting your time, and imposing a time tax on everyone. Leaving is okay. It's hard but it is valuable, very valuable. So leave.
Studies show that difficult people contribute to lower productivity. Therefore, if workers quit their jobs and found new jobs with better people the world would be more productive with the same amount of resources. So, at a very high level, the proper course of action when you encounter a difficult person -- is to leave.
That's right, just leave. Quit your job, move away from difficult friends or family, break up. Do it gracefully and politely, but do it.
You see, difficult people are unlikely change. Spending resources trying to change them is a fruitless endeavor. Seeking strategies for dealing with difficult people is one step better, however, the time and resources spent learning these strategies could be spent on more productive activities.
Think of the countless hours people spend reading and writing articles titled "5 Ways to Manage a Micromanager" and "How to Get Along With Your Sociopath Boss." What if that time was spent trying to cure cancer or invent spaceships or volunteering with disabled kids? We waste millions of hours every year just trying to learn about getting along with difficult people. Does it help?
Think of difficult people like lids on your productivity. Remove that lid. The results would be massive. If the entire US workforce increased their productivity by 1% it would be like adding 1.5 million workers to the economy but with no additional cost. In my experience I am about 100% more productive without a difficult person in the way. That would be like adding 150 million workers to the economy at no additional cost.
So leave. Leave the difficult person. Yes they will call you immature and a quitter and a baby whatever else but the truth is they are stifling you, wasting your time, and imposing a time tax on everyone. Leaving is okay. It's hard but it is valuable, very valuable. So leave.
10.12.2016
Economic Change is Happening Yesterday
Data lag is a big problem.
Right now we have the following occurring:
1) Unemployment ticked up
2) Corporate profits continue to decline
3) Job postings are down
4) WIRP is down
5) The Gold Put/Call Ratio is down
6) The SPY Put/Call Ratio is up
7) Class 8 truck sales looks like 2009
And all of this is on a data lag because it takes a few weeks to gather the data. Then it takes a few weeks to write and publish the report.
That means that as of yesterday when I put that list together, we are even farther down this road than the data shows. Plus I noticed most of this stuff in July so we're talking a major data lag. By the time the data catches up it will be too late.
And a little FYI, the media sentiment lags the data lag by a few months so don't wait for them to report what's happening now. They'll be late by a few months and call it breaking news.
Right now we have the following occurring:
1) Unemployment ticked up
2) Corporate profits continue to decline
3) Job postings are down
4) WIRP is down
5) The Gold Put/Call Ratio is down
6) The SPY Put/Call Ratio is up
7) Class 8 truck sales looks like 2009
And all of this is on a data lag because it takes a few weeks to gather the data. Then it takes a few weeks to write and publish the report.
That means that as of yesterday when I put that list together, we are even farther down this road than the data shows. Plus I noticed most of this stuff in July so we're talking a major data lag. By the time the data catches up it will be too late.
And a little FYI, the media sentiment lags the data lag by a few months so don't wait for them to report what's happening now. They'll be late by a few months and call it breaking news.
Journalists Should Write and Not Speculate
Do you get car advice from your barber? Do you get spiritual advice from your banker? Do you get insurance advice from your grocer? No. Nobody does. But everybody gets financial advice from journalists.
Here's a little secret. Journalists almost never have enough depth of knowledge to be taken seriously. They report the news. They are incapable of interpreting it.
Case in point. The unemployment rate ticked up yesterday while companies simultaneously posted fewer jobs. I read a story where the writer actually argued that this is a good thing. But it's not. It never is. Ever.
You see. An expanding economy is a good thing and a shrinking economy is a good thing. However, for an economy to expand it needs employees to fill all the new jobs. Shrinking job openings and an increase in people hunting for jobs means the economy is shrinking, not expanding.
Now those data points (unemployment and job postings) are early indicators. So we should monitor them closely. We should not say the economy is shrinking. We should not say it is continuing to expand. We should say it looks like something might be happening. Let's verify.
When journalists are reckless we all lose. Journalists should report new from experts and stay out of speculation.
7.13.2016
9 Reasons Why a Recession is Imminent
First let's be clear. I don't know when the next recession will hit.
Timing is impossible to predict with precision. However, I've noticed a handful of indicators that are shifting together. Any one indicator is questionable on its own, however, I believe that, taken as a whole, they are showing that the economy is shifting.
Let's examine them together:
1) Class 8 truck sales is down.
A recession is when GDP is declining. That means the economy is shrinking. This happens when people reduce their consumption of goods. The first way this shows up is in reduced inventory reorders from stores, which automatically means truckers see fewer shipments. When truckers see this happening they stop buying more trucks. We are currently seeing class 8 truck orders drop off a cliff. That can only mean there is reduced demand for shipping goods. I don't really care about the argument for new emissions rules creating false demand over that last few years because you can go to trucking forums and see that truckers are doing one way shipments when they used to be able to drive a full truck both ways. Face it, stores are ordering less goods because they are selling less goods. That is the definition of a recession.
2) Gold is up.
When people are uncertain about the economy they buy gold because they consider it safe. Gold has risen by 40% this year. That means demand for it has increased. In other words, demand for safety has increased because uncertainty has increased. However, in order to move to safety, investors have to sell assets (stocks and bonds) to buy gold. That means increased selling on the stock market. That puts downward pressure and reduces the ability of the market to rise. I am aware that the S&P is still rising as I write this but so is gold. The money going into gold is coming out of something.
3) Treasuries are up (prices, which are inverse to yield).
Same rationale as gold. People are moving to safety which means they are selling something that is more risky, but what? Corporate bonds are up. Stocks are up. Where is the money flowing out so that people can buy gold? Perhaps the smart money is flowing to safety. They are the earlier birds and main street is always late. This is a downward spiral, the more people move to safety the more people have to move to safety. It is only a matter of time. At this point what change could possibly occur to make the markets safer or more valuable than treasuries? Until that change happens we will continue to see the shift to safety accelerate.
4) Unemployment is down.
When everyone has a job companies must compete for workers by raising wages. As wages rise profits fall, forecasts fall, and hiring slows. We are currently at full employment which will begin the downward spiral of shrinking corporate profits. Additionally, unemployment is nearly crossing the 3 month average of unemployment which is a reliable indicator of a recession.
5) Temp agencies are experiencing a slowdown.
Temp agencies see demand when companies are expanding. It's easy to hire temps for uncertain growth when businesses are expanding. When demand for temporary workers drops, it means that companies are cutting their expansion projects. That indicates their forecasts are weakening and executives are nervous about adding costs and risks within their companies. (Perhaps due to diminishing demand. See the class 8 trucking argument above.) Anyway, nobody wants to jump into the water right now. It's only a matter of time before companies begin to cut losing projects, which is when hiring stalls and unemployment will begin to rise. We're already seeing hiring slow a bit.
6) An election is near.
People get nervous around elections. There has been a recession within 12 months of almost every presidential election in the 20th and 21st centuries. Just speculation here, but elections cause uncertainty and that causes people to move to safety. It's just part of the spiral to safety (reflexivity is the formal term) you see in gold and treasuries.
7) Billionaires are betting on a recession.
See George Soros, Jeffrey Gundlach and Stan Druckenmiller. They are all betting on a recession. These guys are early birds that can take the pain of short term losses to be right on the big move. Soros is long gold, short the S&P and short Deutsche Bank. Gundlach is long gold too. They have access to far more resources than just about anyone. The decisions they make risk billions of dollars so they aren't playing around when they bet big. Plus, they play the numbers game using probabilities. Bearish bets by these guys indicate that the probabilities are in favor of a shift to safety. That's how they play the game and why they are billionaires. They take high probability trades.
8) Talking heads are pitching safety.
Talking heads lag reality. They always do. I don't have any data, just experience to verify this but if you watch over the next few months you'll see their recommendations are always behind and therefore cause main street to lose money. They only say 'buy' when the market is topping. They say start to say 'buy' the dips when the market is tanking. The say it can fall another 30% when it is at the bottom. They say it's at the bottom long after it starts to rise. Given this trend, when the talking heads pitch safety. It's too late. We are long past the time to move to safety which puts us in a risky place.
9) Totality of the above 8 points.
So, let's review. The country is buying less goods as evidenced by trucking. Therefore, company's reduce their forecasts and are not pursuing growth projects as evidenced by fewer temp workers and slowing hiring. This makes Wall Street nervous so they being shifting money away from stocks to safer positions such as gold and treasuries. The more Wall Street shifts money to safety, the less dollars companies have to expand which reduces hiring and reduces consumers discretionary income. A reduction in discretionary income reduces demand for goods which reduces trucking...and we're back to the beginning.
Now, just in case you think this is all doom and gloom and I'm just looking for the bad...you're right, there is no good. I've looked. Where is a bright spot? Russia, Venezuela, and the Middle East are broke because oil prices are down. Europe is in question due to Brexit and hefty debt and demographic challenges. China is in a slowdown. Japan is...well...Japan. Where can a guy put his money with confidence and an expectation of growth?
Right now the only question is where can a guy put his money that he won't lose it.
The answer is gold and treasuries. As more people discover this it will lead to an acceleration in the movement towards a recession. The exception to that is if Ray Dalio is correct in his estimation that we are headed for stagnation. Either way, safety looks good.
Timing is impossible to predict with precision. However, I've noticed a handful of indicators that are shifting together. Any one indicator is questionable on its own, however, I believe that, taken as a whole, they are showing that the economy is shifting.
Let's examine them together:
1) Class 8 truck sales is down.
A recession is when GDP is declining. That means the economy is shrinking. This happens when people reduce their consumption of goods. The first way this shows up is in reduced inventory reorders from stores, which automatically means truckers see fewer shipments. When truckers see this happening they stop buying more trucks. We are currently seeing class 8 truck orders drop off a cliff. That can only mean there is reduced demand for shipping goods. I don't really care about the argument for new emissions rules creating false demand over that last few years because you can go to trucking forums and see that truckers are doing one way shipments when they used to be able to drive a full truck both ways. Face it, stores are ordering less goods because they are selling less goods. That is the definition of a recession.
2) Gold is up.
When people are uncertain about the economy they buy gold because they consider it safe. Gold has risen by 40% this year. That means demand for it has increased. In other words, demand for safety has increased because uncertainty has increased. However, in order to move to safety, investors have to sell assets (stocks and bonds) to buy gold. That means increased selling on the stock market. That puts downward pressure and reduces the ability of the market to rise. I am aware that the S&P is still rising as I write this but so is gold. The money going into gold is coming out of something.
3) Treasuries are up (prices, which are inverse to yield).
Same rationale as gold. People are moving to safety which means they are selling something that is more risky, but what? Corporate bonds are up. Stocks are up. Where is the money flowing out so that people can buy gold? Perhaps the smart money is flowing to safety. They are the earlier birds and main street is always late. This is a downward spiral, the more people move to safety the more people have to move to safety. It is only a matter of time. At this point what change could possibly occur to make the markets safer or more valuable than treasuries? Until that change happens we will continue to see the shift to safety accelerate.
4) Unemployment is down.
When everyone has a job companies must compete for workers by raising wages. As wages rise profits fall, forecasts fall, and hiring slows. We are currently at full employment which will begin the downward spiral of shrinking corporate profits. Additionally, unemployment is nearly crossing the 3 month average of unemployment which is a reliable indicator of a recession.
5) Temp agencies are experiencing a slowdown.
Temp agencies see demand when companies are expanding. It's easy to hire temps for uncertain growth when businesses are expanding. When demand for temporary workers drops, it means that companies are cutting their expansion projects. That indicates their forecasts are weakening and executives are nervous about adding costs and risks within their companies. (Perhaps due to diminishing demand. See the class 8 trucking argument above.) Anyway, nobody wants to jump into the water right now. It's only a matter of time before companies begin to cut losing projects, which is when hiring stalls and unemployment will begin to rise. We're already seeing hiring slow a bit.
6) An election is near.
People get nervous around elections. There has been a recession within 12 months of almost every presidential election in the 20th and 21st centuries. Just speculation here, but elections cause uncertainty and that causes people to move to safety. It's just part of the spiral to safety (reflexivity is the formal term) you see in gold and treasuries.
7) Billionaires are betting on a recession.
See George Soros, Jeffrey Gundlach and Stan Druckenmiller. They are all betting on a recession. These guys are early birds that can take the pain of short term losses to be right on the big move. Soros is long gold, short the S&P and short Deutsche Bank. Gundlach is long gold too. They have access to far more resources than just about anyone. The decisions they make risk billions of dollars so they aren't playing around when they bet big. Plus, they play the numbers game using probabilities. Bearish bets by these guys indicate that the probabilities are in favor of a shift to safety. That's how they play the game and why they are billionaires. They take high probability trades.
8) Talking heads are pitching safety.
Talking heads lag reality. They always do. I don't have any data, just experience to verify this but if you watch over the next few months you'll see their recommendations are always behind and therefore cause main street to lose money. They only say 'buy' when the market is topping. They say start to say 'buy' the dips when the market is tanking. The say it can fall another 30% when it is at the bottom. They say it's at the bottom long after it starts to rise. Given this trend, when the talking heads pitch safety. It's too late. We are long past the time to move to safety which puts us in a risky place.
9) Totality of the above 8 points.
So, let's review. The country is buying less goods as evidenced by trucking. Therefore, company's reduce their forecasts and are not pursuing growth projects as evidenced by fewer temp workers and slowing hiring. This makes Wall Street nervous so they being shifting money away from stocks to safer positions such as gold and treasuries. The more Wall Street shifts money to safety, the less dollars companies have to expand which reduces hiring and reduces consumers discretionary income. A reduction in discretionary income reduces demand for goods which reduces trucking...and we're back to the beginning.
Now, just in case you think this is all doom and gloom and I'm just looking for the bad...you're right, there is no good. I've looked. Where is a bright spot? Russia, Venezuela, and the Middle East are broke because oil prices are down. Europe is in question due to Brexit and hefty debt and demographic challenges. China is in a slowdown. Japan is...well...Japan. Where can a guy put his money with confidence and an expectation of growth?
Right now the only question is where can a guy put his money that he won't lose it.
The answer is gold and treasuries. As more people discover this it will lead to an acceleration in the movement towards a recession. The exception to that is if Ray Dalio is correct in his estimation that we are headed for stagnation. Either way, safety looks good.
5.02.2016
Poor People: It Starts Inside
I have customers come into my shop all the time that start their conversations with, "I'm poor. I'm on a fixed income..." Why do they do this? Is it a negotiation tactic? Is it a pity party?
If I was poor I sure as heck wouldn't admit it. I'd be ashamed...ashamed that I didn't have a job, or that I couldn't hack it as a...well...bag boy, cashier or car salesman. Yet these people seem proud of their poverty. What is that?
On top of it, a few of them have declared their "fixed income" from being on disability. Funny how one guy had a truck loaded with drywall for his remodeling project and a second one offered to clean my shop once a week. So, why not get a job at a drywall company? Is it the disability or the laws for getting on disability that causes this?
What's weird is that multiple people who generally have no relationship to each other all behave the same way. The same statements, nearly word for word, about being poor and on a fixed income with no prompting from me. The same statements about remodeling or cleaning. It seems there is a pattern here. It's a pattern of drawing pity and emotion from someone.
It's sad. What happened to the bootstrap mentality? What happened to the attitude of our ancestors who packed up everything to move across an ocean with only pennies in their pocket? Where did that toughness go? How did the pride of endurance and strength morph into a pity party?
Sure we need to care for the poor. However, I think poor needs to be better defined. You see, poor is not financial. It is mental. We should have no obligation fund the finances of able-bodied people. It is the sick, and wounded who require our assistance and even many of those ailments can be overcome.
Believe me, I've overcome them.
If I was poor I sure as heck wouldn't admit it. I'd be ashamed...ashamed that I didn't have a job, or that I couldn't hack it as a...well...bag boy, cashier or car salesman. Yet these people seem proud of their poverty. What is that?
On top of it, a few of them have declared their "fixed income" from being on disability. Funny how one guy had a truck loaded with drywall for his remodeling project and a second one offered to clean my shop once a week. So, why not get a job at a drywall company? Is it the disability or the laws for getting on disability that causes this?
What's weird is that multiple people who generally have no relationship to each other all behave the same way. The same statements, nearly word for word, about being poor and on a fixed income with no prompting from me. The same statements about remodeling or cleaning. It seems there is a pattern here. It's a pattern of drawing pity and emotion from someone.
It's sad. What happened to the bootstrap mentality? What happened to the attitude of our ancestors who packed up everything to move across an ocean with only pennies in their pocket? Where did that toughness go? How did the pride of endurance and strength morph into a pity party?
Sure we need to care for the poor. However, I think poor needs to be better defined. You see, poor is not financial. It is mental. We should have no obligation fund the finances of able-bodied people. It is the sick, and wounded who require our assistance and even many of those ailments can be overcome.
Believe me, I've overcome them.
4.11.2016
Don't Let the Ball Control You
Today my shop closed at 5:30. I didn't leave until 6:30. No good reason either. I chatted with my manager for awhile, answered the phone and let a good customer come in and use my tire machine because his broke. Then I chatted with him for awhile.
Then my wife called. Uh-oh!
I let my business control me. That is not good for me, my marriage or my family. It certainly isn't a recipe for growth.
This is a head trash thing that starts with fear. Fear that a customer will leave because I'm not "nice." Or fear of a mutiny from my employees because I'm not "carrying my weight."
In high school my basketball coach always said, "Control the ball. Don't let it control you." To do that you need to practice dribbling, shooting and rebounding. Then you can control the ball and that's how you win. But you can't do that without deliberate, repetitive practice. Same goes for business.
Practice is boring and hard. It is also effective. I think we all need to practice controlling our business (or job) so that it doesn't control us. Anything other than that is unhealthy physically and emotionally.
Then my wife called. Uh-oh!
I let my business control me. That is not good for me, my marriage or my family. It certainly isn't a recipe for growth.
This is a head trash thing that starts with fear. Fear that a customer will leave because I'm not "nice." Or fear of a mutiny from my employees because I'm not "carrying my weight."
In high school my basketball coach always said, "Control the ball. Don't let it control you." To do that you need to practice dribbling, shooting and rebounding. Then you can control the ball and that's how you win. But you can't do that without deliberate, repetitive practice. Same goes for business.
Practice is boring and hard. It is also effective. I think we all need to practice controlling our business (or job) so that it doesn't control us. Anything other than that is unhealthy physically and emotionally.
The Secrets of Gross Margin
Margin is everything in business. It is what you have left over after you've paid for your final product but before you pay for phone bills, rent and yourself. It is more helpful to think of margin as sales than as margin.
For example, if you sell a widget for $100 and it cost you $95 to make it then your margin is $5. That is 5% margin. If you are able to lower your cost to $94 and raise your price to $101 then you would make $7 and your profit would increase to 6.9%...an increase of almost 40%.
Would a 40% increase in profit make your business better? If your business nets you 100k per year you are now making 140k per year. Now your problems are more along the lines of naming your new boat.
Do you see why margin is so important?
It is also helpful to think about it this way:
If you work for 20 weekdays per month and your margin is 10%, then you only get paid on the sales from the last 2 weekdays in the month. So you will spend 18 of those weekdays hoping/worrying if you have customers on the last 2 days so you can take some bacon home.
On the other hand if your margin is 25% that means that all of the sales from the last week of the month are available to take home. That is a much safer and more pleasant way to operate. In a low margin business one day of bad weather, or a holiday, or a broken machine could steal your profits for the month.
When thinking about businesses think in terms of margin. Think about how you can expand it by selling more higher margin products and services, or think of how you can negotiate better costs. Remember the example from above? If you are in a low margin business a 1% decrease in costs goes a long way towards the bottom line. So does a 1% increase in prices.
For example, if you sell a widget for $100 and it cost you $95 to make it then your margin is $5. That is 5% margin. If you are able to lower your cost to $94 and raise your price to $101 then you would make $7 and your profit would increase to 6.9%...an increase of almost 40%.
Would a 40% increase in profit make your business better? If your business nets you 100k per year you are now making 140k per year. Now your problems are more along the lines of naming your new boat.
Do you see why margin is so important?
It is also helpful to think about it this way:
If you work for 20 weekdays per month and your margin is 10%, then you only get paid on the sales from the last 2 weekdays in the month. So you will spend 18 of those weekdays hoping/worrying if you have customers on the last 2 days so you can take some bacon home.
On the other hand if your margin is 25% that means that all of the sales from the last week of the month are available to take home. That is a much safer and more pleasant way to operate. In a low margin business one day of bad weather, or a holiday, or a broken machine could steal your profits for the month.
When thinking about businesses think in terms of margin. Think about how you can expand it by selling more higher margin products and services, or think of how you can negotiate better costs. Remember the example from above? If you are in a low margin business a 1% decrease in costs goes a long way towards the bottom line. So does a 1% increase in prices.
10.26.2015
Start From Nothing: Nobody Has Started Something From Nothing
That's right. Nobody has started something from nothing.
Without the Napster, Zuckerberg is a nobody.
Without Bill Hewlett answering the phone Steve Jobs and Apple computer are nothing.
Without money from IBM Bill Gates and Paul Allen go bust.
A lucky break is required for success and too many entrepreneurs (with egos the size of Texas) take too much credit for their own lucky circumstances.
I once worked with a guy who claimed he was self-made. Turns out his dad lent him $200,000 to start his business.
There's a billionaire family who lives 20 miles from my house. From all the accolades they receive you'd think they started their $200 million dollar countertop business from nothing. Turns out they invested $34 million before they ever made a dime.
I'm pretty sure that most people could start a business from scratch given a $34 million dollar budget.
Take Steve Jobs. What a fake. Yes he made Apple from "nothing (reread above qualification)" but look at Next. Not even Steve Jobs could turn his money, connections and experience into a successful company. Even Steve needed something more...something unquantifiable.
The truth is you need resources to be successful. Money, experience, and connections are necessary but they are not enough. There has to be an opportunity that can sweep you up in it and that is something that you can't manufacture. It is a meeting of a need, a skill set and a passion all coming together at the same time. For entrepreneurs, they can only supply 2 of those 3 things. The need is illusive. I can only be found by accident. You can set out to discover it but you will fail multiple times before you find it.
Just ask AJ Khubani the infomercial king. He built a multimillion dollar business only to go bankrupt because he hit a dry spell. The need, or demand if you will, is lucky. Not even the experts can spot it. But if you find it it will take you away.
Luck is required. Nothing else matters. Luck supersedes money, experience and connections. It is necessary for success.
Without the Napster, Zuckerberg is a nobody.
Without Bill Hewlett answering the phone Steve Jobs and Apple computer are nothing.
Without money from IBM Bill Gates and Paul Allen go bust.
A lucky break is required for success and too many entrepreneurs (with egos the size of Texas) take too much credit for their own lucky circumstances.
I once worked with a guy who claimed he was self-made. Turns out his dad lent him $200,000 to start his business.
There's a billionaire family who lives 20 miles from my house. From all the accolades they receive you'd think they started their $200 million dollar countertop business from nothing. Turns out they invested $34 million before they ever made a dime.
I'm pretty sure that most people could start a business from scratch given a $34 million dollar budget.
Take Steve Jobs. What a fake. Yes he made Apple from "nothing (reread above qualification)" but look at Next. Not even Steve Jobs could turn his money, connections and experience into a successful company. Even Steve needed something more...something unquantifiable.
The truth is you need resources to be successful. Money, experience, and connections are necessary but they are not enough. There has to be an opportunity that can sweep you up in it and that is something that you can't manufacture. It is a meeting of a need, a skill set and a passion all coming together at the same time. For entrepreneurs, they can only supply 2 of those 3 things. The need is illusive. I can only be found by accident. You can set out to discover it but you will fail multiple times before you find it.
Just ask AJ Khubani the infomercial king. He built a multimillion dollar business only to go bankrupt because he hit a dry spell. The need, or demand if you will, is lucky. Not even the experts can spot it. But if you find it it will take you away.
Luck is required. Nothing else matters. Luck supersedes money, experience and connections. It is necessary for success.
Moron Gurus and The Ultimate Dare
Warning, this is a rant/vent.
I'm sick of gurus.
They talk and talk and the reality is they're all a bunch of idiots. Not a one of them can actually start something from nothing. They all had unusually favorable head starts and advantages that allowed them to make their millions and grow their businesses. Either that or they are narcissistic liars who have absolutely no empathy or feeling towards those that they fleece.
"We're awesome" they say.
"We can get you a 10 gazillion percent ROI!"
You just need a minimum $10,000 per month advertising budget. Oh, and we won't guarantee anything because the reality is we don't know if what we're going to do is actually going to work and so you can have 100% of the risk. Then when it fails we'll just blame your puny budget and ask for more money and promise the same old BS all over again.
F!
I once ran a business that sold to a half billion dollar per year TV shopping network. When I asked them how they get new customers they didn't know. They were struggling to find new customers too and they had an 87 million person audience on cable and satellite built in to their business model. When you ask small business owners which of their advertising works they don't know. What's the difference? Nobody seems to know.
When you ask an advertising agency what to expect for ROI they don't know either. I once did some consulting work for a company that grew from 0 to $3 million in revenue in 5 years. They got lucky and some reporter wrote a story about them that went national. Since then their business has declined substantially because they also don't know how advertising works.
Yet, the gurus continue to write and film useless articles and videos that are full of crappy, watered down, advertising advice.
Here's the question I have: Why not put your money where your mouth is? You spend $2000 per month for 6 months advertising my small business and I'll give you 100% of the ROI attributed directly to that marketing. If you're advice is worth what you say it is then that's a heck of an ROI. Any takers?
No.
There are no takers.
You see, nobody actually has the guts/brains to take that. If the promises were true a truthful guru would take that dare and print money like nobody's business. The returns would be too good to pass up--much better than the stock market. And, there would be customers lined up around the corner.
But the reality is that the returns on advertising suck and are unmeasurable. So no guru could ever take that bet and get an ROI. Therefore, neither can I...the small business owner.
So, what is a small business owner to do? Other than luck and happenstance, how can you grow your business?
I'm sick of gurus.
They talk and talk and the reality is they're all a bunch of idiots. Not a one of them can actually start something from nothing. They all had unusually favorable head starts and advantages that allowed them to make their millions and grow their businesses. Either that or they are narcissistic liars who have absolutely no empathy or feeling towards those that they fleece.
"We're awesome" they say.
"We can get you a 10 gazillion percent ROI!"
You just need a minimum $10,000 per month advertising budget. Oh, and we won't guarantee anything because the reality is we don't know if what we're going to do is actually going to work and so you can have 100% of the risk. Then when it fails we'll just blame your puny budget and ask for more money and promise the same old BS all over again.
F!
I once ran a business that sold to a half billion dollar per year TV shopping network. When I asked them how they get new customers they didn't know. They were struggling to find new customers too and they had an 87 million person audience on cable and satellite built in to their business model. When you ask small business owners which of their advertising works they don't know. What's the difference? Nobody seems to know.
When you ask an advertising agency what to expect for ROI they don't know either. I once did some consulting work for a company that grew from 0 to $3 million in revenue in 5 years. They got lucky and some reporter wrote a story about them that went national. Since then their business has declined substantially because they also don't know how advertising works.
Yet, the gurus continue to write and film useless articles and videos that are full of crappy, watered down, advertising advice.
Here's the question I have: Why not put your money where your mouth is? You spend $2000 per month for 6 months advertising my small business and I'll give you 100% of the ROI attributed directly to that marketing. If you're advice is worth what you say it is then that's a heck of an ROI. Any takers?
No.
There are no takers.
You see, nobody actually has the guts/brains to take that. If the promises were true a truthful guru would take that dare and print money like nobody's business. The returns would be too good to pass up--much better than the stock market. And, there would be customers lined up around the corner.
But the reality is that the returns on advertising suck and are unmeasurable. So no guru could ever take that bet and get an ROI. Therefore, neither can I...the small business owner.
So, what is a small business owner to do? Other than luck and happenstance, how can you grow your business?
7.21.2015
Invest in Bonds When Interest Rates Rise
Most people are fearful of investing in bonds when interest rates rise because that means the price of bonds will be dropping...significantly.
Most people can't take that heat. However, I think it's actually a great time to invest because the interest payments will allow you to buy the next batch of bonds for cheaper at a higher yield.
That means that every year your yield goes up with certainty instead of like the stock market where...hang on I have a phone call...no, for the second time I am not interested in a business opportunity with Amway!
Okay, back to stocks. Stocks are hard to predict so you never know what you are going to get and you are always looking for better returns. With bonds you can just sit back and watch the 7% roll it. Yes, that is correct, 7% yield is easy to find in investment grade bonds. You just have to look for it. And, as I mentioned before, with a little help from the Fed that yield will only increase.
So while bonds are boring and misunderstood. I think it's a great time to get in, so that's what I'm going to do.
Most people can't take that heat. However, I think it's actually a great time to invest because the interest payments will allow you to buy the next batch of bonds for cheaper at a higher yield.
That means that every year your yield goes up with certainty instead of like the stock market where...hang on I have a phone call...no, for the second time I am not interested in a business opportunity with Amway!
Okay, back to stocks. Stocks are hard to predict so you never know what you are going to get and you are always looking for better returns. With bonds you can just sit back and watch the 7% roll it. Yes, that is correct, 7% yield is easy to find in investment grade bonds. You just have to look for it. And, as I mentioned before, with a little help from the Fed that yield will only increase.
So while bonds are boring and misunderstood. I think it's a great time to get in, so that's what I'm going to do.
7.10.2015
How to Spot a Lazy Incompetent Business Person Using E-mail
Using cc in e-mail drives me crazy. It has caused quite a bit of mistrust of me and my communication. However, upon closer examination I noticed something. CC'ing people on e-mails is not and should not be my problem.
Requesting that someone cc people on e-mails is the equivalent to saying, "I'm too lazy to communicate with my people...so you should do it for me."
CC's cause all kinds of confusion especially when the e-mail is to someone outside of your organization:
1) Sometimes you cc someone and you shouldn't. How are you supposed to know that?
2) Sometimes you don't cc someone and you should. How are you supposed to know that?
3) Sometimes the conversation morphs and cc'd people should be dropped or added. How are you supposed to know that?
4) CC'ing people give's the impression that the e-mail is not as important for the cc'd people or they would have been in the To field. Then they don't make a mental note of the communication.
5) CC is used as a weapon by toxic (i.e. lazy) people, "What do you mean you didn't get it, I cc'd you? Now I can't trust you."
6) Important information gets stuffed at the bottom of important e-mails and cc'd parties are expected to root it out and remember it.
7) CC fills up people's inboxes. Enough said.
8) Everybody has different, sometimes competing views of e-mail etiquette. CC etiquette for one person violates etiquette for someone else.
9) Remembering who to CC for all the organizations your business deals with is simply impossible. There are too many scenarios and nuances and preferences to keep straight. This guarantees miscommunications, accidental communications, and overtly political situations.
10) It allows supervisors to spy on and micromanage subordinates, which creates distrust. This spills through to customers. "Why am I cc'd the boss on everything? Is my contact incompetent?"
11) If I cc 3 people plus the "To" person, that team has now spent 4x the time reading that e-mail even if it was erroneously send to 2 of the people. If time is money, then cc is a massive waste. What if your entire company cut the time reading e-mails by 50% like in my example above?
The more I write and think about it the more I believe that CC is bad for business and relationships. If I e-mail a business contact with a question or important information, I expect them to deal with it internally and get back to me. If cc'ing is so important to their team, then they can set up a filter to forward e-mails from me automatically, or have daily meetings to enhance communication. That eliminates a lot of friction, tension, erroneous e-mails, politics (why didn't you cc me?) etc...
The best solution, let each person manage their communication to their team instead of requesting outsiders do it for them. Under this scenario only the most important information makes it to the right people and time is not wasted over communicating to the wrong people.
I'm done with cc.
Requesting that someone cc people on e-mails is the equivalent to saying, "I'm too lazy to communicate with my people...so you should do it for me."
CC's cause all kinds of confusion especially when the e-mail is to someone outside of your organization:
1) Sometimes you cc someone and you shouldn't. How are you supposed to know that?
2) Sometimes you don't cc someone and you should. How are you supposed to know that?
3) Sometimes the conversation morphs and cc'd people should be dropped or added. How are you supposed to know that?
4) CC'ing people give's the impression that the e-mail is not as important for the cc'd people or they would have been in the To field. Then they don't make a mental note of the communication.
5) CC is used as a weapon by toxic (i.e. lazy) people, "What do you mean you didn't get it, I cc'd you? Now I can't trust you."
6) Important information gets stuffed at the bottom of important e-mails and cc'd parties are expected to root it out and remember it.
7) CC fills up people's inboxes. Enough said.
8) Everybody has different, sometimes competing views of e-mail etiquette. CC etiquette for one person violates etiquette for someone else.
9) Remembering who to CC for all the organizations your business deals with is simply impossible. There are too many scenarios and nuances and preferences to keep straight. This guarantees miscommunications, accidental communications, and overtly political situations.
10) It allows supervisors to spy on and micromanage subordinates, which creates distrust. This spills through to customers. "Why am I cc'd the boss on everything? Is my contact incompetent?"
11) If I cc 3 people plus the "To" person, that team has now spent 4x the time reading that e-mail even if it was erroneously send to 2 of the people. If time is money, then cc is a massive waste. What if your entire company cut the time reading e-mails by 50% like in my example above?
The more I write and think about it the more I believe that CC is bad for business and relationships. If I e-mail a business contact with a question or important information, I expect them to deal with it internally and get back to me. If cc'ing is so important to their team, then they can set up a filter to forward e-mails from me automatically, or have daily meetings to enhance communication. That eliminates a lot of friction, tension, erroneous e-mails, politics (why didn't you cc me?) etc...
The best solution, let each person manage their communication to their team instead of requesting outsiders do it for them. Under this scenario only the most important information makes it to the right people and time is not wasted over communicating to the wrong people.
I'm done with cc.
3.25.2015
Inside the Ant Farm: Recruiting in the Wild West
Warning, this is a bit of a rant, but there are some lessons in there at the end.
So, I just had my first adventure in recruiting my first employee. I am looking at hiring someone for a canvassing position to help me drum up business. I posted an ad on Craigslist and received a resume at 4:30pm. Being close to dinner time I decided to call the person in the morning.
The next morning before I could call back the prospective candidate called me. After a short time on the phone I found out the following:
1) The address on his resume was 3 years old
2) He lived in a different state than me and wanted me to pay for commuting
3) He did not want to do canvassing, but instead suggested working a cart in a mall
4) He wanted $100 per lead which is the equivalent to $2500 per week just for leads! (I was offering $10 per lead and $160 per job sold. That works out to $1250 per week for 15-20 hours of work.)
Can you say red flags?
Anyway, being somewhat new to this I decided to meet him anyway and told him to e-mail me so I could send him the address for a coffee shop where we could meet. He sent me an e-mail at midnight that night.
The next morning at 10am I get a text saying "I never received an e-mail. I can't do business like this sir."
I thought, that's a little forward considering I only had 10 hours to respond, during which 7 were definitely while most of America was sleeping.
Based on that text I replied that I thought it would not work out and wished him luck in his search.
Then he went ballistic on me calling my ad a garbage ad and saying I was crazy and that he wouldn't work for free. All I can say is wow! Not the type of person I want on my team. Now that I've written this it all seems too obvious.
So, lessons from recruiting:
1) Some people are crazy
2) If a candidate calls immediately after submitting a resume then be on guard. Why are they being so incredibly impatient. If they are worth their salt then waiting 1 business day for a phone call shouldn't be a big deal. (I return all phone calls the same or next business day)
3) If a candidate won't take the time to update their resume (their first impression) then they probably won't give a good second, third, fourth impression either.
4) If someone says $5000 per month for a 20 hour per week job is "working for free" then that person is probably a whiny loser. Stay away!
I think it's interesting that there are people out there who demand so much of others. How do these people hold a job and make ends meet? I suspect that this fellow may be hurting big time and that by rejecting me he can avoid being rejected himself. He obviously didn't take to kindly to me not hiring him.
Okay, it's time to let this one go.
So, I just had my first adventure in recruiting my first employee. I am looking at hiring someone for a canvassing position to help me drum up business. I posted an ad on Craigslist and received a resume at 4:30pm. Being close to dinner time I decided to call the person in the morning.
The next morning before I could call back the prospective candidate called me. After a short time on the phone I found out the following:
1) The address on his resume was 3 years old
2) He lived in a different state than me and wanted me to pay for commuting
3) He did not want to do canvassing, but instead suggested working a cart in a mall
4) He wanted $100 per lead which is the equivalent to $2500 per week just for leads! (I was offering $10 per lead and $160 per job sold. That works out to $1250 per week for 15-20 hours of work.)
Can you say red flags?
Anyway, being somewhat new to this I decided to meet him anyway and told him to e-mail me so I could send him the address for a coffee shop where we could meet. He sent me an e-mail at midnight that night.
The next morning at 10am I get a text saying "I never received an e-mail. I can't do business like this sir."
I thought, that's a little forward considering I only had 10 hours to respond, during which 7 were definitely while most of America was sleeping.
Based on that text I replied that I thought it would not work out and wished him luck in his search.
Then he went ballistic on me calling my ad a garbage ad and saying I was crazy and that he wouldn't work for free. All I can say is wow! Not the type of person I want on my team. Now that I've written this it all seems too obvious.
So, lessons from recruiting:
1) Some people are crazy
2) If a candidate calls immediately after submitting a resume then be on guard. Why are they being so incredibly impatient. If they are worth their salt then waiting 1 business day for a phone call shouldn't be a big deal. (I return all phone calls the same or next business day)
3) If a candidate won't take the time to update their resume (their first impression) then they probably won't give a good second, third, fourth impression either.
4) If someone says $5000 per month for a 20 hour per week job is "working for free" then that person is probably a whiny loser. Stay away!
I think it's interesting that there are people out there who demand so much of others. How do these people hold a job and make ends meet? I suspect that this fellow may be hurting big time and that by rejecting me he can avoid being rejected himself. He obviously didn't take to kindly to me not hiring him.
Okay, it's time to let this one go.
3.13.2015
Inside the Ant Farm: Postcards Failed
So the first 2000 postcards landed on Monday. I got one call and that guy didn't leave a voicemail. I called him back with no results.
That's a 0.05% response rate. :(
I'm trying to decide if it is worth paying to send out the remaining 4000 postcards. Is it better to put the money into something else or should I stick to the plan of 3 waves of 2000 postcards to the same audience?
I'm going to sleep on it.
That's a 0.05% response rate. :(
I'm trying to decide if it is worth paying to send out the remaining 4000 postcards. Is it better to put the money into something else or should I stick to the plan of 3 waves of 2000 postcards to the same audience?
I'm going to sleep on it.
3.05.2015
Inside the Ant Farm: Waiting for Postcards
Yesterday my first wave of postcards went out. I am now in limbo until they land.
I continue to test my phone system to make sure it works and am constantly reading internet case studies on response rates. There is basically no good data out there about response rates. Probably because they can vary so much. I'm hoping for a 0.25% response rate or better over the whole campaign. That means I am looking forward to getting 5 phone calls next week.
Fingers crossed!
I continue to test my phone system to make sure it works and am constantly reading internet case studies on response rates. There is basically no good data out there about response rates. Probably because they can vary so much. I'm hoping for a 0.25% response rate or better over the whole campaign. That means I am looking forward to getting 5 phone calls next week.
Fingers crossed!
2.27.2015
Inside the Ant Farm: Courage to Start
Today I bought 6000 postcards.
It took me 5 weeks to summon up the courage to spend $3000 on postcards and a mailing list.
The cards will go out in 3 waves to 2000 very targeted people in my area. Hopefully I will get 2 people to buy flooring from me so I can break even. If nobody responds then it's back to the drawing board.
I am not a risk taker by nature. When I look back at some of the "risky" things I've done, most of them were somewhat hedged. I tend to take risks that have a plan B, C, D and E so that I can get my money back, preferably with friends attached.
In this case I have taken care to target potential customers with large houses, in expensive neighborhoods so that I will need fewer jobs to recover my postcard expense. Big houses means more flooring and expensive neighborhoods means more expensive flooring. By doing this I expect each job to be 2.5x more profitable than the smaller homes in my neighborhood. That means I only need a 0.2% response rate if I close half of my leads. It's much safer to advertise to big houses.
Advertising is the kind of activity that most people avoid because on the surface it looks like a waste of money. Plus, it's a lot of money for most new business owners to spend on something that isn't tangible. Buying a truck or tools or business cards is easy. You have something to show for it and you could get your money back and sell most of those items if you had to.
Buying advertising is not easy.
It is nerve-racking.
Now that it's done I'm excited to see the results. If I get a 0.5% response rate and I close half of the leads I'll get 5 jobs and then I'll send out more post cards. As long as it is profitable I will continue to send post cards to build my business. My goal is to have 1 job for every weekday. That means 250 jobs per year.
It takes courage to start a business...to let go of something so precious and sought after as money.
Plus it might fail.
But, if it works (and it has a better than 50% chance in my estimation) then I can't afford not to do it. 250 jobs per year, all derived from postcards, it too much money to pass up just because I'm afraid.
The postcards land in 2 weeks. I'll keep you posted.
It took me 5 weeks to summon up the courage to spend $3000 on postcards and a mailing list.
The cards will go out in 3 waves to 2000 very targeted people in my area. Hopefully I will get 2 people to buy flooring from me so I can break even. If nobody responds then it's back to the drawing board.
I am not a risk taker by nature. When I look back at some of the "risky" things I've done, most of them were somewhat hedged. I tend to take risks that have a plan B, C, D and E so that I can get my money back, preferably with friends attached.
In this case I have taken care to target potential customers with large houses, in expensive neighborhoods so that I will need fewer jobs to recover my postcard expense. Big houses means more flooring and expensive neighborhoods means more expensive flooring. By doing this I expect each job to be 2.5x more profitable than the smaller homes in my neighborhood. That means I only need a 0.2% response rate if I close half of my leads. It's much safer to advertise to big houses.
Advertising is the kind of activity that most people avoid because on the surface it looks like a waste of money. Plus, it's a lot of money for most new business owners to spend on something that isn't tangible. Buying a truck or tools or business cards is easy. You have something to show for it and you could get your money back and sell most of those items if you had to.
Buying advertising is not easy.
It is nerve-racking.
Now that it's done I'm excited to see the results. If I get a 0.5% response rate and I close half of the leads I'll get 5 jobs and then I'll send out more post cards. As long as it is profitable I will continue to send post cards to build my business. My goal is to have 1 job for every weekday. That means 250 jobs per year.
It takes courage to start a business...to let go of something so precious and sought after as money.
Plus it might fail.
But, if it works (and it has a better than 50% chance in my estimation) then I can't afford not to do it. 250 jobs per year, all derived from postcards, it too much money to pass up just because I'm afraid.
The postcards land in 2 weeks. I'll keep you posted.
Inside The Ant Farm: A Real Time Look at Starting a Business
It's easy to watch Shark Tank. It's fun. But it is discouraging.
Here are these people who have invested many thousands of dollars, or hundreds of the thousands of dollars, or millions of dollars...and the sharks are chewing them up. How's the average Joe supposed to start a business? While I love the show, I think it makes business seem way to complicated.
Is step 1 to raise capital?
Do I need a fancy app or to invent the next Snap Chat?
Do I need thousands of dollars for a prototype and a patent?
What about licensing deals?
There are literally hundreds of questions that lead to discouraging answers, but the reality is that business is helping someone by trading something you have for something they have. If it's a good trade for your customers then customers will not be a problem.
I've started this "Inside the Ant Farm" series to chronicle my new start up as it starts up.
The term start up may give the wrong impression. This is not a tech start up. It is not a crazy new invention. It is not something that will be suitable for Kickstarter. No, this is way too simple for that.
It's flooring.
You know, carpet, and hardwood and tile...the stuff you walk on everyday. The only thing you are physically touching 99% of your waking hours. And, it's boring.
But, being simple, I think it will make for a great experiment that just about anyone can learn from.
So let's rock and see where it goes.
Here are these people who have invested many thousands of dollars, or hundreds of the thousands of dollars, or millions of dollars...and the sharks are chewing them up. How's the average Joe supposed to start a business? While I love the show, I think it makes business seem way to complicated.
Is step 1 to raise capital?
Do I need a fancy app or to invent the next Snap Chat?
Do I need thousands of dollars for a prototype and a patent?
What about licensing deals?
There are literally hundreds of questions that lead to discouraging answers, but the reality is that business is helping someone by trading something you have for something they have. If it's a good trade for your customers then customers will not be a problem.
I've started this "Inside the Ant Farm" series to chronicle my new start up as it starts up.
The term start up may give the wrong impression. This is not a tech start up. It is not a crazy new invention. It is not something that will be suitable for Kickstarter. No, this is way too simple for that.
It's flooring.
You know, carpet, and hardwood and tile...the stuff you walk on everyday. The only thing you are physically touching 99% of your waking hours. And, it's boring.
But, being simple, I think it will make for a great experiment that just about anyone can learn from.
So let's rock and see where it goes.
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